FARMERS NATIONAL BANC CORP. A N N UA L R E P O RT 2023
F A R M E R S N A T I O N A L B A N C C O R P .
Forward Looking Statements
Cautionary Note Regarding Forward Looking Statements: Certain statements contained herein are "forward looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. For a discussion of factors that could cause future results to differ from historical performance or those forward-looking statements, see "Cautionary Note Regarding Forward Looking Statements" on page 29, "Supervision and Regulation" on page 3, and "Item 1A. Risk Factors" on page 15 of the attached Annual Report on Form 10-K for the year ended December 31, 2023 and all risks and uncertainties disclosed in our filings with the SEC, including our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, which are available on the SEC's website at www.sec.gov. We do not undertake, and expressly disclaim, any obligation to update any forward-looking statements, except as required by applicable law.
Board of Directors
Terry A. Moore 2,3,5
Chairman of the Board
Former Managing Shareholder, Krugliak,
Wilkins, Griffiths and Dougherty
David Z. Paull 2,4,5
Retired Vice President, Human Resources
Operations and Labor Relations, RTI International Metals, Inc.
Gregory C. Bestic 1,2
Certified Public Accountant Retired, Former CGMA, Certified Forensic Accountant, DABFA, FACFEI
Retired Principal with Schroedel, Scullin & Bestic, LLC - Certified Public Accountants and Strategic Advisors
Anne Frederick Crawford 2,3
Attorney-At-Law
Self-employed/Sole Proprietor
Kevin J. Helmick 5
President and Chief Executive Officer of
Farmers National Banc. Corp
Ralph D. Macali 1,3
Vice President of Palmer J. Macali, Inc.
Partner in P.M.R.P. Partnership
Edward W. Muransky 3,4,5
CEO, Chestnut Land Company
Frank J. Monaco 2,4
Senior Partner, 415 Group
Richard B. Thompson 1,4
Executive, Therm-O-Link, Inc.
Neil J. Kaback 1,4
Retired Partner, Cohen & Company
Nicholas D. Varischetti 1,3
Attorney, Burns White
Partner, Varischetti Holdings, LP
Allegheny Strategy Partners
André Thornton 3,4
President & CEO, ASW Global LLC.
Carl D. Culp 4
Retired Chief Financial Officer,
Farmers National Bank of Canfield
Gina A. Richardson 1,3
Legal Counsel, Gina Richardson LLC.
1 Audit Committee
2 Compensation Committee
3 Corporate Governance and Nominating Committee
4 Board Enterprise Risk Management Committee
5 Executive Committee
Annual Meeting Notice
The Annual Meeting of Shareholders will be held at 10:00 a.m. Eastern Time
on Thursday, April 18, 2024, via live webcast at https://meetnow.global/MARAVQT
A N N UA L R E P O R T 2 0 2 3
F A R M E R S N A T I O N A L B A N C C O R P .
Leveraging 137 years of institutional knowledge to navigate the present -
AND BUILD A
BETTER FUTURE.
Dear Fellow Shareholders,
Henry Luce, the founding publisher of Time, Life and Fortune magazines, believed that "Business more than any other occupation is a continual dealing with the future; it is a continual calculation, an instinctive exercise in foresight." I respectfully offer that Mr. Luce was mostly correct - with one notable, mitigating factor that has proven relevant to the continued success of your Company.
That important factor is that your Board of Directors and executive management team take our 137-year history into our "continual calcula- tion" regarding the future. A history of not only weathering, but in the long run taking advantage of the
inevitable ups and downs of macroeconomic cycles.
Our historically conservative management and financial philosophies provide your Company's leadership with foundational insights into how to navigate the future. Whatever the future holds, we know that maintaining consistent credit discipline in and out of cycles, and preserving strong asset quality, will never go out of fashion at Farmers National Bank.
These operational principles contributed to your bank recording its 164th consecutive quarter of profitability at the close of 2023 - which translates to 41 consecutive years without a quar-
terly miss. I'm also pleased to inform you that your bank's performance this past year contributed to it being named one of Newsweek's best regional banks in America for 2024.
Our ingrained principles coupled with our relationship-driven culture contributed to our success in this past year's challenging economic environment. Your bank's total assets reached $5.08 billion in 2023, up from $4.08 billion in 2022, in part due to the successful acquisition of the coincidentally-named Farmers National Bank of Emlenton in Western Pennsylvania, formalized in early 2023. This acquisition marks the first time Farmers has significantly extended its presence outside of Ohio.
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A N N UA L R E P O RT 2023
F A R M E R S N A T I O N A L B A N C C O R P .
