UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
Securities Exchange Act of 1934
or
Securities Exchange Act of 1934
For the Quarterly period ended
Commission file number
FARMERS NATIONAL BANC CORP.
(Exact name of registrant as specified in its charter)
| | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No) |
| | |
| (Address of principal executive offices) | (Zip Code) |
(
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act.
| Title of each class | Trading Symbol | Name of each exchange on which registered |
| | | The |
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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | | ☒ |
| Non-accelerated filer | ☐ | Small reporting company | |
| Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | Outstanding at May 1, 2025 | |
| Common Stock, No Par Value | |
| Page Number |
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| PART I - FINANCIAL INFORMATION |
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| Item 1 |
Financial Statements (Unaudited) |
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| Included in Part I of this report: |
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| Farmers National Banc Corp. and Subsidiaries |
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| Consolidated Condensed Statements of Comprehensive Income (Loss) (Unaudited) |
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| Consolidated Condensed Statements of Stockholders’ Equity (Unaudited) |
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| Notes to Unaudited Condensed Consolidated Financial Statements |
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| Item 2 |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| Item 3 |
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| Item 4 |
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| Item 1 |
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| Item 1A |
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| Item 2 |
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| Item 3 |
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| Item 4 |
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| Item 5 |
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| Item 6 |
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| 10-Q Certifications |
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| Section 906 Certifications |
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CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
FARMERS NATIONAL BANC CORP. AND SUBSIDIARIES
| (In Thousands of Dollars) | ||||||||
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| ASSETS | ||||||||
| Cash and due from banks | $ | $ | ||||||
| Federal funds sold and other | ||||||||
| TOTAL CASH AND CASH EQUIVALENTS | ||||||||
| Securities available for sale (Amortized cost $ in 2025 and $ in 2024) | ||||||||
| 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 | ||||||||
| Tax credit 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 | ||||||||
| Commitments and contingent liabilities | ||||||||
| Stockholders' Equity: | ||||||||
| Common Stock, par value; shares authorized; shares issued in 2025 and 2024; and shares outstanding, respectively | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive (loss) | ( | ) | ( | ) | ||||
| Treasury stock, at cost; and shares in 2025 and 2024, respectively | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS' EQUITY | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | $ | ||||||
See accompanying notes
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited)
FARMERS NATIONAL BANC CORP. AND SUBSIDIARIES
| (In Thousands except Per Share Data) | ||||||||
| For the Three Months Ended | ||||||||
| March 31, | March 31, | |||||||
| 2025 | 2024 | |||||||
| 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 (credit) for credit losses | ( | ) | ||||||
| (Credit) for unfunded commitments | ( | ) | ( | ) | ||||
| NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES | ||||||||
| NONINTEREST INCOME | ||||||||
| Service charges on deposit accounts | ||||||||
| Bank owned life insurance income | ||||||||
| 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 | ||||||||
| Other operating income | ||||||||
| TOTAL NONINTEREST INCOME | ||||||||
| NONINTEREST EXPENSES | ||||||||
| Salaries and employee benefits | ||||||||
| Occupancy and equipment | ||||||||
| FDIC insurance and state and local taxes | ||||||||
| Professional fees | ||||||||
| Advertising | ||||||||
| Intangible amortization | ||||||||
| Core processing charges | ||||||||
| Other operating expenses | ||||||||
| TOTAL NONINTEREST EXPENSES | ||||||||
| INCOME BEFORE INCOME TAXES | ||||||||
| INCOME TAXES | ||||||||
| NET INCOME | $ | $ | ||||||
| EARNINGS PER SHARE - basic | $ | $ | ||||||
| EARNINGS PER SHARE - diluted | $ | $ | ||||||
See accompanying notes
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
FARMERS NATIONAL BANC CORP. AND SUBSIDIARIES
| (In Thousands of Dollars) | ||||||||
| For the Three Months Ended | ||||||||
| March 31, | March 31, | |||||||
| 2025 | 2024 | |||||||
| NET INCOME | $ | $ | ||||||
| Other comprehensive income (loss): | ||||||||
| Net unrealized holding gains (losses) on available for sale securities | ( | ) | ||||||
| Reclassification adjustment for losses realized in income on sales | ||||||||
| Reclassification adjustment for (gains) losses realized in income on fair value hedge | ( | ) | ||||||
| Net unrealized holding gains (losses) | ( | ) | ||||||
| Income tax effect | ( | ) | ||||||
| Unrealized holding gains (losses), net of reclassification and tax | ( | ) | ||||||
| Change in funded status of post-retirement plan, net of tax | ||||||||
| Other comprehensive income (loss), net of tax | ( | ) | ||||||
| TOTAL COMPREHENSIVE INCOME (LOSS) | $ | $ | ( | ) | ||||
See accompanying notes
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)
FARMERS NATIONAL BANC CORP. AND SUBSIDIARIES
(Table Dollar Amounts in Thousands except Per Share Data)
| Accumulated | ||||||||||||||||||||
| Other | ||||||||||||||||||||
| Common | Retained | Comprehensive | Treasury | |||||||||||||||||
| Stock | Earnings | Income (Loss) | Stock | Total | ||||||||||||||||
| Balance December 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||
| Net income | ||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||
| Restricted share issuance | ( | ) | ||||||||||||||||||
| Stock based compensation expense | ||||||||||||||||||||
| Vesting of Long Term Incentive Plan | ( | ) | ||||||||||||||||||
| Share forfeitures for taxes | ( | ) | ( | ) | ||||||||||||||||
| Dividends paid at $ per share | ( | ) | ( | ) | ||||||||||||||||
| Balance March 31, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||
| Accumulated | ||||||||||||||||||||
| Other | ||||||||||||||||||||
| Common | Retained | Comprehensive | Treasury | |||||||||||||||||
| Stock | Earnings | Income (Loss) | Stock | Total | ||||||||||||||||
| 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 $ per share | ( | ) | ( | ) | ||||||||||||||||
| Balance March 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||
See accompanying notes.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
FARMERS NATIONAL BANC CORP. AND SUBSIDIARIES
| (In Thousands of Dollars) | ||||||||
| Three Months Ended | ||||||||
| March 31, | March 31, | |||||||
| 2025 | 2024 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash from operating activities: | ||||||||
| Provision (credit) for credit losses | ( | ) | ||||||
| Credit for unfunded loans | ( | ) | ( | ) | ||||
| Depreciation and amortization | ||||||||
| Net amortization of securities | ||||||||
| Available for sale security losses | ||||||||
| Realized gains on equity securities | ( | ) | ( | ) | ||||
| Loss 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 for sale | ||||||||
| Proceeds from sales of securities available for sale | ||||||||
| Purchases of securities available for sale | ( | ) | ( | ) | ||||
| Proceeds from sales of equity securities | ||||||||
| Purchase of equity securities | ( | ) | ( | ) | ||||
| Proceeds from maturities and repayments of SBIC funds | ||||||||
| Purchases of SBIC funds | ( | ) | ( | ) | ||||
| Proceeds from redemption of regulatory stock | ||||||||
| Purchase 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 | ||||||||
| Purchase of company owned life insurance | ( | ) | ||||||
| Proceeds from land, building and equipment sales | ||||||||
| Additions to premises and equipment | ( | ) | ( | ) | ||||
| NET CASH FROM INVESTING ACTIVITIES | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Net change in deposits | ||||||||
| Net change in short-term borrowings | ( | ) | ( | ) | ||||
| Cash dividends paid | ( | ) | ( | ) | ||||
| Cash paid for withholding taxes on share-based awards | ( | ) | ( | ) | ||||
| NET CASH FROM 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 awards | $ | $ | ||||||
| Transfer of loans to loans held for sale | $ | $ | ||||||
| Lease liabilities arising from obtaining right-of-use assets | $ | $ | ||||||
See accompanying notes
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Principles of Consolidation:
Farmers National Banc Corp. (“Company” or “Farmers”) is a Financial Holding Company registered under the Bank Holding Company Act of 1956, as amended. The Company provides full banking services through its nationally chartered subsidiary, The Farmers National Bank of Canfield (“Bank”). The consolidated financial statements also include the accounts of the Bank’s subsidiaries; Farmers National Insurance, LLC (“Insurance”) and Farmers of Canfield Investment Co. (“Investments”). The Company provides trust and retirement consulting services through its subsidiary, Farmers Trust Company (“Trust”), and insurance services through the Bank’s subsidiary, Insurance. The consolidated financial statements include the accounts of the Company, the Bank and its subsidiaries, along with the Trust company. All significant intercompany balances and transactions have been eliminated in the consolidation.
Basis of Presentation:
The unaudited consolidated condensed financial statements have been prepared in conformity with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2024 Annual Report to Shareholders included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (“2024 Form 10-K”). The interim consolidated financial statements include all adjustments (consisting of only normal recurring items) that, in the opinion of management, are necessary for a fair presentation of the financial position and results of operations for the periods presented. The results of operations for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year. Certain items included in the prior period financial statements were reclassified to conform to the current period presentation. There was no effect on net income or total stockholders’ equity.
