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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
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Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the fiscal year ended
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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
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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Registrant’s telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange on which registered |
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Common Shares, no par value |
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The NASDAQ Stock Market LLC |
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
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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
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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.
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).
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.
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Large accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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
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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, 2024, 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 $
Securities registered pursuant to Section 12(b) of the Act:
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DOCUMENTS INCORPORATED BY REFERENCE
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Document |
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Part of Form 10-K
into which
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Portions of the registrant’s definitive proxy statement for the 2024 |
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III |
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Annual Meeting of Shareholders |
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FARMERS NATIONAL BANC CORP.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2024
TABLE OF CONTENTS
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PART I |
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Item 1. |
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Item 1A. |
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Item 1B. |
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Item 2. |
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Item 3. |
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Item 4. |
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PART II |
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Item 5. |
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Item 6. |
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Item 7. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 7A. |
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Item 8. |
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Item 9. |
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
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Item 9A. |
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Item 9B. |
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Item 9C. |
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Disclosure Regarding Foreign Jurisdictions that Prevent Inspections |
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PART III |
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Item 10. |
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Item 11. |
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Item 12. |
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
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Item 13. |
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Certain Relationships and Related Transactions, and Director Independence |
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Item 14. |
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PART IV |
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Item 15. |
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Item 16. |
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PART I
Item 1. B usiness.
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 of 1977 (the "CRA"). The Company operates principally through its wholly-owned subsidiaries, The Farmers National Bank of Canfield (the “Bank” or “Farmers Bank”) and Farmers Trust Company (“Farmers Trust”). A third subsidiary, Farmers National Captive, Inc. (“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, 2024, 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.
1
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 2024, 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 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 2024, Farmers Trust acquired substantially all of the assets, in a cash transaction, of Crest Retirement Advisors, LLC ("Crest"). 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. 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 “Commission”). Farmers makes available free of charge on or through its website the Company’s annual reports on
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Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such documents filed or furnished pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as soon as reasonably practicable after the Company has filed these documents with the Commission. In addition, the Company’s filings with the Commission may be read and copied at the Commission’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. These filings are also available on the Commission’s web site at http://www.sec.gov free of charge as soon as reasonably practicable after the Company has filed the above referenced reports.
Human Capital
Our core values of Integrity, Respect, Diligence, Stewardship, Commitment, Relationships and Performance represent our belief that our long-term success is closely tied to having a dedicated and engaged workforce. We are committed to attracting, developing, and retaining associates who reflect the communities in which we serve. As of December 31, 2024, Farmers and its subsidiaries had 682 full-time equivalent employees. The market for top talent is highly competitive, and we recognize that workforce turnover is not only financially costly, but also is not aligned with our commitment to our team. Farmers is committed to supporting a high performing, collaborative culture that provides the foundation to attract and retain the best associates in banking. By investing in our team, we also invest in our financial future. We offer all of our associates a comprehensive benefits package that includes medical, dental and vision insurance, a flexible spending plan, prescription drug coverage, group life insurance, short-term and long-term disability insurance, a traditional 401(k) Plan, a Roth IRA plan, competitive paid time off/paid holidays, competitive incentives, an annual Profit Sharing Plan and an Employee Stock Purchase Plan.
We are committed to providing a safe and secure work environment in accordance with applicable labor, safety, health, anti-discrimination and other workplace laws. We strive for all of our associates to feel safe and empowered at work. To that end, we maintain a whistleblower hotline that allows associates and others to anonymously voice concerns. We prohibit retaliation against an individual who reported a concern or assisted with an inquiry or investigation.
Supervision and Regulation
Introduction
The Company and its subsidiaries are subject to extensive regulation by federal and state regulatory agencies. The regulation of financial holding companies and their subsidiaries is intended primarily for the protection of consumers, depositors, borrowers, the Deposit Insurance Fund (the “DIF”) and the banking system as a whole and not for the protection of shareholders. This intensive regulatory environment, among other things, may restrict the Company’s ability to diversify into certain areas of financial services, acquire depository institutions in certain markets or pay dividends on its common shares. It also may require the Company to provide financial support to its banking and other subsidiaries, maintain capital balances in excess of those desired by management and pay higher deposit insurance premiums as a result of the deterioration in the financial condition of depository institutions in general.
Significant aspects of the laws and regulations that have, or could have a material impact on Farmers and its subsidiaries are described below. To the extent that the following discussion describes legislation, statutes, regulations or policies applicable to the Company or its subsidiaries, the discussion is qualified in its entirety by reference to the full text of the legislation, statutes, regulations and policies that are described herein, as they may be amended or revised by the United States ("U.S"). Congress or state legislatures and federal or state regulatory agencies, as the case may be. Changes in these legislation, statutes, regulations and policies may have a material adverse effect on the Company and its business, financial condition or results of operations. Such legislation, statutes, regulations and policies are continually under review by the U.S. Congress and state legislatures as well as federal and state regulatory agencies and are subject to change at any time, particularly in the current economic and regulatory environment. Any such change in applicable legislation, statutes, regulations or regulatory policies could have a material adverse effect on the Company and its business, financial condition or results of operations.
3
Regulatory Agencies
Financial Holding Company . Farmers elected to be a financial holding company. A bank holding company may elect to become a financial holding company if each of its subsidiary banks is well capitalized under the prompt corrective action regulations of the Federal Deposit Insurance Corporation (the “FDIC”), is well managed, and has at least a satisfactory rating under the CRA. Financial holding companies may engage in activities that are financial in nature, including affiliating with securities firms and insurance companies, which are not otherwise permissible for a bank holding company.
As a financial holding company, Farmers is subject to regulation under the BHCA and to inspection, examination and supervision by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”). The Federal Reserve Board has extensive enforcement authority over financial and bank holding companies and may initiate enforcement actions for violations of laws and regulations and unsafe or unsound practices. The Federal Reserve Board may assess civil money penalties, issue cease and desist or removal orders and may require that a bank holding company divest subsidiaries, including subsidiary banks. Farmers is also required to file reports and other information with the Federal Reserve Board regarding its business operations and those of its subsidiaries.
Subsidiary Bank . The Bank is subject to regulation and examination primarily by the Office of the Comptroller of the Currency (the “OCC”) and secondarily by the FDIC. OCC regulations govern permissible activities, capital requirements, dividend limitations, investments, loans and other matters. The OCC has extensive enforcement authority over Farmers Bank and may impose sanctions on Farmers Bank and, under certain circumstances, may place Farmers Bank into receivership.
Farmers Bank is also subject to certain restrictions imposed by the Federal Reserve Act and Federal Reserve Board regulations regarding such matters as the maintenance of reserves against deposits, extensions of credit to Farmers or any of its subsidiaries, investments in the stock or other securities of Farmers or its subsidiaries and the taking of such stock or securities as collateral for loans to any borrower.
Non-Banking Subsidiaries . Farmers’ non-banking subsidiaries are also subject to regulation by the Federal Reserve Board and other applicable federal and state agencies. In particular, Farmers Insurance is subject to regulation by the Ohio Department of Insurance, which requires, amongst other things, the education and licensing of agencies and individual agents and imposes business conduct rules.
Securities and Exchange Commission and The NASDAQ Stock Market LLC . The Company is also under the regulation and supervision of the Commission and certain state securities commissions for matters relating to the offering and sale of its securities. The Company is subject to disclosure and regulatory requirements of the Securities Act of 1933, as amended (the “Securities Act”), and the Exchange Act, and the regulations promulgated thereunder. Farmers common shares are listed on the NASDAQ under the symbol “FMNB” and the Company is subject to the rules for NASDAQ listed companies.
Federal Home Loan Bank . Farmers Bank is a member of the Federal Home Loan Bank of Cincinnati (the “FHLB”), which provides credit to its members in the form of advances. As a member of the FHLB, the Bank must maintain an investment in the capital stock of the FHLB in a specified amount. Upon the origination or renewal of a loan or advance, the FHLB is required by law to obtain and maintain a security interest in certain types of collateral. The FHLB is required to establish standards of community investment or service that its members must maintain for continued access to long-term advances from the FHLB. The standards take into account a member’s performance under the CRA and its record of lending to first-time home buyers.
The Federal Deposit Insurance Corporation . The FDIC is an independent federal agency that insures the deposits, up to prescribed statutory limits, of federally-insured banks and savings associations and safeguards the safety and soundness of the financial institution industry. The Bank’s deposits are insured up to applicable limits by the DIF of the FDIC and subject to deposit insurance assessments to maintain the DIF.
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The FDIC may terminate insurance coverage upon a finding that an insured depository institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition, or has violated any applicable law, regulation, rule, order or condition enacted or imposed by the institution’s regulatory agency.
Financial Holding Company Regulation
As a financial holding company, Farmers’ activities are subject to extensive regulation by the Federal Reserve Board under the BHCA. Generally, in addition to the BHCA limits of banking, managing or controlling banks and other activities that the Federal Reserve Board has determined to be closely related to banking, financial holding company activities may include securities underwriting and dealing, insurance agency and underwriting activities and merchant banking activities. Under Federal Reserve Board policy, a financial holding company is expected to serve as a source of financial and managerial strength to each subsidiary and to commit resources to support those subsidiaries. Under this policy, the Federal Reserve Board may require the company to contribute additional capital to an undercapitalized subsidiary and may disapprove of the payment of dividends to the holding company’s shareholders if the Federal Reserve Board believes the payment of such dividends would be an unsafe or unsound practice. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) codified this policy as a statutory requirement.
The BHCA requires prior approval by the Federal Reserve Board for a bank holding company to directly or indirectly acquire more than a 5.0% voting interest in any bank or its parent holding company. Factors taken into consideration in making such a determination include the effect of the acquisition on competition, the public benefits expected to be received from the acquisition, the projected capital ratios and levels on a post-acquisition basis and the acquiring institution’s record of addressing the credit needs of the communities it serves.
The BHCA also governs interstate banking and restricts Farmers’ nonbanking activities to those determined by the Federal Reserve Board to be financial in nature, or incidental or complementary to such financial activity, without regard to territorial restrictions. Transactions among the Bank and its affiliates are also subject to certain limitations and restrictions of the Federal Reserve Board, as described more fully under the caption “Dividends and Transactions with Affiliates” in this Item 1.
The Gramm-Leach-Bliley Act of 1999 permits a qualifying bank holding company to elect to become a financial holding company and thereby affiliate with securities firms and insurance companies and engage in other activities that are financial in nature and not otherwise permissible for a bank holding company. Farmers elected to become a financial holding company during 2016.
Regulation of Nationally Chartered Banks
As a national banking association, Farmers Bank is subject to regulation under the National Banking Act and is periodically examined by the OCC. OCC regulations govern permissible activities, capital requirements, dividend limitations, investments, loans and other matters. Furthermore, Farmers Bank is subject, as a member bank, to certain rules and regulations of the Federal Reserve Board, many of which restrict activities and prescribe documentation to protect consumers. Under the Bank Merger Act, the prior approval of the OCC is required for a national bank to merge with, or purchase the assets or assume the deposits of, another bank. In reviewing applications to approve merger and other acquisition transactions, the OCC and other bank regulatory authorities may include among their considerations the competitive effect and public benefits of the transactions, the capital position of the combined organization, the applicant’s performance under the CRA and fair housing laws, and the effectiveness of the entities in restricting money laundering activities. In addition, the establishment of branches by Farmers Bank is subject to the prior approval of the OCC. The OCC has the authority to impose sanctions on the Bank and, under certain circumstances, may place Farmers Bank into receivership.
The Bank is also an insured institution as a member of the DIF. As a result, it is subject to regulation and deposit insurance assessments by the FDIC.
5
Dividends and Transactions with Affiliates
The Company is a legal entity separate and distinct from the Bank and its other subsidiaries. The Company’s principal source of funds to pay dividends on its common shares and service its debt is dividends from Farmers Bank and its other subsidiaries. Various federal and state statutory provisions and regulations limit the amount of dividends that Farmers Bank may pay to Farmers without regulatory approval. Farmers Bank generally may not, without prior regulatory approval, pay a dividend in an amount greater than its undivided profits after deducting statutory bad debt in excess of the Bank’s allowance for loan losses. In addition, prior approval of the OCC is required for the payment of a dividend if the total of all dividends declared in a calendar year would exceed the total of Farmers Bank’s net income for the year combined with its retained net income for the two preceding years.
In addition, Farmers and Farmers Bank are subject to other regulatory policies and requirements relating to the payment of dividends, including requirements to maintain adequate capital above regulatory minimums. The federal banking agencies are authorized to determine under certain circumstances that the payment of dividends would be an unsafe or unsound practice and to prohibit payment thereof. The federal banking agencies have stated that paying dividends that deplete a bank’s capital base to an inadequate level would be an unsafe and unsound banking practice and that banking organizations should generally pay dividends only out of current operating earnings. In addition, in the current financial and economic environment, the Federal Reserve Board has indicated that financial holding companies should carefully review their dividend policy and has discouraged payment ratios that are at maximum allowable levels, unless both asset quality and capital are very strong. Thus, the ability of Farmers to pay dividends in the future is currently influenced, and could be further influenced, by bank regulatory policies and capital guidelines.
The Bank is subject to restrictions under federal law that limit the transfer of funds or other items of value to the Company and its nonbanking subsidiaries and affiliates, whether in the form of loans and other extensions of credit, investments and asset purchases or other transactions involving the transfer of value from a subsidiary to an affiliate or for the benefit of an affiliate. These regulations limit the types and amounts of transactions (including loans due and extensions of credit) that may take place and generally require those transactions to be on an arm’s-length basis. In general, these regulations require that any “covered transaction” by Farmers Bank with an affiliate must be secured by designated amounts of specified collateral and must be limited, as to any one of Farmers or its non-bank subsidiaries, to 10% of Farmers Bank’s capital stock and surplus, and, as to Farmers and all such non-bank subsidiaries in the aggregate, to 20% of Farmers Bank’s capital stock and surplus. The Dodd-Frank Act significantly expanded the coverage and scope of the limitations on affiliate transactions within a banking organization including, for example, the requirement that the 10% capital limit on covered transactions apply to financial subsidiaries. “Covered transactions” are defined by statute to include a loan or extension of credit, as well as a purchase of securities issued by an affiliate, a purchase of assets (unless otherwise exempted by the Federal Reserve Board) from the affiliate, certain derivative transactions that create a credit exposure to an affiliate, the acceptance of securities issued by the affiliate as collateral for a loan and the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate.
Capital loans from the Company to the Bank are subordinate in right of payment to deposits and certain other indebtedness of the Bank. In the event of Farmers’ bankruptcy, any commitment by Farmers to a federal bank regulatory agency to maintain the capital of Farmers Bank will be assumed by the bankruptcy trustee and entitled to a priority of payment.
The Federal Deposit Insurance Act of 1950, as amended, provides that, in the event of the “liquidation or other resolution” of an insured depository institution such as the Bank, the insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, nondeposit creditors, including the Company, with respect to any extensions of credit they have made to such insured depository institution.
Capital Adequacy
Both Farmers and Farmers Bank are subject to risk-based capital requirements imposed by their respective primary federal banking regulator. The Federal Reserve Bank monitors the capital adequacy of Farmers and the FDIC monitors the capital adequacy of Farmers Bank.
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In July 2013, the Federal banking regulators approved a final rule to implement the revised capital adequacy standards of the Basel Committee on Banking Supervision (“Basel III”), and to address relevant provisions of the Dodd-Frank Act. The final rule strengthens the definition of regulatory capital, increases risk-based capital requirements, makes selected changes to the calculation of risk-weighted assets and adjusts the prompt corrective action thresholds. The Company and the Bank became subject to Basel III on January 1, 2015.
Under Basel III, common equity tier 1 capital consists of common stock and paid-in capital (net of treasury stock) and retained earnings. Common equity tier 1 capital is reduced by goodwill, certain intangible assets, net of associated deferred tax liabilities, deferred tax assets that arise from tax credit and net operating loss carryforwards, net of any valuation allowance, and certain other items as specified by Basel III.
Tier 1 capital includes common equity tier 1 capital and certain additional tier 1 items as provided under Basel III. Tier 2 capital, which can be included in the total capital ratio, generally consists of other preferred stock and subordinated debt meeting certain conditions plus limited amounts of the allowance for credit losses, subject to specified eligibility criteria, less applicable deductions.
Basel III allows for insured depository institutions to make a one-time election not to include most elements of accumulated other comprehensive income in regulatory capital and instead effectively use the existing treatment under the general risk-based capital rules. The Company and the Bank made this opt-out election in the first quarter of 2015 to avoid significant variations in the level of capital depending upon the impact of interest rate fluctuations on the fair value of our investment securities portfolio.
Basel III also changed the risk-weights of assets in an effort to better reflect credit risk and other risk exposures.
Basel III limits capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of 2.5% of common equity tier 1 capital, tier 1 capital and total capital to risk-weighted assets in addition to the amount necessary to meet minimum risk-based capital requirements. Basel III requires the Bank to maintain: (i) a minimum ratio of Common Equity Tier 1 (“CET1”) to risk-weighted assets of 4.5%, plus a 2.5% capital conservation buffer (the “CCB”) (effectively resulting in a minimum ratio of CET1 to risk-weighted assets of 7.0%); (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of 6.0%, plus the CCB (effectively resulting in a minimum Tier 1 capital ratio of 8.5%); (iii) a minimum ratio of Total (Tier 1 plus Tier 2) capital to risk-weighted assets of at least 8.0%, plus the CCB (effectively resulting in a minimum total capital ratio of 10.5%); and (iv) a minimum leverage ratio of 4.0%, calculated as the ratio of Tier 1 capital to balance sheet exposures plus certain off-balance sheet exposures (computed as the average for each quarter of the month-end ratios for the quarter).
Basel III provides for a number of deductions from and adjustments to CET1, including the deduction of mortgage servicing rights, deferred tax assets dependent upon future taxable income and significant investments in non-consolidated financial entities if any one such category exceeds 10.0% of CET1 or if all such categories in the aggregate exceed 15.0% of CET1.
In addition to Basel III, the Dodd-Frank Act requires or permits federal banking agencies to adopt regulations affecting capital requirements in a number of respects, including potentially more stringent capital requirements for systemically important financial institutions. Accordingly, the regulations ultimately applicable to the Company may differ substantially from Basel III. Requirements of higher capital levels or higher levels of liquid assets could adversely impact the Company’s net income and return on equity.
In December 2018, the federal banking agencies issued a final rule to address regulatory treatment of credit loss allowances under the Current Expected Credit Losses (“CECL”). The rule revised the federal banking agencies’ regulatory capital rules to identify which credit loss allowances under the CECL model are eligible for inclusion in regulatory capital and to provide banking organizations the option to phase in over three years the day-one adverse effects on regulatory capital that may result from the adoption of the CECL model. Due to COVID-19, federal banking agencies issued an interim final rule that delayed the estimated impact on regulatory capital resulting from the adoption of CECL. The interim final rule provided banking organizations that implemented CECL prior to the end of 2020 the option to delay for two years the estimated impact of CECL on regulatory capital relative to regulatory capital determined under the prior incurred loss methodology, followed by a three-year transition period to phase out the aggregate amount of capital benefit provided during the initial two-year delay. On August 26, 2020, the federal
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banking agencies issued a final rule that made certain technical changes to the interim final rule, including expanding the pool of eligible institutions. The changes in the final rule applied only to those banking organizations that elected the CECL transition relief provided for under the rule. The Company did not elect this transition relief.
Economic Growth, Regulatory Relief and Consumer Protection Act
On May 25, 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act (the “Regulatory Relief Act”) was enacted, which repealed or modified certain provisions of the Dodd-Frank Act and eased restrictions on all but the largest banks (those with consolidated assets in excess of $250 billion). Bank holding companies with consolidated assets of less than $100 billion, including Farmers, are no longer subject to enhanced prudential standards. The Regulatory Relief Act also relieves bank holding companies and banks with consolidated assets of less than $100 billion, including Farmers, from certain record-keeping, reporting and disclosure requirements.
Volcker Rule
In December 2013, five federal agencies adopted a final regulation implementing the Volcker Rule provision of the Dodd-Frank Act (the “Volcker Rule”). The Volcker Rule places limits on the trading activity of insured depository institutions and entities affiliated with a depository institution, subject to certain exceptions. The trading activity includes a purchase or sale as principal of a security, derivative, commodity future or option on any such instrument in order to benefit from short-term price movements or to realize short-term profits. The Volcker Rule exempts specified U.S. Government, agency and/or municipal obligations, and it exempts trading conducted in certain capacities, including as a broker or other agent, through a deferred compensation or pension plan, as a fiduciary on behalf of customers, to satisfy a debt previously contracted, repurchase and securities lending agreements and risk-mitigating hedging activities.
The Volcker Rule also prohibits a banking entity from having an ownership interest in, or certain relationships with, a hedge fund or private equity fund, with a number of exceptions.
In July 2019, the federal bank regulatory agencies that adopted the Volcker Rule adopted a final rule to exempt certain community banks, including Farmers, from such rule consistent with the Regulatory Relief Act. Under the final rule, community banks with $10 billion or less in total consolidated assets and total trading assets and liabilities of 5.0% or less of total consolidated assets were excluded from the restrictions of the Volcker Rule. On June 25, 2020, the federal bank regulatory agencies also finalized a rule modifying the Volcker Rule’s prohibition on banking entities investing in or sponsoring covered funds. Such rule permits certain banking entities to offer financial services and engage in other activities that do not raise concerns that the Volcker Rule was originally intended to address.
The Bank does not engage in any of the trading activities or own any of the types of funds prohibited by the Volcker Rule.
Prompt Corrective Action
The federal banking agencies have established a system of prompt corrective action to resolve certain problems of undercapitalized institutions. This system is based on five capital level categories for insured depository institutions: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.”
The federal banking agencies may (or in some cases must) take certain supervisory actions depending upon a bank’s capital level. For example, the banking agencies must appoint a receiver or conservator for a bank within 90 days after it becomes “critically undercapitalized” unless the bank’s primary regulator determines, with the concurrence of the FDIC, that other action would better achieve regulatory purposes. Banking operations otherwise may be significantly affected depending on a bank’s capital category. For example, a bank that is not “well capitalized” generally is prohibited from accepting brokered deposits and offering interest rates on deposits higher than the prevailing rate in its market, and the holding company of any undercapitalized depository institution must guarantee, in part, specific aspects of the bank’s capital plan for the plan to be acceptable.
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Federal law permits the OCC to order the pro rata assessment of shareholders of a national bank whose capital stock has become impaired, by losses or otherwise, to relieve a deficiency in such national bank’s capital stock. This statute also provides for the enforcement of any such pro rata assessment of shareholders of such national bank to cover such impairment of capital stock by sale, to the extent necessary, of the capital stock owned by any assessed shareholder failing to pay the assessment. As the sole shareholder of Farmers Bank, the Company is subject to such provisions.
Deposit Insurance
Substantially all of the deposits of the Bank are insured up to applicable limits by the DIF of the FDIC, and Farmers Bank is assessed deposit insurance premiums to maintain the DIF. The general insurance limit is $250,000 per separately insured depositor. This insurance is backed by the full faith and credit of the U.S. Government. Insurance premiums for each insured institution are determined based upon the institution’s capital level and supervisory rating provided to the FDIC by the institution’s primary federal regulator and other information deemed by the FDIC to be relevant to the risk posed to the DIF by the institution. The assessment rate is then applied to the amount of the institution’s deposits to determine the institution’s insurance premium.
The FDIC assesses quarterly deposit insurance premiums on each insured institution based on risk characteristics of the institution and may also impose special assessments in emergency situations. The premiums fund the DIF. Pursuant to the Dodd-Frank Act, the FDIC has established 2.0% as the designated reserve ratio (“DRR”), which is the amount in the DIF as a percentage of all DIF insured deposits. In 2016, the FDIC adopted final rules designed to meet the statutory minimum DRR of 1.35%. The Dodd-Frank Act requires the FDIC to offset the effect on institutions with assets of less than $10 billion of the increase in the statutory minimum DRR to 1.35% from the former statutory minimum of 1.15%. Although the FDIC’s new rules reduced assessment rates on all banks, they imposed a surcharge on banks with assets of $10 billion or more to be paid until the DRR reaches 1.35%. The rules also provide assessment credits to banks with assets of less than $1 billion for the portion of their assessments that contribute to the increase of the DRR to 1.35%. The rules further changed the method of determining risk-based assessment rates for established banks with less than $10 billion in assets to better ensure that banks taking on greater risks pay more for deposit insurance than banks that take on less risk. The DRR reached 1.40% on June 30, 2019, but as of June 30, 2020, the DRR fell below the statutory minimum to 1.30%. This resulted in the FDIC adopting a restoration plan that requires the restoration of the DRR to 1.35% by September 30, 2028. The restoration plan maintained the scheduled assessment rates for all insured institutions.
As insurer, the FDIC is authorized to conduct examinations of, and to require reporting by, federally-insured institutions. It also may prohibit any federally-insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious threat to the DIF. The FDIC also has the authority to take enforcement actions against insured institutions. Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged or is engaging in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC or written agreement entered into with the FDIC. The management of the Bank does not know of any practice, condition or violation that might lead to termination of deposit insurance.
Fiscal and Monetary Policies
The Company’s business and earnings are affected significantly by the fiscal and monetary policies of the federal government and its agencies. The Company is particularly affected by the policies of the Federal Reserve Board, which regulates the supply of money and credit in the United States in order to influence general economic conditions, primarily through open market operations in U.S. government securities, changes in the discount rate on bank borrowings and changes in the reserve requirements against depository institutions’ deposits. These policies and regulations significantly affect the overall growth and distribution of loans, investments and deposits, as well as interest rates charged on loans and paid on deposits.
The monetary policies of the Federal Reserve Board have had a significant effect on operations and results of financial institutions in the past and are expected to have significant effects in the future. In view of the changing conditions in the economy, the money markets and activities of monetary and fiscal authorities, Farmers can make no predictions as to future changes in interest rates, credit availability or deposit levels.
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Community Reinvestment Act
The CRA requires depository institutions to assist in meeting the credit needs of their market areas consistent with safe and sound banking practice. Under the CRA, each depository institution is required to help meet the credit needs of its market areas by, among other things, providing credit to low and moderate-income individuals and communities. Depository institutions are periodically examined for compliance with the CRA and are assigned ratings. In order for a bank holding company to commence any new activity permitted by the BHCA, or to acquire any company engaged in any new activity permitted by the BHCA, each insured depository institution subsidiary of the bank holding company must have received a rating of at least “satisfactory” in its most recent examination under the CRA. Furthermore, banking regulators take into account CRA ratings when considering approval of a proposed transaction. Farmers received a rating of “satisfactory” in its most recent CRA examination.
Customer Privacy
Farmers Bank is subject to regulations limiting the ability of financial institutions to disclose non-public information about consumers to nonaffiliated third parties. These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow customers to prevent disclosure of certain personal information to a nonaffiliated third party. These regulations affect how consumer information is transmitted and conveyed to outside vendors.
Anti-Money Laundering and the USA Patriot Act
The Uniting and Strengthening of America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA Patriot Act”) and its related regulations require insured depository institutions, broker-dealers and certain other financial institutions to have policies, procedures and controls to detect, prevent, and report money laundering and terrorist financing. The USA Patriot Act and its regulations also provide for information sharing, subject to conditions, between federal law enforcement agencies and financial institutions, as well as among financial institutions, for counter-terrorism purposes. Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious legal and reputational consequences for the institution. In addition, federal banking agencies are required, when reviewing bank holding company acquisition and bank merger applications, to take into account the effectiveness of the anti-money laundering policies, procedures and controls of the applicants.
Corporate Governance
The Sarbanes-Oxley Act of 2002 effected broad reforms to areas of corporate governance and financial reporting for public companies under the jurisdiction of the Commission. The Company’s corporate governance policies include an Audit Committee Charter, a Compensation Committee Charter, Corporate Governance and Nominating Committee Charter and Code of Business Conduct and Ethics. The Board of Directors reviews the Company’s corporate governance practices on a continuing basis. These and other corporate governance policies have been provided previously to shareholders and are available, along with other information on Farmers’ corporate governance practices, on the Company’s website at www.farmersbankgroup.com .
As directed by Section 302(a) of the Sarbanes-Oxley Act, the Company’s chief executive officer and chief financial officer are each required to certify that the Company’s Quarterly and Annual Reports do not contain any untrue statement of a material fact. The rules have several requirements, including having these officers certify that: they are responsible for establishing, maintaining and regularly evaluating the effectiveness of the Company’s internal controls, they have made certain disclosures about the Company’s internal controls to its auditors and the audit committee of the Board of Directors and they have included information in the Company’s Quarterly and Annual Reports about their evaluation and whether there have been significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the evaluation.
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Executive and Incentive Compensation
In June 2010, the Federal Reserve Board, OCC and FDIC issued joint interagency guidance on incentive compensation policies (the “Joint Guidance”) intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking. This principles-based guidance, which covers all employees that have the ability to materially affect the risk profile of an organization, either individually or as part of a group, is based upon the key principles that a banking organization’s incentive compensation arrangements should: (i) provide incentives that do not encourage risk-taking beyond the organization’s ability to effectively identify and manage risks; (ii) be compatible with effective internal controls and risk management; and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.
Pursuant to the Joint Guidance, the Federal Reserve Board will review as part of a regular, risk-focused examination process, the incentive compensation arrangements of financial institutions such as Farmers. Such reviews will be tailored to each organization based on the scope and complexity of the organization’s activities and the prevalence of incentive compensation arrangements. The findings of the supervisory initiatives will be included in reports of examination and deficiencies will be incorporated into the institution’s supervisory ratings, which can affect the institution’s ability to make acquisitions and take other actions. Enforcement actions may be taken against an institution if its incentive compensation arrangements, or related risk-management control or governance processes, pose a risk to the organization’s safety and soundness, and prompt and effective measures are not being taken to correct the deficiencies.
The Dodd-Frank Act also provides shareholders the opportunity to cast a non-binding vote on executive compensation practices, imposes new executive compensation disclosure requirements, and contains additional considerations of the independence of compensation advisors.
A new compliant clawback policy was approved by the Board of Directors on September 26, 2023. See Exhibit 97.1 for the policy relating to recovery of erroneously awarded compensation.
Cybersecurity
Federal banking regulators issued two related statements regarding cybersecurity in 2015. One statement indicates that financial institutions should design multiple layers of security controls to establish several lines of defense and to ensure that their risk management processes also address the risk posed by compromised customer credentials, including security measures to reliably authenticate customers accessing Internet-based services of the financial institution. The second statement indicates that management of financial institutions are expected to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption and maintenance of the financial institution’s operations after a cybersecurity attack involving destructive malware. A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations and address rebuilding network capabilities and restoring data if the financial institution or its critical service providers fall victim to this type of cybersecurity attack. If the Bank fails to observe the regulatory guidance, it could be subject to various regulatory sanctions, including financial penalties.
In November 2021, the federal bank regulatory agencies issued a final rules that became effective in May 2022, requiring banking organizations that experience a computer-security incident to notify certain entities. A computer-security incident occurs when actual or potential harm to the confidentiality, integrity or availability of information or the information system occurs, or there is a violation or imminent threat of a violation to banking security policies and procedures. The affected bank must notify its respective federal regulator of the computer-security incident as soon as possible and no later than 36 hours after the bank determine a computer-security incident that rises to the level of a notification incident has occurred. These notifications are intended to promote early awareness of threats to banking organizations and will help banks react to those threats before they manifest into larger incidents. This rule also requires bank service providers to notify their bank organization customers of a computer-security incident that has occurred, or is reasonably likely to cause, a material service disruption or degradation for four or more hours.
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The Cyber Incident Reporting for Critical Infrastructure Act, enacted in March 2022, requires certain covered entities to report a covered incident to the U.S. Department of Homeland Security's Cybersecurity & Infrastructure Security Agency ("CISA") within 72 hours after a covered entity reasonably believes an incident has occurred. Separate reporting to CISA will also be required within 24 hours if a ransom payment is made as a result of a ransomware attack.
The SEC adopted a new rule on Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure by Public Companies in 2023, which applies to all public companies subject to the reporting requirements of the Exchange Act and requires disclosure of material cybersecurity incidents in Current Reports on Form 8-K and periodic disclosure of cybersecurity risk management, strategy, and governance in annual reports in Annual Reports on Form 10-K.
State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations and many states have recently implemented or modified their data breach notification and data privacy requirements. The Company expects this trend of state-level cybersecurity regulatory activity to continue, and continues to monitor these developments.
In the ordinary course of its business, the Bank relies on electronic communications and information systems to conduct its operations and to store sensitive data, and employs a variety of preventative and detective tools to monitor, block, and provide alerts regarding suspicious activity, as well as to report on any suspected advanced persistent threats. Notwithstanding these defensive measures, the threat from cybersecurity attacks is severe, attacks are sophisticated and increasing in volume, and attackers respond rapidly to changes in defensive measures. While the Bank has not, to date, detected a significant compromise, significant data loss or any material financial losses related to cybersecurity attacks, the Bank’s systems and those of its customers and third-party service providers are under constant threat and it is possible that we could experience a future significant event. The Bank expects risks and exposures related to cybersecurity attacks to remain high for the foreseeable future. For further discussion of risks related to cybersecurity, see “Item 1A Risk Factors.” See also the Company’s disclosures regarding risk management, strategy, governance and incident disclosure under “Item 1C.”