Eleven federal interest rate increases
- after years of historically low and stable rates - is only one factor that made 2023 challenging to navigate for banks and their customers. Still, our loan portfolio increased by $793.4 million over 2022, with our acquisition of Farmers National Bank of Emlenton being responsible for $740.7 million of this increase.
Providing capital to small businesses remains at the heart of Farmers mis- sion. You may recall that during the pandemic, no community bank in Northeast Ohio was more proficient at getting PPP funds into the hands of small business owners than Farmers. I am pleased to tell you that nearly two years later, Farmers has largely retained the loyalty and accounts of the many small businesses it served
whose needs were not met by larger banks with whom they previously did business. Your Company's commitment to small business results in helping to drive the economies in communities across the Farmers footprint.
At home, in Canfield, Ohio, Farmers is now fulfilling a goal first established by executive management in the early 2000s of expanding and upgrading its headquarters. As your bank continues to grow, this expansion will greatly enhance our ability to be centrally located and will allow us to take advantage of the synergies of the talented associates that have joined Farmers over the years. The construction of this 27,000 square foot addition will also pay homage to our roots by featuring tributes to
our past, including photos of past Directors, CEOs and office locations.
To close, in the words of Mr. Luce, everyone in business is engaged in a continual dealing with the future - a sometimes daunting task. But, your Company has the built-in advantage of institutional knowledge accumulated over more than a century to provide a roadmap to what can be an even more prosperous future.
Sincerely,
Kevin J. Helmick
President & Chief Executive Officer
3 | f i e rce l y | LOCAL . f i e rce l y LOYAL . |
A N N UA L R E P O RT 2023
F A R M E R S N A T I O N A L B A N C C O R P .
COMMITMENT TO COMMUNITY
175
ASSOCIATES
200+ | 19 |
ORGANIZATIONS | COUNTIES |
I N 2023,
TWO BANK-WIDE VOLUNTEER DAYS WERE HELD.
FROM LEFT TO RIGHT:
Troy Adair, Myke Matuszak,
Kevin Helmick, David Redig
and Mark Wenick.
Habitat for Humanity - August
- Over 70 employees volunteered at 3 different sites in August
- The company also made a $5,000 donation to Habitat for Humanity
Salvation Army - November
- 80 associates participated in ringing bells for the Salvation Army's Red Kettle Campaign
- 18 sites across Ohio and Pennsylvania
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A N N UA L R E P O RT 2023
F A R M E R S N A T I O N A L B A N C C O R P .
IMPACT
Farmers National Banc Corp., through its subsidiaries, has always been a strong supporter of the communities we work and live in. Last year, Farmers donated more than $700,000 in sponsorships and donations to a wide range of non-profits and community organizations throughout its footprint.
SOCIAL SERVICES - 27%
CIVIC - 24%
HEALTH & WELLNESS - 23%
EDUCATION/HIGHER EDUCATION - 18%
ARTS - 4%
COMMUNITY ATHLETICS - 3% | RELIGIOUS - 1% |
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UNITED STATES | |||||||||
SECURITIES AND EXCHANGE COMMISSION | |||||||||
WASHINGTON, D.C. 20549 | |||||||||
FORM 10-K | |||||||||
(Mark One) | |||||||||
☒ | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | ||||||||
For the fiscal year ended December 31, 2023 | |||||||||
or | |||||||||
☐ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | ||||||||
For the transition period from | to | ||||||||
Commission file number 001-35296 | |||||||||
Farmers | National Banc Corp. | ||||||||
(Exact name of registrant as specified in its charter) | |||||||||
Ohio | 34-1371693 | ||||||||
(State or other jurisdiction of | (I.R.S. Employer | ||||||||
incorporation or organization) | Identification No.) | ||||||||
20 South Broad Street, Canfield, Ohio | 44406 | ||||||||
(Address of principal executive offices) | (Zip Code) | ||||||||
Registrant's telephone number, including area code: 330-533-3341 | |||||||||
Securities registered pursuant to Section 12(b) of the Act: | |||||||||
Title of each class | Name of each exchange on which registered | ||||||||
Common Shares, no par value | The NASDAQ Stock Market LLC | ||||||||
Securities registered pursuant to Section 12(g) of the Act: | |||||||||
None | |||||||||
(Title of Class) |
Yes ☐ | No ☒ | |||
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. | ||||
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. | Yes ☐ | No ☒ |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 | |
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes | No |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T ((§232.405 | |
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes | No |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. | |||
See the definition of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. | |||
Large accelerated filer | ☐ | Accelerated filer | ☒ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1 (b). ☐
As of June 30, 2023, the estimated aggregate market value of the registrant's common shares, no par value (the only common equity of the registrant), held by non-affiliates of the registrant was approximately $445.5 million based upon the last sales price as of June 30, 2023 reported on NASDAQ. (The exclusion from such amount of the market value of the common shares owned by any person shall not be deemed as admission by the registrant that such person is an affiliate of the registrant).