Estimates:
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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.
Segments:
The Company provides a broad range of financial services to individuals and companies in northeastern Ohio and western Pennsylvania. Operations are managed and financial performance is primarily aggregated and reported in lines of business, the Bank segment and the Trust segment.
Equity:
There are
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 components of stockholders’ equity, net of tax effect.
Updates to Significant Accounting Policies:
New Accounting Standard:
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.
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.
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 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The standard was adopted by the company and footnote16 - Segment information has been updated per the ASU.
Business Combinations:
On December 16, 2024, Farmers Trust acquired substantially all of the assets of Crest Retirement Advisors, LLC, for $
Securities:
The following table summarizes the amortized cost and fair value of the available-for-sale securities portfolio at March 31, 2025 and December 31, 2024, and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss).
| Gross | Gross | |||||||||||||||
| Amortized | Unrealized | Unrealized | ||||||||||||||
| (In Thousands of Dollars) | Cost | Gains | Losses | Fair Value | ||||||||||||
| March 31, 2025 | ||||||||||||||||
| U.S. Treasury and U.S. government sponsored entities | $ | $ | $ | ( | ) | $ | ||||||||||
| State and political subdivisions | ( | ) | ||||||||||||||
| Corporate bonds | ( | ) | ||||||||||||||
| Mortgage-backed securities | ( | ) | ||||||||||||||
| Collateralized mortgage obligations | ( | ) | ||||||||||||||
| Small Business Administration | ( | ) | ||||||||||||||
| Totals | $ | $ | $ | ( | ) | $ | ||||||||||
| Gross | Gross | |||||||||||||||
| Amortized | Unrealized | Unrealized | ||||||||||||||
| (In Thousands of Dollars) | Cost | Gains | Losses | Fair Value | ||||||||||||
| December 31, 2024 | ||||||||||||||||
| U.S. Treasury and U.S. government sponsored entities | $ | $ | $ | ( | ) | $ | ||||||||||
| 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 are as follows:
| Three Months Ended | ||||||||
| March 31, | ||||||||
| (In Thousands of Dollars) | 2025 | 2024 | ||||||
| Proceeds | $ | $ | ||||||
| Gross gains | ||||||||
| Gross losses | ( | ) | ( | ) | ||||
The amortized cost and fair value of the debt securities portfolio are shown in the table below by expected maturity. Expected maturities may differ from contractual maturities if issuers have the right to call or prepay obligations with or without call, or prepayment penalties. Securities not due at a single maturity date are shown separately.
| March 31, 2025 | ||||||||
| (In Thousands of Dollars) | Amortized Cost | Fair Value | ||||||
| Maturity | ||||||||
| Within one year | $ | $ | ||||||
| One to five years | ||||||||
| Five to ten years | ||||||||
| Beyond ten years | ||||||||
| Mortgage-backed, collateralized mortgage obligations and Small Business Administration securities | ||||||||
| Total | $ | $ | ||||||
The following table summarizes the investment securities with unrealized losses for which an allowance for credit losses has not been recorded at March 31, 2025 and December 31, 2024, aggregated by major security type and length of time in a continuous unrealized loss position.
| Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||
| Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
| (In Thousands of Dollars) | Value | Loss | Value | Loss | Value | Loss | ||||||||||||||||||
| March 31, 2025 | ||||||||||||||||||||||||
| 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 | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||
| Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||
| Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
| (In Thousands of Dollars) | Value | Loss | Value | Loss | Value | Loss | ||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||
| 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 March 31, 2025, the Company’s security portfolio consisted of
At December 31, 2024, the Company’s security portfolio consisted of
Equity Securities
The Company also holds equity securities which include $
Loans:
Loan balances were as follows:
| (In Thousands of Dollars) | March 31, 2025 | 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 | $ | $ | ||||||
| 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 the three month periods ended March 31, 2025 and 2024:
Three Months Ended March 31, 2025
| Commercial | Residential | |||||||||||||||||||
| (In Thousands of Dollars) | Real Estate | Commercial | Real Estate | Consumer | Total | |||||||||||||||
| Allowance for credit losses | ||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | |||||||||||||||
| (Credit) Provision for credit losses | ( | ) | ( | ) | ||||||||||||||||
| Loans charged off | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Recoveries | ||||||||||||||||||||
| Total ending allowance balance | $ | $ | $ | $ | $ | |||||||||||||||
Three Months Ended March 31, 2024
| Commercial | Residential | |||||||||||||||||||
| (In Thousands of Dollars) | Real Estate | Commercial | Real Estate | Consumer | Total | |||||||||||||||
| Allowance for credit losses | ||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | |||||||||||||||
| (Credit) 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 March 31, 2025. As of March 31, 2025, the Company expects that the markets in which it operates will experience minimal changes to economic conditions, stable trend in unemployment rate, 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 March 31, 2024 to March 31, 2025 is largely attributed to adjustments made to an increase in the specific reserve related to the individual evaluation of a commercial real estate non-owner occupied loan, loss ratio trends, and increased loan balances. These factors were partially offset by adjustments made to the Commercial Staffing qualitative factor and Portfolio Composition and Growth qualitative factor.
The following tables present the amortized cost basis of loans on nonaccrual status and loans past due over 89 days still accruing as of March 31, 2025 and December 31, 2024:
| Nonaccrual with | Nonaccrual with | Loans past due | ||||||||||
| no allowance | an allowance | over 89 days | ||||||||||
| (In Thousands of Dollars) | for credit loss | for credit loss | still accruing | |||||||||
| March 31, 2025 | ||||||||||||
| 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 | $ | $ | $ | |||||||||
| Nonaccrual with | Nonaccrual with | Loans past due | ||||||||||
| no allowance | an allowance | over 89 days | ||||||||||
| (In Thousands of Dollars) | for credit loss | for credit loss | 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 | $ | $ | $ | |||||||||
The above table for the period ending March 31, 2025 does not include $
The following tables present the amortized cost basis of collateral-dependent loans by class of loans as of March 31, 2025 and December 31, 2024:
| (In Thousands of Dollars) | Real Estate | Business Assets | Vehicles | Cash | ||||||||||||
| March 31, 2025 | ||||||||||||||||
| 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, 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 | $ | $ | $ | $ | ||||||||||||
The following tables present the aging of the amortized cost basis in past due loans as of March 31, 2025 and December 31, 2024 by class of loans.
| 90 Days | ||||||||||||||||||||||||
| or More | ||||||||||||||||||||||||
| 30-59 Days | 60-89 Days | Past Due | Total | Loans Not | ||||||||||||||||||||
| (In Thousands of Dollars) | Past Due | Past Due | and Nonaccrual | Past Due | Past Due | Total | ||||||||||||||||||
| March 31, 2025 | ||||||||||||||||||||||||
| 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 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| 90 Days | ||||||||||||||||||||||||
| or More | ||||||||||||||||||||||||
| 30-59 Days | 60-89 Days | Past Due | Total | Loans Not | ||||||||||||||||||||
| (In Thousands of Dollars) | Past Due | Past Due | and Nonaccrual | Past Due | Past Due | Total | ||||||||||||||||||
| 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 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Loan Restructurings
The Company evaluates all loan restructurings according to the accounting guidance for loan modifications to determine if the restructuring results in a new loan or a continuation of the existing loan. Loan modifications to borrowers experiencing financial difficulty that result in a direct change in the timing or amount of contractual cash flows include situations where there is principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions, and combinations of the listed modifications. Therefore, the disclosures related to loan restructurings are only for modifications that directly affect cash flows.
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.