Future Legislation and Regulation
Various and significant legislation affecting financial institutions and the financial industry is from time to time introduced in the U.S. Congress and state legislatures, as well as by regulatory agencies, and such legislation may further change banking statutes and the operating environment of the Company in substantial and unpredictable ways. Such initiatives may include proposals to expand or contract the powers of bank holding companies and depository institutions or proposals to substantially change the financial institution regulatory system. With the enactment and the continuing implementation of the Dodd-Frank Act and regulations thereunder, the nature and extent of future legislative and regulatory changes affecting financial institutions remains very unpredictable.
A change in legislation affecting financial institutions and the financial industry could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance depending upon whether any of this potential legislation will be enacted, and if enacted, the effect that it or any implementing regulations, would have on the financial condition or results of operations of the Company or any of its subsidiaries. Farmers cannot predict the scope and timing of any such future legislation and, if enacted, the effect that it could have on its business, financial condition or results of operations.
Also, such statutes, regulations and policies are continually under review by the U.S. Congress and state legislatures and federal and state regulatory agencies and are subject to change at any time, particularly in the current economic and regulatory environment. Any such change in statutes, regulations or regulatory policies applicable to the Company could have a material effect on the business of the Company.
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Information About Our Executive Officers
The names, ages and positions of Farmers’ executive officers as of March 1, 2025:
|
Name |
|
Age |
|
Title |
|
Troy Adair |
|
58 |
|
Executive Vice President, Secretary, Treasurer and Chief Financial Officer of Farmers and Senior Executive Vice President and Chief Financial Officer of Farmers Bank |
|
Kevin J. Helmick |
|
53 |
|
President and Chief Executive Officer of Farmers and Farmers Bank |
|
Brian E. Jackson |
|
55 |
|
Executive Vice President and Chief Information Officer of Farmers Bank |
|
Michael E. Matuszak |
|
57 |
|
Senior Executive Vice President and Chief Operating Officer of Farmers Bank |
|
Mark A. Nicastro |
|
54 |
|
Executive Vice President and Chief Human Resources Officer of Farmers Bank |
|
Michael Oberhaus |
|
48 |
|
Executive Vice President and Chief Risk Officer of Farmers Bank |
|
Joseph W. Sabat |
|
64 |
|
Senior Vice President and Chief Accounting Officer of Farmers Bank |
|
Timothy F. Shaffer |
|
63 |
|
Senior Executive Vice President and Chief Banking Officer of Farmers Bank |
|
Amber Wallace Soukenik |
|
59 |
|
Senior Executive Vice President and Chief Retail/Marketing Officer of Farmers Bank |
|
Mark J. Wenick |
|
65 |
|
Senior Executive Vice President and Chief Wealth Management Officer of Farmers Bank |
Officers are generally elected annually by the Board of Directors. The term of office for all the above executive officers is for the period ending with the next annual meeting.
Principal Occupation and Business Experience of Executive Officers
Mr. Adair has served as Executive Vice President, Secretary, Treasurer and Chief Financial Officer of Farmers and Senior Executive Vice President and Chief Financial Officer of Farmers Bank since August 2021. Mr. Adair joined Farmers in June of 2021 as Executive Vice President of Finance. Prior to that time, Mr. Adair was the treasurer of Home Savings Bank/Premier Bank from February 2016 through June of 2021 and Director of Risk Management from February of 2002 to February of 2016. Mr. Adair has 37 years of experience in finance and accounting in the banking industry.
Mr. Helmick is the President and Chief Executive Officer of Farmers and Farmers Bank, a position he has held since November 2013. Prior to becoming President, Mr. Helmick was Secretary of Farmers and Executive Vice President – Wealth Management and Retail Services of Farmers Bank since January 2012. Mr. Helmick has been with the Company for 30 years and has a retail and investment background, including an MBA and CFP designation. From 1997 through 2008, Mr. Helmick served as the Vice President and Program Manager for Farmers Investments. In 2008, Mr. Helmick was promoted to Senior Vice President of Wealth Management and Retail Services where he was responsible for the management and oversight of the retail investment area of Farmers Bank, Farmers Insurance, and all branch sales and operational functions.
Mr. Jackson is the Executive Vice President and Chief Information Officer of Farmers Bank, a position he has held since May 2009. Prior to coming to the Company, Mr. Jackson was Assistant Vice President and Information Technology Manager with Home Savings Bank since 1993. He has over 31 years of experience in the IT field. Mr. Jackson was appointed as an executive officer in 2012.
Mr. Nicastro is the Executive Vice President and Chief Human Resources Officer of Farmers Bank. Mr. Nicastro was appointed to that position in 2017 and previously served as Director of Human Resources since joining Farmers in July 2009. Prior to that, Mr. Nicastro served as Staffing and Compliance Manager for Huntington National Bank (2007-2008) and Regional Human Resources Manager for Sky Bank from 2004 until 2007. Mr. Nicastro has an MBA, and has more than 26 years of experience in Human Resource Management from both large multi-national banks and regional community banks. He was appointed as an executive officer in 2012.
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Mr. Matuszak is the Senior Executive Vice President and Chief Operating Officer of Farmers Bank, a position he has held since December of 2022. Most recently, Mr. Matuszak served as the Vice President, Cloud Services with Wellmark Blue Cross Blue Shield for 6 years, becoming Vice President, Cloud Services and CISO in 2019. Mr. Matuszak has more than 26 years of experience in operations, facilities, cybersecurity and software development throughout the financial services, insurance and healthcare industries. He also holds certifications in Six Sigma and ITIL and a master’s degree in technical communications.
Mr. Oberhaus is currently the Executive Vice President and Chief Risk Officer of Farmers Bank. Mr. Oberhaus joined Farmers National Bank as part of the merger with First National Bank of Orrville in June of 2015 as the company’s Enterprise Risk Manager. Prior to the merger Mr. Oberhaus served as the SVP and Chief Risk Officer of First National Bank of Orrville and brings more than 26 years of experience in banking.
Mr. Sabat is the Senior Vice President and Chief Accounting Officer of Farmers Bank. Mr. Sabat was appointed to that position in June 2021 and previously served as Controller of Farmers Bank since April 2006. Prior to coming to the Company, Mr. Sabat was with a regional public accounting firm. Mr. Sabat has 29 years of experience in the accounting, finance and auditing fields. He is a certified public accountant and was appointed as an executive officer in 2012.
Mr. Shaffer serves as Senior Executive Vice President and Chief Banking Officer and has held that title since January of 2025. Previously, Mr. Shaffer served as Chief Credit Officer from 2021 through January 2025. He was previously Regional President and held that title from July of 2015 through 2020. Mr. Shaffer also served as the Director of Commercial Banking & Private Client Services. In October of 2011, Mr. Shaffer joined Farmers Bank as the Commercial Lending Manager, overseeing commercial lending, small business lending and treasury management. Mr. Shaffer has over 35 years of banking and lending experience in the Mahoning Valley market. Mr. Shaffer was appointed as an executive officer in 2014.
Ms. Wallace Soukenik has served as Senior Executive Vice President and Chief Retail/Marketing Officer for Farmers Bank since November 2013. In August 2008, Ms. Wallace Soukenik joined Farmers Bank as Senior Vice President and Director of Marketing. She has 34 years of experience in the marketing field. Prior to joining the Company, Ms. Wallace Soukenik served as the Assistant Vice President of Marketing and Physician Relations at Trumbull Memorial Hospital. She was appointed as an executive officer in 2012.
Mr. Wenick is Senior Executive Vice President and Chief Wealth Management Officer of Farmers Bank. Prior to coming to Farmers National Bank in 2017, Mr. Wenick was regional president of Chemical Bank for 3 years. Prior to that, Mr. Wenick spent 5 years in local bank investment and trust positions. He brings more than 41 years of financial expertise in the area of wealth management.
Item 1A. Ris k Factors.
The following are certain risk factors that could materially and negatively affect our business, results of operations, cash flows or financial condition. These risk factors should be considered in connection with evaluating the forward-looking statements contained in this Annual Report on Form 10-K because these factors could cause our actual results or financial condition to differ materially from those projected in forward-looking statements. The risks that are discussed below are not the only ones we face. If any of the following risks occur, our business, financial condition or results of operations could be negatively affected. Additional risks that are not presently known or that we presently deem to be immaterial could also have a material, adverse impact on our business, financial condition or results of operations.
Risks Relating to General Economic and Market Conditions
Changes in economic, political, and market conditions may adversely affect our industry and our business.
Our success depends in part on national and local economic, political, and market conditions as well as governmental monetary and other financial policies. Conditions such as inflation, recession, unemployment, changes in interest rates, money supply, governmental fiscal policies and other factors beyond our control may adversely affect our asset quality, deposit levels and loan demand and, therefore, our earnings. Because we have a significant amount
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of real estate loans, additional decreases in real estate values could adversely affect the value of property used as collateral and our ability to sell the collateral upon foreclosure. Adverse changes in the economy may also have a negative effect on the ability of our borrowers to make timely repayments of their loans, which would have an adverse impact on our earnings. If during a period of reduced real estate values we are required to liquidate the collateral securing loans to satisfy the debt or to increase our allowance for loan losses, it could materially reduce our profitability and adversely affect our financial condition. The majority of our loans are to individuals and businesses in Northeast Ohio. Consequently, further significant declines in the economy in the area could have a material adverse effect on our business, financial condition or results of operations. It is uncertain when credit trends in our market will reverse, and, therefore, future earnings are susceptible to further declining credit conditions in the market in which we operate. The continued impact on economic conditions caused by the currently inflationary environment and increases in market interest rates could have an adverse effect on our asset quality, deposit levels and loan demand, and, therefore, our financial condition and results of operations.
Instability in geopolitical matters, as well as volatility in financial markets, may have a material adverse effect on our industry and our business.
The macroeconomic environment in the U.S. is susceptible to global events and volatility in financial markets. The unrest in Israel and the Middle East could escalate and cause financial market volatility. In addition, the ongoing invasion of Ukraine by Russian military forces that began in early 2022 resulted in significant market and other disruptions, including volatility of commodity prices and supply of energy, food, and other commodities. Trade negotiations between the U.S. and other nations remain uncertain as the extent and duration of this military conflict and resulting market disruptions could be significant and could potentially have substantial impact on the global economy and our business for an unknown period of time.
Changes to United States tariff and import/export regulations may have a negative effect on our industry and our business.
There has been on-going discussion and commentary regarding potential significant changes to United States trade policies and tariffs, including imposing higher tariffs or implementing more restrictive trade policies. The current administration has created significant uncertainty about the future relationship between the United States and other countries with respect to the trade policies and tariffs. These tariffs or other trade restrictions on products and materials that our customers import or export, or the perception that any of these tariffs or other trade restrictions could occur, could cause the prices of our customers’ products to increase which could reduce demand for such products, or reduce our customer margins, and adversely impact their revenues, financial results and ability to service debt. This could adversely affect our financial condition and results of operations. In addition, to the extent changes in the political environment have a negative impact on us or on the markets in which we operate, our business, financial condition and results of operations could be materially and adversely impacted in the future.
Adverse changes in the ability or willingness of our customers to meet their repayment obligations to the Company could adversely impact our liquidity, financial condition and results of operations.
Our business consists mainly of making loans to salaried people or other wage earners who generally depend on their earnings to meet their repayment obligations, and our ability to collect on loans depends on the willingness and repayment ability of our customers. Adverse changes in the ability or willingness of a significant portion of our customers to repay their obligations to the Company, whether due to changes in general economic, political or social conditions including the results of national, state or local elections, the cost of consumer goods, interest rates, natural disasters, acts of war or terrorism, prolonged public health crisis or a pandemic, such as COVID-19, or other causes, or events affecting our customers such as unemployment, major medical expenses, bankruptcy, divorce or death, could have a material effect on our liquidity, financial condition and results of operations.
We maintain an allowance for credit losses in our financial statements. Under CECL the credit loss estimation process involves procedures that consider the unique characteristics of the Company’s loan portfolio segments, based on estimates and assumptions at that date. However, the amount of actual future credit losses we may incur is susceptible to changes in economic, operating and other conditions within our various local markets, which may be beyond our control, and such losses may exceed current estimates. Although Management believes that the Company’s allowance for credit losses is adequate to absorb losses on any existing loans that may become
15
uncollectible, we cannot estimate loan losses with certainty, and we cannot provide any assurances that our allowance for loan losses will prove sufficient to cover actual credit losses in the future. Credit losses in excess of our reserves may adversely affect our financial condition and results of operations.
In any event, any reduced liquidity could negatively impact our ability to be able to fund loans, or to pay the principal and interest on any of our outstanding debt securities at any time, including when due.
Changes in Interest rates could adversely affect our income and financial condition.
Our earnings and cash flow are dependent upon our net interest income. Net interest income is the difference between the interest income generated by our interest-earning assets (consisting primarily of loans and, to a lesser extent, securities) and the interest expense generated by our interest-bearing liabilities (consisting primarily of deposits and wholesale borrowings). Our level of net interest income is primarily a function of the average balance of our interest-earning assets, the average balance of our interest-bearing liabilities and the spread between the yield on such assets and the cost of such liabilities. These factors are influenced by both the pricing and mix of our interest-earning assets and our interest-bearing liabilities, which, in turn, are impacted by external factors, such as the local economy, competition for loans and deposits, the monetary policy of the Federal Reserve Board and market interest rates.
Interest rates are beyond our control, and they fluctuate in response to general economic conditions and the policies of various governmental and regulatory agencies, in particular, the Federal Reserve Board. Changes in monetary policy, including changes in interest rates, will influence the origination of loans, the purchase of investments, the generation of deposits and the rates received on loans and investment securities and paid on deposits. While we have taken measures intended to manage the risks of operating in a changing interest rate environment, there can be no assurance that such measures will be effective in avoiding undue interest rate risk. See additional interest rate risk discussion under the Market Risk section found in Item 7A of this Annual Report on Form 10-K.
Inflation may adversely impact our business and our customers.
Inflation and rapid increases in interest rates have led to a decline in the trading value of previously issued government securities with interest rates below current market interest rates. There is no guarantee that the U.S. Treasury Department, FDIC and Federal Reserve Board will provide access to uninsured funds in the future in the event of the closure of other banks or financial institutions, or that they would do so in a timely fashion. In addition, inflation generally increases the cost of goods and services we use in our business operations, such as electricity and other utilities, which increases our noninterest expenses. Furthermore, our customers are also affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans with us.
Defaults by another larger financial institution could adversely affect financial markets generally.
The commercial soundness of many financial institutions may be closely interrelated as a result of credit, trading, clearing or other relationships between institutions. As a result, concerns about, or a default or threatened default by, one institution could lead to significant market-wide liquidity and credit problems, losses or defaults by other institutions. This is sometimes referred to as “systemic risk” and may adversely affect financial intermediaries, such as clearing agencies, clearing houses, banks, securities firms and exchanges, with which we and our subsidiaries interact on a daily basis, and therefore could adversely affect our business, financial condition or results of operations.
Our financial condition, results of operation, and stock price may be negatively impacted by unrelated bank failures and negative depositor confidence in depository institutions.
During 2023, several high profile bank failures caused uncertainty in the investor community and negative confidence among bank customers generally.
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These failures and any additional failures that could occur may reduce customer confidence, affect sources of funding and liquidity, increase regulatory requirements and costs, adversely affect financial markets and/or have a negative reputational ramification for the financial services industry, including us. These bank failures led to volatility and declines in the market for bank stocks and questions about depositor confidence in depository institutions, which in turn led to a greater focus by institutions, investors, and regulators on the on-balance sheet liquidity of and funding sources for financial institutions and the composition of its deposits. Notwithstanding, our efforts to promote deposit insurance coverage with our customers and otherwise effectively manage our liquidity, deposit portfolio retention, and other related matters, our financial condition, results of operation, and stock price may be adversely affected by future negative events within the banking sector and adverse customer or investor responses to such events.
Risks Related to Our Business
We extend credit to a variety of customers based on internally set standards and judgment. We manage credit risk through a program of underwriting standards, the review of certain credit decisions and an on-going process of assessment of the quality of credit already extended. Our credit standards and on-going process of credit assessment might not protect us from significant credit losses.
We take credit risk by virtue of making loans, extending loan commitments and letters of credit and, to a lesser degree, purchasing non-governmental securities. Our exposure to credit risk is managed through the use of consistent underwriting standards that emphasize “in-market” lending, while avoiding highly leveraged transactions as well as excessive industry and other concentrations. Our credit administration function employs risk management techniques to ensure that loans adhere to corporate policy and problem loans are promptly identified. While these procedures are designed to provide us with the information needed to implement policy adjustments where necessary, and to take proactive corrective actions, there can be no assurance that such measures will be effective in avoiding undue credit risk.
We have significant exposure to risks associated with commercial real estate and residential real estate in our primary markets.
As of December 31, 2024, a majority of our loan portfolio consisted of commercial real estate and residential real estate loans, including real estate development, construction and residential and commercial mortgage loans. Consequently, real estate-related credit risks are a significant concern for us. The adverse consequences from real estate-related credit risks tend to be cyclical and are often driven by national economic developments that are not controllable or entirely foreseeable by us or our borrowers.
Our business depends significantly on general economic conditions in northeastern Ohio and western Pennsylvania. Accordingly, the ability of our borrowers to repay their loans, and the value of the collateral securing such loans, may be significantly affected by economic conditions in the regions we serve or by changes in the local real estate markets. A significant decline in general economic conditions caused by inflation, recession, unemployment, acts of terrorism or other factors beyond our control could have an adverse effect on our business, financial condition or results of operations.
Our indirect lending exposes us to increased credit risks.
A portion of our current lending involves the purchase of consumer automobile installment sales contracts from automobile dealers located in Northeastern Ohio. These loans are for the purchase of new or late model used cars. We serve customers over a broad range of creditworthiness, and the required terms and rates are reflective of those risk profiles. While these loans have higher yields than many of our other loans, such loans involve significant risks in addition to normal credit risk. Potential risk elements associated with indirect lending include the limited personal contact with the borrower as a result of indirect lending through dealers, the absence of assured continued employment of the borrower, the varying general creditworthiness of the borrower, changes in the local economy and difficulty in monitoring collateral. While indirect automobile loans are secured, such loans are secured by depreciating assets and characterized by loan to value ratios that could result in us not recovering the full value of an outstanding loan upon default by the borrower. Delinquencies, charge-offs and repossessions of vehicles in this portfolio are always concerns. If general economic conditions worsen, we may experience higher levels of delinquencies, repossessions and charge-offs.
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Commercial and industrial loans may expose us to greater financial and credit risk than other loans.
As of December 31, 2024, approximately 10.8% of our loan portfolio consisted of commercial and industrial loans. Commercial and industrial loans generally carry larger loan balances and can involve a greater degree of financial and credit risk than other loans. Any significant failure to pay on time by our customers would hurt our earnings and cause a significant increase in non-performing loans. The increased financial and credit risk associated with these types of loans are a result of several factors, including the concentration of principal in a limited number of loans and borrowers, the size of loan balances, the effects of general economic conditions on income-producing properties and the increased difficulty of evaluating and monitoring these types of loans. In addition, when underwriting a commercial or industrial loan, we may take a security interest in commercial real estate, and, in some instances upon a default by the borrower, we may foreclose on and take title to the property, which may lead to potential financial risks. An increase in non-performing loans could result in a net loss of earnings from these loans, an increase in the provision for loan losses and an increase in loan charge-offs, all of which could have a material adverse effect on our business, financial condition or results of operations.
Our allowance for credit losses may not be adequate to cover the expected, lifetime losses in our loan portfolio.
We maintain an allowance for credit losses that we believe is a reasonable estimate of the expected losses within the CECL model, based on management’s quarterly analysis of our loan portfolio. The determination of the allowance for credit losses requires management to make various assumptions and judgments about the collectability of our loans, including the creditworthiness of our borrowers and the value of real estate and other assets serving as collateral for the repayment of loans. Additional information regarding our allowance for credit losses methodology and the sensitivity of the estimates can be found in the discussion of “CRITICAL ACCOUNTING POLICIES” included in “ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” of this Annual Report on Form 10-K.
Our estimates of future credit losses is susceptible to changes in economic, operating and other conditions, including changes in regulations and interest rates, which may be beyond our control, and the losses may exceed current estimates. We cannot be assured of the amount of timing of losses, nor whether the allowance for credit losses will be adequate in the future.
If our assumptions prove to be incorrect, our allowance for credit losses may not be sufficient to cover the expected losses from our loan portfolio, resulting in the need for additions to the allowance for credit losses which could have a material adverse impact on our financial condition and results of operations. In addition, bank regulators periodically review our allowance for credit losses as part of their examination process and may require management to increase the allowance or recognize further loan charge-offs based on judgments different than those of management.
The accounting guidance under the CECL model requires banks to record, at the time of origination, credit losses expected throughout the life of financial assets measured at amortized cost, including loan receivables, debt securities and reinsurance receivables, and off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees and other similar instruments) and net investments in leases recognized by a lessor. Under the CECL model, we are required to use historical information, current conditions and reasonable and supportable forecasts to estimate the expected credit losses. If the methodologies and assumptions we use in the CECL model prove to be incorrect, or inadequate, the allowance for credit losses may not be sufficient, resulting in the need for additional allowance for credit losses to be established, which could have a material adverse impact on our financial condition and results of operations.
The adoption of the CECL model by the Company resulted in a onetime adjustment to equity in the amount of $1.9 million, net of tax. As a result of the implementation of the CECL model, the time horizon over which we are required to estimate future credit losses expanded, which could result in increased volatility in future provisions for credit losses. We may also experience a higher or more volatile provision for credit losses due to higher levels of nonperforming loans and net charge-offs if commercial and consumer customers are unable to make scheduled loan payments.
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We are subject to certain risks with respect to liquidity.
“Liquidity” refers to our ability to generate sufficient cash flows to support our operations and to fulfill our obligations, including commitments to originate loans, to repay our wholesale borrowings and other liabilities and to satisfy the withdrawal of deposits by our customers. Our primary source of liquidity is our core deposit base, which is raised through our retail branch system. Core deposits – savings and money market accounts, time deposits less than $250 thousand and demand deposits—comprised approximately 91.6% of total deposits at December 31, 2024. Additional available unused wholesale sources of liquidity include advances from the FHLB, issuances through dealers in the capital markets and access to certificates of deposit issued through brokers. Liquidity is further provided by unencumbered, or unpledged, investment securities that totaled $414.0 million at December 31, 2024. An inability to raise funds through deposits, borrowings, the sale or pledging as collateral of loans and other assets could have a substantial negative effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities could be impaired by factors that affect us specifically or the financial services industry in general. Factors that could negatively affect our access to liquidity sources include a decrease in the level of our business activity due to a market downturn or negative regulatory action against us. Our ability to borrow could also be impaired by factors that are not specific to us, such as severe disruption of the financial markets or negative news and expectations about the prospects for the financial services industry as a whole, as evidenced by recent turmoil in the domestic and worldwide credit markets.
Our business strategy includes continuing our growth plans. Our business, financial condition or results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively.
We intend to continue pursuing a profitable growth strategy both within our existing markets and in new markets. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in significant growth stages of development. We cannot assure that we will be able to expand our market presence in our existing markets or successfully enter new markets or that any such expansion will not adversely affect our results of operations. Failure to manage our growth effectively could have a material adverse effect on our business, future prospects, financial condition or results of operations and could adversely affect our ability to successfully implement our business strategy. Also, if we grow more slowly than anticipated, our operating results could be materially adversely affected.
We may experience difficulties in integrating acquired businesses, or acquisitions may not perform as expected.
In the future, we may acquire other financial institutions or assets of financial institution. The successful integration of these potential acquisitions depends on our ability to manage the operations and personnel of the acquired businesses. Integrating operations is complex and requires significant efforts and expenses. Potential difficulties we may encounter as part of the acquisition and integration process include the following:
Any of these factors could adversely affect each company’s ability to maintain relationships with customers, suppliers, employees and other constituencies or our ability to achieve the anticipated benefits of the acquisition or could reduce each company’s earnings or otherwise adversely affect our business and financial results after the acquisition.
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We may fail to realize all of the anticipated benefits of acquisitions, which could reduce our anticipated profitability.
We expect that our acquisitions will result in certain synergies, business opportunities and growth prospects, although we may not fully realize these expectations. Our assumptions underlying estimates of expected cost savings may be inaccurate or general industry and business conditions may deteriorate. In addition, our growth and operating strategies for acquired businesses may be different from the strategies that the acquired companies pursued. If these factors limit our ability to integrate or operate the acquired companies successfully or on a timely basis, our expectations of future results of operations, including certain cost savings and synergies expected to result from acquisitions, may not be met.
We may not be able to attract and retain skilled people.
Our success depends, in large part, on our ability to attract and retain key people. Competition for the best people in most activities in which we engage can be intense, and we may not be able to retain or hire the people we want or need. In order to attract and retain qualified employees, we must compensate them at market levels. If we are unable to continue to attract and retain qualified employees, or do so at rates necessary to maintain our competitive position, our performance, including our competitive position, could suffer, and, in turn, adversely affect our business, financial condition or results of operations.
Strong competition within our markets could reduce our ability to attract and retain business.
We encounter significant competition from banks, savings and loan associations, credit unions, mortgage banks, and other financial service companies in our markets. Some of our competitors offer a broader range of products and services than we can offer as a result of their size and ability to achieve economies of scale. Such competition includes major financial companies whose greater resources may afford them a marketplace advantage by enabling them to maintain more numerous banking locations and support extensive promotional and advertising campaigns. Our ability to maintain our history of strong financial performance and return on investment to shareholders will depend in part on our continued ability to compete successfully in our market. Our financial performance and return on investment to shareholders also depends on our ability to expand the scope of available financial services to our customers. In addition to other banks, competitors include securities dealers, brokers, investment advisors and finance and insurance companies. The increasingly competitive environment is, in part, a result of changes in regulation, changes in technology and product delivery systems and the accelerating pace of consolidation among financial service providers.
Consumers may decide not to use banks to complete their financial transactions.
Technology and other changes are allowing parties to utilize alternative methods to complete financial transactions that historically have involved banks. For example, consumers can now maintain funds in brokerage accounts or mutual funds that would have historically been held as bank deposits. Customers may also move money out of bank deposits in favor of other investments, including digital or cryptocurrency. Consumers can also complete transactions such as paying bills and/or transferring funds directly without the assistance of banks. The process of eliminating banks as intermediaries could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. The loss of these revenue streams and the lower cost deposits as a source of funds could have a material adverse effect on our business, financial condition or results of operations.
We are exposed to operational risk.
Similar to any large organization, we are exposed to many types of operational risk, including reputational risk, legal and compliance risk, the risk of fraud or theft by employees or outsiders, unauthorized transactions by employees or operational errors, including clerical or record-keeping errors or those resulting from faulty or disabled computer or telecommunications systems.
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Negative public opinion can result from our actual or alleged conduct in any number of activities, including lending practices, corporate governance and acquisitions, social media and other marketing activities, the implementation of environmental, social, and governance practices, and from actions taken by government regulators and community organizations in response to any of the foregoing. Negative public opinion could adversely affect our ability to attract and keep customers, and could expose us to litigation and regulatory action, and could have a material adverse effect on our stock price or result in heightened volatility.
Given the volume of transactions we process, certain errors may be repeated or compounded before they are discovered and successfully rectified. Our necessary dependence upon automated systems to record and process our transaction volume may further increase the risk that technical system flaws or employee tampering or manipulation of those systems will result in losses that are difficult to detect. We may also be subject to disruptions of our operating systems arising from events that are wholly or partially beyond our control (for example, computer viruses or electrical or telecommunications outages), which may give rise to disruption of service to customers and to financial loss of liability. We are further exposed to the risk that our external vendors may be unable to fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their respective employees as we are) and to the risk that our (or our vendors’) business continuity and data security systems prove to be inadequate.
We depend on the accuracy and completeness of information about our customers.
In deciding whether to extend credit or enter into other transactions and in evaluating and monitoring our loan portfolio, we rely on information provided to us by or on behalf of customers and other third parties, including financial statements, credit reports, and other financial information. We also rely on representations from our customers, counterparties, and other third parties, such as independent auditors, as to the accuracy and completeness of that information. Reliance on inaccurate, incomplete, fraudulent or misleading financial or business information could result in a material adverse effect on our business, financial condition or results of operation.
Unauthorized disclosure of sensitive or confidential customer information, whether through a data breach of our computer systems, third-party service providers’ systems, by cyber-attack or otherwise, could severely harm our business.
As part of our financial institution business, we collect, process and retain sensitive and confidential client and customer information on behalf of our subsidiaries and other third parties. Despite the security measures we have in place, our facilities and systems, and those of our third-party service providers, may be vulnerable to security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming and/or human errors or other similar events. If information security is breached, information could be lost or misappropriated, resulting in financial loss or costs to us or damages to others. Any security breach involving the misappropriation, loss or other unauthorized disclosure of confidential customer information, whether by us or by our vendors, could severely damage our reputation, expose us to the risks of litigation and liability, or disrupt our operations, and have a material adverse effect on our business, financial condition or results of operations. We also depend on third-party vendors for components of our business infrastructure. While we have carefully selected these third-party vendors, we do not control their operations. Further, the operations of our third-party vendors could fail or otherwise become delayed. As such, our business and operations could be adversely affected in the event these vendors are unable to perform their various responsibilities and we are unable to timely and cost-effectively identify acceptable substitute providers.
We have not experienced any material loss relating to a cyber-attack or other information security breach, but there can be no assurance that we will not suffer such attacks or attempted breaches, or incur resulting losses, in the future. Our risks with respect to these threats remains heightened due to the evolving sophistication and frequency of such threats. As cyber-attacks and other attempted information security threats continue to evolve, we may be required to spend significant additional resources in efforts to modify and enhance our protective measures or in investigating or remediating of security breaches or vulnerabilities.
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We depend on our subsidiaries for dividends, distributions and other payments.
As a financial holding company, we are a legal entity separate and distinct from our subsidiaries. Our principal source of funds to pay dividends on our common shares is dividends from these subsidiaries. Federal and state statutory provisions and regulations limit the amount of dividends that our banking and other subsidiaries may pay to us without regulatory approval. In the event our subsidiaries become unable to pay dividends to us, we may not be able to pay dividends on our outstanding common shares. Accordingly, our inability to receive dividends from our subsidiaries could also have a material adverse effect on our business, financial condition and results of operations. Further discussion of our ability to pay dividends can be found under the caption “Dividends and Transactions with Affiliates” in Item 1 of this Annual Report on Form 10-K.
We may elect or be compelled to seek additional capital in the future, but that capital may not be available when it is needed.
We are required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations. Federal banking agencies have proposed extensive changes to their capital requirements; including raising required amounts and eliminating the inclusion of certain instruments from the calculation of capital. The final form of such regulations and their impact on the Company is unknown at this time, but may require us to raise additional capital. In addition, we may elect to raise capital to support our business or to finance acquisitions, if any, or for other anticipated reasons. Our ability to raise additional capital, if needed, will depend on financial performance, conditions in the capital markets, economic conditions and a number of other factors, including the satisfaction or release of preemptive rights in the event of a common share offering, many of which are outside our control. Therefore, there can be no assurance additional capital can be raised when needed or that capital can be raised on acceptable terms. Impairment to our ability to raise capital may have a material adverse effect on our business, financial condition or results of operations.
We may not be able to adapt to technological change.
The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers while reducing costs. Our future success depends, in part, upon our ability to address customer needs by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations. This could include the development, implementation, and adaptation of digital or cryptocurrency, blockchain, and other “fintech” technology. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers.
In addition, our implementation of certain new technologies, such as those related to artificial intelligence and algorithms, in our business processes may have unintended consequences due to their limitations, potential manipulation or our failure to use them effectively. Cloud technologies are also critical to the operation of our systems, and our reliance on cloud technologies is growing. Failure to successfully keep pace with technological change affecting the financial services industry, and failure to successfully manage the risks associated with the implementation of these new technologies, could negatively affect our growth, revenue and net income.
Risks Related to the Legal and Regulatory Environment
Increases in FDIC insurance premiums may have a material adverse effect on our earnings.
The FDIC maintains the Deposit Insurance Fund to resolve the cost of bank failures. Since late 2008, the FDIC has taken various actions intended to maintain a strong funding position and restore reserve ratios of the Deposit Insurance Fund. Those actions included increasing assessment rates for all insured institutions, requiring riskier institutions to pay a larger share of premiums by factoring in rate adjustments based on secured liabilities and unsecured debt levels, and imposing special assessments. In addition, in 2011 the FDIC approved a final rule that changed the deposit insurance assessment base and assessment rate schedule, adopted a new large-bank pricing assessment scheme and set a target size for the Deposit Insurance Fund. The rule, as mandated by the Dodd-Frank Act, finalized a target size for the Deposit Insurance Fund at 2 percent of insured deposits. The FDIC recently adopted rules revising assessments in a manner that benefits banks with assets of less than $10 billion, although there can be no assurance that such assessments will not change in the future.
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We have a limited ability to control the amount of premiums we are required to pay for FDIC insurance. If there are additional financial institution failures or other significant legislative or regulatory changes, the FDIC may be required to increase assessment rates or take actions similar to those taken after 2008. Increases in FDIC insurance assessment rates may materially adversely affect our results of operations and our ability to continue to pay dividends on our common shares at the current rate or at all.
Legislative or regulatory changes or actions, or significant litigation, could adversely impact us or the businesses in which we are engaged.
The financial services industry is extensively regulated. We are subject to extensive state and federal regulation, supervision and legislation that govern almost all aspects of our operations. Laws and regulations may change from time to time and are primarily intended for the protection of consumers, depositors and the Deposit Insurance Fund, and not to benefit our shareholders. Regulations affecting banks and financial services businesses are undergoing continuous change, including the stimulus programs issued in connection with the COVID-19 pandemic, and management cannot predict the effect of these changes. The impact of any changes to laws and regulations or other actions by regulatory agencies may negatively impact us or our ability to increase the value of our business. Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of an institution, the classification of assets by an institution and the adequacy of an institution’s allowance for loan losses. Additionally, actions by regulatory agencies or significant litigation against us could cause us to devote significant time and resources to defending our business and may lead to penalties that materially affect our shareholders and us.