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of each exchange on which registered |
Common Stock, No Par Value | FMNB | The NASDAQ Stock Market |
As of March 1, 2024, the registrant had outstanding 37,545,864 common shares, no par value.
DOCUMENTS INCORPORATED BY REFERENCE
Document
Portions of the registrant's definitive proxy statement for the 2023 Annual Meeting of Shareholders
Part of Form 10-K
into which
Document is Incorporated
III
FARMERS NATIONAL BANC CORP. | ||
ANNUAL REPORT ON FORM 10-K | ||
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2023 | ||
TABLE OF CONTENTS | ||
PART I | ||
Item 1. | Business | 1 |
Item 1A. | Risk Factors | 15 |
Item 1B. | Unresolved Staff Comments | 27 |
Item 2. | Properties | 27 |
Item 3. | Legal Proceedings | 27 |
Item 4. | Mine Safety Disclosures | 27 |
PART II | ||
Item 5. | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ... | 28 |
Item 6. | Reserved | 28 |
Item 7. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 29 |
Item 7A. | Quantitative and Qualitative Disclosure about Market Risk | 49 |
Item 8. | Financial Statements and Supplementary Financial Data | 51 |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 109 |
Item 9A. | Controls and Procedures | 109 |
Item 9B. | Other Information | 109 |
Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 109 |
PART III | ||
Item 10. | Directors, Executive Officers and Corporate Governance | 110 |
Item 11. | Executive Compensation | 110 |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 111 |
Item 13. | Certain Relationships and Related Transactions, and Director Independence | 111 |
Item 14. | Principal Accountant Fees and Services | 111 |
PART IV | ||
Item 15. | Exhibits, Financial Statement Schedules | 111 |
Item 16. | Form 10-K Summary | 111 |
SIGNATURES | 115 |
PART I
Item 1. Business.
General
Farmers National Banc Corp.
Farmers National Banc Corp. (the "Company," "Farmers," "we," "our" or "us"), is a financial holding company and was organized as a one-bank holding company in 1983 under the laws of the State of Ohio and registered under the Bank Holding Company Act of 1956, as amended (the "BHCA"). Amendments to the BHCA in 1999 allowed for a bank holding company to declare itself a financial holding company and thereby engage in financial activities, including securities underwriting and dealing, insurance agency and underwriting activities, and merchant banking activities. The Company made the declaration to become a financial holding company in 2016. For a bank holding company to be eligible to declare itself a financial holding company, all of the depository institution subsidiaries must be well-capitalized and well-managed and have satisfactory or better ratings under the Community Reinvestment Act. The Company operates principally through its wholly-owned subsidiaries, The Farmers National Bank of Canfield (the "Bank" or "Farmers Bank"), Farmers Trust Company ("Farmers Trust"), and Farmers National Captive, Inc. ("Captive"). The Captive was dissolved in November of 2023. Farmers National Insurance, LLC ("Farmers Insurance") and Farmers of Canfield Investment Co. ("Investments or "Farmers Investments") are wholly-owned subsidiaries of the Bank. The Company and its subsidiaries operate in the domestic banking, trust, retirement consulting, insurance and financial management industries.
The Company's principal business consists of owning and supervising its subsidiaries. Although Farmers directs the overall policies of its subsidiaries, including lending practices and financial resources, most day-to-day affairs are managed by their respective officers.
The Company's principal executive offices are located at 20 South Broad Street, Canfield, Ohio 44406, and its telephone number is (330) 533-3341. Farmers' common shares, no par value, are listed on the NASDAQ Capital Market (the "NASDAQ") under the symbol "FMNB." Farmers' business activities are managed and financial performance is primarily aggregated and reported in two lines of business, the Bank segment and the Trust segment. For a discussion of Farmers' financial performance for the fiscal year ended December 31, 2023, see the Consolidated Financial Statements and Notes to the Consolidated Financial Statements found in Item 8 of this Annual Report on Form 10-K.