The following table presents the amortized cost basis of loans that were both experiencing financial difficulty and modified during the three months ended March 31, 2025 and March 31, 2024, by class and type of modification. 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:
| Three Months Ended March 31, 2025 | Amortized Cost | |||||||||||||||||||||||
| Combination | % of Total | |||||||||||||||||||||||
| Term Extension | Class of | |||||||||||||||||||||||
| Payment | Term | Interest Rate | and Interest | Financing | ||||||||||||||||||||
| (In Thousands of Dollars) | Deferral | Extension | Reduction | Rate Reduction | Total | Receivable | ||||||||||||||||||
| Commercial | ||||||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | $ | $ | % | ||||||||||||||||||
| Residential real estate | ||||||||||||||||||||||||
| Home equity lines of credit | $ | % | ||||||||||||||||||||||
| Total modifications to borrowers experiencing financial difficulty | $ | $ | $ | $ | $ | % | ||||||||||||||||||
| Three Months Ended March 31, 2024 | Amortized Cost | |||||||||||||||||||||||
| Combination | % of Total | |||||||||||||||||||||||
| Term Extension | Class of | |||||||||||||||||||||||
| Payment | Principal | Interest Rate | and Interest | Financing | ||||||||||||||||||||
| (In Thousands of Dollars) | Deferral | Forgiveness | Reduction | Rate Reduction | Total | Receivable | ||||||||||||||||||
| Commercial real estate | ||||||||||||||||||||||||
| Non-owner occupied | $ | $ | $ | $ | $ | % | ||||||||||||||||||
| Residential real estate | ||||||||||||||||||||||||
| Home equity lines of credit | $ | % | ||||||||||||||||||||||
| Total modifications to borrowers experiencing financial difficulty | $ | $ | $ | $ | $ | % | ||||||||||||||||||
The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty during the three months ended March 31, 2025 and March 31, 2024:
| Payment Deferral | Term Extension | Interest Rate Reduction | ||||||||||||||
| Weighted-Average | Weighted-Average Years | Weighted-Average | ||||||||||||||
| Principal Deferred | Added to the Life | Contractual Interest Rate | ||||||||||||||
| Three Months Ended March 31, 2025 | From | To | ||||||||||||||
| Commercial | ||||||||||||||||
| Commercial and industrial | $ | |||||||||||||||
| Residential real estate | ||||||||||||||||
| Home equity lines of credit | ||||||||||||||||
| Payment Deferral | Principal Forgiveness | Interest Rate Reduction | ||||||||||||||
| Weighted-Average | Reduction of Amortized | Weighted-Average | ||||||||||||||
| Principal Deferred | Cost Basis of the Loans | Contractual Interest Rate | ||||||||||||||
| Three Months Ended March 31, 2024 | From | To | ||||||||||||||
| Commercial real estate | ||||||||||||||||
| Non-owner occupied | $ | $ | ||||||||||||||
| Residential real estate | ||||||||||||||||
| Home Equity Lines of Credit | % | % | ||||||||||||||
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. The following table presents the performance of such loans that have been modified in the three months ended March 31, 2025 and March 31, 2024:
| Three Months Ended March 31, 2025 | Payment status (Amortized cost Basis) | |||||||||||
| 30-89 | 90+ | |||||||||||
| (In Thousands of Dollars) | Current | Days past due | Days past due | |||||||||
| Accrual restructured loans | ||||||||||||
| Commercial | ||||||||||||
| Commercial and industrial | $ | $ | $ | |||||||||
| Residential real estate | ||||||||||||
| Home equity lines of credit | ||||||||||||
| Total accruing restructured loans | ||||||||||||
| Nonaccrual restructured loans | ||||||||||||
| Commercial | ||||||||||||
| Commercial and industrial | ||||||||||||
| Residential real estate | ||||||||||||
| Home equity lines of credit | ||||||||||||
| Total nonaccrual restructured loans | ||||||||||||
| Total restructured loans | $ | $ | $ | |||||||||
| Three Months Ended March 31, 2024 | Payment status (Amortized cost Basis) | |||||||||||
| 30-89 | 90+ | |||||||||||
| (In Thousands of Dollars) | Current | Days past due | Days past due | |||||||||
| Nonaccrual restructured loans | ||||||||||||
| Commercial real estate | ||||||||||||
| Non-owner occupied | $ | $ | $ | |||||||||
| Residential real estate | ||||||||||||
| Home equity lines of credit | ||||||||||||
| Total nonaccrual restructured loans | ||||||||||||
| Total restructured loans | $ | $ | $ | |||||||||
As of March 31, 2025, the Company had no commitments to lend any additional funds on restructured loans.
The following table presents the amortized cost basis of loans that had a payment default during the three months ended March 31, 2025 and March 31, 2024 , 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:
| Three Months Ended March 31, 2025 | Amortized Cost | |||||||||||||||
| Combination | ||||||||||||||||
| Term Extension | ||||||||||||||||
| Payment | Term | Interest Rate | and Interest Rate | |||||||||||||
| (In Thousands of Dollars) | Deferral | Extension | Reduction | Reduction | ||||||||||||
| Commercial | ||||||||||||||||
| Commercial and industrial | $ | $ | $ | |||||||||||||
| Residential real estate | ||||||||||||||||
| Home equity lines of credit | ||||||||||||||||
| Total modifications to borrowers experiencing financial difficulty | $ | $ | $ | $ | ||||||||||||
| Three Months Ended March 31, 2024 | Amortized Cost | |||||||||||||||
| Combination | ||||||||||||||||
| Term Extension | ||||||||||||||||
| Payment | Term | Interest Rate | and Interest Rate | |||||||||||||
| (In Thousands of Dollars) | Deferral | Extension | Reduction | 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 the 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. Substandard loans 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.
The Company considers the performance of the loan portfolio and its impact on the allowance for credit losses. For residential, consumer indirect and direct loan classes, the Company evaluates credit quality based on the aging status of the loan and by payment activity. Nonperforming loans are loans past due 90 days and still accruing interest and nonaccrual loans.
The following table presents total loans by risk categories and year of origination:
| Term Loans Amortized Cost Basis by Origination Year | ||||||||||||||||||||||||||||||||
| (In Thousands of Dollars) | Revolving | |||||||||||||||||||||||||||||||
| As of March 31, 2025 | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | 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 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| 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 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Term Loans Amortized Cost Basis by Origination Year (Continued) | ||||||||||||||||||||||||||||||||
| (In Thousands of Dollars) | Revolving | |||||||||||||||||||||||||||||||
| As of March 31, 2025 | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | 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 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Term Loans Amortized Cost Basis by Origination Year (Continued) | ||||||||||||||||||||||||||||||||
| (In Thousands of Dollars) | Revolving | |||||||||||||||||||||||||||||||
| As of March 31, 2025 | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | 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 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Term Loans Amortized Cost Basis by Origination Year | ||||||||||||||||||||||||||||||||
| (In Thousands of Dollars) | Revolving | |||||||||||||||||||||||||||||||
| As of December 31, 2024 | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | 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 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Term Loans Amortized Cost Basis by Origination Year (Continued) | ||||||||||||||||||||||||||||||||
| (In Thousands of Dollars) | Revolving | |||||||||||||||||||||||||||||||
| As of December 31, 2024 | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | 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 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Term Loans Amortized Cost Basis by Origination Year (Continued) | ||||||||||||||||||||||||||||||||
| (In Thousands of Dollars) | Revolving | |||||||||||||||||||||||||||||||
| As of December 31, 2024 | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | 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 previous table for the period ending March 31, 2025 does not include $
The Company follows ASU 2016-13 to calculate the allowance for credit losses which requires projecting 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 probability of default/loss given default (“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, loan restructuring for borrowers experiencing financial difficulty or is partially, or wholly, charged-off. Typically, a one-year time period is used to assess probability of default (“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 following table presents the loan pools and the associated methodology used during the calculation of the allowance for credit losses in 2025.
| Portfolio Segments | Loan Pool | Methodology | Loss Drivers | |||
| Residential real estate | 1-4 Family Residential Real Estate - 1st Liens | Cohort | Credit Loss History | |||
| 1-4 Family Residential Real Estate - 2nd Liens | Cohort | Credit Loss History | ||||
| Home Equity Lines of Credit | Home Equity Lines of Credit | Cohort | Credit Loss History | |||
| Consumer Finance | Cash Reserves | Cohort | Credit Loss History | |||
| Direct | Cohort | Credit Loss History | ||||
| Indirect | Cohort | Credit Loss History | ||||
| Commercial | Commercial and Industrial | PD/LGD | Credit Loss History | |||
| Agricultural | PD/LGD | Credit Loss History | ||||
| Municipal | PD/LGD | Credit Loss History | ||||
| Commercial real estate | Owner Occupied | PD/LGD | Credit Loss History | |||
| Non-Owner Occupied | PD/LGD | Credit Loss History | ||||
| Multifamily | PD/LGD | Credit Loss History | ||||
| Farmland | PD/LGD | Credit Loss History | ||||
| Construction | PD/LGD | Credit Loss History |
According to the accounting standard, 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 March 31, 2025, the Company had $
The determination of the 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 $
Purchased Loans
Under ASU Topic 326, when loans are purchased with evidence of more than significant deterioration of credit, they are accounted for as purchase credit deteriorated (“PCD”). PCD loans acquired in a transaction are marked to fair value and a mark on yield is recorded. In addition, an adjustment is made to the ACL for the expected loss on the acquisition date. These loans are assessed on a regular basis and subsequent adjustments to the ACL are recorded on the income statement. During 2025, the Company has not acquired any additional PCD loans. The outstanding balance at March 31, 2025 and related allowance on PCD loans is as follows:
| March 31, 2025 | December 31, 2024 | |||||||||||||||
| (In Thousands of Dollars) | 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 | $ | $ | $ | $ | ||||||||||||
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 three months ended March 31, 2025 and 2024.
| Trust | Bank | |||||||||||
| (In Thousands of Dollars) | Segment | Segment | Totals | |||||||||
| For Three Months Ended March 31, 2025 | ||||||||||||
| 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 | $ | $ | $ | |||||||||
| Trust | Bank | |||||||||||
| (In Thousands of Dollars) | Segment | Segment | Totals | |||||||||
| For Three Months Ended March 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 | $ | $ | $ | |||||||||
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 revenue standards.
Debit Card Interchange 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 no contingent debit card interchange fees recorded by the Company that could be subject to a clawback in future periods.
Trust fees – Services provided to 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 no contingent incentive fees recorded by the Company that could be subject to a clawback in future periods.