In light of conditions in the global financial markets and the global economy that occurred in the last decade, regulators have increased their focus on the regulation of the financial services industry. Most recently, the U.S. Congress and the federal agencies regulating the financial services industry have acted on an unprecedented scale in responding to the stresses experienced in the global financial markets. Some of the laws enacted by the U. S. Congress and regulations promulgated by federal regulatory agencies subject us, and other financial institutions to which such laws and regulations apply, to additional restrictions, oversight and costs that may have an impact on our business, results of operations or the trading price of our common shares.
In addition to laws, regulations and actions directed at the operations of banks, proposals to reform the housing finance market consider winding down Fannie Mae and Freddie Mac, which could negatively affect our sales of loans.
Even a reduction in regulatory restrictions could adversely affect our operations and our shareholders if less restrictive regulation increases competition within the industry generally or within our markets.
Our results of operations, financial condition or liquidity may be adversely impacted by issues arising in foreclosure practices, including delays in the foreclosure process, related to certain industry deficiencies, as well as potential losses in connection with actual or projected repurchases and indemnification payments related to mortgages sold into the secondary market.
Previous announcements of deficiencies in foreclosure documentation by several large seller/servicer financial institutions have raised various concerns relating to mortgage foreclosure practices. The integrity of the foreclosure process is important to our business, as an originator and servicer of residential mortgages. As a result of our continued focus of concentrating our lending efforts in our primary markets in Ohio, as well as servicing loans for the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), we do not anticipate suspending foreclosure activities. We previously reviewed our foreclosure procedures and concluded they are generally conservative in nature and do not present the significant documentation deficiencies underlying other industry foreclosure problems. Nevertheless, we could face delays and challenges in the foreclosure process arising from claims relating to industry practices generally, which could adversely affect recoveries and our financial results, whether through increased expenses of litigation and property maintenance, deteriorating values of underlying mortgaged properties or unsuccessful litigation results generally.
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In addition, in connection with the origination and sale of residential mortgages into the secondary market, we make certain representations and warranties, which, if breached, may require us to repurchase such loans, substitute other loans or indemnify the purchasers of such loans for actual losses incurred in respect of such loans. Although we believe that our mortgage documentation and procedures have been appropriate and are generally conservative in nature, it is possible that we will receive repurchase requests in the future and we may not be able to reach favorable settlements with respect to such requests. It is therefore possible that we may increase our reserves or may sustain losses associated with such loan repurchases and indemnification payments.
Environmental liability associated with commercial lending could have a material adverse effect on our business, financial condition or results of operations.
A significant portion of our loan portfolio is secured by real property. During the ordinary course of business, we may foreclose on and take title to properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous or toxic substances are found, we may be liable for remediation costs, as well as for personal injury and property damage. In addition, we own and operate certain properties that may be subject to similar environmental liability risks.
Environmental laws and evolving regulation may require us to incur substantial expenses and may materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws and regulations or more stringent interpretations or enforcement policies with respect to existing laws or regulations may increase our exposure to environmental liability. Although we have policies and procedures requiring the performance of an environmental site assessment before initiating any foreclosure action on real property, these assessments may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on our business, financial condition or results of operations.
Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.
Companies are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their environmental, social and governance (“ESG”) practices and disclosure. Investor advocacy groups, investment funds and influential investors are also increasingly focused on these practices, especially as they relate to the environment, health and safety, diversity, labor conditions and human rights. Increased ESG-related compliance costs for us as well as among our third-party suppliers, vendors and various other parties within our supply chain could result in increases to our overall operational costs. Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners, access to capital, and the price of our common shares.
Impairment of investment securities, goodwill, other intangible assets, or deferred tax assets could require charges to earnings, which could result in a negative impact on our results of operations.
Quarterly, the Company evaluates its security portfolio to see if any security has a fair value less than its amortized cost. Once these securities are identified, the Company performs additional analysis to determine whether the decline in fair value resulted from a credit loss or other factors. Under current accounting standards, goodwill and certain other intangible assets with indeterminate lives are no longer amortized but, instead, are assessed for impairment periodically or when impairment indicators are present. Assessment of goodwill and such other intangible assets could result in circumstances where the applicable intangible asset is deemed to be impaired for accounting purposes. Under such circumstances, the intangible asset’s impairment would be reflected as a charge to earnings in the period. Deferred tax assets are only recognized to the extent it is more likely than not they will be realized. Should management determine it is more likely than not that the deferred tax assets will be realized, a valuation allowance with a change to earnings would be reflected in the period.
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Changes and uncertainty in tax laws could adversely affect our performance.
We are subject to extensive federal, state and local taxes, including income, excise, sales/use, payroll, financial institutions tax, withholding and ad valorem taxes. Changes to our taxes could have a material adverse effect on our results of operations and, as described in the above risk discussion and below, the fair value of net deferred tax assets. In addition, our customers are subject to a wide variety of federal, state and local taxes. Changes in taxes paid by our customers may adversely affect their ability to purchase homes or consumer products, which could adversely affect their demand for our loans and deposit products. In addition, such negative effects on our customers could result in defaults on the loans we have made and decrease the value of mortgage-backed securities in which we have invested.
The Tax Cuts and Jobs Act, among other changes, imposed additional limitations on the federal income tax deductions individual taxpayers may take for mortgage loan interest payments and for payments of state and local taxes, including real property taxes. The Tax Cuts and Jobs Act also imposed additional limitations on the deductibility of business interest expense and eliminated other deductions in their entirety, including deductions for certain home equity loan interest payments. Such limits and eliminations may result in customer defaults on loans we have made and decrease the value of mortgage-backed securities in which we have invested.
Anti-takeover provisions could delay or prevent an acquisition or change in control by a third party.
Provisions of the Ohio General Corporation Law, our Amended Articles of Incorporation, and our Amended Code of Regulations, including a staggered board and supermajority voting requirements, could make it more difficult for a third party to acquire control of us or could have the effect of discouraging a third party from attempting to acquire control of us.
We may be a defendant from time to time in the future in a variety of litigation and other actions, which could have a material adverse effect on our business, financial condition or results of operations.
Our subsidiaries and we may be involved from time to time in the future in a variety of litigation arising out of our business. Our insurance may not cover all claims that may be asserted against us, and any claims asserted against us, regardless of merit or eventual outcome, may harm our reputation. Should the ultimate judgments or settlements in any litigation exceed our insurance coverage, they could have a material adverse effect on our business, financial condition or results of operations. In addition, we may not be able to obtain appropriate types or levels of insurance in the future, nor may we be able to obtain adequate replacement policies with acceptable terms, if at all.
Item 1B. Unresolve d Staff Comments.
There are no matters of unresolved staff comments from the Commission staff.
Item 1C. Cybersecurity
Risk Management and Strategy
In the ordinary course of its business, the Bank relies on electronic communications and information systems to conduct its operations and to store sensitive data, and
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Governance
Item 2. Pr operties.
At December 31, 2024, the Company conducted its business from its main office at 30 South Broad Street, Canfield, Ohio and 62 full-service banking centers and 2 stand-alone loan production offices located in northeast Ohio. Farmers Trust operates five offices in northeast Ohio and Farmers Insurance operates two offices. Farmers also has a back-office operations facility located in Niles, Ohio. See Note 8 to the Consolidated Financial Statements for additional information.
Item 3. Legal Proceedings.
In the normal course of business, the Company and its subsidiaries are at times subject to pending and threatened legal actions, some for which the relief or damages sought are substantial. Although Farmers is not able to predict the outcome of such actions, after reviewing pending and threatened actions with counsel, management believes that, based on the information currently available, the outcome of such actions, individually or in the aggregate, would not have a material adverse effect on the results of operations or stockholders’ equity of the Company. However, it is possible that the ultimate resolution of these matters, if unfavorable, may be material to the results of operations in a particular future period as the time and amount of any resolution of such actions and its relationship to the future results of operations are not known.
Item 4. Mine Safe ty Disclosures.
Not applicable.
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Part II
Item 5. Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuers Purchases of Equity Securities.
Market Information regarding the Company’s Common Shares.
Farmers’ common shares currently trade under the symbol “FMNB” on the Nasdaq Capital Market. Farmers had approximately 3,970 holders of record of common shares at March 1, 2025. The following table sets forth price ranges and dividend information for Farmers’ common shares for the calendar quarters indicated. Quotations reflect inter-dealer prices without retail mark-up, mark-down or commission, and may not represent actual transactions. Certain limitations and restrictions on the ability of Farmers to continue to pay quarterly dividends are described under the caption “Capital Resources” in Item 7 of this Part II, and under the caption “Dividends and Transactions with Affiliates” in Item 1 of Part I.
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||||
|
High |
|
$ |
14.75 |
|
|
$ |
13.36 |
|
|
$ |
16.32 |
|
|
$ |
16.29 |
|
|
Low |
|
$ |
12.29 |
|
|
$ |
11.55 |
|
|
$ |
12.01 |
|
|
$ |
13.64 |
|
|
Cash dividends paid per share |
|
$ |
0.17 |
|
|
$ |
0.17 |
|
|
$ |
0.17 |
|
|
$ |
0.17 |
|
|
Quarter Ended |
|
March 31,
|
|
|
June 30,
|
|
|
September 30,
|
|
|
December 31,
|
|
||||
|
High |
|
$ |
15.08 |
|
|
$ |
13.31 |
|
|
$ |
14.25 |
|
|
$ |
14.72 |
|
|
Low |
|
$ |
11.56 |
|
|
$ |
10.82 |
|
|
$ |
11.25 |
|
|
$ |
10.38 |
|
|
Cash dividends paid per share |
|
$ |
0.17 |
|
|
$ |
0.17 |
|
|
$ |
0.17 |
|
|
$ |
0.17 |
|
The following table provides information regarding the Company's purchases of its common shares during the quarter ended December 31, 2024:
|
Period |
|
Total
|
|
|
Average
|
|
|
Total Number of
|
|
|
Maximum
|
|
||||
|
Beginning balance |
|
|
|
|
|
|
|
|
|
|
|
497,047 |
|
|||
|
October |
|
|
1,918 |
|
|
$ |
14.67 |
|
|
|
0 |
|
|
|
497,047 |
|
|
November |
|
|
2,120 |
|
|
|
13.80 |
|
|
|
0 |
|
|
|
497,047 |
|
|
December |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
497,047 |
|
|
Ending balance |
|
|
4,038 |
|
|
$ |
14.21 |
|
|
|
0 |
|
|
|
497,047 |
|
On July 30, 2019, the Company announced that its Board of Directors authorized the purchase of up to 1,500,000 shares of its common stock in the open market or in privately negotiated transactions, from time to time and subject to market and other conditions. During the first two months of 2023, 347,846 shares were repurchased under this plan.
On March 1, 2023, the Company announced that its Board of Directors authorized the purchase of up to 1,000,000 shares of its common stock in the open market or in privately negotiated transactions, from time to time and subject to market and other conditions. This 2023 Repurchase Program supersedes the Company’s prior share repurchase program discussed above. The 2023 Repurchase Program may be modified, suspended or terminated by the Company at any time. During 2024, no shares were repurchased under this plan. There were 497,047 shares left to repurchase under this plan at December 31, 2024.
Ite m 6. Reserved.
27
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following presents a discussion and analysis of Farmers’ financial condition and results of operations by its management. The review highlights the principal factors affecting earnings and the significant changes in balance sheet items for the years 2024, 2023 and 2022. Financial information for prior years is presented when appropriate. The objective of this financial review is to enhance the reader’s understanding of the accompanying tables and charts, the consolidated financial statements, notes to financial statements and financial statistics appearing elsewhere in this Annual Report on Form 10-K. Where applicable, this discussion also reflects management’s insights of known events and trends that have or may reasonably be expected to have a material effect on Farmers’ business, financial condition or results of operations.
Cautionary Note Regarding Forward Looking Statements
This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are not statements of historical fact, but rather statements based on Farmers’ current expectations, beliefs and assumptions regarding the future of Farmers’ business, future plans and strategies, projections, anticipated events and trends, its intended results and future performance, the economy and other future conditions. Forward-looking statements are preceded by terms such as “will,” “would,” “should,” “could,” “may,” “expect,” “estimate,” “believe,” “anticipate,” “intend,” “plan” “project,” or variations of these words, or similar expressions. Forward-looking statements are not a guarantee of future performance, and actual future results could differ materially from those contained in forward-looking information. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Numerous uncertainties, risks, and changes could cause or contribute to Farmers’ actual results, performance, and achievements to be materially different from those expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, without limitation, risks and uncertainties detailed from time to time in Farmers’ filings with the Commission, including without limitation the risk factors disclosed in Item 1A, “Risk Factors” of this Annual Report on Form 10-K.
Many of these factors are beyond the Company’s ability to control or predict, and readers are cautioned not to put undue reliance on those forward-looking statements. The following, which is not intended to be an all-encompassing list, summarizes several factors that could cause the Company’s actual results to differ materially from those anticipated or expected in any forward-looking statement:
28
Other factors not currently anticipated may also materially and adversely affect the Company’s results of operations, cash flows and financial position. There can be no assurance that future results will meet expectations. While the Company believes that the forward-looking statements in the presentation are reasonable, you should not place undue reliance on any forward-looking statement. In addition, these statements speak only as of the date made. The Company does not undertake, and expressly disclaims, any obligation to update or alter any statements whether as a result of new information, future events or otherwise, expect as may be required by applicable law.
Results of Operations
Comparison of Operating Results for the Years Ended December 31, 2024 and 2023.
The Company recorded net income of $45.9 million for the year ended December 31, 2024, compared to $49.9 million for the year ended December 31, 2023. The Company reported $1.22 per diluted common share in 2024 compared to $1.33 per diluted common share in 2023.
Net Interest Income
The Company recognized net interest income of $128.4 million for the year ended December 31, 2024, compared to $137.8 million for the year ended December 31, 2023. The tax-equivalent net interest margin declined from 2.91% for 2023 to 2.69% for 2024. The margin declined due to increased funding costs associated with the Federal Reserve's aggressive rate increases in 2022 and 2023 along with an inverted U.S treasury yield curve which caused deposit funding costs to rise faster than the yields being earned on loans and securities.
Total interest income increased from $213.3 million in 2023 to $227.7 million for 2024. The increase was primarily due to an increase in the yield on loans and securities associated with the higher interest rate environment.
Interest income on loans increased to $185.7 million for the year ended December 31, 2024, compared to $171.8 million for the year ended December 31, 2023. This increase was due to better yields on loans which increased from 5.46% in 2023 to 5.76% in 2024.
The income on federal funds sold and other interest income increased by $1.3 million in 2024 to $3.7 million compared to $2.5 million in 2023 primarily due to a volume increase of $21.3 million in 2024 and an increase of 57 basis points in the yield on the portfolio.
Interest expense increased $23.8 million in 2024 to $99.4 million from $75.5 million in 2023. The increase was primarily due to a 59 basis point increase in the yield on interest-bearing deposits and an increase in the volume of average borrowed funds which increased from $249.4 million in 2023 to $381.2 million in 2024. The increase in deposit costs was driven by the movement of lower cost checking and savings deposits into certificates of deposit while the increase in borrowed funds was due a lower level of brokered CDs utilized in 2024.
29
Average Balance Sheets and Related Yields and Rates
(Table Dollar Amounts in Thousands except Per Share Data)
|
Years ended December 31, |
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||||||||||||||||||||||||||
|
|
|
AVERAGE |
|
|
|
|
|
|
|
|
AVERAGE |
|
|
|
|
|
|
|
|
AVERAGE |
|
|
|
|
|
|
|
|||||||||
|
|
|
BALANCE |
|
|
INTEREST |
|
|
RATE |
|
|
BALANCE |
|
|
INTEREST |
|
|
RATE |
|
|
BALANCE |
|
|
INTEREST |
|
|
RATE |
|
|||||||||
|
EARNING ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Loans (1) (2) |
|
$ |
3,227,384 |
|
|
$ |
186,032 |
|
|
|
5.76 |
% |
|
$ |
3,155,858 |
|
|
$ |
172,161 |
|
|
|
5.46 |
% |
|
$ |
2,358,724 |
|
|
$ |
108,100 |
|
|
|
4.58 |
% |
|
Taxable securities |
|
|
1,110,905 |
|
|
|
26,838 |
|
|
|
2.42 |
|
|
|
1,143,547 |
|
|
|
26,231 |
|
|
|
2.29 |
|
|
|
1,081,966 |
|
|
|
20,843 |
|
|
|
1.93 |
|
|
Tax-exempt securities (1) |
|
|
386,643 |
|
|
|
12,165 |
|
|
|
3.15 |
|
|
|
419,557 |
|
|
|
13,283 |
|
|
|
3.17 |
|
|
|
465,855 |
|
|
|
14,952 |
|
|
|
3.21 |
|
|
Other investments |
|
|
35,402 |
|
|
|
1,450 |
|
|
|
4.10 |
|
|
|
39,559 |
|
|
|
1,986 |
|
|
|
5.02 |
|
|
|
33,153 |
|
|
|
871 |
|
|
|
2.63 |
|
|
Federal funds sold and other cash |
|
|
96,288 |
|
|
|
3,727 |
|
|
|
3.87 |
|
|
|
74,950 |
|
|
|
2,476 |
|
|
|
3.30 |
|
|
|
76,253 |
|
|
|
684 |
|
|
|
0.90 |
|
|
Total earning assets |
|
|
4,856,622 |
|
|
|
230,212 |
|
|
|
4.74 |
|
|
|
4,833,471 |
|
|
|
216,137 |
|
|
|
4.47 |
|
|
|
4,015,951 |
|
|
|
145,450 |
|
|
|
3.62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
NONEARNING ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Noninterest-earning assets |
|
|
234,297 |
|
|
|
|
|
|
|
|
|
205,683 |
|
|
|
|
|
|
|
|
|
128,757 |
|
|
|
|
|
|
|
||||||
|
Total Assets |
|
$ |
5,090,919 |
|
|
|
|
|
|
|
|
$ |
5,039,154 |
|
|
|
|
|
|
|
|
$ |
4,144,708 |
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
INTEREST-BEARING LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Time deposits |
|
$ |
745,945 |
|
|
$ |
29,329 |
|
|
|
3.93 |
% |
|
$ |
654,717 |
|
|
$ |
19,462 |
|
|
|
2.97 |
% |
|
$ |
360,687 |
|
|
$ |
3,044 |
|
|
|
0.84 |
% |
|
Brokered time deposits |
|
|
25,389 |
|
|
|
1,108 |
|
|
|
4.36 |
|
|
|
132,895 |
|
|
|
6,204 |
|
|
|
4.67 |
|
|
|
56,965 |
|
|
|
1,240 |
|
|
|
2.18 |
|
|
Savings deposits |
|
|
1,095,470 |
|
|
|
16,144 |
|
|
|
1.47 |
|
|
|
1,113,561 |
|
|
|
9,899 |
|
|
|
0.89 |
|
|
|
846,418 |
|
|
|
1,352 |
|
|
|
0.16 |
|
|
Demand deposits - interest bearing |
|
|
1,396,193 |
|
|
|
34,588 |
|
|
|
2.48 |
|
|
|
1,415,425 |
|
|
|
27,541 |
|
|
|
1.95 |
|
|
|
1,392,058 |
|
|
|
7,449 |
|
|
|
0.54 |
|
|
Total interest-bearing deposits |
|
|
3,262,997 |
|
|
|
81,169 |
|
|
|
2.49 |
|
|
|
3,316,598 |
|
|
|
63,106 |
|
|
|
1.90 |
|
|
|
2,656,128 |
|
|
|
13,085 |
|
|
|
0.49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Short term borrowings |
|
|
293,488 |
|
|
|
14,105 |
|
|
|
4.81 |
|
|
|
160,964 |
|
|
|
8,357 |
|
|
|
5.19 |
|
|
|
55,668 |
|
|
|
1,408 |
|
|
|
2.53 |
|
|
Long term borrowings |
|
|
87,749 |
|
|
|
4,090 |
|
|
|
4.66 |
|
|
|
88,439 |
|
|
|
4,086 |
|
|
|
4.62 |
|
|
|
87,972 |
|
|
|
3,427 |
|
|
|
3.90 |
|
|
Total borrowed funds |
|
|
381,237 |
|
|
|
18,195 |
|
|
|
4.77 |
|
|
|
249,403 |
|
|
|
12,443 |
|
|
|
4.99 |
|
|
|
143,640 |
|
|
|
4,835 |
|
|
|
3.37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Total Interest-Bearing Liabilities |
|
|
3,644,234 |
|
|
|
99,364 |
|
|
|
2.73 |
|
|
|
3,566,001 |
|
|
|
75,549 |
|
|
|
2.12 |
|
|
|
2,799,768 |
|
|
|
17,920 |
|
|
|
0.64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
NONINTEREST-BEARING LIABILITIES AND
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Demand deposits - noninterest bearing |
|
|
981,115 |
|
|
|
|
|
|
|
|
|
1,065,389 |
|
|
|
|
|
|
|
|
|
959,294 |
|
|
|
|
|
|
|
||||||
|
Other Liabilities |
|
|
58,134 |
|
|
|
|
|
|
|
|
|
50,302 |
|
|
|
|
|
|
|
|
|
34,180 |
|
|
|
|
|
|
|
||||||
|
Stockholders' equity |
|
|
407,436 |
|
|
|
|
|
|
|
|
|
357,462 |
|
|
|
|
|
|
|
|
|
351,466 |
|
|
|
|
|
|
|
||||||
|
Total Liabilities and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Stockholders' Equity |
|
$ |
5,090,919 |
|
|
|
|
|
|
|
|
$ |
5,039,154 |
|
|
|
|
|
|
|
|
$ |
4,144,708 |
|
|
|
|
|
|
|
||||||
|
Net interest income and interest rate spread |
|
|
|
|
$ |
130,848 |
|
|
|
2.01 |
% |
|
|
|
|
$ |
140,588 |
|
|
|
2.35 |
% |
|
|
|
|
$ |
127,530 |
|
|
|
2.98 |
% |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Net interest margin |
|
|
|
|
|
|
|
|
2.69 |
% |
|
|
|
|
|
|
|
|
2.91 |
% |
|
|
|
|
|
|
|
|
3.18 |
% |
||||||
30
RATE AND VOLUME ANALYSIS
(Table Dollar Amounts in Thousands except Per Share Data)
The following table analyzes by rate and volume the dollar amount of changes in the components of the interest differential:
|
|
|
2024 change from 2023 |
|
|
2023 change from 2022 |
|
||||||||||||||||||
|
|
|
Net |
|
|
Change Due |
|
|
Change Due |
|
|
Net |
|
|
Change Due |
|
|
Change Due |
|
||||||
|
|
|
Change |
|
|
To Volume |
|
|
To Rate |
|
|
Change |
|
|
To Volume |
|
|
To Rate |
|
||||||
|
Tax Equivalent Interest Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Loans |
|
$ |
13,871 |
|
|
$ |
3,902 |
|
|
$ |
9,969 |
|
|
$ |
64,061 |
|
|
$ |
36,533 |
|
|
$ |
27,528 |
|
|
Taxable securities |
|
|
607 |
|
|
|
(749 |
) |
|
|
1,356 |
|
|
|
5,388 |
|
|
|
1,186 |
|
|
|
4,202 |
|
|
Tax-exempt securities |
|
|
(1,118 |
) |
|
|
(1,042 |
) |
|
|
(76 |
) |
|
|
(1,669 |
) |
|
|
(1,486 |
) |
|
|
(183 |
) |
|
Other investments |
|
|
(536 |
) |
|
|
(209 |
) |
|
|
(327 |
) |
|
|
1,115 |
|
|
|
168 |
|
|
|
947 |
|
|
Funds sold and other cash |
|
|
1,251 |
|
|
|
705 |
|
|
|
546 |
|
|
|
1,792 |
|
|
|
(12 |
) |
|
|
1,804 |
|
|
Total interest income |
|
$ |
14,075 |
|
|
$ |
2,607 |
|
|
$ |
11,468 |
|
|
$ |
70,687 |
|
|
$ |
36,389 |
|
|
$ |
34,298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Interest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Time deposits |
|
$ |
9,867 |
|
|
$ |
2,712 |
|
|
$ |
7,155 |
|
|
$ |
16,418 |
|
|
$ |
2,481 |
|
|
$ |
13,937 |
|
|
Brokered time deposits |
|
|
(5,096 |
) |
|
|
(5,019 |
) |
|
|
(77 |
) |
|
|
4,964 |
|
|
|
1,653 |
|
|
|
3,311 |
|
|
Savings deposits |
|
|
6,245 |
|
|
|
(161 |
) |
|
|
6,406 |
|
|
|
8,547 |
|
|
|
427 |
|
|
|
8,120 |
|
|
Demand deposits |
|
|
7,047 |
|
|
|
(374 |
) |
|
|
7,421 |
|
|
|
20,092 |
|
|
|
125 |
|
|
|
19,967 |
|
|
Short term borrowings |
|
|
5,748 |
|
|
|
6,880 |
|
|
|
(1,132 |
) |
|
|
6,949 |
|
|
|
2,663 |
|
|
|
4,286 |
|
|
Long term borrowings |
|
|
4 |
|
|
|
(32 |
) |
|
|
36 |
|
|
|
659 |
|
|
|
18 |
|
|
|
641 |
|
|
Total interest expense |
|
$ |
23,815 |
|
|
$ |
4,006 |
|
|
$ |
19,809 |
|
|
$ |
57,629 |
|
|
$ |
7,367 |
|
|
$ |
50,262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Increase (decrease) in tax equivalent net interest income |
|
$ |
(9,740 |
) |
|
$ |
(1,399 |
) |
|
$ |
(8,341 |
) |
|
$ |
13,058 |
|
|
$ |
29,022 |
|
|
$ |
(15,964 |
) |
The amount of change not solely due to rate or volume changes was allocated between the change due to rate and the change due to volume based on the relative size of the rate and volume changes.
Noninterest Income
Noninterest income declined slightly to $41.7 million for the year ended December 31, 2024 compared to $41.9 million for the year ended December 31, 2023. The major categories of noninterest income are discussed below.
Service charges on deposit accounts increased to $7.3 million for 2024 compared to $6.3 million in 2023. The increase was primarily due to the Company undertaking a review of all service charges in late 2023 and early 2024 and implementing fee increases across deposit product lines in the second quarter of 2024.
Bank owned life insurance income increased by $217,000 in 2024 to $2.7 million, compared to $2.4 million for the twelve months ended December 31, 2023. The increase was due to an increase of $241,000 from earnings on the policies offset by a decline in death benefits received from the policies.
Trust fees increased to $10.1 million for the twelve months ended December 31, 2024, compared to $9.0 million for the twelve months ended December 31, 2023. The trust business continued to grow in 2024 as the value of assets under management increased.
Insurance agency commissions were $5.5 million in 2024 compared to $5.4 million in 2023. The increase was driven by better income from fixed annuity sales offset by declines in property and casualty commissions.
Retirement plan consulting fees increased to $2.6 million for 2024 compared to $2.5 million for 2023. The Company picked up additional business in 2024 and with the acquisition of Crest in December of 2024, revenue from this business should continue to increase in 2025.
31
Security losses increased to $2.6 million during the year ended December 31, 2024, from $471,000 for the year ended December 31, 2023. The losses increased in 2024 due to the Company restructuring more securities in order to reinvest the proceeds into securities with a higher yield than those sold.
The net gains on the sale of loans declined by $889,000 from 2023 at $2.5 million to $1.5 million in 2024. The primary reason for this decrease was the sale of nonaccrual commercial loans in 2023 that generated a gain of $915,000. There was no sale of commercial loans in 2024. Gains on the sale of loans continues to be negatively impacted by a lower level of saleable mortgage volume due to the higher interest rate environment and the lack of supply of homes for sale.
Other mortgage banking income declined by $276,000 in 2024 compared to 2023. The decrease was driven by lower servicing income and faster amortization of the mortgage servicing rights.
Debit card fees increased to $7.5 million in 2024 compared to $7.1 million in 2023. The increase was primarily due to higher volumes.
Other operating income increased to $4.7 million for the twelve months ended December 31, 2024, from $4.5 million for the twelve months ended December 31, 2023. This increase was primarily due to decreased losses on the sale of assets offset by higher Small Business Investment Company (“SBIC”) income in 2024 compared to 2023.
Noninterest Expenses
Noninterest expense totaled $106.7 million for the year ended December 31, 2024 compared to $111.8 million for the year ended December 31, 2023. The decline was primarily driven by merger related costs which fell from $5.5 million in 2023 to $92 thousand in 2024.
Salaries and employee benefits increased by $1.6 million to $58.9 million for the year ended December 31, 2024 from $57.4 million for the year ended December 31, 2023. This increase was primarily due to salary increases and greater incentive compensation.
FDIC insurance and state and local taxes decreased to $5.0 million in 2024 from $5.8 million in 2023. The decline was due to lower FDIC expense as the Company had higher capital levels in 2024 resulting in lower expense.
Advertising costs declined to $1.5 million in 2024 from $1.8 million in 2023. This decrease was due to a few marketing campaigns being reduced in 2024.
Intangible amortization expense decreased by $573,000 to $2.9 million for the year ended December 31, 2024 compared to $3.4 million for the year ended December 31, 2023. The decline was primarily driven by the runoff of intangibles from older acquisitions.
Other operating expenses increased by $306,000 to $13.8 million in 2024 compared to $13.5 million in 2023. The increase was spread across several categories of expense.
Income Taxes
Income tax expense increased from $8.8 million for the year ended December 31, 2023, to $9.5 million for the year ended December 31, 2024. The increase was primarily due to a higher effective tax rate and less benefit from low income housing tax credits. Income taxes are computed using the appropriate effective tax rates for each period. The effective tax rates are less than the statutory tax rate primarily due to nontaxable interest and dividend income. The effective income tax rate was 17.1% in 2024 and 14.9% for 2023. Refer to Note 18 to the consolidated financial statements for additional information regarding the effective tax rate.
32
Comparison of Operating Results for the Years Ended December 31, 2023 and 2022.
The Company recorded net income of $49.9 million for the year ended December 31, 2023, compared to $60.6 million for the year ended December 31, 2022. The Company reported $1.33 per diluted common share in 2023 compared to $1.79 per diluted common share in 2022. The results for 2023 include a full year of income and expense from the Emclaire acquisition which closed on January 1, 2023.
Net Interest Income
The Company recognized net interest income of $137.8 million for the twelve months ended December 31, 2023, compared to $124.2 million for the twelve months ended December 31, 2022. The tax-equivalent net interest margin declined from 3.18% for 2022 to 2.91% for the year ended December 31, 2023. The margin declined due to increased funding costs associated with the Federal Reserve's aggressive rate increases in 2022 and 2023 along with an inverted U.S treasury yield curve which caused deposit funding costs to rise faster than the yields being earned on loans and securities.
Total interest income increased $71.2 million from $142.1 million in 2022 to $213.3 million for the twelve months ended December 31, 2023. The increase was primarily due to an increase in the average balance of loans and securities from the acquisition of Emclaire. In addition, the yields received on the various categories of earning assets increased year over year due to rising rates being received.
Interest income on loans increased to $171.8 million for the year ended December 31, 2023, compared to $107.8 million for the year ended December 31, 2022. This increase was due to the average loan balances increasing $797.1 million in 2023 primarily due to the acquisition of Emclaire. The yield on loans increased to 5.46% in 2023 from 4.58% in 2022.
Income on taxable securities increased by $5.4 million in 2023 due to the average balance being higher by $61.6 million. Yields on taxable securities were also higher by 36 basis points ("bp") in 2023 compared to 2022. The increased balance was due to the Emclaire acquisition. Income on tax exempt securities decreased $1.7 million in 2023 as the average balance of this category declined $46.3 million and the yield on the portfolio declined by 4 bp year over year.
The income on federal funds sold and other interest income increased by $1.8 million in 2023 compared to 2022 primarily due to an increase of 239 bp in the yield on the portfolio. This portfolio is heavily impacted by the actions of the Federal Reserve.
Interest expense increased $57.6 million in 2023 compared to 2022 due to an increase of $766.2 million in the volume of interest-bearing liabilities and an increase in the rates paid on deposits and borrowings of 148 bp year over year. The increase in the volume of interest-bearing liabilities was due to the merger with Emclaire while the increase in rates paid was due to the higher interest rate environment that existed in 2023 compared to 2022. The average balance of interest-bearing deposits increased $660.5 million in 2023 primarily due to the Emclaire acquisition while the cost of interest-bearing deposits increased by 141 bp year over year. Interest expense related to interest-bearing deposits was $63.1 million in 2023 compared to $13.1 million in 2022.
Interest expense on short-term borrowings was $8.4 million in 2023 compared to $1.4 million in 2022. The increase was due to the increased usage of short term borrowings and an increase in the cost of those borrowings due to the Federal Reserve increasing the fed funds rate. Interest on long-term borrowings increased to $4.1 million in 2023 from $3.4 million in 2022. This increase was primarily due to the increased cost of some of the long term borrowings that are tied to variable rates and which continued to increase in 2023.
Noninterest Income
Noninterest income declined to $41.9 million for the year ended December 31, 2023 compared to $44.2 million for the year ended December 31, 2022. The major categories of noninterest income are discussed below.