The Farmers National Bank of Canfield
On January 1, 2023, Farmers National Banc Corp. (the "Company") completed its previously announced merger with Emclaire Financial Corp., a Pennsylvania corporation and registered financial holding company ("Emclaire"), pursuant to the Agreement and Plan of Merger dated as of March 23, 2022, by and among the Company, FMNB Merger Subsidiary V, LLC, a wholly owned subsidiary of Farmers ("Merger Sub"), and Emclaire (the "Merger Agreement"). Pursuant to the terms of the Merger Agreement, at the effective time of the Merger (the "Effective Time") Emclaire merged with and into Merger Sub (the "Merger"), with Merger Sub as the surviving entity in the Merger. Promptly following the consummation of the Merger, Merger Sub was dissolved and liquidated and The Farmers National Bank of Emlenton, the banking subsidiary of Emclaire, merged with and into The Farmers National Bank of Canfield, the national banking subsidiary of the Company ("Farmers Bank"), with Farmers Bank as the surviving bank. Pursuant to the terms of the Merger Agreement, at the Effective Time of the Merger, each common share, without par value, of Emclaire ("Emclaire Common Shares") issued and outstanding immediately prior to the Effective Time (except for certain Emclaire Common Shares held directly by Emclaire or the Company) was converted into the right to receive, without interest, $40.00 in cash (the "Cash Consideration") or 2.15 common shares, without par value, of the Company ("Company Common Shares") (the "Stock Consideration"), subject to an overall limitation of 70% of the Emclaire Common Shares being exchanged for the Stock Consideration and the remaining 30% of Emclaire Common Shares being exchanged for the Cash Consideration. No fractional Company Common Shares were issued in the Merger, and Emclaire's shareholders became entitled to receive cash in lieu of fractional Company Common Shares. Emclaire operated 19 branches in ten counties throughout western Pennsylvania.
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The Bank is a full-service national banking association engaged in commercial and retail banking mainly in the northeastern region of Ohio and the western region of Pennsylvania. The Bank's commercial and retail banking services include checking accounts, savings accounts, time deposit accounts, commercial, mortgage and installment loans, home equity loans, home equity lines of credit, night depository, safe deposit boxes, money orders, bank checks, automated teller machines, internet banking, travel cards, "E" Bond transactions, brokerage services and other miscellaneous services normally offered by commercial banks.
A discussion of the general development of the Bank's business and information regarding its financial performance throughout 2023, is discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of this Annual Report on Form 10-K.
The Bank faces significant competition in offering financial services to customers. Ohio and Pennsylvania have a high density of financial service providers, many of which are significantly larger institutions that have greater financial resources than the Bank, and all of which are competitors to varying degrees. Competition for loans comes principally from savings banks, savings and loan associations, commercial banks, mortgage banking companies, credit unions, insurance companies and other financial service companies. The most direct competition for deposits has historically come from savings and loan associations, savings banks, commercial banks and credit unions. Additional competition for deposits comes from non-depository competitors such as the mutual fund industry, securities and brokerage firms and insurance companies.
Farmers Trust Company
During 2009, the Company acquired the Farmers Trust. Farmers Trust offers a full complement of personal and corporate trust services in the areas of estate settlement, trust administration, employee benefit plans and retirement services. During 2019, National Associates Inc. was combined with the Farmers Trust entity. Farmers Trust operates five offices located in Boardman, Canton, Howland, Wooster and Fairview Park, Ohio.
Farmers National Captive, Inc.
Captive was formed during 2016 and operated until November 20, 2023 when the Company dissolved the entity. During its operation Captive was a wholly-owned insurance subsidiary of the Company that provided property and casualty insurance coverage to the Company and its subsidiaries. The Captive pooled resources with similar insurance company subsidiaries of financial institutions to spread a limited amount of risk among themselves and to provide insurance where not available or economically feasible. Captive did not account for a material portion of revenue and, therefore, will not be discussed individually, but as part of the Company.
Farmers National Insurance, LLC
Farmers Insurance was formed during 2009 and offers a variety of insurance products through licensed representatives. During 2022, Farmers Insurance acquired substantially all of the assets, in a cash transaction, of Randy L. Jones Agency, Inc., doing business as Champion Insurance. During 2016, the Bank completed the acquisition of the Bowers Insurance Agency, Inc. ("Bowers"). The transaction involved both cash and stock. All activity has been merged into Farmers Insurance. Farmers Insurance is a subsidiary of Farmers Bank and does not account for a material portion of revenue and, therefore, will not be discussed individually, but as part of the Bank.
Farmers of Canfield Investment Company
Farmers Investments was formed during 2014, with the primary purpose of investing in municipal securities. Farmers Investments is a subsidiary of Farmers Bank and does not account for a material portion of revenue and, therefore, will not be discussed individually, but as part of the Bank.
Investor Relations
The Company maintains an Internet site at http://www.farmersbankgroup.com, which contains an Investor Relations section that provides access to the Company's filings with the Securities and Exchange Commission (the
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Farmers National Banc Corp. published this content on 09 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 March 2024 13:58:02 UTC.