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 no contingent portion associated with these commission checks. There may be a short time-lag in recording revenue when cash is received instead of recording the revenue when the policy is signed by the customer, but the time lag is insignificant and does not impact the revenue recognition process.
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 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 in 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 no contingent portion that may need to be refunded back to the broker dealer.
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. Any amounts within the scope of ASC 606 are deemed immaterial.
Fair Value:
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 at the end of each quarter. 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 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 March 31, 2025, the Company determined that no securities had a fair value less than amortized cost that was as a result of credit deterioration as outlined in ASU 2016-13.
Loans Held For Sale, at Fair Value
The fair value of loans held for sale is estimated based upon binding contracts or 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 receive individual allocations of the allowance for credit losses in 2024 and 2025. 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.
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 March 31, 2025 Using: | ||||||||||||||||
| Quoted | ||||||||||||||||
| Prices in | Significant | |||||||||||||||
| Active Markets | Other | Significant | ||||||||||||||
| for Identical | Observable | Unobservable | ||||||||||||||
| Carrying | Assets | Inputs | Inputs | |||||||||||||
| (In Thousands of Dollars) | Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| 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-residential | ||||||||||||||||
| Collateralized mortgage obligations | ||||||||||||||||
| Small Business Administration | ||||||||||||||||
| Total investment securities | ||||||||||||||||
| Equity securities | ||||||||||||||||
| Loans held for sale | ||||||||||||||||
| Interest rate swaps | ||||||||||||||||
| Interest rate lock commitments | ||||||||||||||||
| Financial Liabilities | ||||||||||||||||
| Interest rate swaps | ||||||||||||||||
| Fair value hedge derivative | ||||||||||||||||
| Mortgage banking derivative | ||||||||||||||||
| Fair Value Measurements at December 31, 2024 Using: | ||||||||||||||||
| Quoted | ||||||||||||||||
| Prices in | Significant | |||||||||||||||
| Active Markets | Other | Significant | ||||||||||||||
| for Identical | Observable | Unobservable | ||||||||||||||
| Carrying | Assets | Inputs | Inputs | |||||||||||||
| (In Thousands of Dollars) | Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| 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-residential | ||||||||||||||||
| Collateralized mortgage obligations | ||||||||||||||||
| Small Business Administration | ||||||||||||||||
| Total investment securities | ||||||||||||||||
| Equity securities | ||||||||||||||||
| Loans held for sale | ||||||||||||||||
| Interest rate swaps | ||||||||||||||||
| Interest rate lock commitments | ||||||||||||||||
| Mortgage banking derivative | ||||||||||||||||
| Financial Liabilities | ||||||||||||||||
| Interest rate swaps | ||||||||||||||||
| Fair value hedge derivative | ||||||||||||||||
There were no significant transfers between Level 1 and Level 2 during the periods presented above.
The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
| Three Months ended | ||||||||
| March 31, | ||||||||
| (In Thousands of Dollars) | 2025 | 2024 | ||||||
| Beginning Balance | $ | $ | ||||||
| Transfers between levels | ||||||||
| Acquired and/or purchased | ||||||||
| Discount accretion (premium amortization) | ||||||||
| Repayments, calls and maturities | ||||||||
| Changes in unrealized gains (losses) | ( | ) | ( | ) | ||||
| Ending Balance | $ | $ | ||||||
Assets measured at fair value on a non-recurring basis are summarized below:
| Fair Value Measurements at March 31, 2025 Using: | ||||||||||||||||
| Quoted | ||||||||||||||||
| Prices in | Significant | |||||||||||||||
| Active Markets | Other | Significant | ||||||||||||||
| for Identical | Observable | Unobservable | ||||||||||||||
| Carrying | Assets | Inputs | Inputs | |||||||||||||
| (In Thousands of Dollars) | Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| Financial Assets | ||||||||||||||||
| Individually evaluated loans | ||||||||||||||||
| Commercial real estate | ||||||||||||||||
| Non-owner occupied | $ | $ | $ | $ | ||||||||||||
| Other | ||||||||||||||||
| Commercial and industrial | ||||||||||||||||
| 1–4 family residential | ||||||||||||||||
| Mortgage servicing rights | ||||||||||||||||
| Fair Value Measurements at December 31, 2024 Using: | ||||||||||||||||
| Quoted | ||||||||||||||||
| Prices in | Significant | |||||||||||||||
| Active Markets | Other | Significant | ||||||||||||||
| for Identical | Observable | Unobservable | ||||||||||||||
| Carrying | Assets | Inputs | Inputs | |||||||||||||
| (In Thousands of Dollars) | Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| Financial Assets | ||||||||||||||||
| Individually evaluated loans | ||||||||||||||||
| Commercial real estate | ||||||||||||||||
| Non-owner occupied | $ | $ | $ | $ | ||||||||||||
| Commercial and industrial | ||||||||||||||||
| 1–4 family residential | ||||||||||||||||
| Mortgage servicing rights | ||||||||||||||||
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 the periods ended March 31, 2025 and December 31, 2024:
| Range | ||||||||||
| Valuation | Unobservable | (Weighted | ||||||||
| March 31, 2025 | Fair value | Technique(s) | Input(s) | Average) | ||||||
| Individually evaluated loans | ||||||||||
| Commercial real estate | $ | Income Approach |
| |||||||
| Commercial | Quoted price for collateral | Offer Price | ||||||||
| Residential | Sales comparison |
| ||||||||
| Range | ||||||||||
| Valuation | Unobservable | (Weighted | ||||||||
| December 31, 2024 | Fair value | Technique(s) | Input(s) | Average) | ||||||
| Individually evaluated loans | ||||||||||
| Commercial real estate | $ | Income approach |
| |||||||
| Commercial | Quoted price for collateral | Offer Price | ||||||||
| Residential | Sales comparison |
| ||||||||
The carrying amounts and estimated fair values of financial instruments not previously disclosed at March 31, 2025 and December 31, 2024 are as follows:
| Fair Value Measurements at March 31, 2025 Using: | ||||||||||||||||||||
| Carrying | ||||||||||||||||||||
| (In Thousands of Dollars) | Amount | 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, 2024 Using: | ||||||||||||||||||||
| Carrying | ||||||||||||||||||||
| (In Thousands of Dollars) | Amount | 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 | ||||||||||||||||||||
Goodwill and Intangible Assets:
Goodwill associated with the Company’s past acquisitions totaled $
Acquired Intangible Assets
Acquired intangible assets were as follows:
| March 31, 2025 | December 31, 2024 | |||||||||||||||
| Gross Carrying | Accumulated | Gross Carrying | Accumulated | |||||||||||||
| (In Thousands of Dollars) | Amount | Amortization | Amount | Amortization | ||||||||||||
| Amortized intangible assets: | ||||||||||||||||
| Customer relationship intangibles | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Non-compete contracts | ( | ) | ( | ) | ||||||||||||
| Trade name | ( | ) | ( | ) | ||||||||||||
| Core deposit intangible | ( | ) | ( | ) | ||||||||||||
| Total | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
Aggregate amortization expense was $
Estimated amortization expense for each of the next five periods and thereafter:
| 2025 (9 months) | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total | $ |
Leases:
The Company has operating leases for branch office locations, vehicles, land and certain office equipment such as printers and copiers. The leases have remaining lease terms of up to
The right of use assets and lease liabilities were $
Lease expense for the three month periods ended March 31, 2025 and 2024, was $
Maturities of lease liabilities are as follows as of March 31, 2025:
| 2025 (9 months) | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total Payments | ||||
| Less: lease liability expense | ( | ) | ||
| Total | $ |
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 value of $
There were
Interest Rate Swap Designated as a Fair Value Hedge
The Company has interest rate swap with a notional amount of $
| (In Thousands of Dollars) | March 31, 2025 | December 31, 2024 | ||||||
| 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 locks are committed 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 quarters ended March 31, 2025 and March 31, 2024:
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| 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 of March 31, 2025 and December 31, 2024:
| March 31, 2025 | December 31, 2024 | |||||||||||||||
| Notional | Fair | Notional | Fair | |||||||||||||
| (In Thousands of Dollars) | Amount | Value | Amount | Value | ||||||||||||
| Included in other assets: | ||||||||||||||||
| Forward sales contracts | $ | $ | $ | $ | ||||||||||||
| Interest rate lock commitments | ||||||||||||||||
| Mortgage banking derivative | ||||||||||||||||
| Total included in other assets | $ | $ | $ | $ | ||||||||||||
| Included in other liabilities: | ||||||||||||||||
| Forward sales contracts | $ | $ | $ | $ | ||||||||||||
Earnings Per Share:
The computation of basic and diluted earnings per share is shown in the following table:
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| Basic EPS | ||||||||
| Net income (In thousands of dollars) | $ | $ | ||||||
| Weighted average shares outstanding | ||||||||
| Basic earnings per share | $ | $ | ||||||
| Diluted EPS | ||||||||
| Net income (In thousands of dollars) | $ | $ | ||||||
| Weighted average shares outstanding for basic earnings per share | ||||||||
| Dilutive effect of restricted stock awards | ||||||||
| Weighted average shares for diluted earnings per share | ||||||||
| Diluted earnings per share | $ | $ | ||||||
There were
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 shares to the Company’s directors and employees to attract and retain exceptional personnel, motivate performance and, most importantly, to help align the interests of the Company’s executives with those of the Company’s shareholders. The 2022 Plan replaced the 2017 Plan. There were
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 Plans during the three month period ended March 31, 2025.