33
Service charges on deposit accounts totaled $6.3 million in 2023 compared to $4.7 million in 2022. The increase was due to the acquisition of Emclaire.
Bank owned life insurance income increased by $632,000 to $2.4 million for the twelve months ended December 31, 2023, compared to $1.8 million for the twelve months ended December 31, 2022. The increase was due to the addition of Emclaire offset by a decline of $79,000 on the proceeds from death benefits received from the policies.
Trust fees increased to $9.0 million in 2023 from $8.5 million in 2022. The trust business continued to expand in 2023 as the Company added revenue producers in the new Pennsylvania markets.
Insurance agency commissions increased by $1.0 million to $5.4 million in 2023 from $4.4 million in 2022. The increase was driven by better margins in the insurance industry in 2023 along with increased sales of annuity products as rates on these products were very attractive to customers. Investment commissions declined slightly to $2.0 million in 2023 from $2.2 million in 2022. This line of business was down due to the heavy demand for annuities in lieu of traditional investment products.
The net gains on the sale of loans increased by $329,000 between 2022 and 2023. The primary reason for this increase was the sale of nonaccrual commercial loans that generated a gain of $915,000 in 2023 offset by lower gain on sale figures on the sale of 1-4 family mortgage loans. Mortgage volume continues to be negatively impacted by the higher interest rate environment and the lack of supply of homes for sale.
Other mortgage banking income was up $420,000 in 2023 compared to 2022. The increase was driven by slower prepayment speeds on the mortgage servicing portfolio in 2023 due to the higher level of interest rates.
Debit card fees increased to $7.1 million in 2023 compared to $5.8 million in 2022. The increase was primarily due to the addition of Emclaire.
The Company recorded an $8.4 million gain related to a legal settlement in 2022. No gain was recorded in 2023.
Other operating income increased by $495,000 to $4.5 million for the twelve months ended December 31, 2023, from $4.0 million for the twelve months ended December 31, 2022. This increase was primarily due to increased non-recurring income associated with recoveries on Emclaire and Cortland loans that were charged off prior to acquisition. This increase was offset by lower SBIC income in 2023 compared to 2022.
Noninterest Expenses
Noninterest expense totaled $111.8 million for the twelve months ended December 31, 2023 compared to $94.4 million for the twelve months ended December 31, 2022. The increase is primarily due to the merger with Emclaire and normal increases in operating expenses.
Salaries and employee benefits increased to $57.4 million for the year ended December 31, 2023, an increase of $12.4 million, from $45.0 million for the year ended December 31, 2022. This increase was primarily due to the Company having a higher level of employees due to the addition of Emclaire along with normal raise activity.
Occupancy and equipment expense increased by $4.0 million to $15.4 million for the twelve months ended December 31, 2023 compared to $11.4 million for the twelve months ended December 31, 2022. The increase was due to the higher level of depreciation and facilities maintenance costs associated with the additional Emclaire properties.
FDIC insurance and state and local taxes increased to $5.8 million in 2023 from $4.0 million in 2022. The Emclaire acquisition along with higher FDIC assessment rates in 2023 drove the increase.
34
Professional fees decreased by $1.7 million in 2023 to $4.4 million from $6.1 million for the twelve months ended December 31, 2022. The decrease was due to legal expenses associated with the legal settlement income in 2022 discussed above that did not reoccur in 2023. This amounted to approximately $2.1 million of additional expense in 2022 compared to 2023. Offsetting this somewhat was additional expense associated with the Emclaire acquisition.
Merger related costs increased to $5.5 million in 2023 from $4.1 million in 2022. This increase was due to the acquisition of Emclaire at the beginning of 2023.
Intangible amortization expense increased by $1.4 million in 2023 to $3.4 million compared to $2.0 million for the year ended December 31, 2022. The increase was primarily driven by the acquisition of Emclaire.
Core processing charges increased to $4.6 million in 2023 compared to $3.3 million in 2022. The increase was due to the acquisition of Emclaire.
An additional, special charitable donation of $6.0 million was made during 2022 with no such contribution made in 2023. The donation was made possible in 2022 by the $8.4 million legal settlement income discussed above.
Other operating expenses increased by $2.8 million to $13.4 million in 2023 compared to $10.6 million in 2022. The increase was primarily due to the acquisition of Emclaire but 2023 also included $785,000 for the settlement of a lawsuit whereas 2022 did not have any of this expense.
Income Taxes
Income tax expense decreased to $8.8 million for the year ended December 31, 2023, from $12.2 million for the year ended December 31, 2022. The decrease was primarily due to a $14.1 million decrease in income before income taxes. Income taxes are computed using the appropriate effective tax rates for each period. The effective tax rates are less than the statutory tax rate primarily due to nontaxable interest and dividend income. The effective income tax rate was 14.9% in 2023 and 16.8% for 2022. Refer to Note 18 to the consolidated financial statements for additional information regarding the effective tax rate.
Loan Portfolio
Maturities and Sensitivities of Loans to Interest Rates
The following schedule shows the composition of loans and the percentage of loans in each category at the dates indicated. Balances include unamortized loan origination fees and costs.
|
Years Ended December 31, |
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||||||||||||||||||||||||
|
Commercial Real Estate |
|
$ |
1,381,573 |
|
|
|
42.2 |
% |
|
$ |
1,334,600 |
|
|
|
41.6 |
% |
|
$ |
1,026,822 |
|
|
|
42.6 |
% |
|
$ |
1,010,674 |
|
|
|
43.3 |
% |
|
$ |
712,818 |
|
|
|
34.3 |
% |
|
Commercial |
|
|
351,533 |
|
|
|
10.8 |
|
|
|
347,819 |
|
|
|
10.9 |
|
|
|
294,406 |
|
|
|
12.2 |
|
|
|
312,532 |
|
|
|
13.4 |
|
|
|
401,003 |
|
|
|
19.3 |
|
|
Residential Real Estate |
|
|
1,003,678 |
|
|
|
30.8 |
|
|
|
986,032 |
|
|
|
30.8 |
|
|
|
607,557 |
|
|
|
25.3 |
|
|
|
580,242 |
|
|
|
24.9 |
|
|
|
523,340 |
|
|
|
25.2 |
|
|
Consumer |
|
|
268,533 |
|
|
|
8.2 |
|
|
|
267,875 |
|
|
|
8.4 |
|
|
|
228,794 |
|
|
|
9.5 |
|
|
|
195,343 |
|
|
|
8.4 |
|
|
|
208,842 |
|
|
|
10.0 |
|
|
Agricultural |
|
|
263,029 |
|
|
|
8.0 |
|
|
|
261,801 |
|
|
|
8.2 |
|
|
|
247,171 |
|
|
|
10.3 |
|
|
|
232,291 |
|
|
|
10.0 |
|
|
|
232,041 |
|
|
|
11.1 |
|
|
Total Loans |
|
$ |
3,268,346 |
|
|
|
100.0 |
% |
|
$ |
3,198,127 |
|
|
|
100.0 |
% |
|
$ |
2,404,750 |
|
|
|
100.0 |
% |
|
$ |
2,331,082 |
|
|
|
100.0 |
% |
|
$ |
2,078,044 |
|
|
|
100.0 |
% |
35
The following schedule sets forth maturities based on remaining scheduled repayments of principal for loans listed above as of December 31, 2024:
|
Types of Loans |
|
1 Year or less |
|
|
1 to 5 Years |
|
|
5 to 15 Years |
|
|
Over 15 Years |
|
||||
|
Commercial |
|
$ |
19,713 |
|
|
$ |
181,984 |
|
|
$ |
97,994 |
|
|
$ |
51,842 |
|
|
Commercial Real Estate |
|
$ |
124,311 |
|
|
$ |
514,111 |
|
|
$ |
630,941 |
|
|
$ |
112,211 |
|
|
Residential Real Estate |
|
$ |
9,782 |
|
|
$ |
48,963 |
|
|
$ |
215,293 |
|
|
$ |
729,639 |
|
|
Consumer |
|
$ |
4,076 |
|
|
$ |
107,972 |
|
|
$ |
132,043 |
|
|
$ |
24,442 |
|
|
Agricultural |
|
$ |
4,105 |
|
|
$ |
36,625 |
|
|
$ |
49,288 |
|
|
$ |
173,011 |
|
The amounts of loans as of December 31, 2024, based on remaining scheduled repayments of principal, are shown in the following table:
|
Loan Sensitivities |
|
1 Year or less |
|
|
Over 1 Year |
|
|
Total |
|
|||
|
Floating or Adjustable Rates of Interest |
|
$ |
99,059 |
|
|
$ |
1,524,346 |
|
|
$ |
1,623,405 |
|
|
Fixed Rates of Interest |
|
|
62,928 |
|
|
|
1,582,013 |
|
|
|
1,644,941 |
|
|
Total Loans |
|
$ |
161,987 |
|
|
$ |
3,106,359 |
|
|
$ |
3,268,346 |
|
Total loans were $3.27 billion at December 31, 2024, compared to $3.20 billion at December 31, 2023, an increase of $70.2 million. Loans comprised 66.5% of the Bank’s average earning assets in 2024, compared to 65.3% in 2023.
Management recognizes that while the loan portfolio holds some of the Bank’s’ highest yielding assets, it is inherently the most risky portfolio. Accordingly, management attempts to balance credit risk versus return with conservative credit standards. Management has developed and maintains comprehensive underwriting guidelines and a loan review function that monitors credits during and after the approval process. To minimize risks associated with changes in the borrower’s future repayment capacity, the Bank generally requires scheduled periodic principal and interest payments on all types of loans and normally requires collateral.
Commercial real estate loans increased to $1.38 billion at December 31, 2024 from $1.33 billion at December 31, 2023. The Company’s commercial real estate loan portfolio includes loans for owner occupied and non-owner occupied real estate. These loans are made to finance properties such as office and industrial buildings, hotels and retail shopping centers.
36
The following tables present the amortized cost basis of the Company's commercial real estate portfolio segment by industry, inclusive of farmland, as of December 31, 2024 and 2023:
|
(In Thousands of Dollars) |
|
Amortized Cost |
|
|
% of Commercial Real Estate |
|
|
% of Total Portfolio |
|
|
Weighted Average
|
|
|
Weighted Average
|
|
|||||
|
December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Retail |
|
$ |
345,354 |
|
|
|
21.75 |
% |
|
|
10.57 |
% |
|
|
53.93 |
% |
|
|
85.07 |
% |
|
Farmland |
|
|
206,600 |
|
|
|
13.01 |
% |
|
|
6.32 |
% |
|
|
49.63 |
% |
|
|
100.00 |
% |
|
Warehouse/Industrial |
|
|
186,316 |
|
|
|
11.73 |
% |
|
|
5.70 |
% |
|
|
54.26 |
% |
|
|
72.23 |
% |
|
Office |
|
|
192,269 |
|
|
|
12.11 |
% |
|
|
5.88 |
% |
|
|
53.70 |
% |
|
|
74.06 |
% |
|
Multifamily |
|
|
158,168 |
|
|
|
9.96 |
% |
|
|
4.84 |
% |
|
|
61.16 |
% |
|
|
85.75 |
% |
|
Medical |
|
|
147,353 |
|
|
|
9.28 |
% |
|
|
4.51 |
% |
|
|
46.27 |
% |
|
|
92.60 |
% |
|
Hotel |
|
|
44,301 |
|
|
|
2.79 |
% |
|
|
1.36 |
% |
|
|
45.24 |
% |
|
|
79.65 |
% |
|
Special Purpose |
|
|
85,361 |
|
|
|
5.37 |
% |
|
|
2.61 |
% |
|
|
51.83 |
% |
|
|
98.53 |
% |
|
Restaurant |
|
|
50,990 |
|
|
|
3.21 |
% |
|
|
1.56 |
% |
|
|
51.36 |
% |
|
|
100.00 |
% |
|
Multifamily - Construction |
|
|
73,857 |
|
|
|
4.65 |
% |
|
|
2.26 |
% |
|
|
53.28 |
% |
|
|
29.61 |
% |
|
All Other |
|
|
97,605 |
|
|
|
6.14 |
% |
|
|
2.99 |
% |
|
|
48.05 |
% |
|
|
94.97 |
% |
|
Total |
|
$ |
1,588,174 |
|
|
|
100.00 |
% |
|
|
48.60 |
% |
|
|
|
|
|
|
||
|
(In Thousands of Dollars) |
|
Amortized Cost |
|
|
% of Commercial Real Estate |
|
|
% of Total Portfolio |
|
|
Weighted Average
|
|
|
Weighted Average
|
|
|||||
|
December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Retail |
|
$ |
354,953 |
|
|
|
23.09 |
% |
|
|
11.10 |
% |
|
|
55.16 |
% |
|
|
85.26 |
% |
|
Farmland |
|
|
202,726 |
|
|
|
13.19 |
% |
|
|
6.34 |
% |
|
|
51.24 |
% |
|
|
100.00 |
% |
|
Warehouse/Industrial |
|
|
166,291 |
|
|
|
10.82 |
% |
|
|
5.20 |
% |
|
|
56.04 |
% |
|
|
70.99 |
% |
|
Office |
|
|
175,020 |
|
|
|
11.38 |
% |
|
|
5.47 |
% |
|
|
53.91 |
% |
|
|
75.04 |
% |
|
Multifamily |
|
|
153,410 |
|
|
|
9.98 |
% |
|
|
4.80 |
% |
|
|
63.10 |
% |
|
|
85.79 |
% |
|
Medical |
|
|
154,890 |
|
|
|
10.08 |
% |
|
|
4.84 |
% |
|
|
51.51 |
% |
|
|
92.64 |
% |
|
Hotel |
|
|
49,695 |
|
|
|
3.23 |
% |
|
|
1.55 |
% |
|
|
48.64 |
% |
|
|
79.59 |
% |
|
Special Purpose |
|
|
99,152 |
|
|
|
6.45 |
% |
|
|
3.10 |
% |
|
|
55.10 |
% |
|
|
99.88 |
% |
|
Restaurant |
|
|
56,460 |
|
|
|
3.67 |
% |
|
|
1.77 |
% |
|
|
53.17 |
% |
|
|
100.00 |
% |
|
Multifamily - Construction |
|
|
27,860 |
|
|
|
1.81 |
% |
|
|
0.87 |
% |
|
|
59.02 |
% |
|
|
22.06 |
% |
|
All Other |
|
|
96,869 |
|
|
|
6.30 |
% |
|
|
3.03 |
% |
|
|
47.10 |
% |
|
|
95.30 |
% |
|
Total |
|
$ |
1,537,326 |
|
|
|
100.00 |
% |
|
|
48.07 |
% |
|
|
|
|
|
|
||
Residential real estate mortgage loans increased to $1.00 billion at December 31, 2024, from $986.0 million at December 31, 2023. Farmers originated both fixed rate and adjustable rate mortgages during 2024. Fixed rate terms are offered with terms between fifteen and thirty years while adjustable rate products are offered with maturities up to thirty years. The Company sells all fixed rate loans that are secondary market eligible.
Commercial loans at December 31, 2024, totaled $351.5 million compared to $347.8 million at December 31, 2023. The Bank’s commercial loans are granted to customers within the immediate trade area of the Bank. The mix is diverse, covering a wide range of borrowers, business types and local municipalities. The Bank monitors and controls concentrations within a particular industry or segment of the economy. These loans are made for purposes such as equipment purchases, capital and leasehold improvements, the purchase of inventory, general working capital and small business lines of credit.
37
Agricultural loans increased from $261.8 million in 2023 to $263.0 million in 2024. The Company’s agricultural loan portfolio contains a diverse mix of dairy, crops, land, poultry and cattle loans.
Consumer loans increased to $268.5 million at December 31, 2024, from $267.9 million at December 31, 2023. The consumer loan portfolio includes indirect auto loans and other consumer loan products.
Summary of Credit Loss Experience
The following is an analysis of the allowance for credit losses for the years 2020 through 2024. During the years 2021-2024, the Company used the CECL methodology while the incurred loss methodology was used in 2020:
|
Years Ended December 31, |
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||||
|
Balance at Beginning of Year |
|
$ |
34,440 |
|
|
$ |
26,978 |
|
|
$ |
29,386 |
|
|
$ |
22,144 |
|
|
$ |
14,487 |
|
|
Charge-Offs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Commercial Real Estate |
|
|
(4,619 |
) |
|
|
(349 |
) |
|
|
(300 |
) |
|
|
(70 |
) |
|
|
(122 |
) |
|
Commercial |
|
|
(1,742 |
) |
|
|
(1,272 |
) |
|
|
(2,042 |
) |
|
|
(388 |
) |
|
|
(412 |
) |
|
Residential Real Estate |
|
|
(155 |
) |
|
|
(384 |
) |
|
|
(92 |
) |
|
|
(297 |
) |
|
|
(172 |
) |
|
Consumer |
|
|
(1,471 |
) |
|
|
(932 |
) |
|
|
(870 |
) |
|
|
(912 |
) |
|
|
(1,347 |
) |
|
Total Charge-Offs |
|
|
(7,987 |
) |
|
|
(2,937 |
) |
|
|
(3,304 |
) |
|
|
(1,667 |
) |
|
|
(2,053 |
) |
|
Recoveries on Previous Charge-Offs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Commercial Real Estate |
|
|
22 |
|
|
|
1 |
|
|
|
3 |
|
|
|
33 |
|
|
|
31 |
|
|
Commercial |
|
|
520 |
|
|
|
103 |
|
|
|
75 |
|
|
|
199 |
|
|
|
11 |
|
|
Residential Real Estate |
|
|
177 |
|
|
|
81 |
|
|
|
89 |
|
|
|
162 |
|
|
|
85 |
|
|
Consumer |
|
|
447 |
|
|
|
496 |
|
|
|
479 |
|
|
|
411 |
|
|
|
483 |
|
|
Total Recoveries |
|
|
1,166 |
|
|
|
681 |
|
|
|
646 |
|
|
|
805 |
|
|
|
610 |
|
|
Net Charge-Offs |
|
|
(6,821 |
) |
|
|
(2,256 |
) |
|
|
(2,658 |
) |
|
|
(862 |
) |
|
|
(1,443 |
) |
|
Impact of CECL adoption |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
2,160 |
|
|
|
0 |
|
|
Provision For Credit Losses and Day One
|
|
|
8,244 |
|
|
|
9,718 |
|
|
|
250 |
|
|
|
5,944 |
|
|
|
9,100 |
|
|
Balance at End of Year |
|
$ |
35,863 |
|
|
$ |
34,440 |
|
|
$ |
26,978 |
|
|
$ |
29,386 |
|
|
$ |
22,144 |
|
|
Ratio of Net Commercial Real Estate
|
|
|
0.14 |
% |
|
|
0.01 |
% |
|
|
0.01 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
Ratio of Net Commercial Charge-offs
|
|
|
0.04 |
% |
|
|
0.04 |
% |
|
|
0.08 |
% |
|
|
0.01 |
% |
|
|
0.02 |
% |
|
Ratio of Net Residential Real Estate
|
|
|
0.00 |
% |
|
|
0.01 |
% |
|
|
0.00 |
% |
|
|
0.01 |
% |
|
|
0.00 |
% |
|
Ratio of Net Consumer Charge-offs
|
|
|
0.03 |
% |
|
|
0.01 |
% |
|
|
0.02 |
% |
|
|
0.02 |
% |
|
|
0.04 |
% |
|
Allowance for Credit Losses/Total Loans |
|
|
1.10 |
|
|
|
1.08 |
|
|
|
1.12 |
|
|
|
1.26 |
|
|
|
1.07 |
|
The provision for credit losses, which includes the provision for unfunded commitments, declined to $8.0 million in 2024 compared to $9.2 million in 2023. In 2023, the Company recognized a day one purchase entry for the Emclaire loans of $7.7 million while there was no day one purchase entry recognized in 2024. Offsetting this was an increase in net charge-offs in 2024 of $4.6 million to $6.8 million compared to net charge-offs of $2.3 million in 2023. The increased net charge-off figure in 2024 was driven by a charge-off of $4.4 million for a single commercial credit backed by office space.
The Company adopted ASU 2016-13 in 2021, to calculate the allowance for credit losses (“ACL”) which requires estimating credit losses over the life of the credits. The ACL is adjusted through the provision for credit losses and reduced by net charge offs of loans. Although the Company has a diversified loan portfolio, the credit risk in the loan portfolio is largely influenced by general economic conditions and trends of the counties and markets in which the debtors operate, and the resulting impact on the operations of borrowers or on the value of any underlying collateral.
38
The credit loss estimation process involves procedures that consider the unique characteristics of the Company’s loan portfolio segments. These segments are disaggregated into the loan pools for monitoring. A model of risk characteristics, such as loss history and delinquency experience, trends in past due and non-performing loans, as well as existing economic conditions and supportable forecasts are used to determine credit loss assumptions.
The Company uses two methodologies to analyze loan pools. The cohort method (“cohort”) and the probability of default/loss given default method (“PD/LGD”). Cohort relies on the creation of cohorts to capture loans that qualify for a particular segment, as of a point in time. Those loans are then tracked over their remaining lives to determine their loss experience. The Company aggregates financial assets on the basis of similar risk characteristics when evaluating loans on a collective basis. Those characteristics include, but are not limited to, internal or external credit score, risk ratings, financial asset, loan type, collateral type, size, effective interest rate, term, or geographical location. The Company uses cohort primarily for consumer loan portfolios.
The probability of default (“PD”) portion of PD/LGD is defined by the Company as 90 days past due, placed on non-accrual, or is partially or wholly, charged-off. Typically, a one-year time period is used to assess PD. PD can be measured and applied using various risk criteria. Risk rating is one common way to apply PDs. Loss given default (“LGD”) is to determine the percentage of loss by facility or collateral type. LGD estimates can sometimes be driven, or influenced, by product type, industry or geography. The Company uses PD/LGD primarily for commercial loan portfolios.
The allowance for credit losses to total loans increased to 1.10% at December 31, 2024, compared to 1.08% at December 31, 2023. Nonperforming loans to total loans increased from 0.47% at December 31, 2023 to 0.70% at December 31, 2024. Nonperforming loans to total loans increased in 2024 primarily due to a single commercial real estate credit totaling $8.8 million moving into nonaccrual status.
The provision for credit losses is based on management’s judgment after taking into consideration all factors connected with the collectability of the existing loan portfolio. Management evaluates the loan portfolio in light of economic conditions, changes in the nature and volume of the loan portfolio, industry standards and other relevant reasonable and supportable forecasts. Specific factors considered by management in determining the amounts charged to operating expenses include previous charge-off experience, the status of past due interest and principal payments, the quality of financial information supplied by loan customers and the general condition of the industries in the community to which loans have been made.
The allowance for credit losses increased to $35.9 million at December 31, 2024, compared to $34.4 million at December 31, 2023. The increase was primarily driven by growth in the loan portfolio.
Typically, commercial and commercial real estate loans are identified as collateral dependent when they become ninety days past due, or earlier if management believes it is probable that the Company will not collect all amounts due under the terms of the loan agreement. When Farmers identifies a loan and concludes that the loan is collateral dependent, Farmers performs an internal collateral valuation as an interim measure. Farmers typically obtains an external appraisal to validate its internal collateral valuation as soon as is practical and adjusts the associated loss reserve, if necessary.
39
The following table summarizes the Company’s nonperforming loans and nonperforming assets for the years ending 2020 through 2024:
|
Nonperforming Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
December 31, |
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||||
|
Nonaccrual loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Commercial Real Estate |
|
$ |
10,642 |
|
|
$ |
5,852 |
|
|
$ |
4,057 |
|
|
$ |
3,004 |
|
|
$ |
389 |
|
|
Commercial |
|
|
3,858 |
|
|
|
1,802 |
|
|
|
3,840 |
|
|
|
7,190 |
|
|
|
3,789 |
|
|
Residential Real Estate |
|
|
4,983 |
|
|
|
3,807 |
|
|
|
3,438 |
|
|
|
4,280 |
|
|
|
5,783 |
|
|
Consumer |
|
|
600 |
|
|
|
461 |
|
|
|
494 |
|
|
|
682 |
|
|
|
864 |
|
|
Agricultural |
|
|
2,120 |
|
|
|
2,486 |
|
|
|
2,482 |
|
|
|
314 |
|
|
|
680 |
|
|
Total Nonaccrual Loans |
|
$ |
22,203 |
|
|
$ |
14,408 |
|
|
$ |
14,311 |
|
|
$ |
15,470 |
|
|
$ |
11,505 |
|
|
Loans Past Due 90 Days or More |
|
|
615 |
|
|
|
655 |
|
|
|
492 |
|
|
|
725 |
|
|
|
2,330 |
|
|
Total Nonperforming Loans |
|
$ |
22,818 |
|
|
$ |
15,063 |
|
|
$ |
14,803 |
|
|
$ |
16,195 |
|
|
$ |
13,835 |
|
|
Repossessed assets |
|
|
33 |
|
|
|
166 |
|
|
|
73 |
|
|
|
0 |
|
|
|
0 |
|
|
Total Nonperforming Assets |
|
$ |
22,851 |
|
|
$ |
15,229 |
|
|
$ |
14,876 |
|
|
$ |
16,195 |
|
|
$ |
13,835 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Percentage of Nonperforming Loans to Total Loans |
|
|
0.70 |
% |
|
|
0.47 |
% |
|
|
0.62 |
% |
|
|
0.69 |
% |
|
|
0.67 |
% |
|
Percentage of Nonperforming Assets to Total Assets |
|
|
0.45 |
% |
|
|
0.30 |
% |
|
|
0.36 |
% |
|
|
0.39 |
% |
|
|
0.45 |
% |
|
Loans Delinquent 30-89 days |
|
$ |
13,032 |
|
|
$ |
16,705 |
|
|
$ |
9,605 |
|
|
$ |
8,891 |
|
|
$ |
9,297 |
|
|
Percentage of Loans Delinquent 30-89 days
|
|
|
0.40 |
% |
|
|
0.52 |
% |
|
|
0.40 |
% |
|
|
0.38 |
% |
|
|
0.45 |
% |
|
Percentage of Nonaccrual Loans to Total Loans |
|
|
0.68 |
% |
|
|
0.45 |
% |
|
|
0.60 |
% |
|
|
0.66 |
% |
|
|
0.55 |
% |
|
Percentage of Allowance for Credit Losses to Nonaccrual Loans |
|
|
161.52 |
% |
|
|
239.03 |
% |
|
|
188.51 |
% |
|
|
189.94 |
% |
|
|
192.49 |
% |
The following table summarizes the Company’s allocation of the allowance for credit losses under CECL for the years 2021 through 2024 and the allowance for loan losses in 2020:
|
December 31, |
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||||||||||||||||||||||||
|
|
|
|
|
|
Loans to |
|
|
|
|
|
Loans to |
|
|
|
|
|
Loans to |
|
|
|
|
|
Loans to |
|
|
|
|
|
Loans to |
|
||||||||||
|
|
|
Amount |
|
|
Total
|
|
|
Amount |
|
|
Total
|
|
|
Amount |
|
|
Total
|
|
|
Amount |
|
|
Total
|
|
|
Amount |
|
|
Total
|
|
||||||||||
|
Commercial Real Estate |
|
$ |
19,259 |
|
|
|
48.6 |
% |
|
$ |
18,150 |
|
|
|
48.1 |
% |
|
$ |
14,840 |
|
|
|
50.5 |
% |
|
$ |
15,879 |
|
|
|
51.0 |
% |
|
$ |
10,775 |
|
|
|
43.1 |
% |
|
Commercial |
|
|
4,628 |
|
|
|
12.4 |
|
|
|
5,086 |
|
|
|
12.6 |
|
|
|
4,186 |
|
|
|
14.6 |
|
|
|
4,949 |
|
|
|
15.7 |
|
|
|
5,022 |
|
|
|
21.6 |
|
|
Residential Real Estate |
|
|
7,271 |
|
|
|
30.7 |
|
|
|
6,917 |
|
|
|
30.8 |
|
|
|
4,374 |
|
|
|
25.3 |
|
|
|
4,870 |
|
|
|
24.9 |
|
|
|
3,684 |
|
|
|
25.2 |
|
|
Consumer |
|
|
4,705 |
|
|
|
8.3 |
|
|
|
4,287 |
|
|
|
8.5 |
|
|
|
3,578 |
|
|
|
9.6 |
|
|
|
3,688 |
|
|
|
8.4 |
|
|
|
2,663 |
|
|
|
10.0 |
|
|
|
|
$ |
35,863 |
|
|
|
100.0 |
% |
|
$ |
34,440 |
|
|
|
100.0 |
% |
|
$ |
26,978 |
|
|
|
100.0 |
% |
|
$ |
29,386 |
|
|
|
100.0 |
% |
|
$ |
22,144 |
|
|
|
100.0 |
% |
The allowance allocated to each of the four loan categories should not be interpreted as an indication that charge-offs in 2024 occurred in the same proportions or that the allocation indicates future charge-off trends. The allowance allocated to the one-to-four family real estate loan category and the consumer loan category is based upon the Company’s allowance methodology for homogeneous loans, and increases and decreases in the balances of those portfolios. For the commercial real estate and commercial categories, which represent 42.2% and 10.8% of the total loan portfolio in 2024, respectively, management relies on the Bank’s internal loan review procedures and allocates accordingly based on loan classifications. The gross charge-offs in the commercial real estate portfolio, were $4.6 million for 2024, which represented approximately 57.8% of the gross losses for the entire loan portfolio.
There were no loans other than those identified above, that management has known information about possible credit problems of borrowers and their ability to comply with the loan repayment terms. Management is actively monitoring certain borrowers’ financial condition and loans which management wants to more closely monitor due to special circumstances. These loans and their potential loss exposure have been considered in management’s analysis of the adequacy of the allowance for credit losses.
40
Loan Commitments and Lines of Credit
In the normal course of business, the Bank has extended various commitments for credit. Commitments for mortgages, revolving lines of credit and letters of credit generally are extended for a period of one month up to one year. Normally, no fees are charged on any unused portion, but an annual fee of two percent is charged for the issuance of a letter of credit.
As of December 31, 2024, there were no concentrations of loans exceeding 10% of total loans that are not disclosed as a category of loans. As of that date, there were also no other interest-earning assets that are either nonaccrual, past due, restructured or non-performing.
Investment Securities
The debt securities available for sale decreased $33.1 million in 2024 to $1.27 billion at December 31, 2024, from $1.30 billion at December 31, 2023. For additional information regarding Farmers’ investment securities see Note 3 to the Consolidated Financial Statements.
The following table shows the carrying value of investment securities by type of obligation at the dates indicated:
|
December 31, |
|
2024 |
|
|
2023 |
|
||
|
U.S. Treasury securities |
|
$ |
52,606 |
|
|
$ |
53,210 |
|
|
U.S. government sponsored enterprise debt securities |
|
|
62,501 |
|
|
|
74,745 |
|
|
Mortgage-backed securities - residential and collateralized
|
|
|
626,643 |
|
|
|
594,385 |
|
|
Small Business Administration |
|
|
2,475 |
|
|
|
2,917 |
|
|
Obligations of states and political subdivisions |
|
|
504,880 |
|
|
|
556,169 |
|
|
Corporate bonds |
|
|
17,448 |
|
|
|
18,275 |
|
|
Debt securities available for sale |
|
$ |
1,266,553 |
|
|
$ |
1,299,701 |
|
|
Other investments |
|
|
14,736 |
|
|
|
15,114 |
|
|
Total securities |
|
$ |
1,281,289 |
|
|
$ |
1,314,815 |
|
41
A summary of debt securities held at December 31, 2024 classified according to maturity and including weighted average yield for each range of maturities is set forth below:
|
|
|
|
|
|
|
|
||
|
|
|
December 31, 2024 |
|
|||||
|
Type and Maturity Grouping |
|
Fair Value |
|
|
Weighted Average
|
|
||
|
U.S. Treasury securities |
|
|
|
|
|
|
||
|
Maturing within one year |
|
$ |
99 |
|
|
|
2.18 |
% |
|
Maturing after one year but within five years |
|
|
35,629 |
|
|
|
1.04 |
% |
|
Maturing after five years but within ten years |
|
|
16,878 |
|
|
|
1.21 |
% |
|
Maturing after ten years |
|
|
0 |
|
|
|
0.00 |
% |
|
Total U.S. Treasury securities |
|
$ |
52,606 |
|
|
|
1.10 |
% |
|
|
|
|
|
|
|
|
||
|
U.S. government sponsored enterprise debt securities |
|
|
|
|
|
|
||
|
Maturing within one year |
|
$ |
248 |
|
|
|
3.11 |
% |
|
Maturing after one year but within five years |
|
|
12,776 |
|
|
|
1.43 |
% |
|
Maturing after five years but within ten years |
|
|
48,154 |
|
|
|
2.71 |
% |
|
Maturing after ten years |
|
|
1,323 |
|
|
|
4.37 |
% |
|
Total U.S. government sponsored enterprise debt securities |
|
$ |
62,501 |
|
|
|
2.47 |
% |
|
|
|
|
|
|
|
|
||
|
Mortgage-backed securities - residential and collateralized mortgage obligations (1) |
|
|
|
|
|
|
||
|
Maturing within one year |
|
$ |
0 |
|
|
|
0.00 |
% |
|
Maturing after one year but within five years |
|
|
6,518 |
|
|
|
2.45 |
% |
|
Maturing after five years but within ten years |
|
|
26,785 |
|
|
|
2.35 |
% |
|
Maturing after ten years |
|
|
593,340 |
|
|
|
2.50 |
% |
|
Total mortgage-backed securities |
|
$ |
626,643 |
|
|
|
2.49 |
% |
|
|
|
|
|
|
|
|
||
|
Small Business Administration |
|
|
|
|
|
|
||
|
Maturing within one year |
|
$ |
0 |
|
|
|
0.00 |
% |
|
Maturing after one year but within five years |
|
|
0 |
|
|
|
0.00 |
% |
|
Maturing after five years but within ten years |
|
|
1,846 |
|
|
|
2.15 |
% |
|
Maturing after ten years |
|
|
629 |
|
|
|
1.98 |
% |
|
Total small business administration |
|
$ |
2,475 |
|
|
|
2.11 |
% |
|
|
|
|
|
|
|
|
||
|
Obligations of states and political subdivisions |
|
|
|
|
|
|
||
|
Maturing within one year |
|
$ |
867 |
|
|
|
3.61 |
% |
|
Maturing after one year but within five years |
|
|
7,604 |
|
|
|
3.17 |
% |
|
Maturing after five years but within ten years |
|
|
81,557 |
|
|
|
3.10 |
% |
|
Maturing after ten years |
|
|
414,852 |
|
|
|
2.84 |
% |
|
Total obligations of states and political subdivisions |
|
$ |
504,880 |
|
|
|
2.89 |
% |
|
|
|
|
|
|
|
|
||
|
Corporate bonds |
|
|
|
|
|
|
||
|
Maturing within one year |
|
$ |
1,163 |
|
|
|
9.25 |
% |
|
Maturing after one year but within five years |
|
|
4,882 |
|
|
|
6.72 |
% |
|
Maturing after five years but within ten years |
|
|
11,403 |
|
|
|
6.49 |
% |
|
Maturing after ten years |
|
|
0 |
|
|
|
0.00 |
% |
|
Total corporate bonds |
|
$ |
17,448 |
|
|
|
6.74 |
% |
Premises and Equipment
Premises and equipment increased $7.9 million from $44.4 million at December 31, 2023, to $52.3 million at December 31, 2024. This increase was primarily due to the construction of additional office space at the Company's headquarters in Canfield, OH, partially offset by depreciation.
Bank Owned Life Insurance
The Company owns bank owned life insurance policies on the lives of certain members of management. The purpose of this investment is to help offset the costs of employee benefit plans. The cash surrender value of these policies increased to $101.4 million at December 31, 2024, compared to $99.5 million at December 31, 2023. The increase was due to earnings on the policies in 2024 offset slightly by proceeds from a death benefit.
42
Deposits
Total deposits increased to $4.3 billion at December 31, 2024, from $4.2 billion at December 31, 2023, an increase of $89.4 million. Noninterest bearing deposits declined $61.1 million during 2024 to $965.5 million from $1.03 billion. This decline was primarily due to the migration of noninterest bearing deposits into interest bearing deposits as customers looked to take advantage of the increase in interest rates. Interest-bearing deposits increased $75.5 million to $3.2 billion at December 31, 2024, compared to $3.15 billion at December 31, 2023. The increase was primarily due to the migration of noninterest bearing deposits discussed above. Brokered time deposits increased $75.0 million for the year ended December 31, 2024, due to the Company using brokered time deposits to pay off short-term borrowings.
Average balances and average rates paid on deposits are as follows:
|
|
|
Years Ended December 31 |
|
|||||||||||||||||||||
|
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||||||||||||||
|
|
|
Amount |
|
|
Rate |
|
|
Amount |
|
|
Rate |
|
|
Amount |
|
|
Rate |
|
||||||
|
Noninterest-bearing demand |
|
$ |
981,115 |
|
|
|
0.00 |
% |
|
$ |
1,065,389 |
|
|
|
0.00 |
% |
|
$ |
959,294 |
|
|
|
0.00 |
% |
|
Interest-bearing demand |
|
|
1,396,193 |
|
|
|
2.48 |
% |
|
|
1,415,425 |
|
|
|
1.95 |
% |
|
|
1,392,058 |
|
|
|
0.54 |
% |
|
Money market |
|
|
659,807 |
|
|
|
2.43 |
% |
|
|
602,445 |
|
|
|
1.62 |
% |
|
|
389,036 |
|
|
|
0.14 |
% |
|
Savings |
|
|
435,663 |
|
|
|
0.03 |
% |
|
|
511,116 |
|
|
|
0.03 |
% |
|
|
457,382 |
|
|
|
0.02 |
% |
|
Brokered time deposits |
|
|
25,389 |
|
|
|
4.36 |
% |
|
|
132,895 |
|
|
|
4.67 |
% |
|
|
56,965 |
|
|
|
2.18 |
% |
|
Certificates of deposit |
|
|
745,945 |
|
|
|
3.93 |
% |
|
|
654,717 |
|
|
|
2.97 |
% |
|
|
360,687 |
|
|
|
0.84 |
% |
|
Total |
|
$ |
4,244,112 |
|
|
|
1.91 |
% |
|
$ |
4,381,987 |
|
|
|
1.44 |
% |
|
$ |
3,615,422 |
|
|
|
0.64 |
% |
The following table sets forth the maturities of retail certificates of deposit having principal amounts $250,000 or greater at December 31, 2024 (in thousands):
|
Retail certificates of deposit maturing in quarter ending: |
|
|||
|
March 31, 2025 |
|
$ |
136,533 |
|
|
June 30, 2025 |
|
|
112,131 |
|
|
September 30, 2025 |
|
|
12,207 |
|
|
December 31, 2025 |
|
|
13,115 |
|
|
After December 31, 2025 |
|
|
11,025 |
|
|
Total retail certificates of deposit with balances $250,000 or greater |
|
$ |
285,011 |
|
Uninsured deposits for bank and savings and loan registrants are U.S. federally insured depository institutions as the portion of deposit accounts in U.S. offices that exceed the FDIC insurance limit or similar state deposit insurance regimes and amounts in any other uninsured investment or deposit account that are classified as deposits and not subject to any federal or state deposit insurance regimes. Deposits in amounts in excess of the FDIC insurance limit were $1.42 billion at December 31, 2024.
Short-Term Borrowings
The Company's short-term borrowings decreased by $50.0 million from $355.0 million at December 31, 2023, to $305.0 million at December 31, 2024. This decrease was due to proceeds from the issuance of brokered time deposits being used to pay down short term borrowings. The Company uses short term borrowings to manage the ongoing fluctuations with loans and deposits, when necessary.
Long-Term Borrowings
Total long-term borrowings decreased $2.5 million to $86.2 million at December 31. 2024, from $88.7 million at December 31, 2023. The decline was primarily due to the Company purchasing $3.0 million of its subordinated debt during 2024 and recording a gain of $444 thousand. See Note 13 within Item 8 of this Annual report on Form 10-K for additional detail.
43
Stockholders’ Equity
Total stockholders’ equity increased $1.6 million from $404.4 million at December 31, 2023, to $406.0 million at December 31, 2024. The increase was primarily due to net income of $45.9 million offset by an increase in accumulated other comprehensive loss of $20.7 million and dividends paid on common stock of $25.5 million.
Contractual Obligations, Commitments, Contingent Liabilities and Off-Balance Sheet Arrangements
The following table presents, as of December 31, 2024, the Company’s significant fixed and determinable contractual obligations by payment date. The payment amounts represent those amounts contractually due to the recipient and do not include any unamortized premiums or discounts or other similar carrying value adjustments. Further discussion of the nature of each obligation is included in the referenced note to the consolidated financial statements.
|
Commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
12/31/2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
Note |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
Ref. |
|
2025 |
|
|
2026 |
|
|
2027 |
|
|
2028 |
|
|
2029 |
|
|
Thereafter |
|
||||||
|
Deposits without maturity |
|
|
|
$ |
3,429,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Certificates of deposit and
|
|
11 |
|
|
790,004 |
|
|
$ |
21,574 |
|
|
$ |
9,018 |
|
|
$ |
4,098 |
|
|
$ |
6,550 |
|
|
$ |
6,419 |
|
|
Long-term borrowings |
|
13 |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
90,000 |
|
|
Leases |
|
9 |
|
|
1,393 |
|
|
|
1,279 |
|
|
|
1,198 |
|
|
|
1,214 |
|
|
|
1,110 |
|
|
|
5,652 |
|
There are also $17.1 million of commitments to various partnership investment funds. The Company invests in these funds, consisting of affordable housing tax credit investments and SBIC funds, in efforts to comply with CRA regulations. The commitments have no predetermined due dates but are expected to be funded sporadically over the next ten years. Note 14 to the consolidated financial statements discusses in greater detail other commitments and contingencies and the various obligations that exist under those agreements. Examples of these commitments and contingencies include commitments to extend credit and standby letters of credit.
Management’s policy is to not engage in derivatives contracts for speculative trading purposes. The Company does utilize interest-rate swaps as a way of helping manage interest rate risk and not as derivatives for trading purposes. See Note 22 within Item 8 of this Annual report on Form 10-K for additional detail.
Liquidity
The principal sources of funds for the Bank are deposits, loan and security repayments, borrowings from financial institutions, repurchase agreements and other funds provided by operations. The Bank also has the ability to borrow from the FHLB. While scheduled loan repayments and maturing investments are relatively predictable, deposit flows and early loan prepayments are more influenced by interest rates, general economic conditions and competition. Investments in liquid assets maintained by the Company and the Bank are based upon management’s assessment of (1) the need for funds, (2) expected deposit flows, (3) yields available on short-term liquid assets, and (4) objectives of the asset and liability management program.
The Bank’s Asset/Liability Committee (“ALCO”) is responsible for monitoring liquidity guidelines, policies and procedures. ALCO uses a variety of methods to monitor the liquidity position of the Bank including a liquidity analysis that measures potential sources and uses of funds over future time periods. ALCO also performs contingency funding analyses to determine the Bank’s ability to meet potential liquidity needs under stress scenarios that cover varying time horizons ranging from immediate to long-term.
Capital Resources
The Bank, as a national chartered bank, is subject to the dividend restrictions set forth by the OCC. The OCC must approve declaration of any dividends in excess of the sum of profits for the current year and retained net profits for the preceding two years (as defined). Farmers and Farmers Bank are required to maintain minimum amounts of capital to total “risk weighted” assets, as defined by the banking regulators. At December 31, 2024, under the
44
minimum capital requirements associated with the Basel III, Farmers Bank and Farmers are required to have actual and minimum capital ratios, which are detailed in Note 16 of the Consolidated Financial Statements. Farmers Bank and Farmers had capital ratios above the minimum levels at December 31, 2024 and 2023. At year-end 2024 and 2023, the most recent regulatory notifications categorized Farmers Bank as well capitalized under the regulatory framework for prompt corrective action.
During 2013, the Federal banking regulators approved a final rule to implement revised capital adequacy standards of the Basel Committee on Banking Supervision, commonly called Basel III, and to address relevant provisions of the Dodd-Frank Act. The final rule strengthens the definition of regulatory capital, increases risk-based capital requirements, makes selected changes to the calculation of risk-weighted assets, and adjusts the prompt corrective action thresholds. The Bank has retained, through a one-time election, the prior treatment for most accumulated other comprehensive income, such that unrealized gains and losses on securities available for sale that did not affect regulatory capital amounts and ratios. As mentioned in the prior paragraph, the Bank falls within the new regulatory capital ratio guidelines.
Critical Accounting Policies
The Company follows financial accounting and reporting policies that are in accordance with generally accepted accounting principles in the United States of America and conform to general practices within the banking industry. Some of these accounting policies are considered to be critical accounting policies. Critical accounting policies are those policies that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The Company has identified three accounting policies that are critical accounting policies and an understanding of these policies is necessary to understand the financial statements. These policies relate to determining the adequacy of the allowance for credit losses, if there is any impairment of goodwill and other intangibles, and estimating the fair value of assets acquired and liabilities assumed in connection with any merger activity. Additional information regarding these policies is included in the notes to the consolidated financial statements, including Note 1 (Summary of Significant Accounting Policies), Note 4 (Loans) and Note 2 (Business Combinations), and the section above captioned “Loan Portfolio.” Management believes that the judgments, estimates and assumptions used in the preparation of the consolidated financial statements are appropriate given the factual circumstances at the time.
Farmers maintains an allowance for credit losses. The allowance for credit losses is presented as a reserve against loans on the balance sheet. Credit losses are charged off against the allowance for credit losses, while recoveries of amounts previously charged off are credited to the allowance for credit losses. A provision for credit losses is charged to operations based on management’s periodic evaluation of adequacy of the allowance.
The Company’s allowance for credit losses represents management’s estimate of expected credit losses over the remaining expected life of the Company’s financial assets measured at amortized cost and certain off-balance sheet lending-related commitments.
The allowance for credit losses involves significant judgment on a number of matters including the weighting of macroeconomic forecasts and microeconomic statistics, incorporation of historical loss experience, assessment of risk characteristics, assignment of risk ratings, valuation of collateral, and the determination of remaining expected life. Refer to Note 4 for further information on these judgments as well as the Company’s policies and methodologies used to determine the Company’s allowance for credit losses.
A significant judgment involved in estimating the Company’s allowance for credit losses relates to the macroeconomic forecasts used to estimate credit losses over the four-quarter forecast period within the Company’s methodology. The four-quarter forecast incorporates three macroeconomic variables (“MEVs”) that are relevant for exposures across the Company.
45
Changes in the Company’s assumptions and forecasts of economic conditions could significantly affect its estimate of expected credit losses in the portfolio at the balance sheet date or lead to significant changes in the estimate from one reporting period to the next.
It is difficult to estimate how potential changes in any one factor or input might affect the overall allowance for credit losses because management considers a wide variety of factors and inputs in estimating the allowance for credit losses. Changes in the factors and inputs considered may not occur at the same rate and may not be consistent across all product types, and changes in factors and inputs may be directionally inconsistent, such that improvement in one factor or input may offset deterioration in others.
To consider the impact of a hypothetical alternate macroeconomic forecast, the Company compared the modeled credit losses determined using its central and relative adverse macroeconomic scenarios. The central and relative adverse scenarios each included the three MEVs, but differed in the levels, paths and peaks/troughs of those variables over the four-quarter forecast period.
For example, compared to the Company’s central scenario that is based on a four-quarter forecasted change in U.S. real GDP of 2.10% from 4Q2024 to 4Q2025, U.S. PCE inflation of 2.50%, and U.S. unemployment of 4.30%, the Company’s relative adverse scenario assumes a four-quarter forecast with a contraction of U.S. real GDP, a PCE inflation between 5.00% and 7.00% and an elevated U.S. unemployment rate between 6.00% and 7.00%. This analysis is not intended to estimate expected future changes in the allowance for credit losses, for a number of reasons, including:
To demonstrate the sensitivity of credit loss estimates to macroeconomic forecasts as of December 31, 2024, the Company compared the modeled estimates under its relative adverse scenario for two of the Company’s largest loan pools to its central scenario for the same loan pools. Without considering offsetting or correlated effects in other qualitative components of the Company’s allowance for credit losses, the comparison between these two scenarios for the exposures below reflect the following differences:
This analysis relates only to the modeled credit loss estimates and is not intended to estimate changes in the overall allowance for credit losses as it does not reflect any potential changes in the other adjustments to the quantitative calculation, which would also be influenced by the judgment management applies to the modeled lifetime loss estimates to reflect the uncertainty and imprecision of these modeled lifetime loss estimates based on then-current circumstances and conditions.
Recognizing that forecasts of macroeconomic conditions are inherently uncertain, the Company believes that its process to consider the available information and associated risks and uncertainties is appropriately governed and that its estimates of expected credit losses were reasonable and appropriate for the period ended December 31, 2024.
The Company uses two methodologies to analyze loan pools. The cohort method and the PD/LGD method. Cohort relies on the creation of cohorts to capture loans that qualify for a particular segment, as of a point in time. Those loans are then tracked over their remaining lives to determine their loss experience. The Company aggregates financial assets on the basis of similar risk characteristics when evaluating loans on a collective basis. Those characteristics include, but are not limited to, internal or external credit score, risk ratings, financial asset, loan type, collateral type, size, effective interest rate, term, or geographical location. The Company uses cohort primarily for consumer loan portfolios.
46
The PD portion of PD/LGD is defined by the Company as 90 days past due, placed on non-accrual, or is partially or wholly charged-off. Typically, a one-year time period is used to assess PD. PD can be measured and applied using various risk criteria. Risk rating is one common way to apply PDs. LGD is to determine the percentage of loss by facility or collateral type. LGD estimates can sometimes be driven, or influenced, by product type, industry or geography. The Company uses PD/LGD primarily for commercial loan portfolios.
Management believes that the accounting for goodwill and other intangible assets also involves a higher degree of judgment than most other significant accounting policies. GAAP establishes standards for the amortization of acquired intangible assets and the impairment assessment of goodwill. Goodwill arising from business combinations represents the value attributable to unidentifiable intangible assets in the business acquired. The Company’s goodwill relates to the value inherent in the banking industry and that value is dependent upon the ability of the Company’s subsidiaries to provide quality, cost-effective services in a competitive marketplace. The goodwill value is supported by revenue that is in part driven by the volume of business transacted. A decrease in earnings resulting from a decline in the customer base or the inability to deliver cost-effective services over sustained periods can lead to impairment of goodwill that could adversely impact earnings in future periods. GAAP requires an annual evaluation of goodwill for impairment, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The fair value of the goodwill is estimated by reviewing the past and projected operating results for the subsidiaries and comparable industry information. At December 31, 2024, on a consolidated basis, Farmers had intangibles of $20.8 million subject to amortization and $167.5 million in goodwill, which was not subject to periodic amortization.
The Company accounts for acquisitions under Financial Accounting Standards Board (“FASB”) ASC Topic 805, Business Combinations, which requires the use of the acquisition method of accounting. Assets acquired and liabilities assumed in a business combination are recorded at the estimated fair value on their purchase date. As provided for under GAAP, management has up to 12 months following the date of the acquisition to finalize the fair values of acquired assets and assumed liabilities. In particular, the valuation of acquired loans involves significant estimates, assumptions and judgment based on information available as of the acquisition date. Loans acquired in a business combination transaction are evaluated either individually or in pools of loans with similar characteristics; including consideration of a credit component. A number of factors are considered in determining the estimated fair value of purchased loans including, among other things, the remaining life of the acquired loans, estimated prepayments, estimated loss ratios, estimated value of the underlying collateral, estimated holding periods, contractual interest rates compared to market interest rates, and net present value of cash flows expected to be received.
Recent Accounting Pronouncements and Developments
Note 1 to the consolidated financial statements discusses new accounting policies adopted by Farmers during 2024 and 2023 and the expected impact of accounting policies recently issued or proposed but not yet required to be adopted. To the extent the adoption of new accounting standards materially affects financial condition, results of operations or liquidity, the impacts are discussed in the applicable sections of this financial review and notes to the consolidated financial statements.
47
Item 7A. Quantitative and Qualitati ve Disclosures about Market Risk.
Important considerations in asset/liability management are liquidity, the balance between interest rate sensitive assets and liabilities and the adequacy of capital. Interest rate sensitive assets and liabilities are those which have rates subject to change within a future time period due to maturity of the instrument or changes in market rates. While liquidity management involves meeting the funds flow requirements of the Company, the management of interest rate sensitivity focuses on the structure of these assets and liabilities with respect to maturity and repricing characteristics. Managing interest rate sensitive assets and liabilities provides a means of tempering fluctuating interest rates and maintaining net interest margins through periods of changing interest rates. The Company monitors interest rate sensitive assets and liabilities to determine the overall interest rate position over various time frames.
The Company considers the primary market exposure to be interest rate risk. Simulation analysis is used to monitor the Company’s exposure to changes in interest rates, and the effect of the change to net interest income. The following table shows the effect on net interest income and the net present value of equity from a sudden and sustained 400 basis point increase to a 400 basis point decrease in market interest rates. The assumptions and predictions include inputs to compute baseline net interest income, expected changes in rates on interest bearing deposit accounts and loans, competition and various other factors that are difficult to accurately predict.
|
|
|
2024 |
|
|
2023 |
|
|
ALCO |
|
|||
|
Changes In Interest Rate (basis points) |
|
Result |
|
|
Result |
|
|
Guideline |
|
|||
|
Net Interest Income Change |
|
|
|
|
|
|
|
|
|
|||
|
+400 |
|
|
-9.0 |
% |
|
|
-6.2 |
% |
|
|
-12.5 |
% |
|
+300 |
|
|
-7.0 |
% |
|
|
-5.0 |
% |
|
|
-10.0 |
% |
|
+200 |
|
|
-4.7 |
% |
|
|
-3.4 |
% |
|
|
-7.5 |
% |
|
+100 |
|
|
-2.5 |
% |
|
|
-1.9 |
% |
|
|
-5.0 |
% |
|
-100 |
|
|
2.2 |
% |
|
|
1.4 |
% |
|
|
-5.0 |
% |
|
-200 |
|
|
3.9 |
% |
|
|
2.3 |
% |
|
|
-10.0 |
% |
|
-300 |
|
|
5.5 |
% |
|
|
3.1 |
% |
|
|
-15.0 |
% |
|
-400 |
|
|
6.1 |
% |
|
|
2.7 |
% |
|
|
-20.0 |
% |
|
Net Present Value Of Equity Change |
|
|
|
|
|
|
|
|
|
|||
|
+400 |
|
|
-37.2 |
% |
|
|
-36.4 |
% |
|
|
-12.5 |
% |
|
+300 |
|
|
-27.3 |
% |
|
|
-26.8 |
% |
|
|
-10.0 |
% |
|
+200 |
|
|
-17.7 |
% |
|
|
-17.3 |
% |
|
|
-7.5 |
% |
|
+100 |
|
|
-9.0 |
% |
|
|
-8.7 |
% |
|
|
-5.0 |
% |
|
-100 |
|
|
5.5 |
% |
|
|
5.3 |
% |
|
|
-10.0 |
% |
|
-200 |
|
|
7.1 |
% |
|
|
7.2 |
% |
|
|
-15.0 |
% |
|
-300 |
|
|
4.4 |
% |
|
|
5.1 |
% |
|
|
-20.0 |
% |
|
-400 |
|
|
1.5 |
% |
|
|
3.5 |
% |
|
|
-25.0 |
% |
The yield curve has changed dramatically over the past three years. From March 2022 to July 2023, in an intense effort to diffuse inflation, the Federal Open Market Committee raised the discount rate from 0.25% to 5.50%. The committee then held the discount rate at 5.50% until September 2024 when they cut the discount rate by a total of 100 basis points over the last four months of 2024. These rate cuts were an attempt to guide the economy into a “soft landing”, where the still comparatively elevated rate will continue to bring down inflation without harming the job market or the economy.
The above table presents results in the up rate scenarios that exceed internal policy limits for the Economic Value of Equity (“EVE”) for both year end periods. This unprecedented outcome was created by the events occurring over the past four years, namely, the massive influx of liquidity in the form of deposits in 2020 and 2021 from government assistance while interest rates were at their lowest; the deployment of these funds at the prevailing low rates; and now the usage of the deposits as consumers utilize their deposits in an effort to maintain living standards in this highly inflationary economy, which prevents the Company from investing in the higher rates that are now available. With the EVE model moving rates even higher than the current rates, it further exacerbates the differential between market rates and book rates, thereby creating the out of internal policy consequence. To mitigate these results, the Company has prioritized employing strategies to shrink the longer duration investment portfolio and replace the
48
balances with assets having a shorter duration, including loans, in an effort to close the gap between the book and market rates. Any growth in lending will be done in a measured manner given the uncertain economic backdrop that exists today. The Company recognizes the risk that is inherent in growing loans but feels that its historical record of prudent underwriting, its low loan to deposit ratio and its strong credit metrics provide the ability to pursue solid opportunities in the marketplace. In addition, any loan growth will be broad based and will encompass consumer, indirect, 1-4 family, commercial and industrial and commercial real estate, so as not to increase the risk in any one portfolio or sector.
The remaining results of the simulations in the table above indicate that interest rate change results fall within internal limits established by the Company at both December 31, 2024, and December 31, 2023. A report on interest rate risk is presented to the Board of Directors and the ALCO on a quarterly basis. The Company has no market risk sensitive instruments held for trading purposes.
A large amount of interest sensitive assets and liabilities mature within twelve months and the Company monitors this area closely. Early withdrawal of deposits, prepayments of loans and loan delinquencies are some of the factors that can impact actual results in comparison to our simulation analysis. In addition, changes in rates on interest sensitive assets and liabilities may not be equal, which could result in a change in net interest margin.
Interest rate sensitivity management provides some degree of protection against net interest income volatility. It is not possible, or necessarily desirable, to attempt to eliminate this risk completely by matching interest sensitive assets and liabilities. Other factors, such as market demand, interest rate outlook, regulatory restraint and strategic planning also have an effect on the desired balance sheet structure.
49
Item 8. Finan cial Statements and Supplementary Financial Data.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Farmers National Banc Corp. (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(1) promulgated under the Exchange Act as a process designed by, or under the supervision of; our principal executive and principal financial officers and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles and includes those policies and procedures that:
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024, based on criteria for effective internal control over financial reporting established in “Internal Control — Integrated Framework,” issued by the Committee of Sponsoring Organization of the Treadway Commission (COSO). Management also conducted an assessment of requirements pertaining to Section 112 of the Federal Deposit Insurance Corporation Improvement Act. This section relates to management’s evaluation of internal control over financial reporting, including controls over the preparation of financial statements in accordance with the instructions to the Consolidated Financial Statements for Bank Holding Companies (Form FR Y-9C) and in compliance with laws and regulations. Our evaluation included a review of the documentation of controls, evaluations of the design of the internal control system and tests of the effectiveness of internal controls. Based on this assessment, management has determined that the Company’s internal control over financial reporting as of December 31, 2024, was effective.
Crowe LLP, the independent registered public accounting firm that audited the 2024 consolidated financial statements of the Company included in this Annual Report on Form 10-K, has issued an audit report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024. The report, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024 is included under the heading “Report of Independent Registered Public Accounting Firm” In Part II, Item 8.
|
|
|
|
|
Kevin J. Helmick |
|
Troy Adair |
|
President and Chief Executive Officer |
|
Executive Vice President and Chief Financial Officer |
50
|
|
|
|
Crowe LLP Independent Member Crowe Global |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders and the Board of Directors of Farmers National Banc Corp.
Canfield, Ohio
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Farmers National Banc Corp. (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
51
presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Allowance for Credit Losses on Loans-Qualitative Factors
The allowance for credit losses (the “ACL”) as described in Notes 1 and 4 is an accounting estimate of expected credit losses over the life of loans. The Company’s loan portfolio is presented at the net amount expected to be collected. Estimates of expected credit losses for loans are based on historical experience, current conditions and reasonable and supportable forecasts over the life of the loans.
The Company measures expected credit losses based on pooled loans when similar risk characteristics exist using the cohort and the probability of default/loss given default (“PD/LGD”) models. The cohort model is used primarily for consumer loan portfolios and uses cohorts to capture loans that qualify for a particular segment at a point in time. The loans are then tracked over their remaining lives to determine loss experience. The PD/LGD model is primarily used for commercial loan portfolios. The PD is defined as 90 days past due, placed on nonaccrual, or is partially or wholly charged-off. Risk rating is a common way to apply PDs. LGD can be driven or influenced by product type, industry or geography. The Company adjusts its quantitative model for certain qualitative factors to reflect the extent to which management expects current conditions and reasonable and supportable forecasts to differ from the conditions that existed for the period over which historical information was evaluated.
52
Auditing the qualitative factors within the ACL was identified by us as a critical audit matter because of the extent of auditor judgment applied and significant audit effort to evaluate the significant subjective and complex judgments made by management related to the determination of the qualitative factors used in the calculation.
The primary procedures performed to address the critical audit matter included:
We have served as the Company's auditor since 2022.
March 6, 2025
53
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Farmers National Banc Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of income, comprehensive income,
stockholders’ equity, and cash flows of Farmers National Banc Corp. (the Company) for the year ended
December 31, 2022, and the related notes (collectively referred to as the financial statements).
In our opinion, the financial statements referred to above present fairly, in all material respects, the results
of the Company’s operations and its cash flows for the year ended December 31, 2022, in conformity
with accounting principles generally accepted in the United States of America.
Basis for Opinion
The Company’s management is responsible for these financial statements. Our responsibility is to
express an opinion on the Company’s financial statements based on our audit. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud.
Our audit of the financial statements included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the financial statements. Our audit also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audit provide a reasonable basis for our
opinion.
CliftonLarsonAllen LLP
We have served as the Company’s auditor from 2019 through 2022.
Maumee, Ohio
March 9, 2023
CLA (CliftonLarsonAllen LLP) is an independent network member of CLA Global. See CLAglobal.com/disclaimer.
54
CONSOLIDATED BALANCE SHEETS
(Table Dollar Amounts in Thousands except Per Share Data)
|
December 31, |
|
2024 |
|
|
2023 |
|
||
|
ASSETS |
|
|
|
|
|
|
||
|
Cash and due from banks |
|
$ |
|
|
|
$ |
|
|
|
Federal funds sold and other |
|
|
|
|
|
|
|
|
|
TOTAL CASH AND CASH EQUIVALENTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Debt securities available for sale, at fair value (amortized cost $
|
|
|
|
|
|
|
|
|
|
Other investments |
|
|
|
|
|
|
|
|
|
Loans held for sale, at fair value |
|
|
|
|
|
|
|
|
|
Loans |
|
|
|
|
|
|
|
|
|
Less allowance for credit losses |
|
|
|
|
|
|
|
|
|
NET LOANS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Premises and equipment, net |
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
|
|
|
|
|
|
|
Other intangibles, net |
|
|
|
|
|
|
|
|
|
Bank owned life insurance |
|
|
|
|
|
|
|
|
|
Affordable housing investments |
|
|
|
|
|
|
|
|
|
Other assets |
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
||
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
||
|
Deposits: |
|
|
|
|
|
|
||
|
Noninterest-bearing |
|
$ |
|
|
|
$ |
|
|
|
Interest-bearing |
|
|
|
|
|
|
|
|
|
Brokered time deposits |
|
|
|
|
|
|
|
|
|
TOTAL DEPOSITS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Short-term borrowings |
|
|
|
|
|
|
|
|
|
Long-term borrowings |
|
|
|
|
|
|
|
|
|
Other liabilities |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
(Note 14) |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
||
|
Stockholders' equity |
|
|
|
|
|
|
||
|
Common Stock, no par value;
|
|
|
|
|
|
|
|
|
|
Retained earnings |
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive (loss) |
|
|
(
|
) |
|
|
(
|
) |
|
Treasury stock, at cost;
|
|
|
(
|
) |
|
|
(
|
) |
|
TOTAL STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
|
$ |
|
|
|
$ |
|
|
See accompanying notes
55
CONSOLIDATED STATEMENTS OF INCOME
(Table Dollar Amounts in Thousands except Per Share Data)
|
Years ended December 31, |
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
|
INTEREST AND DIVIDEND INCOME |
|
|
|
|
|
|
|
|
|
|||
|
Loans, including fees |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Taxable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax exempt securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds sold and other interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL INTEREST AND DIVIDEND INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
INTEREST EXPENSE |
|
|
|
|
|
|
|
|
|
|||
|
Deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL INTEREST EXPENSE |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INTEREST INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Credit) provision for unfunded commitments |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES AND UNFUNDED COMMITMENTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
NONINTEREST INCOME |
|
|
|
|
|
|
|
|
|
|||
|
Service charges on deposit accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank owned life insurance income, including death benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance agency commissions |
|
|
|
|
|
|
|
|
|
|
|
|
|
Security (losses), including fair value changes for equity securities |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Retirement plan consulting fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment commissions |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains on sale of loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other mortgage banking income, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
Debit card and EFT fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal settlement |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL NONINTEREST INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
NONINTEREST EXPENSE |
|
|
|
|
|
|
|
|
|
|||
|
Salaries and employee benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy and equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
FDIC insurance and state and local taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger related costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising |
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
Core processing charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
Charitable donation |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL NONINTEREST EXPENSE |
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
INCOME TAXES |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
EARNINGS PER SHARE: |
|
|
|
|
|
|
|
|
|
|||
|
Basic |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Diluted |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
See accompanying notes.
56
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Table Dollar Amounts in Thousands except Per Share Data)
|
Years ended December 31, |
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
|
NET INCOME |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|||
|
Net unrealized holding (losses) gains on available for sale securities |
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
Reclassification adjustment for losses realized in income on sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification adjustment for losses (gains) realized in income on fair value hedge |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Net unrealized holding (losses) gains |
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
Income tax effect |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Unrealized holding (losses) gains, net of reclassification and tax |
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|||
|
Change in funded status of post-retirement plan, net of tax |
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|||
|
Other comprehensive (loss) income, net of tax |
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|||
|
TOTAL COMPREHENSIVE INCOME (LOSS) |
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
See accompanying notes.
57
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Table Dollar Amounts in Thousands except Per Share Data)
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|||||
|
|
|
Common |
|
|
Retained |
|
|
Comprehensive |
|
|
Treasury |
|
|
|
|
|||||
|
|
|
Stock |
|
|
Earnings |
|
|
(Loss) Income |
|
|
Stock |
|
|
Total |
|
|||||
|
Balance December 31, 2021 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Other comprehensive loss |
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
(
|
) |
|||
|
Restricted share issuance |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Restricted share forfeitures |
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
||
|
Stock based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Vesting of Long Term Incentive Plan |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
||
|
Share forfeitures for taxes |
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|||
|
Dividends paid at $
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
(
|
) |
|||
|
Balance December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Share issuance as part of a business combination |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Restricted share issuance |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Restricted share forfeitures |
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
||
|
Stock based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Vesting of Long Term Incentive Plan |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Share forfeitures for taxes |
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|||
|
Treasury share purchases |
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|||
|
Dividends paid at $
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
(
|
) |
|||
|
Balance December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Other comprehensive loss |
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
(
|
) |
|||
|
Restricted share issuance |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Restricted share forfeitures |
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
||
|
Stock based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Vesting of Long Term Incentive Plan |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Share forfeitures for taxes |
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|||
|
Dividends paid at $
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
(
|
) |
|||
|
Balance December 31, 2024 |
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
See accompanying notes.