| Maximum | Weighted | Maximum | Weighted | |||||||||||||
| Awarded | Average | Awarded | Average | |||||||||||||
| Service | Grant Date | Performance | Grant Date | |||||||||||||
| Units | Fair Value | Units | Fair Value | |||||||||||||
| Beginning balance - non-vested shares | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Vested | ( | ) | ( | ) | ||||||||||||
| Forfeited | ||||||||||||||||
| Ending balance - non-vested shares | $ | $ | ||||||||||||||
The following is the activity under the Plans during the three month period ended March 31, 2024.
| Maximum | Weighted | Maximum | Weighted | |||||||||||||
| Awarded | Average | Awarded | Average | |||||||||||||
| Service | Grant Date | Performance | Grant Date | |||||||||||||
| Units | Fair Value | Units | Fair Value | |||||||||||||
| Beginning balance - non-vested shares | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Vested | ( | ) | ( | ) | ||||||||||||
| Forfeited | ( | ) | ( | ) | ||||||||||||
| Ending balance - non-vested shares | $ | $ | ||||||||||||||
The
Other Comprehensive Income (Loss):
The following tables represent the changes in accumulated other comprehensive income (loss) by component, net of tax, for the three month periods ended March 31, 2025 and 2024.
| Reclassification | ||||||||||||||||
| Net unrealized | adjustment for | |||||||||||||||
| holding (losses) | (gains) losses | |||||||||||||||
| gains on available | realized in income | Change in funded status | ||||||||||||||
| (In Thousands of Dollars) | for sale securities | on fair value hedge | of post-retirement plan | Total | ||||||||||||
| Balance December 31, 2024 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive (loss) before reclassification | ||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income | ( | ) | ||||||||||||||
| Net current period other comprehensive (loss) income | ( | ) | ||||||||||||||
| Balance March 31, 2025 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Balance December 31, 2023 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive income before reclassification | ( | ) | ( | ) | ||||||||||||
| Amounts reclassified from accumulated other comprehensive (loss) | ||||||||||||||||
| Net current period other comprehensive income | ( | ) | ( | ) | ||||||||||||
| Balance March 31, 2024 | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
Amounts reclassified out of each component of accumulated other comprehensive income (loss) were not material for the three month periods ended March 31, 2025 and 2024.
Regulatory Capital 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. Management believes that as of March 31, 2025, 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 March 31, 2025 and December 31, 2024, 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.
Actual and required capital amounts and ratios, which do not include the capital conservation buffer, are presented below at March 31, 2025 and December 31, 2024:
| To be Well Capitalized | ||||||||||||||||||||||||
| Requirement For Capital | Under Prompt Corrective | |||||||||||||||||||||||
| Actual | Adequacy Purposes: | Action Provisions: | ||||||||||||||||||||||
| Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
| March 31, 2025 | ||||||||||||||||||||||||
| Common equity tier 1 capital ratio | ||||||||||||||||||||||||
| Consolidated | $ | % | $ | % | N/A | N/A | ||||||||||||||||||
| Bank | % | % | % | |||||||||||||||||||||
| Total risk based capital ratio | ||||||||||||||||||||||||
| Consolidated | % | % | N/A | N/A | ||||||||||||||||||||
| Bank | % | % | % | |||||||||||||||||||||
| Tier 1 risk based capital ratio | ||||||||||||||||||||||||
| Consolidated | % | % | N/A | N/A | ||||||||||||||||||||
| Bank | % | % | % | |||||||||||||||||||||
| Tier 1 leverage ratio | ||||||||||||||||||||||||
| Consolidated | % | % | N/A | N/A | ||||||||||||||||||||
| Bank | % | % | % | |||||||||||||||||||||
| December 31, 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 1 risk based capital ratio | ||||||||||||||||||||||||
| Consolidated | % | % | N/A | N/A | ||||||||||||||||||||
| Bank | % | % | % | |||||||||||||||||||||
| Tier 1 leverage ratio | ||||||||||||||||||||||||
| Consolidated | % | % | N/A | N/A | ||||||||||||||||||||
| Bank | % | % | % | |||||||||||||||||||||
Segment Information:
The Company's reportable segments are determined by the Chief Financial Officer, 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. The chief operating decision maker uses revenue streams to evaluate product pricing and significant expenses to assess performance of each segment to evaluate compensation of certain employees. Segment pretax profit is used to assess the performance of the banking segment by monitoring the net interest margin and non-interest expenses. Segment pretax profit is also used to assess the performance of the trust segment by monitoring trust service fees, retirement plan consulting fees and non-interest expenses. Loans and investments provide the significant revenues in the banking operation, while trust service fees and retirement plan consulting fees provide the significant revenues in trust operations. Interest expense, provisions for credit losses and payroll provide the significant expenses in the banking operation, while payroll provides the significant expense in the trust segment. All operations are domestic.
Accounting policies for segments are the same as those described in the Financial Statement Notes. 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:
| Trust | Bank | Consolidated | ||||||||||
| (In Thousands of Dollars) | Segment | Segment | Segment totals | |||||||||
| March 31, 2025 | ||||||||||||
| Total assets for reportable segments | $ | $ | $ | |||||||||
| Eliminations and other | ( | ) | ||||||||||
| Total consolidated assets | $ | |||||||||||
| Trust | Bank | Consolidated | ||||||||||
| (In Thousands of Dollars) | Segment | Segment | Segment totals | |||||||||
| December 31, 2024 | ||||||||||||
| Total assets for reportable segments | $ | $ | $ | |||||||||
| Eliminations and other | ( | ) | ||||||||||
| Total consolidated assets | $ | |||||||||||
| Trust | Bank | Consolidated | ||||||||||
| (In Thousands of Dollars) | Segment | Segment | Segment totals | |||||||||
| For Three Months Ended March 31, 2025 | ||||||||||||
| 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 | ||||||||||||
| Credir 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 | ||||||||||||
| Trust | Bank | Consolidated | ||||||||||
| (In Thousands of Dollars) | Segment | Segment | Segment totals | |||||||||
| For Three Months Ended March 31, 2024 | ||||||||||||
| 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 | ||||||||||||
* The Bank segment includes Farmers National Insurance and Farmers of Canfield Investment Co.
Short-term borrowings:
The Bank had short-term advances from the Federal Home Loan Bank ("FHLB") of $
The Bank has access to a line of credit for $
Farmers has one unsecured revolving line of credit for $
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 $
In August 2024, the Company bought back and retired $
On November 1, 2021, the Company completed its acquisition of Cortland, which included the assumption of Floating Rate Junior Subordinated Debt Securities due in September 15, 2037 (the “junior subordinated debt securities”) at an acquisition-date fair value of $
On January 7, 2020, the Company completed its acquisition of Maple Leaf, which included the assumption of Floating Rate Junior Subordinated Debt Securities due December 15, 2036 (the “junior subordinated debt securities”) held in a wholly-owned statutory trust whose common securities were wholly-owned by Maple Leaf. The sole assets of the statutory trust are the junior subordinated debt securities and related payments. The junior subordinated debt securities and the back-up obligations, in the aggregate, constitute a full and unconditional guarantee of the obligations of the statutory trust under the capital securities held by third-party investors. The securities bear interest at a rate of
In 2015, the Company completed its acquisition of National Bancshares Corporation, which included the assumption of Floating Rate Junior Subordinated Debt Securities due June 15, 2035 (the “junior subordinated debt securities”) held in a wholly-owned statutory trust, TSEO Statutory Trust I. The sole assets of the statutory trust are the junior subordinated debt securities and related payments. The junior subordinated debt securities and the back-up obligations, in the aggregate, constitute a full and unconditional guarantee of the obligations of the statutory trust under the capital securities held by third-party investors. The securities bear interest at a rate of
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. Balances were as follows at March 31, 2025 and December 31, 2024:
| (In Thousands of Dollars) | March 31, 2025 | December 31, 2024 | ||||||
| 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 | $ | $ |
Tax Credit Investments:
The Company invests in qualified affordable housing projects, as well as solar investment tax credits.
At March 31, 2025 and December 31, 2024, the balance of the investment for qualified affordable housing projects was $
In the first quarters ended March 31, 2025 and March 31, 2024, the Company recognized amortization expense of $
Additionally, during the first quarters ended March 31, 2025 and March 31, 2024, the Company recognized tax credits and other benefits from its investment in affordable housing tax credits of $
In the first quarter of 2025, the Company began investing in solar investment tax credits and at March 31, 2025 the balance of the investment was $
The Company has recognized any amortization expense or tax credits from its investment in solar investment tax credits in the first quarter ended March 31, 2025.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Note Regarding Forward Looking Statements
This Quarterly Report on Form 10-Q 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 the Company’s 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 the Company’s filings with the Securities and Exchange Commission (the “Commission”), including without limitation, the risk factors disclosed in Item 1A, “Risk Factors,” in the Company’s 2024 Form 10-K, as updated in Item 1A, “Risk Factors,” in this Quarterly Report on Form 10-Q.