58
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Table Dollar Amounts in Thousands except Per Share Data)
|
Years ended December 31, |
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|||
|
Net income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Adjustments to reconcile net income to net cash from operating
|
|
|
|
|
|
|
|
|
|
|||
|
Provision for credit losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Credit) provision for unfunded commitments |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amortization of securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale security losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized (gains) losses on equity securities |
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
|
(Gain) on debt extinguishment |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
Losses (gains) on premises and equipment sales and disposals, net |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
Stock compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings on bank owned life insurance |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Income recognized from death benefit on bank owned life insurance |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Origination of loans held for sale |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Proceeds from loans held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (gains) on sale of loans |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Net change in other assets and liabilities |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
NET CASH FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|||
|
Proceeds from maturities and repayments of securities available
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales of securities available for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of securities available for sale |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Proceeds from sale of equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of equity securities |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Proceeds from maturities and repayments of SBIC funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of SBIC funds |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Purchases of regulatory stock |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Proceeds from redemption of regulatory stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan originations and payments, net |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Purchase of portfolio loans |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
Proceeds from loans held for sale previously classified as portfolio loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from BOLI death benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from land and building sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to premises and equipment |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Net cash paid in business combinations |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
NET CASH (USED IN) FROM INVESTING ACTIVITIES |
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|||
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|||
|
Net change in deposits |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Net change in short-term borrowings |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
Redemption of subordinated debentures |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
Cash dividends paid |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Cash paid for withholding taxes on share-based awards |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Repurchase of common shares |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
NET CASH FROM (USED IN) FINANCING ACTIVITIES |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
NET CHANGE IN CASH AND CASH EQUIVALENTS |
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|||
|
Beginning cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
|
|||
|
Interest paid |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Supplemental noncash disclosures: |
|
|
|
|
|
|
|
|
|
|||
|
Issuance of stock for business combinations |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Issuance of stock awards |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Transfer of loans to loans held for sale |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Lease liabilities assumed from obtaining right-of-use assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
See Note 2 regarding non-cash transactions included in the acquisition
See accompanying notes.
59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands except Per Share Data)
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include the accounts of Farmers National Banc Corp. (“Company”) and its wholly-owned subsidiaries, The Farmers National Bank of Canfield (“Bank” or “Farmers Bank”), Farmers Trust Company (“Farmers Trust”) and Farmers National Captive, Inc. (“Captive”). Captive was a wholly-owned insurance subsidiary of the Company that provided property and casualty insurance coverage to the Company and its subsidiaries until November 2023 when the Company dissolved the entity. The consolidated financial statements also include the accounts of the Bank’s subsidiaries; Farmers National Insurance, LLC (“Farmers Insurance”) and Farmers of Canfield Investment Co. (“Farmers Investments”). The Company completed its acquisition of Emclaire Financial Corp., (“Emclaire”) on January 1, 2023 and has since included its results of operations in the Consolidated Statements of Income. Together all entities are referred to as “the Company.” All significant intercompany balances and transactions have been eliminated in consolidation.
Nature of Operations:
The Company provides full banking services, including wealth management services and mortgage banking activity, through the Bank. As a national bank, the Bank is subject to regulation by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation. The primary area served by the Bank is the northeastern region of Ohio and the western region of Pennsylvania, through sixty-two (
Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Business Combinations: Business combinations are accounted for by applying the acquisition method. As of acquisition date, the identifiable assets acquired and liabilities assumed are measured at fair value and recognized separately from goodwill. Results of operations of the acquired entities are included in the consolidated statement of income from the date of acquisition.
Cash Flows:
Cash and cash equivalents include cash on hand, deposits with other financial institutions with maturities fewer than ninety (90) days, and federal funds sold. Generally, federal funds are purchased and sold for
Securities: Debt securities classified as available for sale are those that could be sold for liquidity, investment management, or similar reasons, even though management has no present intentions to do so. Securities available for sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of tax. Equity securities with readily determinable fair values are carried at fair value, with changes in fair value reported in net income.
Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except for mortgage backed securities where prepayments are anticipated. Premiums are amortized to the earliest call date. Purchases and sales are recorded on the trade date, with resulting gains and losses determined using the specific identification method.
60
A debt security is placed on non-accrual status at the time any principal or interest payments become
For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For debt securities available-for-sale that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.
Changes in the allowance for credit losses are recorded as credit loss expense. Losses are charged against the allowance when management believes the uncollectibility of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met. As of December 31, 2024 the Company has not recorded an allowance for credit losses on available-for-sale securities.
Loans Held for Sale: Mortgage loans originated and intended for sale in the secondary market are carried at fair value, as determined by outstanding commitments from investors.
Mortgage loans held for sale are sold with or without servicing rights. Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold.
Loans: Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of deferred loan fees and costs, and an allowance for credit losses. Substantially all loans are secured by specific items of collateral including business assets, consumer assets, and commercial and residential real estate.
Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level yield method without anticipating prepayments. Interest income on mortgage and commercial loans is discontinued at the time the loan is
For all classes of loans, when interest accruals are discontinued, interest accrued but not received is reversed against interest income. Interest on such loans is thereafter recorded on a cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Purchased Credit Deteriorated Loans (PCD):
The Company acquires loans individually and in groups or portfolios. At acquisition, the Company reviews each loan to determine whether there is evidence of more than insignificant deterioration of credit quality since origination. Loans having an aggregate commitment of $
61
PCD loans are recorded at fair value. An allowance for credit losses ("ACL") is determined using the same methodology as other loans held for investment. The sum of the purchase price and ACL becomes its initial amortized cost basis. The difference between the initial amortized cost basis and par value of the loan is a noncredit discount or premium which is amortized into interest income over the life of the loan. These loans are assessed on a regular basis and subsequent adjustments to the ACL are recorded on the statements of income.
Derivatives: Derivative financial instruments are recognized as assets or liabilities at fair value. The Company’s derivatives are interest-rate swaps for certain commercial loan customers, mortgage banking derivatives and interest rate fair value hedges associated with the state and political subdivision municipal bond portfolio. These are used as part of the Company's asset and liability management strategy to aid in managing its interest rate risk position. The Company uses derivatives for balance sheet hedging purposes.
Concentration of Credit Risk:
There are no significant concentrations of loans to any one industry or customer. However, most of the Company’s business activity is with customers located within Northeastern Ohio and Western Pennsylvania. Therefore, the Company’s exposure to credit risk is significantly affected by changes in the economy of an
Allowance for Credit Losses:
The Company uses the current expected credit loss model (“CECL”). This methodology for calculating the allowance for credit losses considers the expected loss over the life of the loan. It also considers historical loss rates and other qualitative adjustments, as well as a forward-looking component that considers reasonable and supportable forecasts over the expected life of each loan. To develop the ACL estimate under the current expected loss model, the Company segments the loan portfolio into loan pools based on loan type and similar credit risk elements. The Company uses the cohort (“cohort”) and the probability of default/loss given default (“PD/LGD”) methodologies as described in the Credit Quality Indicators section of the loan footnote. Under ASC 326, if a loan does not share similar risk characteristics with loans in that pool, expected credit losses for that loan are evaluated individually. The Company has established specific thresholds for the loan portfolio that trigger when loans need to be evaluated individually. Including but not limited to commercial loans with an aggregate book balance of $
Under CECL the credit loss estimation process involves procedures that consider the unique characteristics of the Company’s loan portfolio segments. These segments are disaggregated into the loan pools for monitoring. A model of risk characteristics, such as loss history and delinquency experience, trends in past due and non-performing loans, as well as existing economic conditions and supportable forecasts are used to determine credit loss assumptions.
The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. The Company has identified the following portfolio segments and measures the ACL using the following methods:
Commercial Real Estate Owner-Occupied, nonfarm nonresidential properties – The Company originates mortgage loans to operating companies primarily in the northeastern region of Ohio and western region of Pennsylvania. Owner-occupied real estate properties primarily include retail buildings, medical buildings and industrial/warehouse space. Owner-occupied loans are typically repaid first by the cash flows generated by the borrower’s business operations. The primary risk characteristics are specific to the underlying business and its ability to generate sustainable profitability and positive cash flow. Factors that may influence a borrower's ability to repay their loan include demand for the business’ products or services, the quality and depth of management, the degree of competition, regulatory changes, and general economic conditions.
Commercial Real Estate Non-Owner Occupied, nonfarm nonresidential properties – The Company originates mortgage loans for commercial real estate that is managed as an investment property primarily in the northeastern region of Ohio and western region of Pennsylvania. Commercial real estate properties primarily include retail buildings/shopping centers, hotels, office/medical buildings and industrial/warehouse space. Increases in vacancy rates, interest rates or other changes in general economic conditions can have an impact on the borrower and its ability to repay the loan. Commercial real estate loans are generally considered to have a higher degree of credit
62
risk as they may be dependent on the ongoing success and operating viability of a fewer number of tenants who are occupying the property and who may have a greater degree of exposure to economic conditions.
Farmland (including farm residential and other improvements) – The Company originates loans secured by farmland and improvements thereon, secured by mortgages. Farmland includes all land known to be used or usable for agricultural purposes, such as crop and livestock production. Farmland also includes grazing or pasture land, whether tillable or not and whether wooded or not. The primary risk characteristics are specific to the uncertainty on production, market, financial, environmental and human resources.
Commercial Real Estate Other – The Company originates mortgage loans for multifamily properties primarily in the northeastern region of Ohio and western region of Pennsylvania and construction loans to finance land development preparatory to erecting new structures or the on-site construction of industrial, commercial, or multi-family buildings. Multifamily loans are expected to be repaid from the cash flows of the underlying property so the collective amount of rents must be sufficient to cover all operating expenses, property management and maintenance, taxes and debt service. Increases in vacancy rates, interest rates or other changes in general economic conditions can have an impact on the borrower and its ability to repay the loan. Construction loans include not only construction of new structures, but also additions or alterations to existing structures and the demolition of existing structures to make way for new structures. Construction loans are generally secured by real estate. The primary risk characteristics are specific to the uncertainty on whether the construction will be completed according to the specifications and schedules. Factors that may influence the completion of construction may be customer specific, such as the quality and depth of property management, or related to changes in general economic conditions.
Commercial and Industrial – The Company originates lines of credit and term loans to operating companies for business purposes. The loans are generally secured by business assets such as accounts receivable, inventory, business vehicles and equipment. Commercial and Industrial loans are typically repaid first by the cash flows generated by the borrower’s business operations. The primary risk characteristics are specific to the underlying business and its ability to generate sustainable profitability and positive cash flow. Factors that may influence a borrower's ability to repay their loan include demand for the business’ products or services, the quality and depth of management, the degree of competition, regulatory changes, and general economic conditions. The ability of the Company to foreclose and realize sufficient value from business assets securing these loans is often uncertain. To mitigate the risk characteristics of commercial and industrial loans, commercial real estate may be included as a secondary source of collateral. The Company will often require more frequent reporting requirements from the borrower in order to better monitor its business performance. The Company also originates various types of loans made directly to municipalities and nonprofit organizations. These loans are repaid through general cash flows or through specific revenue streams and charitable contributions. The primary risk characteristics associated with municipal loans are the municipality's or nonprofit’s ability to manage cash flow, balance the fiscal budget, fixed asset and infrastructure requirements. Additional risks include changes in demographics, as well as social and political conditions.
Agricultural Production – The Company originates loans secured or unsecured to farm owners and operators for the purpose of financing agricultural production, including the growing and storing of crops, the marketing or carrying of agricultural products by the growers thereof, and the breeding, raising, fattening, or marketing of livestock, and for purchases of farm machinery, equipment, and implements. The primary risk characteristics are specific to the uncertainty on production, market, financial, environmental and human resources.
1-4 Family Residential Real Estate – The Company originates 1-4 family residential mortgage and construction loans primarily within the northeastern region of Ohio and western region of Pennsylvania. These loans are secured by first or second liens on a primary residence or investment property. The primary risk characteristics associated with residential mortgage loans typically involve major changes to the borrower, including unemployment or other loss of income; unexpected significant expenses, such as medical expenses, catastrophic events, divorce or death. Residential mortgage loans that have adjustable rates could expose the borrower to higher payments in a rising rate environment. Real estate values could decrease and cause the value of the underlying property to fall below the loan amount, creating additional potential loss exposure for the Company. Residential construction loans are exposed to uncertainty on whether the construction will be completed according to the specifications and
63
schedules. Factors that may influence the completion of construction may be customer specific, or related to changes in general economic conditions.
Home Equity Lines of Credit – The primary risk characteristics associated with home equity lines of credit typically involve changes to the borrower, including unemployment or other loss of income; unexpected significant expenses, such as major medical expenses, catastrophic events, divorce and death. Home equity lines of credit are typically originated with variable or floating interest rates, which could expose the borrower to higher payments in a rising interest rate environment. Real estate values could decrease and cause the value of the underlying property to fall below the loan amount, creating additional potential loss exposure for the Company.
Indirect Loans – The Company originates consumer loans extended for the purpose of purchasing new and used passenger cars and other vehicles such as minivans, vans, sport-utility vehicles, pickup trucks, recreational vehicles, and motorcycles for personal use. The primary risk characteristics associated with automobile loans typically involve major changes to the borrower, including unemployment or other loss of income, unexpected significant expenses, such as for major medical expenses, catastrophic events, divorce or death.
Consumer Direct – The Company originates loans to individuals for household, family, and other personal expenditures. Consumer loans generally have higher interest rates and shorter terms than residential loans but tend to have higher credit risk due to the type of collateral securing the loan or in some cases the absence of collateral. The primary risk characteristics associated with other consumer loans typically involve major changes to the borrower, including unemployment or other loss of income, unexpected significant expenses, such as for major medical expenses, catastrophic events, divorce or death.
Consumer Other – The Company originates lines of credit to individuals for household, family, and other personal expenditures. Consumer loans generally have higher interest rates and shorter terms than residential loans but tend to have higher credit risk due to the type of collateral securing the loan or in some cases the absence of collateral. The primary risk characteristics associated with other revolving loans typically involve major changes to the borrower, including unemployment or other loss of income, unexpected significant expenses, such as for major medical expenses, catastrophic events, divorce or death.
The Company uses two methodologies, the cohort and the PD/LGD, to analyze loan pools. Cohort relies on the creation of cohorts to capture loans that qualify for a particular segment, as of a point in time. Those loans are then tracked over their remaining lives to determine their loss experience. The Company aggregates financial assets on the basis of similar risk characteristics when evaluating loans on a collective basis. Those characteristics include, but aren’t limited to, internal or external credit score, risk ratings, financial asset, loan type, collateral type, size, effective interest rate, term, or geographical location. The Company uses cohort primarily for consumer loan portfolios.
The probability of default (“PD”) portion of PD/LGD is defined by the Company as 90 days past due, placed on non-accrual, or partially or wholly, charged-off. Typically, a one-year time period is used to assess PD. PD can be measured and applied using various risk criteria. Risk rating is one common way to apply PD. Loss given default (“LGD”) is to determine the percentage of loss by facility or collateral type. LGD estimates can sometimes be driven, or influenced, by product type, industry or geography. The Company uses PD/LGD primarily for commercial loan portfolios.
A reassessment of the existing acquired loans occurred in 2021. This was to align with the calculation of the ACL being used under the CECL model. To the extent that any purchased loan is not specifically reviewed, such loan is assumed to have characteristics similar to the characteristics of the originated risk pools. The grade for each purchased loan without evidence of credit deterioration is reviewed subsequent to the date of acquisition any time a loan is renewed or extended or at any time information becomes available to the Company that provides material insight regarding the loan’s performance, the status of the borrower or the quality or value of the underlying collateral. To the extent that current information indicates it is probable that the Company will collect all amounts according to the contractual terms thereof, such loan is not individually considered in the determination of the required allowance for credit losses. To the extent that current information indicates it is probable that the Company will not be able to collect all amounts according to the contractual terms thereof, such loan is considered in the determination of the required level of allowance as a loan individually evaluated.
64
The ACL represents management’s estimate of expected credit losses in the Company’s loan portfolio at the balance sheet date. The Company estimates the ACL based on the amortized cost basis of the underlying loan and has made an accounting policy election to exclude accrued interest from the loan’s amortized cost basis and the related measurement of the ACL. Estimating the amount of the ACL is a function of a number of factors, including but not limited to changes in the loan portfolio, net charge-offs, trends in past due and nonaccrual loans, and the level of potential problem loans, all of which may be susceptible to significant change. While management uses the best information available to establish the allowance, future adjustments to the allowance may be necessary, which may be material, if economic conditions differ substantially from the assumptions used in estimating the allowance. If additions to the original estimate of the allowance for credit losses are deemed necessary, they will be reported in earnings in the period in which they become reasonably estimable and probable. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged-off.
Servicing Rights:
When mortgage loans are sold and servicing rights are retained, the servicing rights are initially recorded at fair value with the income statement effect recorded in gains on sales of loans. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. The Company compares the valuation model inputs and results to published industry data to validate the model results and assumptions. The fair value of the mortgage servicing rights as of December 31, 2024 and 2023 was $
All classes of servicing assets are subsequently measured using the amortization method, which requires servicing rights to be amortized into non‑interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans. Servicing assets are evaluated for impairment based upon the fair value of the assets compared to carrying amount. Any impairment is reported as a valuation allowance, to the extent that fair value is less than the capitalized amount for a grouping. At December 31, 2024 and 2023, there was a valuation allowance totaling $
Servicing fee income is recorded when earned for servicing loans based on a contractual percentage of the outstanding principal or a fixed amount per loan. The amortization of mortgage servicing rights is netted against loan servicing fee income. Servicing fees, late fees and ancillary fees related to loan servicing are not considered significant for financial reporting.
Foreclosed Assets:
Assets acquired through or in lieu of loan foreclosure are initially recorded at fair value less costs to sell, establishing a new cost basis. Physical possession of residential real estate property collateralizing a consumer mortgage loan occurs when legal title is obtained upon completion of foreclosure or when the borrow conveys all interest in the property to satisfy the loan through completion of a deed in lieu of foreclosure or a similar legal agreement. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. These assets are recorded in other assets on the balance sheets as other real estate owned (“OREO”). Operating costs after acquisition are expensed. The Company had $
65
Leases: Leases are classified as operating or finance leases at the lease commencement date. The Company leases certain locations and equipment. The Company records leases on the balance sheet in the form of a lease liability for the present value of future minimum payments under the lease terms and a right-of-use asset equal to the lease liability adjusted for items such as deferred or prepaid rent, lease incentives, and any impairment of the right-of-use asset. The discount rate used in determining the lease liability is based upon incremental borrowing rates the Company could obtain for similar loans as of the date of commencement or renewal.
Restricted Stock:
The Bank is a member of the Federal Home Loan Bank (“FHLB”) system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. The Bank is also a member of and owns stock in the Federal Reserve Bank. These stocks are carried at cost, classified as restricted securities included in other investments, and periodically evaluated for impairment based on ultimate recovery of par value. Restricted stock totaled $
Bank Owned Life Insurance: The Company has purchased life insurance policies on certain key officers. Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.
Long-term Assets: Premises and equipment and other long-term assets are reviewed for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.
Goodwill and Other Intangible Assets:
Goodwill resulting from a business combination is generally determined as the excess of the fair value of the consideration transferred over the fair value of the net assets acquired as of the acquisition date. Goodwill acquired in a business combination and determined to have an indefinite useful life is not amortized, but tested for impairment at least annually. The Company has selected September 30 as the date to perform the annual goodwill impairment tests associated with the acquisitions of Farmers Trust, Farmers Insurance and the recent Banking acquisitions. Intangible assets with finite useful lives are amortized over their estimated useful lives. Goodwill is the only intangible asset with an indefinite life on the balance sheet. Core deposit intangible assets arising from bank acquisitions are amortized over their estimated useful lives of
Loan Commitments and Related Financial Instruments: Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.
Stock-Based Compensation: Compensation cost is recognized for restricted stock awards issued to employees, based on the fair value of these awards at the date of grant. The market price of the Company’s common stock at the grant date is used for restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.
Income Taxes : Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.
66
A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than
The Company recognizes interest and/or penalties related to income tax matters in income tax expense.
Retirement Plans: Employee 401(k) and profit sharing plan expense is the amount of matching and discretionary contributions. Deferred compensation and supplemental retirement plan expense allocates the benefits over years of service.
Earnings per Common Share: Basic earnings per common share is net income divided by the weighted average number of common shares outstanding during the period. Diluted earnings per common share include the dilutive effect of additional potential common shares issuable under stock equity awards. Earnings and dividends per share are restated for all stock splits and stock dividends through the date of issuance of the financial statements.
Comprehensive Income: Comprehensive income consists of net income and other comprehensive income (loss). Other comprehensive income (loss) consists of unrealized gains and losses on securities available for sale and changes in the funded status of the post-retirement plan, which are recognized as separate components of equity, net of tax effects.
Restrictions on Cash: Cash on hand or on deposit with the Federal Reserve Bank (“FRB”) was required to meet regulatory reserve and clearing requirements.
Equity: Treasury stock is carried at cost.
Dividend Restriction: Banking regulations require maintaining certain capital levels and may limit the dividends paid by the Bank and Farmers Trust to the holding company or by the holding company to shareholders.
Fair Value of Financial Instruments: Fair values of financial instruments are estimated using relevant market information and other assumptions as more fully disclosed in Note 7. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect these estimates.
Operating Segments:
While the chief operating decision maker monitors the revenue streams of the various products and services, operations are managed, and financial performance is primarily aggregated and evaluated in
Reclassification: Some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on prior year net income or stockholders' equity.
Newly Issued, Not Yet Effective Accounting Standards:
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures . The amendments in this update related to the rate reconciliation and income taxes paid disclosures improve the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. The amendments of this update are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The adoption of this standard is not expected to have a material effect on the Company’s operating results or financial condition.
67
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures . The amendments in this update improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The main new provision requires significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss. The amendments of this update were effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The standard was adopted by the Company and footnote 23 - Segment Information has been updated per the ASU.
On March 29, 2024, the FASB issued ASU 2024-02, Codification Improvements—Amendments to Remove References to the Concepts Statements . ASU 2024-02 removes various references to the FASB’s Concepts Statements from the FASB’s Accounting Standards Codification (Codification or GAAP). The Concepts Statements are non-authoritative guidance issued by the FASB that provide the objectives, qualitative characteristics and other concepts that govern the development of accounting principles by the FASB. ASU 2024-02 applies to all reporting entities and updates the Codification by eliminating discrete references to the Concepts Statements across a variety of defined terms and Topics within the Codification. The FASB does not expect these updates to have a significant effect on current accounting practice. The amendments in ASU 2024-02 are effective for public business entities for fiscal years beginning after December 15, 2024. Early adoption is permitted. The adoption of this standard is not expected to have a material effect on the Company’s operating results or financial condition.
NOTE 2 – BUSINESS COMBINATIONS
On
In accordance with ASC 805, the Company expensed approximately $
68
The following table summarizes the consideration paid for Emclaire and the amounts of the assets acquired and liabilities assumed on the closing date of the acquisition.
|
Consideration |
|
|
|
|
|
Cash |
|
$ |
|
|
|
Stock |
|
|
|
|
|
Fair value of total consideration transferred |
|
$ |
|
|
|
Fair value of assets acquired |
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
Securities available for sale |
|
|
|
|
|
Other investments |
|
|
|
|
|
Loans, net |
|
|
|
|
|
Premises and equipment |
|
|
|
|
|
Bank owned life insurance |
|
|
|
|
|
Core deposit intangible |
|
|
|
|
|
Current and deferred taxes |
|
|
|
|
|
Other assets |
|
|
|
|
|
Total assets acquired |
|
|
|
|
|
Fair value of liabilities assumed |
|
|
|
|
|
Deposits |
|
|
|
|
|
Short-term borrowings |
|
|
|
|
|
Accrued interest payable and other liabilities |
|
|
|
|
|
Total liabilities |
|
|
|
|
|
Net assets acquired |
|
$ |
|
|
|
Goodwill created |
|
|
|
|
|
Total net assets acquired |
|
$ |
|
|
The fair value of net assets acquired includes fair value adjustments to certain receivables that were considered performing as of the acquisition date. The fair value adjustments were determined using the income method, discounted cash flow approach. However, the Company believes that all contractual cash flows related to these financial instruments will be collected. As such, these receivables were not considered PCD at the acquisition date and were not subject to the guidance relating to PCD loans. Receivables acquired that were not subject to these requirements had a fair value and gross contractual amounts receivable of $
The fair value of purchased financial assets that were classified as PCD loans are discussed in the loan footnote.
69
The following table presents unaudited pro forma information as if the Emclaire acquisition that occurred on January 1, 2023 actually took place on January 1, 2022. The unaudited pro forma information for the period ended December 31, 2022 include adjustments of interest income on loans, amortization of core deposit intangibles arising from the transaction, interest expense on deposits and borrowings acquired.
|
|
|
2022 |
|
|
|
Net interest income |
|
$ |
|
|
|
Provision for credit losses |
|
|
|
|
|
Noninterest income |
|
|
|
|
|
Noninterest expense |
|
|
|
|
|
Income before income taxes |
|
|
|
|
|
Income tax expense |
|
|
|
|
|
Net income |
|
$ |
|
|
|
Basic earnings per share |
|
$ |
|
|
|
Diluted earnings per share |
|
$ |
|
|
The above unaudited pro forma information excludes nonrecurring merger costs that totaled $
On
NOTE 3 – SECURITIES AVAILABLE FOR SALE
The following table summarizes the amortized cost and fair value of the available-for-sale securities portfolio at December 31, 2024, and 2023, and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss). No allowance for credit losses have been recognized for the securities portfolio at December 31, 2024 or 2023.
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
|
||||
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
|
|
||||
|
2024 |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Fair Value |
|
||||
|
U.S. Treasury and U.S. government sponsored
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
State and political subdivisions |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Collateralized mortgage obligations |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Small Business Administration |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Totals |
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
70
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
|
||||
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
|
|
||||
|
2023 |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Fair Value |
|
||||
|
U.S. Treasury and U.S. government sponsored
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
State and political subdivisions |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Collateralized mortgage obligations |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Small Business Administration |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Totals |
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
The proceeds from sales of available-for-sale securities and the associated gains and losses were as follows:
|
|
|
|
|
|
2024 |
|
|
|
2023 |
|
|
|
2022 |
|
|
Proceeds |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||
|
Gross gains |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Gross losses |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
||
The tax provision (benefit) related to these net realized gains (losses) was $(
The amortized cost and fair value of the debt securities portfolio are shown by expected maturity. Expected maturities may differ from contractual maturities if issuers have the right to call or prepay obligations, with or without a call, or prepayment penalties. Securities not due at a single maturity date are shown separately.
|
Available for sale |
|
|
|
|
|
December 31, 2024 |
|
|||||
|
|
|
|
|
|
|
Amortized |
|
|
|
|
||
|
Maturity |
|
Cost |
|
|
Fair Value |
|
||||||
|
Within one year |
|
$ |
|
|
|
$ |
|
|
||||
|
One to five years |
|
|
|
|
|
|
|
|
||||
|
Five to ten years |
|
|
|
|
|
|
|
|
||||
|
Beyond ten years |
|
|
|
|
|
|
|
|
||||
|
Mortgage-backed Securities, Collateralized Mortgage
|
|
|
|
|
|
|
|
|
||||
|
Totals |
|
$ |
|
|
|
$ |
|
|
||||
Securities with a carrying amount of $
In each year, there were
71
The following table summarizes the investment securities with unrealized losses for which an allowance for credit losses has not been recorded at December 31, 2024 and 2023, aggregated by major security type and length of time in a continuous unrealized loss position.
|
2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
Less than 12 Months |
|
|
12 Months or More |
|
|
Total |
|
|||||||||||||||
|
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
||||||
|
Description of Securities |
|
Value |
|
|
Loss |
|
|
Value |
|
|
Loss |
|
|
Value |
|
|
Loss |
|
||||||
|
U.S. Treasury and U.S. government |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
sponsored entities |
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
(
|
) |
|
State and political subdivisions |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
Corporate bonds |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
Mortgage-backed securities |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
Collateralized mortgage obligations |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
Small Business Administration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
Total |
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
(
|
) |
|
2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
Less than 12 Months |
|
|
12 Months or More |
|
|
Total |
|
|||||||||||||||
|
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
||||||
|
Description of Securities |
|
Value |
|
|
Loss |
|
|
Value |
|
|
Loss |
|
|
Value |
|
|
Loss |
|
||||||
|
U.S. Treasury and U.S. government |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
sponsored entities |
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
(
|
) |
|
State and political subdivisions |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
Corporate bonds |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
Mortgage-backed securities |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
Collateralized mortgage obligations |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
Small Business Administration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
Total |
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
(
|
) |
As of December 31, 2024, the Company’s security portfolio consisted of
At December 31, 2023, the Company’s security portfolio consisted of
72
Equity Securities
The Company also holds equity securities which include $
NOTE 4 – LOANS
Loan balances at year end were as follows:
|
|
|
2024 |
|
|
2023 |
|
||
|
(In Thousands of Dollars) |
|
|
|
|
|
|
||
|
Commercial real estate |
|
|
|
|
|
|
||
|
Owner occupied |
|
$ |
|
|
|
$ |
|
|
|
Non-owner occupied |
|
|
|
|
|
|
|
|
|
Farmland |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
||
|
Commercial and industrial |
|
|
|
|
|
|
|
|
|
Agricultural |
|
|
|
|
|
|
|
|
|
Residential real estate |
|
|
|
|
|
|
||
|
1-4 family residential |
|
|
|
|
|
|
|
|
|
Home equity lines of credit |
|
|
|
|
|
|
|
|
|
Consumer |
|
|
|
|
|
|
||
|
Indirect |
|
|
|
|
|
|
|
|
|
Direct |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Total originated loans |
|
$ |
|
|
|
$ |
|
|
|
Net deferred loan costs |
|
|
|
|
|
|
|
|
|
Allowance for credit losses |
|
|
(
|
) |
|
|
(
|
) |
|
Net loans |
|
$ |
|
|
|
$ |
|
|
Allowance for credit loss activity
The following tables present the activity in the allowance for credit losses by portfolio segment for years ended December 31, 2024, 2023 and 2022:
|
December 31, 2024 |
|
Commercial
|
|
|
Commercial |
|
|
Residential
|
|
|
Consumer |
|
|
Total |
|
|||||
|
(In Thousands of Dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Allowance for credit losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Beginning balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Provision for credit losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans charged off |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ending allowance balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
73
|
December 31, 2023 |
|
Commercial
|
|
|
Commercial |
|
|
Residential
|
|
|
Consumer |
|
|
Total |
|
|||||
|
(In Thousands of Dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Allowance for credit losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Beginning balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
PCD ACL on loans acquired |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans charged off |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ending allowance balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
December 31, 2022 |
|
Commercial
|
|
|
Commercial |
|
|
Residential
|
|
|
Consumer |
|
|
Total |
|
|||||
|
Allowance for credit losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Beginning balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Provision for credit losses |
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
Loans charged off |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ending allowance balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The cumulative loss rate used as the basis for the estimate of credit losses is comprised of the Company's historical loss experience from December 31, 2011 to December 31, 2024. As of December 31, 2024, the Company expects that the markets in which it operates will experience minimal changes to economic conditions, with a stable trend in unemployment, and a level trend of delinquencies. Management adjusted historical loss experience for these expectations. No reversion adjustments were necessary, as the starting point for the Company's estimate was a cumulative loss rate covering the expected contractual term of the portfolio. While there are many factors that go into the calculation of the allowance for credit losses, the change in the balances from December 31, 2023 to December 31, 2024 is largely attributed to an increase in the specific reserve related to the individual evaluation of a commercial real estate non-owner occupied loan, adjustments made to the Portfolio Composition and Growth qualitative factor and increased loan balances. These factors were partially offset by the reduction of the specific reserve related to a loan settlement, reduction of specific reserve related to payoff of another individually evaluated relationship, and improved loss rates for certain loan pools under the PD/LGD methodology.