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:
| • | general economic conditions in markets where the Company conducts business, which could materially impact credit quality trends; |
| • | the length and extent of the economic impacts of the ongoing conflict in Ukraine; |
| • | the length and extent of U.S. and foreign country tariff policies and their impact on global, national, and regional economic conditions. | |
| • | actions by the Federal Reserve Board, U.S. Treasury and other government agencies, including those that impact money supply, market interest rates and inflation; |
| • | disruptions in the mortgage and lending markets and significant or unexpected fluctuations in interest rates related to governmental responses to inflation, including financial stimulus packages and interest rate changes; |
| • | general business conditions in the banking industry; |
| • | the regulatory environment; |
| • | general fluctuations in interest rates; |
| • | demand for loans in the market areas where the Company conducts business; |
| • | rapidly changing technology and evolving banking industry standards; |
| • | competitive factors, including increased competition with regional and national financial institutions; |
| • | Farmers' ability to attract, recruit and retain skilled employees; and |
| • | new service and product offerings by competitors and price pressures. |
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, except as may be required by applicable law.
Results of Operations. The following is a comparison of selected financial ratios and other results at or for the three month periods ended March 31, 2025 and 2024:
| At or for the Three Months Ended |
||||||||
| March 31, |
||||||||
| (In Thousands, except Per Share Data) |
2025 |
2024 |
||||||
| Total assets |
$ | 5,157,040 | $ | 5,080,010 | ||||
| Net income |
$ | 13,578 | $ | 11,240 | ||||
| Diluted earnings per share |
$ | 0.36 | $ | 0.30 | ||||
| Return on average assets (annualized) |
1.06 | % | 0.90 | % | ||||
| Return on average equity (annualized) |
13.12 | % | 11.47 | % | ||||
| Dividends to net income |
47.10 | % | 56.65 | % | ||||
| Net loans to assets |
62.36 | % | 61.97 | % | ||||
| Loans to deposits |
72.55 | % | 75.78 | % | ||||
Net Income. The Company reported net income of $13.6 million, or $0.36 per diluted share, for the quarter ended March 31, 2025 compared to $11.2 million, or $0.30 per diluted share, for the quarter ended March 31, 2024. The results for the first quarter of 2025 were impacted by pretax losses on the sale of investment securities and other assets totaling $1.3 million.
Net Interest Income. The following schedule details the various components of net interest income for the periods indicated. All asset yields are calculated on a tax-equivalent basis where applicable. Security yields are based on amortized cost.
Average Balance Sheets and Related Yields and Rates
(Dollar Amounts in Thousands)
| Three Months Ended |
Three Months Ended |
|||||||||||||||||||||||
| March 31, 2025 |
March 31, 2024 |
|||||||||||||||||||||||
| AVERAGE |
AVERAGE |
|||||||||||||||||||||||
| BALANCE |
INTEREST |
RATE (1) |
BALANCE |
INTEREST |
RATE (1) |
|||||||||||||||||||
| EARNING ASSETS |
||||||||||||||||||||||||
| Loans (2) |
$ | 3,261,908 | $ | 46,810 | 5.74 | % | $ | 3,181,337 | $ | 45,096 | 5.67 | % | ||||||||||||
| Taxable securities |
1,135,580 | 7,096 | 2.50 | % | 1,101,347 | 6,415 | 2.33 | % | ||||||||||||||||
| Tax-exempt securities (2) |
377,078 | 2,990 | 3.17 | % | 408,075 | 3,208 | 3.14 | % | ||||||||||||||||
| Other investments |
44,170 | 541 | 4.90 | % | 34,406 | 362 | 4.21 | % | ||||||||||||||||
| Federal funds sold and other |
73,575 | 510 | 2.77 | % | 71,757 | 626 | 3.49 | % | ||||||||||||||||
| TOTAL EARNING ASSETS |
4,892,311 | 57,947 | 4.74 | % | 4,796,922 | 55,707 | 4.65 | % | ||||||||||||||||
| Nonearning assets |
226,456 | 227,044 | ||||||||||||||||||||||
| TOTAL ASSETS |
$ | 5,118,767 | $ | 5,023,966 | ||||||||||||||||||||
| INTEREST-BEARING LIABILITIES |
||||||||||||||||||||||||
| Time deposits |
$ | 733,406 | $ | 6,632 | 3.62 | % | $ | 736,932 | $ | 7,048 | 3.83 | % | ||||||||||||
| Brokered time deposits |
143,393 | 1,538 | 4.29 | % | 0 | 0 | 0.00 | % | ||||||||||||||||
| Savings deposits |
1,115,259 | 4,012 | 1.44 | % | 1,084,579 | 3,598 | 1.33 | % | ||||||||||||||||
| Demand deposits - interest bearing |
1,377,522 | 7,535 | 2.19 | % | 1,345,311 | 7,743 | 2.30 | % | ||||||||||||||||
| Total interest-bearing deposits |
3,369,580 | 19,717 | 2.34 | % | 3,166,822 | 18,389 | 2.32 | % | ||||||||||||||||
| Short term borrowings |
218,444 | 2,417 | 4.43 | % | 324,791 | 3,939 | 4.85 | % | ||||||||||||||||
| Long term borrowings |
86,209 | 976 | 4.53 | % | 88,721 | 1,038 | 4.68 | % | ||||||||||||||||
| Total borrowed funds |
304,653 | 3,393 | 4.45 | % | 413,512 | 4,977 | 4.81 | % | ||||||||||||||||
| TOTAL INTEREST-BEARING LIABILITIES |
3,674,233 | 23,110 | 2.52 | % | 3,580,334 | 23,366 | 2.61 | % | ||||||||||||||||
| NONINTEREST-BEARING LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||||||||||||||||||
| Demand deposits - noninterest bearing |
977,619 | 995,168 | ||||||||||||||||||||||
| Other liabilities |
52,894 | 52,915 | ||||||||||||||||||||||
| Stockholders' equity |
414,021 | 395,549 | ||||||||||||||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ | 5,118,767 | $ | 5,023,966 | ||||||||||||||||||||
| Net interest income and interest rate spread |
$ | 34,837 | 2.22 | % | $ | 32,341 | 2.04 | % | ||||||||||||||||
| Net interest margin |
2.85 | % | 2.70 | % | ||||||||||||||||||||
| (1) |
Rates are calculated on an annualized basis. |
| (2) |
Interest on certain tax-exempt loans and tax-exempt securities in 2025 and 2024 is not taxable for Federal income tax purposes. In order to compare the tax-exempt yields on these assets to taxable yields, the interest earned on these assets is adjusted to a pre-tax equivalent amount based on the marginal corporate federal income tax rate of 21% |
Net Interest Income. Net interest income for the three months ended March 31, 2025, was $34.2 million compared to $31.7 million for the three months ended March 31, 2024. A 15 basis point increase in the net interest margin was the primary reason for this increase.
The net interest margin for the three month period ended March 31, 2025, was 2.85% compared to 2.70% for the same period in 2024. Interest-earning asset yields increased 9 basis points in the first quarter of 2025 compared to the first quarter of 2024 while the cost of interest-bearing liabilities decreased 9 basis points when comparing these two periods. This decrease in funding costs has been due to the reduction in the Fed Funds rate in the fourth quarter of 2024. Deposit costs have declined as a result of this action.
Provision for Credit Losses and Provision for Unfunded Loans. The provision for credit losses and unfunded commitments was a benefit of $204 thousand for the three months ended March 31, 2025, compared to a benefit of $449 thousand for the three months ended March 31, 2024. The benefit is primarily related to lower loan balances in 2025 and changes in loss factors.
Noninterest Income. Noninterest income for the first quarter of 2025 was of $10.5 million compared to $8.4 million for the first quarter of 2024. This increase was due to improved profitability across all fee based lines of business and a lower level of losses on the sale of available for sale securities.
Service charges on deposit accounts increased $175 thousand to $1.8 million for the first quarter of 2025 compared to $1.6 million for the first quarter in 2024. The Company undertook a review of all service charges in late 2023 and early 2024 and implemented fee increases across deposit product lines in the second quarter of 2024. Bank owned life insurance income increased $103 thousand during the first quarter of 2025 to $810 thousand compared to $707 thousand in the first quarter of 2024. The Company purchased an additional $15.0 million in policies during the first quarter of 2025 and policy crediting rates have increased over the last twelve months. Trust fees increased to $2.6 million at March 31, 2025, from $2.5 million at March 31, 2024. The increase was due to continued growth in the business unit. Insurance agency commissions grew to $1.7 million in the first quarter of 2025 from $1.5 million in the first quarter of 2024. The increase has been driven by growth in fixed annuity sales. Losses on the sale of securities totaled $1.3 million in the first quarter of 2025 compared to losses on the sale of securities of $2.1 million during the first quarter of 2024. The bank restructured $23.9 million at the end of the first quarter of 2025 resulting in the loss realized on the sale. Retirement plan consulting fees increased to $798 thousand in the first quarter of 2025 from $617 thousand in the first quarter of 2024 primarily due to the acquisition of Crest Retirement Advisors LLC in late December of 2024. Net gains on the sale of loans increased to $326 thousand in the first quarter of 2025 compared to $297 thousand in the first quarter of 2024. Greater saleable volume drove this increase. Other mortgage banking fee income was $147 thousand for the first quarter of 2025 compared to income of $125 thousand during the first quarter of 2024. Debit card income grew to $1.9 million in the first quarter of 2025 from $1.6 million in the first quarter of 2024 as better volumes were realized in the current period. Other noninterest income increased from $1.1 million in the first quarter of 2024 to $1.2 million in the first quarter of 2025.
Noninterest Expense. Noninterest expense totaled $28.5 million for the quarter ended March 31, 2025 compared to $27.0 million for the quarter ended March 31, 2024. Salaries and employee benefits were $16.2 million in the first quarter of 2025 compared to $15.1 million in the first quarter of 2024. The increase was primarily driven by higher salaries associated with employee raises, the acquisition of Crest Retirement in the fourth quarter of 2024 and higher commission expense from increased revenue in the fee-based businesses. Occupancy and equipment expense increased to $4.1 million in the first quarter of 2025 from $3.7 million in the first quarter of 2024 due to increased maintenance costs in 2025, the result of more severe winter weather. Core processing expense increased $262 thousand from the first quarter of 2024 to $1.4 million in the first quarter of 2025. All other noninterest expenses decreased $200 thousand as the Company continues to implement various cost saving initiatives.
Income Taxes. Income tax expense was $2.8 million for the three months ended March 31, 2025 compared to $2.2 million for the three months ended March 31, 2024. The increase in tax expense was primarily due to higher income before income taxes in 2025.
Financial Condition
Cash and Cash Equivalents. Cash and cash equivalents increased $27.5 million during the first three months of 2025 to $113.3 million from $85.7 million at December 31, 2024. The increase in the cash balances was primarily due to the Company intentionally holding more liquidity on its balance sheet at March 31, 2025.
Securities. The Company had securities available for sale totaling $1.28 billion as of March 31, 2025, compared to $1.27 billion at December 31, 2024. Net unrealized losses on the portfolio totaled $223.7 million at March 31, 2025, compared to $244.1 million at December 31, 2024. The Company also restructured $23.9 million of available for sale securities and reinvested the proceeds into securities with yields approximately 260 basis points higher than those sold. The earn back on the $1.3 million loss that was incurred on the sale is approximately 2.2 years. The Company anticipates continued volatility in the bond market in 2025.
Loans. Net loans (excluding loans held for sale) decreased to $3.25 billion at March 31, 2025 from $3.27 billion at December 31, 2024. The decrease in 2025 is primarily due to reductions in commercial and construction loans.
The following tables present the amortized cost basis of the Company's commercial real estate portfolio segment by industry as of March 31, 2025 and December 31, 2024:
| % of Commercial |
Weighted Average |
Weighted Average |
||||||||||||||||||
| (In Thousands of Dollars) |
Amortized Cost |
Real Estate |
% of Total Portfolio |
Loan-to-Value |
Occupancy |
|||||||||||||||
| March 31, 2025 |
||||||||||||||||||||
| Commercial real estate |
||||||||||||||||||||
| Retail |
$ | 344,890 | 21.78 | % | 10.61 | % | 53.49 | % | 85.08 | % | ||||||||||
| Farmland |
214,028 | 13.51 | % | 6.58 | % | 49.07 | % | 100.00 | % | |||||||||||
| Warehouse/Industrial |
179,382 | 11.33 | % | 5.52 | % | 54.24 | % | 88.73 | % | |||||||||||
| Office |
198,101 | 12.51 | % | 6.09 | % | 52.38 | % | 74.51 | % | |||||||||||
| Multifamily |
157,504 | 9.95 | % | 4.84 | % | 59.77 | % | 85.74 | % | |||||||||||
| Medical |
141,839 | 8.96 | % | 4.36 | % | 44.65 | % | 92.59 | % | |||||||||||
| Hotel |
42,945 | 2.71 | % | 1.32 | % | 45.08 | % | 79.69 | % | |||||||||||
| Special Purpose |
81,924 | 5.17 | % | 2.52 | % | 51.21 | % | 98.85 | % | |||||||||||
| Restaurant |
50,015 | 3.16 | % | 1.54 | % | 50.19 | % | 100.00 | % | |||||||||||
| Multifamily - Construction |
79,431 | 5.02 | % | 2.44 | % | 49.58 | % | 29.96 | % | |||||||||||
| All Other |
93,614 | 5.90 | % | 2.88 | % | 48.25 | % | 95.00 | % | |||||||||||
| Total |
$ | 1,583,673 | 100.00 | % | 48.70 | % | ||||||||||||||
| % of Commercial |
Weighted Average |
Weighted Average |
||||||||||||||||||
| (In Thousands of Dollars) |
Amortized Cost |
Real Estate |
% of Total Portfolio |
Loan-to-Value |
Occupancy |
|||||||||||||||
| 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 | 6.15 | % | 2.99 | % | 48.05 | % | 94.97 | % | |||||||||||
| Total |
$ | 1,588,174 | 100.00 | % | 48.07 | % | ||||||||||||||
Allowance for Credit Losses. The following table indicates key asset quality ratios that management evaluates on an ongoing basis. The recorded investment balances were used in the calculations.
Asset Quality History
(In Thousands of Dollars)
| 3/31/2025 |
12/31/2024 |
9/30/2024 |
6/30/2024 |
3/31/2024 |
||||||||||||||||
| Nonperforming loans |
$ | 20,724 | $ | 22,818 | $ | 19,076 | $ | 12,870 | $ | 11,951 | ||||||||||
| Nonperforming loans as a % of total loans |
0.64 | % | 0.70 | % | 0.58 | % | 0.40 | % | 0.38 | % | ||||||||||
| Non-performing assets |
$ | 20,902 | $ | 22,093 | $ | 19,137 | $ | 12,975 | $ | 12,215 | ||||||||||
| Non-performing assets as a % of total assets |
0.41 | % | 0.45 | % | 0.37 | % | 0.25 | % | 0.24 | % | ||||||||||
| Loans delinquent 30-89 days |
$ | 11,192 | $ | 13,032 | $ | 15,562 | $ | 18,546 | $ | 14,069 | ||||||||||
| Loans delinquent 30-89 days as a % of total loans |
0.34 | % | 0.40 | % | 0.47 | % | 0.57 | % | 0.44 | % | ||||||||||
| Allowance for credit losses |
$ | 35,549 | $ | 35,863 | $ | 36,186 | $ | 33,991 | $ | 33,159 | ||||||||||
| Allowance for credit losses as a % of total loans |
1.09 | % | 1.10 | % | 1.10 | % | 1.05 | % | 1.04 | % | ||||||||||
| Allowance for credit losses as a % of nonperforming loans |
171.54 | % | 157.17 | % | 189.69 | % | 264.11 | % | 277.46 | % | ||||||||||
| Net charge-offs for the quarter |
$ | 336 | $ | 635 | $ | 4,612 | $ | 563 | $ | 1,011 | ||||||||||
| Annualized net charge-offs to average net loans outstanding |
0.04 | % | 0.08 | % | 0.58 | % | 0.07 | % | 0.13 | % | ||||||||||
The Company's allowance for credit losses decreased to $35.5 million for the period ended March 31, 2025, from $35.9 million for the period ended December 31, 2024. This decline was primarily driven by a reduction in loan growth. 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.
Based on the evaluation of the adequacy of the allowance for credit losses, management believes that the allowance for credit losses at March 31, 2025 is adequate. 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 estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Specific factors considered by management in determining the amounts charged to operating expenses include previous credit loss 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.
Deposits. Total deposits increased to $4.48 billion at March 31, 2025 from $4.27 billion at December 31, 2024. This increase was primarily due to growth in interest-bearing deposits from seasonality of public funds and customers seeking higher yields on their deposit balances. In addition, the Company acquired $85.0 million of brokered time deposits which it used to pay down short-term borrowings.
Short-term Borrowings. Total short-term borrowing balances decreased from $305.0 million at December 31, 2024 to $102.0 million at March 31, 2025. This decrease was due to the Company using the proceeds from deposits to pay down short-term borrowings.
Total Stockholders' Equity. Total stockholders’ equity increased to $429.1 million at March 31, 2025 from $406.0 million at December 31, 2024. The increase was primarily due to a $16.0 million decrease in the accumulated other comprehensive loss coupled with growth in retained earnings of $7.2 million due to $13.6 million of net income recognized during the quarter partially offset by dividends paid on outstanding common shares.