74
The following tables present the amortized cost basis of loans on nonaccrual status and loans past due over 89 days still accruing as of December 31, 2024 and December 31, 2023:
|
(In Thousands of Dollars) |
|
Nonaccrual with no allowance for credit loss |
|
|
Nonaccrual with an allowance for credit loss |
|
|
Loans past due over 89 days still accruing |
|
|||
|
December 31, 2024 |
|
|
|
|
|
|
|
|
|
|||
|
Commercial real estate |
|
|
|
|
|
|
|
|
|
|||
|
Owner occupied |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Non-owner occupied |
|
|
|
|
|
|
|
|
|
|
|
|
|
Farmland |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|||
|
Commercial and industrial |
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural |
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|||
|
1-4 family residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines of credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer |
|
|
|
|
|
|
|
|
|
|||
|
Indirect |
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(In Thousands of Dollars) |
|
Nonaccrual with no allowance for credit loss |
|
|
Nonaccrual with an allowance for credit loss |
|
|
Loans past due over 89 days still accruing |
|
|||
|
December 31, 2023 |
|
|
|
|
|
|
|
|
|
|||
|
Commercial real estate |
|
|
|
|
|
|
|
|
|
|||
|
Owner occupied |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Non-owner occupied |
|
|
|
|
|
|
|
|
|
|
|
|
|
Farmland |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|||
|
Commercial and industrial |
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural |
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|||
|
1-4 family residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines of credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer |
|
|
|
|
|
|
|
|
|
|||
|
Indirect |
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The above table for the period ending December 31, 2024 does not include a $
75
The following tables present the amortized cost basis of collateral-dependent loans by class of loans as of December 31, 2024 and December 31, 2023:
|
(In Thousands of Dollars) |
|
Real Estate |
|
|
Business Assets |
|
|
Vehicles |
|
|
Cash |
|
||||
|
December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Owner occupied |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Non-owner occupied |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Farmland |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Commercial and industrial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
1-4 family residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines of credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Indirect |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(In Thousands of Dollars) |
|
Real Estate |
|
|
Business Assets |
|
|
Vehicles |
|
|
Cash |
|
||||
|
December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Owner occupied |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Non-owner occupied |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Farmland |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Commercial and industrial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
1-4 family residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines of credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Indirect |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
76
The following tables present the aging of the amortized cost basis in past due loans as of December 31, 2024 and 2023 by class of loans:
|
December 31, 2024 |
|
30-59
|
|
|
60-89
|
|
|
90 Days or More Past Due
|
|
|
Total Past
|
|
|
Loans Not
|
|
|
Total |
|
||||||
|
(In Thousands of Dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Owner occupied |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Non-owner occupied |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Farmland |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Commercial and industrial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
1-4 family residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines of credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Indirect |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
December 31, 2023 |
|
30-59
|
|
|
60-89
|
|
|
90 Days or More Past Due
|
|
|
Total Past
|
|
|
Loans Not
|
|
|
Total |
|
||||||
|
Commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Owner occupied |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Non-owner occupied |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Farmland |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Commercial and industrial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
1-4 family residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines of credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Indirect |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans: |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Loan Restructurings:
The Company
Any restructuring of a loan in which the borrower has experienced financial difficulty and the terms of the loan are more favorable than would generally be considered for borrowers with the same credit characteristics would be individually evaluated. Otherwise, the restructured loan remains in the appropriate segment in the ACL model.
77
The following tables present the amortized cost basis of loans that were both experiencing financial difficulty and modified during the twelve months ended December 31, 2024 and December 31, 2023, by class and type of modification at December 31, 2024 and 2023. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below:
|
December 31, 2024 |
|
Amortized Cost |
|
|
|
|
||||||||||||||
|
(In Thousands of Dollars) |
|
Term Extension |
|
|
Interest Rate Reduction |
|
|
Combination Term Extension and Interest Rate Reduction |
|
|
Total |
|
|
% of Total Class of Financing Receivable |
|
|||||
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Home equity lines of credit |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
% |
|
Total modifications to borrowers experiencing financial difficulty |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
% |
|
December 31, 2023 |
|
Amortized Cost |
|
|
|
|
||||||||||||||
|
(In Thousands of Dollars) |
|
Term Extension |
|
|
Interest Rate Reduction |
|
|
Combination Term Extension and Interest Rate Reduction |
|
|
Total |
|
|
% of Total Class of Financing Receivable |
|
|||||
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
1-4 family residential |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
% |
|
Total modifications to borrowers experiencing financial difficulty |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
% |
As of December 31, 2024, the Company had
The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.
|
December 31, 2024 |
|
Payment status (Amortized cost Basis) |
|
|||||||||
|
(In Thousands of Dollars) |
|
Current |
|
|
30-89 Days past due |
|
|
90+ Days past due |
|
|||
|
Accrual restructured loans |
|
|
|
|
|
|
|
|
|
|||
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|||
|
Home equity lines of credit |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total accruing restructured loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Nonaccrual restructured loans |
|
|
|
|
|
|
|
|
|
|||
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|||
|
Home equity lines of credit |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total nonaccrual restructured loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total restructured loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
78
|
December 31, 2023 |
|
Payment status (Amortized cost Basis) |
|
|||||||||
|
(In Thousands of Dollars) |
|
Current |
|
|
30-89 Days past due |
|
|
90+ Days past due |
|
|||
|
Accrual restructured loans |
|
|
|
|
|
|
|
|
|
|||
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|||
|
1-4 family residential |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total accruing restructured loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Nonaccrual restructured loans |
|
|
|
|
|
|
|
|
|
|||
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|||
|
1-4 family residential |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total nonaccrual restructured loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total restructured loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The following tables present the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty during the twelve months ended December 31, 2024 and December 31, 2023:
|
|
|
Payment Deferral |
|
Interest Rate Reduction |
|
|
Term Extension |
|
||||||||||
|
|
|
Weighted-Average Years Added to the Life |
|
Weighted-Average Contractual Interest Rate |
|
|
Weighted-Average Years Added to the Life |
|
||||||||||
|
December 31, 2024 |
|
|
|
From |
|
|
To |
|
|
|
|
|||||||
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Home equity lines of credit |
|
|
|
|
|
|
|
% |
|
|
|
% |
|
|
|
|
|
|
|
|
|
Payment Deferral |
|
Interest Rate Reduction |
|
|
Term Extension |
|
||||||||||
|
|
|
Weighted-Average Years Added to the Life |
|
Weighted-Average Contractual Interest Rate |
|
|
Weighted-Average Years Added to the Life |
|
||||||||||
|
December 31, 2023 |
|
|
|
From |
|
|
To |
|
|
|
|
|||||||
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
1-4 family residential |
|
|
|
|
|
|
|
% |
|
|
|
% |
|
|
|
|
|
|
The following table presents the amortized cost basis of loans that had a payment default during the year ended December 31, 2024 and December 31, 2023 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty. For purposes of this disclosure a default occurs when within 12 months of the original modification, a loan is 30 days contractually past due under the modified terms:
|
December 31, 2024 |
|
Amortized Cost |
|
|||||||||
|
(In Thousands of Dollars) |
|
Term Extension |
|
|
Interest Rate Reduction |
|
|
Combination Term Extension and Interest Rate Reduction |
|
|||
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|||
|
Home equity lines of credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total modifications to borrowers experiencing financial difficulty |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
79
|
December 31, 2023 |
|
Amortized Cost |
|
|||||||||
|
(In Thousands of Dollars) |
|
Term Extension |
|
|
Interest Rate Reduction |
|
|
Combination Term Extension and Interest Rate Reduction |
|
|||
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|||
|
1-4 family residential |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total modifications to borrowers experiencing financial difficulty |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Upon the Company's determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance of credit losses is adjusted by the same amount.
Credit Quality Indicators:
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. The Company establishes a risk rating at origination for all commercial loan and commercial real estate relationships. For relationships over $
Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.
Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.
Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.
80
Based on the most recent analysis performed, the risk category of loans by class of loans is as follows:
|
December 31, 2024 |
|
Pass |
|
|
Special
|
|
|
Sub
|
|
|
Doubtful |
|
|
Total |
|
|||||
|
(In Thousands of Dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Owner occupied |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Non-owner occupied |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Farmland |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Commercial and industrial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
December 31, 2023 |
|
Pass |
|
|
Special
|
|
|
Sub
|
|
|
Total |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Owner occupied |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Non-owner occupied |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Farmland |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Commercial and industrial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The Company considers the performance of the loan portfolio and its impact on the allowance for credit losses. For residential, consumer and indirect loan classes, the Company evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The above table for the period ending December 31, 2024 does not include a $
81
The following table presents the amortized cost in residential, consumer and indirect auto loans based on payment activity. Nonperforming loans are loans past due 90 days and still accruing interest and nonaccrual loans.
|
|
|
Residential Real Estate |
|
|
Consumer |
|
||||||||||||||
|
December 31, 2024 |
|
1-4 Family Residential |
|
|
Home Equity Lines of Credit |
|
|
Indirect |
|
|
Direct |
|
|
Other |
|
|||||
|
(In Thousands of Dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Performing |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Nonperforming |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
Residential Real Estate |
|
|
Consumer |
|
||||||||||||||
|
December 31, 2023 |
|
1-4 Family Residential |
|
|
Home Equity Lines of Credit |
|
|
Indirect |
|
|
Direct |
|
|
Other |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Performing |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Nonperforming |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
82
The following tables present total loans by risk categories and year of origination.
|
|
|
Term Loans Amortized Cost Basis by Origination Year |
|
|||||||||||||||||||||||||||||
|
As of December 31, 2024 |
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
Prior |
|
|
Revolving Loans |
|
|
Total |
|
||||||||
|
Commercial real estate - Owner occupied: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Pass |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Special mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Substandard |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate - Owner occupied loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Commercial real estate - Owner Occupied: Current period gross write-offs |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Commercial real estate - Non-owner occupied: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Pass |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Special mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Substandard |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Doubtful |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate - Non-owner occupied loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Commercial real estate - Non-owner occupied: Current period gross write-offs |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Commercial real estate - Farmland: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Pass |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Substandard |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate - Farmland loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Commercial real estate - Farmland: Current period gross write-offs |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Commercial real estate - Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Pass |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Special mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Substandard |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate - Other loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Commercial real estate - Other: Current period gross write-offs |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
83
|
|
|
Term Loans Amortized Cost Basis by Origination Year (Continued) |
|
|||||||||||||||||||||||||||||
|
As of December 31, 2024 |
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
Prior |
|
|
Revolving Loans |
|
|
Total |
|
||||||||
|
Commercial - Commercial and industrial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Pass |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Special mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Substandard |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial - Commercial and industrial loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Commercial - Commercial and industrial: Current period gross write-offs |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Commercial - Agricultural: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Pass |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Special mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Substandard |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial - Agricultural loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Commercial - Agricultural: Current period gross write-offs |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Residential real estate - 1-4 family residential: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Payment Performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Performing |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Nonperforming |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total residential real estate - 1-4 family residential loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Residential real estate - 1-4 family residential: Current period gross write-offs |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Residential real estate - Home equity lines of credit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Payment Performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Performing |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Nonperforming |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total residential real estate - Home equity lines of credit loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Residential real estate - Home equity lines of credit: Current period gross write-offs |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
84
|
|
|
Term Loans Amortized Cost Basis by Origination Year (Continued) |
|
|||||||||||||||||||||||||||||
|
As of December 31, 2024 |
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
Prior |
|
|
Revolving Loans |
|
|
Total |
|
||||||||
|
Consumer - Indirect: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Payment Performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Performing |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Nonperforming |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer - Indirect loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Consumer - Indirect: Current period gross write-offs |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Consumer - Direct: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Payment Performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Performing |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Nonperforming |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer - Direct loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Consumer - Direct: Current period gross write-offs |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Consumer - Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Payment Performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Performing |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Nonperforming |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer - Other loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Consumer - Other: Current period gross write-offs |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
85
|
|
|
Term Loans Amortized Cost Basis by Origination Year |
|
|||||||||||||||||||||||||||||
|
As of December 31, 2023 |
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
Prior |
|
|
Revolving Loans |
|
|
Total |
|
||||||||
|
Commercial real estate - Owner occupied: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Pass |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Special mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Substandard |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate - Owner occupied loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Commercial real estate - Owner Occupied: Current period gross write-offs |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Commercial real estate - Non-owner occupied: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Pass |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Special mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Substandard |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate - Non-owner occupied loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Commercial real estate - Non-owner occupied: Current period gross write-offs |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Commercial real estate - Farmland: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Pass |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Substandard |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate - Farmland loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Commercial real estate - Farmland: Current period gross write-offs |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Commercial real estate - Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Pass |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Substandard |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate - Other loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
86
|
|
|
Term Loans Amortized Cost Basis by Origination Year (Continued) |
|
|||||||||||||||||||||||||||||
|
As of December 31, 2023 |
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
Prior |
|
|
Revolving Loans |
|
|
Total |
|
||||||||
|
Commercial - Commercial and industrial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Pass |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Special mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Substandard |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial - Commercial and industrial loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Commercial - Commercial and industrial: Current period gross write-offs |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Commercial - Agricultural: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Pass |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Special mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Substandard |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial - Agricultural loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Commercial - Agricultural: Current period gross write-offs |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Residential real estate - 1-4 family residential: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Payment Performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Performing |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Nonperforming |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total residential real estate - 1-4 family residential loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Residential real estate - 1-4 family residential: Current period gross write-offs |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Residential real estate - Home equity lines of credit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Payment Performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Performing |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Nonperforming |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total residential real estate - Home equity lines of credit loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Residential real estate - Home equity lines of credit: Current period gross write-offs |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
87
|
|
|
Term Loans Amortized Cost Basis by Origination Year (Continued) |
|
|||||||||||||||||||||||||||||
|
As of December 31, 2023 |
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
Prior |
|
|
Revolving Loans |
|
|
Total |
|
||||||||
|
Consumer - Indirect: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Payment Performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Performing |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Nonperforming |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer - Indirect loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Consumer - Indirect: Current period gross write-offs |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Consumer - Direct: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Payment Performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Performing |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Nonperforming |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer - Direct loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Consumer - Direct: Current period gross write-offs |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Consumer - Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Payment Performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Performing |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Nonperforming |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer - Other loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Consumer - Other: Current period gross write-offs |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The Company follows ASU 2016-13 to calculate the allowance for credit losses which requires estimating credit losses over the lifetime of the credits. The ACL is adjusted through the provision for credit losses and reduced by net charge offs of loans. Although the Company has a diversified loan portfolio, the credit risk in the loan portfolio is largely influenced by general economic conditions and trends of the counties and markets in which the debtors operate, and the resulting impact on the operations of borrowers or on the value of any underlying collateral.
The credit loss estimation process involves procedures that consider the unique characteristics of the Company’s loan portfolio segments. These segments are disaggregated into the loan pools for monitoring. A model of risk characteristics, such as loss history and delinquency experience, trends in past due and non-performing loans, as well as existing economic conditions and supportable forecasts are used to determine credit loss assumptions.
The Company uses two methodologies to analyze loan pools. The cohort method and the PD/LGD. Cohort relies on the creation of cohorts to capture loans that qualify for a particular segment, as of a point in time. Those loans are then tracked over their remaining lives to determine their loss experience. The Company aggregates financial assets on the basis of similar risk characteristics when evaluating loans on a collective basis. Those characteristics include, but are not limited to, internal or external credit score, risk ratings, financial asset, loan type, collateral type, size, effective interest rate, term, or geographical location. The Company uses cohort primarily for consumer loan portfolios.
The probability of default portion of PD/LGD is defined by the Company as 90 days past due, placed on non-accrual, or is partially or wholly, charged-off. Typically, a one-year time period is used to assess PD. PD can be measured and applied using various risk criteria. Risk rating is one common way to apply PDs. Loss given default is to determine the percentage of loss by facility or collateral type. LGD estimates can sometimes be driven, or
88
influenced, by product type, industry or geography. The Company uses PD/LGD primarily for commercial loan portfolios.
The following table presents the loan pools and the associated methodology used during the calculation of the allowance for credit losses in 2024.
|
Portfolio Segments |
|
Loan Pool |
|
Methodology |
|
Loss Drivers |
|
Residential real estate |
|
1-4 Family Residential Real Estate - 1st Liens |
|
|
|
|
|
|
|
1-4 Family Residential Real Estate - 2nd Liens |
|
|
|
|
|
Home Equity Lines of Credit |
|
Home Equity Lines of Credit |
|
|
|
|
|
Consumer Finance |
|
Cash Reserves |
|
|
|
|
|
|
|
Direct |
|
|
|
|
|
|
|
Indirect |
|
|
|
|
|
Commercial |
|
Commercial and Industrial |
|
|
|
|
|
|
|
Agricultural |
|
|
|
|
|
|
|
Municipal |
|
|
|
|
|
Commercial real estate |
|
Owner Occupied |
|
|
|
|
|
|
|
Non-Owner Occupied |
|
|
|
|
|
|
|
Multifamily |
|
|
|
|
|
|
|
Farmland |
|
|
|
|
|
|
|
Construction |
|
|
|
|
According to accounting standards, an entity may make an accounting policy election not to measure an allowance for credit losses for accrued interest receivable if the entity writes off the applicable accrued interest receivable balance in a timely manner. The Company has made the accounting policy election not to measure an allowance for credit losses for accrued interest receivables for all loan segments. Current policy dictates that a loan will be placed on nonaccrual status, with the current accrued interest receivable balance being written off, upon the loan being 90 days delinquent or when the loan is deemed to be collateral dependent and the collateral analysis shows insufficient collateral coverage based on a current assessment of the value of the collateral.
In addition, ASC Topic 326 requires the Company to establish a liability for anticipated credit losses for unfunded commitments. To accomplish this, the Company must first establish a loss expectation for extended (funded) commitments. This loss expectation, expressed as a ratio to the amortized cost basis, is then applied to the portion of unfunded commitments not considered unilaterally cancelable, and considered by the company’s management as likely to fund over the life of the instrument. At December 31, 2024, the Company had $
The determination of ACL is complex and the Company makes decisions on the effects of factors that are inherently uncertain. Evaluations of the loan portfolio and individual credits require certain estimates, assumptions and judgments as to the facts and circumstances related to particular situations or credits. The ACL was $
89
Purchased Loans
As a result of the Emclaire merger, the Company acquired $
|
|
|
2023 |
|
|
|
Par value of acquired loans at acquisition |
|
$ |
|
|
|
Net purchase discount |
|
|
(
|
) |
|
Allowance for credit losses of PCD loans |
|
|
(
|
) |
|
Purchase price of loans at acquisition |
|
$ |
|
|
Under
|
|
|
2024 |
|
|
2023 |
|
||||||||||
|
December 31, 2024 |
|
Loan Balance |
|
|
ACL Balance |
|
|
Loan Balance |
|
|
ACL Balance |
|
||||
|
Commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Owner Occupied |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Non-owner Occupied |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Farmland |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Commercial and industrial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
1-4 family residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines of credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
NOTE 5 – Revenue from Contracts with Customers
All material revenue from contracts with customers in the scope of ASC 606 is recognized within noninterest income. ASC 606 rules govern the disclosure of revenue tied to contracts. The following table presents the Company’s noninterest income by revenue stream and reportable segment, net of eliminations, for the years ended December 31, 2024, 2023 and 2022.
|
(In Thousands of Dollars) |
|
Trust
|
|
|
Bank
|
|
|
Totals |
|
|||
|
December 31, 2024 |
|
|
|
|
|
|
|
|
|
|||
|
Service charges on deposit accounts |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Debit card and EFT fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance agency commissions |
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement plan consulting fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment commissions |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (outside the scope of ASC 606) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
90
|
(In Thousands of Dollars) |
|
Trust
|
|
|
Bank
|
|
|
Totals |
|
|||
|
December 31, 2023 |
|
|
|
|
|
|
|
|
|
|||
|
Service charges on deposit accounts |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Debit card and EFT fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance agency commissions |
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement plan consulting fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment commissions |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (outside the scope of ASC 606) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(In Thousands of Dollars) |
|
Trust
|
|
|
Bank
|
|
|
Totals |
|
|||
|
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|||
|
Service charges on deposit accounts |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Debit card and EFT fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance agency commissions |
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement plan consulting fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment commissions |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (outside the scope of ASC 606) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
A description of the Company’s revenue streams under ASC 606 follows:
Service Charges on Deposit Accounts – The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Management reviewed the deposit account agreements, and determined that the agreements can be terminated at any time by either the Bank or the account holder. Transaction fees, such as balance transfers, wires and overdraft charges are settled the day the performance obligation is satisfied. The Bank’s monthly service charges and maintenance fees are for services provided to the customer on a monthly basis and are considered a series of services that have the same pattern of transfer each month. The review of service charges assessed on deposit accounts, included the amount of variable consideration that is a part of the monthly charges. It was found that the waiver of service charges due to insufficient funds and dormant account fees is immaterial and would not require a change in the accounting treatment for these fees under the new revenue standards.
Debit Card and EFT Fees
– Customers and the Bank have an account agreement and maintain deposit balances with the Bank. Customers use a bank issued debit card to purchase goods and services, and the Bank earns interchange fees on those transactions, typically a percentage of the sale amount of the transaction. The Bank records the amount due when it receives the settlement from the payment network. Payments from the payment network are received and recorded into income on a daily basis. There are
Trust Fees –
Services provided to Farmers Trust customers are a series of distinct services that have the same pattern of transfer each month. Fees for trust accounts are billed and drafted from trust accounts monthly. The Company records these fees on the income statement on a monthly basis. Fees are assessed based on the total investable assets of the customer’s trust account. A signed contract between the Company and the customer is maintained for all customer trust accounts with payment terms identified. It is probable that the fees will be collectible as funds being managed are accessible by the asset manager. Past history of trust fee income recorded by the Company indicates that it is highly unlikely that a significant reversal could occur. There are
91
Insurance Agency Commissions
– Insurance agency commissions are received from insurance carriers for the agency’s share of commissions from customer premium payments. These commissions are recorded into income when checks are received from the insurance carriers, and there is
Insurance also receives incentive checks from the insurance carriers for achieving specified levels of production with particular carriers. These amounts are recorded into income when a check is received, and there are no contingent amounts associated with these payments that may be clawed back by the carrier in the future. Similar to the monthly commissions explained in the preceding paragraph, there may be a short time-lag in recording incentive revenue on a cash basis as opposed to estimating the amount of incentive revenue expected to be earned, this does not materially impact the recognition of Insurance revenue. If there were any amounts that would need to be refunded for one specific Insurance customer, management believes the reversal would not be significant.
Other potential situations surrounding the recognition of Farmers Insurance revenue include estimating potential refunds due to the likely cancellation of a percentage of customers canceling their policies and recording revenue at the time of policy renewals.
Retirement Plan Consulting Fees – Revenue is recognized based on the level of work performed for the client. Any payments that are received for work to be performed in the future are recorded on a deferred revenue account, and recorded into income when the fees are earned.
Investment Commissions
– Investment commissions are earned through the sales of non-deposit investment products to customers of the Company. The sales are conducted through a third-party broker-dealer. When the commissions are received and recorded into income on the Bank’s income statement, there is
Other
– Income items included in “Other” are Bank owned life insurance income, security gains, net gains on the sale of loans and other operating income. There was a one-time legal settlement of $
NOTE 6 – LOAN SERVICING
The Company has retained servicing rights to mortgage loans sold to both the Federal Home Loan Mortgage Corporation (FHLMC) and the Federal Home Loan Bank (FHLB) of Pittsburgh. Mortgage loans serviced for others are not reported as assets.
|
|
|
2024 |
|
|
2023 |
|
||
|
Mortgage loan portfolios serviced for: |
|
|
|
|
|
|
||
|
FHLMC |
|
$ |
|
|
|
$ |
|
|
|
FHLB Pittsburgh |
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
|
|
|
$ |
|
|
Custodial escrow balances maintained in connection with serviced loans were $
92
Mortgage servicing rights are recorded on the balance sheets as other assets.
|
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
|
Servicing rights: |
|
|
|
|
|
|
|
|
|
|||
|
Beginning balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Additions |
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired in merger |
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization to expense |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Total servicing rights before valuation allowance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Change in valuation allowance |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Ending balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Fair value at year end 2024 was determined using discount rates ranging from
N
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
There are three levels of inputs that may be used to measure fair values:
Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 – Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
The Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:
Investment Securities
The Company uses a third party service to estimate fair value on available for sale securities on a monthly basis. The Company’s service provider uses a leading evaluation pricing service for U.S. domestic fixed income securities and values securities using exit pricing requirements. The Company independently corroborates the fair value received through this pricing service by obtaining the pricing through a second source. The fair values for investment securities, which consist of equity securities that are recorded at fair value to comply with exit pricing, are determined by quoted market prices in active markets, if available (Level 1). The equity securities change in fair value is recorded in the income statement. For securities where quoted prices are not available, fair values are calculated based on quoted prices for similar assets in active markets, quoted prices for similar assets in markets that are not active or inputs other than quoted prices, which provide a reasonable basis for fair value determination. Such inputs may include interest rates and yield curves, prepayment speeds, credit risks and default rates. The inputs used are principally derived from observable market data (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3). The fair values of Level 3 investment securities are determined by using unobservable
93
inputs to measure fair value of assets for which there is little, if any, market activity at the measurement date, using reasonable inputs and assumptions based on the best information at the time, to the extent that inputs are available without undue cost and effort.
At December 31, 2024, the Company determined that
Loans Held For Sale, at Fair Value
The fair value of loans held for sale is estimated based upon binding contracts and quotes from third party investors (Level 2).
Mortgage Banking Derivatives
The fair value of mortgage banking derivatives are calculated using derivative valuation models that utilize quoted prices for similar assets adjusted for the specific attributes of the commitments and other observable market data at the valuation date (Level 2).
Loan Servicing Rights
Loan servicing rights are evaluated for impairment based upon the fair value of the rights as compared to the carrying amount at the end of each quarter. If the carrying amount of an individual tranche exceeds the fair value then an impairment is recorded on that tranche so that the servicing asset is carried at fair value. The calculation of the fair value is performed by an independent third party and the model uses factors such as the interest rate, prepayment speeds and other default rate assumptions that market participants would use in estimating the future net servicing income that can be validated against available market data (Level 2).
Interest Rate Swaps
The Company periodically enters into interest rate swap agreements with its commercial customers who desire a fixed rate loan term that is longer than the Company is willing to extend. The Company enters into a reciprocal swap agreement with a third party that offsets the interest rate risk from the interest rate extended to the customer. The fair value of these interest rate swap derivative instruments is calculated by an independent third party and are based upon valuation models that use observable market data as of the measurement date. (Level 2).
The Company also entered into a fair value hedge to mitigate the risk of further interest rate increases and the subsequent impact on the valuation of the company’s state and political subdivision municipal bond portfolio. The Company uses an independent third party to perform a market valuation analysis for this derivative (Level 2).
Collateral Dependent Loans
Fair value estimates of collateral dependent loans that are individually reviewed are based on the fair value of the collateral, less estimated costs to sell. Loans carried at fair value generally received individual allocations of the allowance for credit losses in 2024 and 2023. For collateral dependent loans, fair value is commonly based on recent real estate appraisals or in quoted sales price in certain instances. Appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Adjustments to a quoted price are routinely made to factor in data that affect the marketability of the collateral. Such adjustments, in both instances, are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. These loans are evaluated on a quarterly basis and adjusted accordingly.
94
Other Real Estate Owned
Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair values are commonly based on recent real estate appraisals. These appraisals may use a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.
Appraisals for both collateral-dependent loans and other real estate owned are performed by certified general appraisers (for commercial and commercial real estate properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the Appraisal Department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. On an annual basis, the Company compares the actual selling price of collateral that has been sold to the most recent appraised value to determine what adjustments should be made to appraisals to arrive at fair value.
Assets measured at fair value on a recurring basis are summarized below:
|
|
|
Fair Value Measurements at December 31, 2024 Using: |
|
|||||||||||||
|
|
|
Carrying
|
|
|
Quoted Prices
|
|
|
Significant
|
|
|
Significant
|
|
||||
|
Financial Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Investment securities available-for sale |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
U.S. Treasury and U.S. government sponsored entities |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
State and political subdivisions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized mortgage obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Small Business Administration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment securities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Equity securities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Loans held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate lock commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage banking derivative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Fair value hedge derivative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95
|
|
|
Fair Value Measurements at December 31, 2023 Using: |
|
|||||||||||||
|
|
|
Carrying
|
|
|
Quoted Prices
|
|
|
Significant
|
|
|
Significant
|
|
||||
|
Financial Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Investment securities available-for sale |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
U.S. Treasury and U.S. government sponsored entities |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
State and political subdivisions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized mortgage obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Small Business Administration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment securities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Equity securities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Loans held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate lock commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Fair value hedge derivative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage banking derivative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were
The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31:
|
|
|
Investment Securities Available-for-sale (Level 3) |
|
|||||||||
|
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
|
Beginning Balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Transfers between levels |
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired and/or purchased |
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount accretion (premium amortization) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments, calls and maturities |
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Assets Measured on a Non-Recurring Basis
Assets measured at fair value on a non-recurring basis are summarized below:
|
|
|
Fair Value Measurements |
|
|||||||||||||
|
|
|
at December 31, 2024 Using: |
|
|||||||||||||
|
|
|
Carrying
|
|
|
Quoted Prices
|
|
|
Significant
|
|
|
Significant
|
|
||||
|
Financial Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Individually Evaluated loans |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Non-Owner occupied |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Commercial and industrial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1–4 family residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage servicing rights |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96
|
|
|
Fair Value Measurements |
|
|||||||||||||
|
|
|
at December 31, 2023 Using: |
|
|||||||||||||
|
|
|
Carrying
|
|
|
Quoted Prices
|
|
|
Significant
|
|
|
Significant
|
|
||||
|
Financial Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Individually Evaluated loans |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Non-Owner occupied |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Commercial and industrial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1–4 family residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
The following table presents quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at year ended 2024 and 2023:
|
December 31, 2024 |
|
Fair value |
|
|
Valuation
|
|
Unobservable
|
|
Range
|
|
|
Individually Evaluated |
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate |
|
$ |
|
|
|
Income approach |
|
Adjustment for difference between cap rates of comparable sales |
|
(
|
|
Commercial |
|
|
|
|
|
Quoted price for collateral |
|
Offer price |
|
|
|
Residential |
|
|
|
|
|
Sales comparison |
|
Adjustment for differences between comparable sales |
|
(
|
|
December 31, 2023 |
|
Fair value |
|
|
Valuation
|
|
Unobservable
|
|
Range
|
|
|
Individually Evaluated |
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate |
|
$ |
|
|
|
Income approach |
|
Adjustment for difference between cap rates of comparable sales |
|
(
|
|
Commercial |
|
|
|
|
|
Quoted price for collateral |
|
Offer price |
|
|
|
Residential |
|
|
|
|
|
Sales comparison |
|
Adjustment for differences between comparable sales |
|
(
|
97
Fair Value of Financial Instruments
The carrying amounts and estimated fair values of financial instruments not previously presented, at December 31, 2024 and December 31, 2023 are as follows:
|
|
|
|
|
|
Fair Value Measurements at December 31, 2024 Using: |
|
||||||||||||||
|
|
|
Carrying
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|||||
|
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Regulatory stock |
|
|
|
|
|
n/a |
|
|
n/a |
|
|
n/a |
|
|
n/a |
|
||||
|
Loans, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2023 Using: |
|
||||||||||||||
|
|
|
Carrying
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|||||
|
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Regulatory stock |
|
|
|
|
|
n/a |
|
|
n/a |
|
|
n/a |
|
|
n/a |
|
||||
|
Loans, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 8 – PREMISES AND EQUIPMENT
Year-end premises and equipment owned and utilized in the operations of the Company were as follows:
|
|
|
2024 |
|
|
2023 |
|
||
|
Land |
|
$ |
|
|
|
$ |
|
|
|
Buildings |
|
|
|
|
|
|
|
|
|
Furniture, fixtures and equipment |
|
|
|
|
|
|
|
|
|
Leasehold Improvements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less accumulated depreciation |
|
|
(
|
) |
|
|
(
|
) |
|
Net book value |
|
$ |
|
|
|
$ |
|
|
Depreciation expense was $
98
NOTE 9 – LEASES
The right of use asset and lease liability were $
Lease expense for the years ended December 31, 2024, 2023 and 2022 was $
On January 1, 2023, the Company performed a valuation of Emclaire’s leases to determine an initial right of use asset (ROU asset) and lease liability in connection with the Merger. The Company recorded and initial
and
of $
Maturities of lease liabilities are as follows as of December 31, 2024:
|
2025 |
|
$ |
|
|
|
2026 |
|
|
|
|
|
2027 |
|
|
|
|
|
2028 |
|
|
|
|
|
2029 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
Total Payments |
|
|
|
|
|
Less: Imputed Interest |
|
|
(
|
) |
|
Total |
|
$ |
|
|
NOTE 10 – GOODWILL AND INTANGIBLE ASSETS
Goodwill associated with the Company’s purchases of Crest in December 2024, Emlenton in January 2023 and other past acquisitions totaled $
99
Acquired Intangible Assets
Acquired intangible assets were as follows:
|
|
|
2024 |
|
|
2023 |
|
||||||||||
|
|
|
Gross
|
|
|
Accumulated
|
|
|
Gross
|
|
|
Accumulated
|
|
||||
|
Other intangible: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Customer relationship intangibles |
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
(
|
) |
|
Non-compete contracts |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
Trade Name |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
Core deposit intangible |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
Total |
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
(
|
) |
Aggregate intangible amortization expense was $
Estimated amortization expense for each of the next five years and thereafter:
|
2025 |
|
$ |
|
|
|
2026 |
|
|
|
|
|
2027 |
|
|
|
|
|
2028 |
|
|
|
|
|
2029 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
Total |
|
$ |
|
|
NOTE 11 - DEPOSITS
Following is a summary of year-end deposits:
|
|
|
2024 |
|
|
2023 |
|
||
|
Noninterest-bearing demand |
|
$ |
|
|
|
$ |
|
|
|
Interest-bearing demand |
|
|
|
|
|
|
|
|
|
Money market |
|
|
|
|
|
|
|
|
|
Savings |
|
|
|
|
|
|
|
|
|
Brokered time deposits |
|
|
|
|
|
|
|
|
|
Certificates of deposit |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
Time deposits of $
100
Following is a summary of scheduled maturities of brokered deposits and certificates of deposit during the years following December 31, 2024:
|
2025 |
|
$ |
|
|
|
2026 |
|
|
|
|
|
2027 |
|
|
|
|
|
2028 |
|
|
|
|
|
2029 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
|
|
$ |
|
|
NOTE 12 – SHORT-TERM BORROWINGS
The Bank had short-term advances from the Federal Home Loan Bank ("FHLB") of $
In addition, at December 31, 2023 the Bank had $
The Bank has access to a line of credit for $
Farmers has one unsecured revolving line of credit for $
NOTE 13 – LONG-TERM BORROWINGS
There were
Long-term and short-term FHLB advances are secured by a blanket pledge of residential mortgage, commercial real estate, and multi-family loans totaling $
In November 2021, the Company completed the issuance of $
101
In August 2024, the Company bought back and retired $
On
On
In 2015, the Company completed its acquisition of National Bancshares Corporation, which included the assumption of Floating Rate Junior Subordinated Debt Securities due
In all three instances, the Company may redeem the junior subordinated debentures at any quarter-end, in whole, or in part, at par. This type of subordinated debenture qualifies as Tier 1 capital for regulatory purposes in determining and evaluating the Company’s capital adequacy.
A summary of all junior subordinated debentures issued by the Company to affiliates and subordinated debentures follows. For the junior subordinated debentures, these amounts represent the par value of the obligations owed to these affiliates, including the Company’s equity interest in the trusts along with any unamortized fair value marks. For the subordinated debentures, these amounts represent the par value less the remaining deferred offering expense associated with the issuance of the debentures.
|
|
|
2024 |
|
|
2023 |
|
||
|
|
|
Amount |
|
|
Amount |
|
||
|
TSEO Statutory Trust I |
|
$ |
|
|
|
$ |
|
|
|
Maple Leaf Financial Statutory Trust II |
|
|
|
|
|
|
|
|
|
Cortland Statutory Trust I |
|
|
|
|
|
|
|
|
|
Total junior subordinated debentures owed to unconsolidated subsidiary trusts |
|
$ |
|
|
|
$ |
|
|
|
Subordinated debentures |
|
|
|
|
|
|
|
|
|
Total long-term borrowings |
|
$ |
|
|
|
$ |
|
|
102
NOTE 14 – COMMITMENTS AND CONTINGENT LIABILITIES
Some financial instruments, such as loan commitments, credit lines, letters of credit and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance-sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment.
The contractual amounts of financial instruments with off-balance-sheet risk at year-end were as follows:
|
|
|
2024 |
|
|
2023 |
|
||||||||||
|
|
|
Fixed Rate |
|
|
Variable Rate |
|
|
Fixed Rate |
|
|
Variable Rate |
|
||||
|
Commitments and unused lines of credit |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Commitments to make loans are generally made for periods of
Standby letters of credit are considered financial guarantees. The standby letters of credit have a contractual value of $
Additionally, the Company has committed up to a $
NOTE 15 – STOCK BASED COMPENSATION
In April of 2022, the Company, with the approval of shareholders, created the 2022 Equity Incentive Plan (the “2022 Plan”). The 2022 Plan permits the award of up to
The restricted stock awards were granted with a fair value price equal to the market price of the Company’s common stock at the date of the grant. Expense recognized was $
The following is the activity under the Plan during 2024:
|
|
|
Maximum
|
|
|
Weighted
|
|
|
Maximum
|
|
|
Weighted
|
|
||||
|
Beginning balance - non-vested shares |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested |
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Forfeited |
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Ending balance - non-vested shares |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
103
The following is the activity under the Plan during 2023:
|
|
|
Maximum
|
|
|
Weighted
|
|
|
Maximum
|
|
|
Weighted
|
|
||||
|
Beginning balance - non-vested shares |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested |
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Forfeited |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance - non-vested shares |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
The
NOTE 16 – REGULATORY MATTERS
Banks and bank holding companies are subject to various regulatory capital requirements administered by the federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action by regulators that, if undertaken, could have a direct material effect on the financial statements. The net unrealized gain or loss on available for sale securities is not included in computing of regulatory capital. Management believes that as of December 31, 2024, the Company and the Bank meet all capital adequacy requirements to which they are subject.
The FDIC and other federal banking regulators revised the risk-based capital requirements applicable to financial holding companies and insured depository institutions, including the Company and the Bank, to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision (“Basel III”).
The common equity tier 1 capital, tier 1 capital and total capital ratios are calculated by dividing the respective capital amounts by risk-weighted assets. The leverage ratio is calculated by dividing tier 1 capital by adjusted average total assets.
Basel III limits capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of
Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized, although these terms are not used to represent overall financial condition. If only adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At year-end 2024 and 2023, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category.
104
Dividend Restrictions: The Company’s principal source of funds for dividend payments is dividends received from the Bank and Farmers Trust. The Bank and Farmers Trust are subject to the dividend restrictions set forth by the Comptroller of the Currency and Ohio Department of Commerce – Division of Financial Institutions, respectively. The respective regulatory agency must approve declaration of any dividends in excess of the sum of profits for the current year and retained net profits for the preceding two years. At the conclusion of 2024, the Bank could, without prior approval, declare dividends of approximately $
|
|
|
Actual |
|
|
Requirement For Capital
|
|
|
To be Well Capitalized
|
|
|||||||||||||||
|
|
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
||||||
|
2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Common equity tier 1 capital ratio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Consolidated |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
N/A |
|
|
N/A |
|
||
|
Bank |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Total risk based capital ratio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Consolidated |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
N/A |
|
|
N/A |
|
||
|
Bank |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Tier I risk based capital ratio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Consolidated |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
N/A |
|
|
N/A |
|
||
|
Bank |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Tier I leverage ratio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Consolidated |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
N/A |
|
|
N/A |
|
||
|
Bank |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Common equity tier 1 capital ratio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Consolidated |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
N/A |
|
|
N/A |
|
||
|
Bank |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Total risk based capital ratio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Consolidated |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
N/A |
|
|
N/A |
|
||
|
Bank |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Tier I risk based capital ratio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Consolidated |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
N/A |
|
|
N/A |
|
||
|
Bank |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Tier I leverage ratio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Consolidated |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
N/A |
|
|
N/A |
|
||
|
Bank |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
105
NOTE 17 – EMPLOYEE BENEFIT PLANS
The Company has a qualified 401(k) deferred compensation Retirement Savings Plan (the “Savings Plan”). All employees of the Company who have completed at least
The Company has a profit sharing plan to provide associates not participating in a current incentive plan a vehicle for sharing in the success of the Company outside of existing wages and non-monetary benefits. The expense for the profit sharing program was $
The Company maintains a deferred compensation plan for certain retirees. Expense under the plan was $
The Company has a nonqualified deferred compensation plan for a select group of management or highly compensated, eligible individuals. Under the terms of the plan, eligible individuals may elect to defer receipt of their compensation to a later taxable year. The Company has recorded both an asset and liability of equal amount that represents the amount of contributions and the payable due to the participants in the plan. The recorded asset and liability was $
As part of the NBOH acquisition the Company has a director retirement and death benefit plan for the benefit of prior members of the Board of Directors of NBOH. The plan is designed to provide an annual retirement benefit to be paid to each director upon retirement from the Board and attaining age
As part of the Cortland acquisition, the Company has supplemental retirement benefit plans for the benefit of certain officers and non-officer directors. The plan for officers is designed to provide post-retirement benefits to supplement other sources of retirement income such as social security and 401(k) benefits. The benefits will be paid for a period of
To fund the above obligations, the Company has insurance contracts on the lives of the participants and directors in the supplemental retirement benefit plans with the Company as the beneficiary. In the case of directors and a small group of employee participants, postretirement split dollar life insurance coverage was accrued for during the service years. The liability at December 31,
2024 and 2023 was $
106
As part of the Emclaire acquisition, the Company maintains a SERP to provide certain additional retirement benefits to participating officers. The SERP is subject to certain vesting provisions and provides that the officers shall receive a supplemental retirement benefit if the officer’s employment is terminated after reaching the normal retirement age of 65, with benefits also payable upon death, disability, a change of control or a termination of employment prior to normal re
tirement age. At December 31, 2024, the accumulated liability for these plans totaled $
NOTE 18 – INCOME TAXES
The provision for income taxes (credit) consists of the following:
|
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
|
Current expense |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Deferred expense (benefit) |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Totals |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Effective tax rates differ from the federal statutory rate of
|
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
|
Statutory tax |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Effect of nontaxable interest |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Bank owned life insurance, net |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Tax credit investments |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Effect of nontaxable insurance premiums |
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
Stock compensation |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
Other |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Actual tax |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
107
Deferred tax assets (liabilities) are comprised of the following:
|
|
|
2024 |
|
|
2023 |
|
||
|
Deferred tax assets: |
|
|
|
|
|
|
||
|
Allowance for credit losses |
|
$ |
|
|
|
$ |
|
|
|
Net unrealized loss on securities available for sale |
|
|
|
|
|
|
|
|
|
Net unrealized loss on swap derivative |
|
|
|
|
|
|
|
|
|
Basis in investment securities |
|
|
|
|
|
|
|
|
|
Purchase accounting adjustments |
|
|
|
|
|
|
|
|
|
Deferred and accrued compensation |
|
|
|
|
|
|
|
|
|
Nonaccrual loan interest income |
|
|
|
|
|
|
|
|
|
Restricted stock |
|
|
|
|
|
|
|
|
|
Lease liabilities |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Gross deferred tax assets |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
||
|
Deferred tax liabilities: |
|
|
|
|
|
|
||
|
Depreciation and amortization |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
Mortgage servicing rights |
|
|
(
|
) |
|
|
(
|
) |
|
Prepaid expenses |
|
|
(
|
) |
|
|
(
|
) |
|
Lease right of use asset |
|
|
(
|
) |
|
|
(
|
) |
|
Other |
|
|
(
|
) |
|
|
|
|
|
Gross deferred tax liabilities |
|
|
(
|
) |
|
|
(
|
) |
|
Net deferred tax asset |
|
$ |
|
|
|
$ |
|
|
At December 31, 2024 and December 31, 2023, the Company had
The Company is subject to U.S. federal income tax. The Company is no longer subject to examination by the federal taxing authority for years prior to 2021. The tax years remain open to examination by the U.S. taxing authority.
108
NOTE 19 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table represents the changes in accumulated other comprehensive income (loss) by component, net of tax, for the years ended December 31, 2024 and 2023.
|
|
|
Net unrealized
|
|
|
Reclassification
|
|
|
Change in
|
|
|
Total |
|
||||
|
December 31, 2024 |
|
|
|
|
|
|
||||||||||
|
Beginning balance |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
Other comprehensive (loss) before reclassification |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
Amounts reclassified from accumulated other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net current period other comprehensive (loss) income |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
Ending balance |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
December 31, 2023 |
|
|
|
|
|
|
||||||||||
|
Beginning balance |
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
Other comprehensive income (loss) before reclassification |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Amounts reclassified from accumulated other comprehensive income (loss) |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
Net current period other comprehensive income (loss) |
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
|
Ending balance |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
Amounts reclassified out of each component of accumulated other comprehensive income (loss) were not material for the years ended December 31, 2024, 2023, and 2022.
NOTE 20 – RELATED PARTY TRANSACTIONS
Loans to principal officers, directors, and their affiliates during 2024 and 2023 were as follows:
|
|
|
2024 |
|
|
2023 |
|
||
|
Beginning balance |
|
$ |
|
|
|
$ |
|
|
|
New loans |
|
|
|
|
|
|
|
|
|
Repayments |
|
|
(
|
) |
|
|
(
|
) |
|
Ending balance |
|
$ |
|
|
|
$ |
|
|
Deposits from principal officers, directors, and their affiliates at year-end 2024 and 2023 were $
109
NOTE 21 – EARNINGS PER SHARE
The factors used in the earnings per share computation follow:
|
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
|
Basic EPS |
|
|
|
|
|
|
|
|
|
|||
|
Net income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Diluted EPS |
|
|
|
|
|
|
|
|
|
|||
|
Net income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Weighted average shares for basic earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average unvested restricted stock awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares for diluted earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
There were
NOTE 22 – DERIVATIVE FINANCIAL INSTRUMENTS
Interest Rate Swaps
The Company maintains an interest rate protection program for commercial loan customers. Under this program, the Company provides a variable rate loan while creating a fixed rate loan for the customer by the customer entering into an interest rate swap with terms that match the loan. The Company offsets its risk exposure by entering into an offsetting interest rate swap with an unaffiliated institution. The Company had interest rate swaps associated with commercial loans with a notional v
alue of $
There were
110
Interest Rate Swap Designated as a Fair Value Hedge
The Company has one interest rate swap with a notional amount of $
|
|
December 31, 2024 |
|
December 31, 2023 |
|
||
|
Notional amount fair value hedge |
$ |
|
|
$ |
|
|
|
Fixed pay rates |
|
|
% |
|
|
% |
|
Variable SOFR receive rates |
|
|
% |
|
|
% |
|
Remaining maturity (in years) |
|
|
|
|
|
|
|
Fair value |
$ |
(
|
) |
$ |
(
|
) |
Mortgage Banking Derivatives
Commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third-party investors are considered derivatives. The Company enters into forward commitments for the future delivery of residential mortgage loans when the interest rate lock commitments are entered into in order to economically hedge the effect of changes in interest rates resulting from its commitments to fund the loans. These mortgage banking derivatives are not designated in hedge relationships.
The net gains (losses) relating to non-designated derivative instruments used for risk management are included in Net Gains on Sale of Loans on the Consolidated Statements of Income and are summarized below for the years ended December 31:
|
|
2024 |
|
2023 |
|
2022 |
|
|||
|
Forward sales contracts |
$ |
|
|
$ |
(
|
) |
$ |
|
|
|
Interest rate lock commitments |
|
(
|
) |
|
|
|
|
|
|
The following table reflects the amount and fair value of mortgage banking derivatives included in the Consolidated Balance Sheets as on December 31:
|
|
|
2024 |
|
|
2023 |
|
||||||||||
|
|
|
Notional |
|
|
Fair |
|
|
Notional |
|
|
Fair |
|
||||
|
|
|
Amount |
|
|
Value |
|
|
Amount |
|
|
Value |
|
||||
|
Included in other assets: |
|
|||||||||||||||
|
|
Forward sales contracts |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
Interest rate lock commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total included in other assets |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Included in other liabilities: |
|
|||||||||||||||
|
|
Forward sales contracts |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
111
NOTE 23 – SEGMENT INFORMATION
The Company's reportable segments are determined by the
, who is the designated chief operating decision maker, based upon information provided about the Company's products and services offered, primarily distinguished between the banking and trust operations. The segments are also distinguished by the level of information provided to the chief operating decision maker, who uses such information to review performance of various components of the business, which are then aggregated if operating performance, products/services, and customers are similar.
Accounting policies for segments are the same as those described in Note 1. Income taxes are calculated on operating income. Transactions among segments are made at fair value.
Significant segment totals are reconciled to the financial statements as follows:
|
December 31, 2024 |
|
Trust
|
|
|
Bank
|
|
|
Consolidated Segment
|
|
|||
|
Total assets for reportable segments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Eliminations and other |
|
|
|
|
|
|
|
|
(
|
) |
||
|
Total consolidated assets |
|
|
|
|
|
|
|
$ |
|
|
||
|
December 31, 2023 |
|
Trust
|
|
|
Bank
|
|
|
Consolidated Segment
|
|
|||
|
Total assets for reportable segments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Eliminations and other |
|
|
|
|
|
|
|
|
(
|
) |
||
|
Total consolidated assets |
|
|
|
|
|
|
|
$ |
|
|
||
112
|
For year ended 2024 |
|
Trust
|
|
|
Bank
|
|
|
Consolidated Segment
|
|
|||
|
Interest income - loans including fees |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Interest income - investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement plan consulting fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated segment revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of revenue |
|
|
|
|
|
|
|
|
|
|||
|
Other revenues |
|
|
|
|
|
|
|
|
|
|
||
|
Total consolidated revenues |
|
|
|
|
|
|
|
$ |
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|||
|
Interest expense - deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense - borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses and unfunded loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
Payroll expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated segment expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Segment profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of expenses |
|
|
|
|
|
|
|
|
|
|||
|
Other expenses * |
|
|
|
|
|
|
|
|
|
|
||
|
Total consolidated expenses |
|
|
|
|
|
|
|
$ |
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|||
|
Total consolidated income before taxes |
|
|
|
|
|
|
|
$ |
|
|
||
|
Other segment disclosures |
|
|
|
|
|
|
|
|
|
|||
|
Occupancy and equipment |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Intangible amortization |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
113
|
For year ended 2023 |
|
Trust
|
|
|
Bank
|
|
|
Consolidated Segment
|
|
|||
|
Interest income - loans including fees |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Interest income - investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement plan consulting fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated segment revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of revenue |
|
|
|
|
|
|
|
|
|
|||
|
Other revenues |
|
|
|
|
|
|
|
|
|
|
||
|
Total consolidated revenues |
|
|
|
|
|
|
|
$ |
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|||
|
Interest expense - deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense - borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses and unfunded loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
Payroll expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated segment expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Segment profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of expenses |
|
|
|
|
|
|
|
|
|
|||
|
Other expenses * |
|
|
|
|
|
|
|
|
|
|
||
|
Total consolidated expenses |
|
|
|
|
|
|
|
$ |
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|||
|
Total consolidated income before taxes |
|
|
|
|
|
|
|
$ |
|
|
||
|
Other segment disclosures |
|
|
|
|
|
|
|
|
|
|||
|
Occupancy and equipment |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Intangible amortization |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
114
|
For year ended 2022 |
|
Trust
|
|
|
Bank
|
|
|
Consolidated Segment
|
|
|||
|
Interest income - loans including fees |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Interest income - investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement plan consulting fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated segment revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of revenue |
|
|
|
|
|
|
|
|
|
|||
|
Other revenues |
|
|
|
|
|
|
|
|
|
|
||
|
Total consolidated revenues |
|
|
|
|
|
|
|
$ |
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|||
|
Interest expense - deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense - borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses and unfunded loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
Payroll expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated segment expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Segment profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of expenses |
|
|
|
|
|
|
|
|
|
|||
|
Other expenses * |
|
|
|
|
|
|
|
|
|
|
||
|
Total consolidated expenses |
|
|
|
|
|
|
|
$ |
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|||
|
Total consolidated income before taxes |
|
|
|
|
|
|
|
$ |
|
|
||
|
Other segment disclosures |
|
|
|
|
|
|
|
|
|
|||
|
Occupancy and equipment |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Intangible amortization |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
* Includes occupancy expenses, FDIC insurance, state and local taxes, professional fees, merger costs, advertising, intangible amortization, core processing charges, charitable donations and other operating expenses.
Bank segment includes Farmers Insurance and Investment.
115
NOTE 24 – PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION
Below is condensed financial information of Farmers National Banc Corp. (parent company only). This information should be read in conjunction with the consolidated financial statements and related notes.
|
December 31, |
|
2024 |
|
|
2023 |
|
||
|
BALANCE SHEETS |
|
|
|
|
|
|
||
|
Assets: |
|
|
|
|
|
|
||
|
Cash |
|
$ |
|
|
|
$ |
|
|
|
Investment in subsidiaries |
|
|
|
|
|
|
||
|
Bank |
|
|
|
|
|
|
|
|
|
Farmers Trust |
|
|
|
|
|
|
|
|
|
Captive |
|
|
|
|
|
|
|
|
|
Other investments |
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
||
|
Liabilities: |
|
|
|
|
|
|
||
|
Other liabilities |
|
$ |
|
|
|
$ |
|
|
|
Subordinated debt |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
|
|
|
Total stockholders' equity |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity |
|
$ |
|
|
|
$ |
|
|
|
STATEMENTS OF INCOME |
|
|
|
|
|
|
|
|
|
|||
|
Years ended December 31, |
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
|
Income: |
|
|
|
|
|
|
|
|
|
|||
|
Dividends from subsidiaries |
|
|
|
|
|
|
|
|
|
|||
|
Bank |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Farmers Trust |
|
|
|
|
|
|
|
|
|
|
|
|
|
Captive Insurance |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on debt extinguishment |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and dividends on securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax benefit and undistributed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in undistributed net income of subsidiaries
|
|
|
|
|
|
|
|
|
|
|||
|
Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
Farmers Trust |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Captive |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
|
|
|
$ |
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|
$ |
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|
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|||
|
Comprehensive Income |
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$ |
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$ |
|
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|
$ |
(
|
) |
116
|
STATEMENTS OF CASH FLOWS |
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|||
|
Years ended December 31, |
|
2024 |
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2023 |
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2022 |
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|||
|
Cash flows from operating activities: |
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|||
|
Net income |
|
$ |
|
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|
$ |
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$ |
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|
Adjustments to reconcile net income to net cash from
|
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|||
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Dividends in excess of net income (Equity in
|
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|
(
|
) |
|
|
(
|
) |
|
|
(
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) |
|
(Gain) on debt extinguishment |
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|
(
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) |
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Other |
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|
(
|
) |
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|
Net cash from operating activities |
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|||
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Cash flows from investing activities: |
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|||
|
Net cash paid in business combinations |
|
|
|
|
|
|
(
|
) |
|
|
|
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|
Net cash from investing activities |
|
|
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|
(
|
) |
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|||
|
Cash flows from financing activities: |
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|
|
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|
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|
|||
|
Repurchase of common shares |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Redemption of subordinated debentures |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
Cash dividends paid |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Net cash from financing activities |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Net change in cash and cash equivalents |
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
|
|
|
|
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|
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|||
|
Beginning cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
NOTE 25 – QUALIFIED AFFORDABLE HOUSING PROJECT INVESTMENTS
The Company invests in qualified affordable housing projects. At December 31, 2024 and 2023, the balance of the investment for
was $
During the years ended December 31, 2024 and 2023, the Company recognized amortization expense of $
Additionally, during the years ended December 31, 2024 and 2023, the Company recognized tax credits and other benefits from its investment in affordable housing tax credits of $
117
Item 9. Changes in and Disagreements with Accou ntants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
As of the end of the period covered by this Annual Report on Form 10-K, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective to ensure that the financial and nonfinancial information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, including this Annual Report on Form 10-K for the period ended December 31, 2024, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
Management’s responsibilities related to establishing and maintaining effective disclosure controls and procedures include maintaining effective internal controls over financial reporting that are designed to produce reliable financial statements in accordance with GAAP. As disclosed in the Report on Management’s Assessment of Internal Control Over Financial Reporting in the Company’s 2024 Annual Report to Shareholders, management assessed the Company’s system of internal control over financial reporting as of December 31, 2024, in relation to criteria for effective internal control over financial reporting as described in the 2013 “Internal Control - Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission and found it to be effective.
Crowe LLP ("Crowe"), the Company’s registered public accounting firm (U.S. PCAOB Auditor Firm I.D.:
There were no changes in the Company’s internal controls over financial reporting (as defined in Rule 13a - 15(f) under the Exchange Act) that occurred during the year ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation or material weaknesses in such internal controls requiring corrective actions.
Item 9B. Other Information.
During the year ended December 31, 2024, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company
Item 9C. Disclosure Regarding Foreign J urisdictions that Prevent Inspections.
Not applicable.
PART III
Item 10. Directors, Exe cutive Officers and Corporate Governance.
The information required by Item 401 of Regulation S-K concerning the directors of the Company and the nominees for election as directors of the Company at the Annual Meeting of Shareholders to be held on April 17, 2025 (the “2025 Annual Meeting”) is incorporated herein by reference from the information to be included under the caption “Proposal 1 – Election of Directors” in Farmers’ definitive proxy statement relating to the 2025 Annual Meeting to be filed with the Commission (“2025 Proxy Statement”).
118
The information required by Item 401 of Regulation S-K concerning the executive officers of the Company is incorporated herein by reference from the disclosure included under the caption “Information About Our Executive Officers” at the end of “Item 1. Business” in Part I of this Annual Report on Form 10-K.
Compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended.
The information required by Item 405 of Regulation S-K is incorporated herein by reference from the disclosure to be included under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in the 2025 Proxy Statement.
Code of Business Conduct and Ethics.
The Company has adopted a Code of Business Conduct and Ethics (the “Code of Ethics”) that covers all employees, including its principal executive, financial and accounting officers, and is posted on the Company’s website www.farmersbankgroup.com . In the event of any amendment to, or waiver from, a provision of the Code of Ethics that applies to its principal executive, financial or accounting officers, the Company intends to disclose such amendment or waiver on its website. See Exhibit 14.1 for our Code of Ethics.
Procedures for Recommending Directors Nominees.
Information concerning the procedures by which shareholders may recommend nominees to Farmers’ Board of Directors is incorporated herein by reference from the information to be included under the caption “Director Nominations” in the 2025 Proxy Statement. These procedures have not materially changed from those described in Farmers’ definitive proxy materials for the 2024 Annual Meeting of Shareholders.
Audit Committee.
The information required by Items 407(d)(4) and (d)(5) of Regulation S-K is incorporated herein by reference from the disclosure to be included under the caption “Committees of the Board of Directors – Audit Committee” in the 2025 Proxy Statement.
Insider Trading
Our executive officers and directors are prohibited under our Insider Trading Policy from pledging our Common Shares, purchasing our Common Shares on margin, engaging in short sales, or engaging in any hedging transaction involving our Common Shares. See Exhibit 19.1 for our Insider Trading Policy.
Item 11. Executive Compensation.
The information required by Item 402 of Regulation S-K is incorporated herein by reference from the disclosure to be included under the captions “Compensation Discussion and Analysis” and “Executive Compensation and Other Information” in the 2025 Proxy Statement.
The information required by Item 407(e)(4) of Regulation S-K is incorporated herein by reference from the disclosure to be included under the caption “Compensation Committee Interlocks and Insider Participation” in the 2025 Proxy Statement.
The information required by Item 407(e)(5) of Regulation S-K is incorporated herein by reference from the disclosure to be included under the caption “The Compensation Committee Report” in the 2025 Proxy Statement.
119
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by Item 201(d) of Regulation S-K is incorporated herein by reference from the disclosure included under the caption “Equity Compensation Plan Information” in the 2025 Proxy Statement.
The information required by Item 403 of Regulation S-K is incorporated herein by reference from the disclosure included under the caption “Beneficial Ownership of Management and Certain Beneficial Owners” in the 2025 Proxy Statement.
Item 13. Certain Relationships and Related Transactions and Director Independence.
The information required by Item 404 of Regulation S-K is incorporated herein by reference from the disclosure to be included under the caption “Certain Relationships and Related Transactions” in the 2025 Proxy Statement.
The information required by Item 407(a) of Regulation S-K is incorporated herein by reference from the disclosure to be included under the caption “The Board of Directors — Independence” in the 2025 Proxy Statement.
Item 14. Principal Accountant Fees and Services.
The information required by this Item 14 is incorporated herein by reference from the disclosure to be included under the captions “Independent Registered Public Accounting Firm Fees” and “Pre-Approval of Fees” in the 2025 Proxy Statement.
PART IV
Item 15. Exhibits, Financial Statement Schedules.
|
|
(a) |
(1) Financial Statements |
|
|
|
|
|
Item 8 Reference is made to the Consolidated Financial Statements included in Item 8 of Part II herein. |
|
|
|
(2) Financial Statement Schedules |
|
|
|
|
|
No financial statement schedules are presented because they are not applicable. |
|
|
|
(3) Exhibits |
|
|
|
|
|
The exhibits filed or incorporated by reference as a part of this Annual Report on Form 10-K are listed in the Exhibit Index, which follows and is incorporated herein by reference. |
|
|
(b) |
Exhibits |
|
|
|
|
|
The exhibits filed or incorporated by reference as a part of this Annual Report on Form 10-K are listed in the Exhibit Index, which follows and is incorporated herein by reference. |
|
|
(c) |
Financial Statement Schedules |
|
|
|
|
|
See subparagraph (a)(2) above. |
Item 16. Form 1 0-K Summary.
None.
120
INDEX TO EXHIBITS
The following exhibits are filed or incorporated by reference as part of this Annual Report on Form 10-K:
|
Exhibit Number |
|
Description |
|
3.1 |
|
|
|
3.2 |
|
|
|
3.3 |
|
|
|
3.4 |
|
|
|
4.1 |
|
|
|
4.2 |
|
|
|
10.1* |
|
|
|
10.2* |
|
|
|
10.3* |
|
|
|
10.4* |
|
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|
10.5* |
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10.6* |
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|
10.7* |
|
|
|
10.8* |
|
|
|
10.9* |
|
121
|
Exhibit Number |
|
Description |
|
10.10* |
|
|
|
10.11* |
|
|
|
10.12* |
|
|
|
10.13* |
|
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|
10.14* |
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|
10.15* |
|
|
|
10.16* |
|
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|
10.17* |
|
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|
10.18* |
|
|
|
10.19* |
|
|
|
10.20* |
|
|
|
10.21* |
|
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|
10.22* |
|
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|
10.23* |
|
|
|
10.24* |
|
|
|
10.25* |
|
|
|
10.26* |
|
122
|
Exhibit Number |
|
Description |
|
14.1 |
|
Farmers National Banc Corp. Code of Business Conduct and Ethics (filed herewith). |
|
19.1 |
|
Farmers National Banc Corp. Insider Trading Policy (filed herewith). |
|
21 |
|
|
|
23.1 |
|
Consent of Independent Registered Public Accounting Firm (filed herewith). |
|
23.2 |
|
Consent of Independent Registered Public Accounting Firm (filed herewith). |
|
24 |
|
Powers of Attorney of Directors and Executive Officers (filed herewith). |
|
31.1 |
|
|
|
31.2 |
|
|
|
32.1 |
|
|
|
32.2 |
|
|
|
97.1 |
|
Policy relating to recovery of erroneously awarded compensation. (filed herewith). |
|
101 |
|
The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, formatted in iXBRL (Inline Extensible Business Reporting Language), filed herewith: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Income; (iii) the Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows; and (vi) Notes to Consolidated Financial Statements. |
|
104 |
|
The cover page from the Company’s Annual report on Form 10-K for the year ended December 31, 2024, has been formatted in Inline XBRL. |
* Constitutes a management contract or compensatory plan or arrangement.
Copies of any exhibits will be furnished to shareholders upon written request. Requests should be directed to Troy Adair, Executive Vice President, Secretary and Chief Financial Officer, Farmers National Banc Corp., 20 S. Broad Street, Canfield, Ohio 44406.
123
SIGNAT URES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the under signed, thereunto duly authorized.
|
FARMERS NATIONAL BANC CORP. |
||
|
|
||
|
By |
|
/s/ Kevin J. Helmick |
|
|
|
Kevin J. Helmick, President and Chief Executive Officer March 6, 2025 |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
|
/s/ Kevin J. Helmick |
|
President, Chief Executive Officer and Director |
|
March 6, 2025 |
|
Kevin J. Helmick |
|
(Principal Executive Officer) |
|
|
|
/s/ Troy Adair |
|
Executive Vice President, Secretary and Chief Financial Officer |
|
March 6, 2025 |
|
Troy Adair |
|
(Principal Financial Officer) |
|
|
|
/s/ Joseph W. Sabat* |
|
Chief Accounting Officer |
|
March 6, 2025 |
|
Joseph W. Sabat |
|
(Principal Accounting Officer) |
|
|
|
/s/ Gregory C. Bestic* |
|
Director |
|
March 6, 2025 |
|
Gregory C. Bestic |
|
|
|
|
|
/s/ Carl D. Culp* |
|
Director |
|
March 6, 2025 |
|
Carl D. Culp |
|
|
|
|
|
/s/ Neil J. Kaback* |
|
Director |
|
March 6, 2025 |
|
Neil J. Kaback |
|
|
|
|
|
/s/ Ralph D. Macali* |
|
Director |
|
March 6, 2025 |
|
Ralph D. Macali |
|
|
|
|
|
/s/ Frank J. Monaco* |
|
Director |
|
March 6, 2025 |
|
Frank J. Monaco |
|
|
|
|
|
/s/ Terry A. Moore* |
|
Director and Board Chair |
|
March 6, 2025 |
|
Terry A. Moore |
|
|
|
|
|
/s/ Edward W. Muransky* |
|
Director |
|
March 6, 2025 |
|
Edward W. Muransky |
|
|
|
|
|
/s/ David Z. Paull* |
|
Director |
|
March 6, 2025 |
|
David Z. Paull |
|
|
|
|
|
/s/ Gina A. Richardson* |
|
Director |
|
March 6, 2025 |
|
Gina A. Richardson |
|
|
|
|
|
/s/ Richard B. Thompson* |
|
Director |
|
March 6, 2025 |
|
Richard B. Thompson |
|
|
|
|
|
/s/ André Thornton* |
|
Director |
|
March 6, 2025 |
|
André Thornton |
|
|
|
|
|
/s/ Nicholas D. Varischetti* |
|
Director |
|
March 6, 2025 |
|
Nicholas D. Varischetti |
|
|
|
|
* The above-named directors and officers of the Registrant sign this Annual Report on Form 10-K by Kevin J. Helmick and Troy Adair, their attorney-in-fact, pursuant to Powers of Attorney signed by the above-named directors and officers, which Powers of Attorney are filed with this Annual Report on Form 10-K as exhibits, in the capacities indicated.
124
|
By |
|
/s/ Kevin J. Helmick |
|
|
|
Kevin J. Helmick |
|
|
|
President, Chief Executive Officer and Director |
|
|
|
(Principal Executive Officer) |
|
|
|
|
|
|
|
/s/ Troy Adair |
|
|
|
Troy Adair |
|
|
|
Executive Vice President, Secretary and Chief Financial Officer |
|
|
|
(Principal Financial Officer) |
125