The capital management function is a regular process that consists of providing capital for both the current financial position and the anticipated future growth of the Company. At March 31, 2025, the Company is required to maintain 4.5% common equity tier 1 to risk weighted assets excluding the conservation buffer to be adequately capitalized. The Company’s common equity tier 1 to risk weighted assets was 11.44%, total risk-based capital ratio stood at 14.87%, and the Tier 1 risk-based capital ratio and Tier 1 leverage ratio were at 11.92% and 8.52%, respectively, at March 31, 2025. Management believes that the Company and the Bank meet all capital adequacy requirements to which they are subject, as of March 31, 2025.
Federal bank regulatory agencies finalized a rule that simplifies capital requirements for community banks by allowing them to adopt a simple leverage ratio to measure capital adequacy. The community bank leverage ratio framework removes requirements for calculating and reporting risk-based capital ratios for a qualifying community bank that opts into the framework. The Company has not elected to adopt this framework.
Critical Accounting Policies
The Company follows financial accounting and reporting policies that are in accordance with U.S. GAAP. These policies are presented in Note 1 of the consolidated audited financial statements in the Company’s Annual Report to Shareholders included in the Company’s 2024 Form 10-K. 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 two accounting policies that are critical accounting policies and an understanding of these policies is necessary to understand the Company’s financial statements. These policies relate to determining the adequacy of the allowance for credit losses and if there is any impairment of goodwill or other intangible. Additional information regarding these policies is included in the notes to the aforementioned 2024 consolidated financial statements, Note 1 (Summary of Significant Accounting Policies), Note 4 (Loans), and the sections captioned “Loan Portfolio.”
Farmers maintains an allowance for credit losses. The allowance for credit losses is presented as a reserve against loans on the balance sheets. 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 (“MEV”) that are relevant for exposures across the Company.
| • | U.S. changes in real gross domestic product (GDP). |
| • | U.S. personal consumption expenditures (PCE) inflation. |
| • | U.S. civilian unemployment rate. |
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 1.70% from 4Q2024 to 4Q2025, U.S. PCE inflation of 2.70%, and U.S. unemployment of 4.40%, 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:
| • | The impacts of changes in the MEVs are both interrelated and nonlinear, so the results of this analysis cannot be simply extrapolated for more severe changes in macroeconomic variables. |
| • | Expectations of future changes in portfolio composition and borrower behavior can significantly affect the allowance for credit losses. |
To demonstrate the sensitivity of credit loss estimates to macroeconomic forecasts as of March 31, 2025, 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:
| • | An increase of approximately $657 thousand for residential real estate loans and lending-related commitments |
| • | An increase of approximately $1.15 million for commercial real estate non-owner occupied loans and lending-related commitments |
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 March 31, 2025.
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 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 March 31, 2025, on a consolidated basis, Farmers had intangibles of $20.0 million subject to amortization and $167.4 million in goodwill, which was not subject to periodic amortization.
Liquidity
The Company maintains, in the opinion of management, liquidity sufficient to satisfy depositors’ requirements and meet the credit needs of customers. The Company depends on its ability to maintain its market share of deposits as well as acquiring new funds. The Company’s ability to attract deposits and borrow funds depends in large measure on its profitability, capitalization and overall financial condition. The Company’s objective in liquidity management is to maintain the ability to meet loan commitments, purchase securities or to repay deposits and other liabilities in accordance with their terms without an adverse impact on current or future earnings. Principal sources of liquidity for the Company include assets considered relatively liquid, such as federal funds sold, cash-due from banks, as well as cash flows from maturities and repayments of loans, and to a lesser extent securities.
Along with its liquid assets, the Bank has additional sources of liquidity available which help to ensure that adequate funds are available as needed. These other sources include, but are not limited to, access to funds in the wholesale arena, the ability to obtain deposits through the adjustment of interest rates and the purchasing of federal funds and borrowings on approved lines of credit at major domestic banks. At March 31, 2025, this line of credit totaled $25.0 million of which the Bank had not borrowed against. In addition, the Company has a revolving line of credit with a correspondent bank totaling $5.0 million. There was no balance on this line at March 31, 2025 and December 31, 2024. Management feels that its liquidity position is adequate and will continue to monitor the position on a monthly basis. As of March 31, 2025, the Bank had $102.0 million in outstanding balances with the FHLB. Additional borrowing capacity at the FHLB was approximately $749.3 million at March 31, 2025. The Company also has access to the Federal Reserve Discount Window, which provides an additional source of funds with the posting of collateral. The Bank views its membership in the FHLB as a solid source of liquidity.
Off-Balance Sheet Arrangements
In the normal course of business, to meet the financial needs of our customers, we are a party to financial instruments with off-balance sheet risk. These financial instruments generally include commitments to originate mortgage, commercial and consumer loans, and involve to varying degrees, elements of credit and interest rate risk in excess of amounts recognized in the Consolidated Balance Sheets. The Bank’s maximum exposure to credit loss in the event of nonperformance by the borrower is represented by the contractual amount of those instruments. Because some commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The same credit policies are used in making commitments as are used for on-balance sheet instruments. Collateral is required in instances where deemed necessary. Undisbursed balances of loans closed include funds not disbursed but committed for construction projects. Unused lines of credit include funds not disbursed, but committed for, home equity, commercial and consumer lines of credit. Financial standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Those guarantees are primarily used to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Total unused commitments were $734.2 million at March 31, 2025, and $692.4 million at December 31, 2024. Additionally, the Company has committed up to $20.2 million in subscriptions in SBIC investment funds. At March 31, 2025, the Company had invested $14.8 million in these funds.
Recent Market and Regulatory Developments
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. 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.
Also, such statutes, regulations and policies are continually under review by Congress, 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.
Item 3. Quantitative and Qualitative 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.
| Changes In Interest Rate |
March 31, 2025 |
December 31, 2024 |
ALCO |
||||||||||
| (basis points) |
Result |
Result |
Guidelines |
||||||||||
| Net Interest Income Change |
|||||||||||||
| +400 |
-7.6 | % | -9.0 | % | -12.5 | % | |||||||
| +300 |
-6.1 | % | -7.0 | % | -10.0 | % | |||||||
| +200 |
-4.1 | % | -4.7 | % | -7.5 | % | |||||||
| +100 |
-2.2 | % | -2.5 | % | -5.0 | % | |||||||
| -100 | 1.8 | % | 2.2 | % | -5.0 | % | |||||||
| -200 | 3.1 | % | 3.9 | % | -10.0 | % | |||||||
| -300 | 4.4 | % | 5.5 | % | -15.0 | % | |||||||
| -400 | 4.6 | % | 6.1 | % | -20.0 | % | |||||||
| Net Present Value Of Equity Change |
|||||||||||||
| +400 |
-33.3 | % | -37.2 | % | -12.5 | % | |||||||
| +300 |
-25.1 | % | -27.3 | % | -10.0 | % | |||||||
| +200 |
-16.1 | % | -17.7 | % | -7.5 | % | |||||||
| +100 |
-8.0 | % | -9.0 | % | -5.0 | % | |||||||
| -100 | 4.4 | % | 5.5 | % | -10.0 | % | |||||||
| -200 | 5.1 | % | 7.1 | % | -15.0 | % | |||||||
| -300 | 1.5 | % | 4.4 | % | -20.0 | % | |||||||
| -400 | -3.3 | % | 1.5 | % | -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 was set at a level that was intended to continue to bring down inflation without harming the job market or the economy. There have been no further changes to the discount rate in the first quarter of 2025.
The above table presents results in the up rate scenarios that exceed internal policy limits for the Economic Value of Equity (“EVE”) for both of the periods presented. This unprecedented outcome was created by the events occurring over the past five 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 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 March 31, 2025, and December 31, 2024. A report on interest rate risk is presented to the Board of Directors and the Asset/Liability Committee on a quarterly basis. The Company has no market risk sensitive instruments held for trading purposes.
With the largest amount of interest sensitive assets and liabilities maturing within twelve months, the Company monitors this area most 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.
Item 4. Controls and Procedures
Based on their evaluation, as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s Chief Executive Officer and Chief Financial Officer have concluded the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) are effective. 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 fiscal quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
The Company is a defendant in lawsuits and other adversary proceedings arising in the ordinary course of business. Legal costs incurred in connection with the resolution of claims and lawsuits are generally expensed as incurred, although the Company establishes accruals where losses are deemed probable and reasonably estimable. The Company’s assessment of the current exposure with respect to adverse claims in legal matters could change in the event of the discovery of additional facts in such matters or upon determinations by judges, juries, administrative agencies or other finders of fact that are inconsistent with the Company’s evaluation of claims. It is possible that the ultimate resolution of 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.
There are no material changes from the risk factors set forth under Part I, Item 1A. “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 except as set forth below:
Significant changes to the size, structure, powers and operations of the federal government, changes to U.S. economic policies, and uncertainties regarding these changes may cause economic disruptions which could adversely impact our business, results of operations and financial condition.
The current U.S. administration has implemented significant changes in federal priorities in the operations, structure, and policy focus of various federal agencies, as well as regulatory priorities, policy approaches and interpretations of existing laws by those federal agencies. Moreover, leadership transitions at key federal agencies have impacted and may continue to impact rulemaking, supervision, enforcement, and examination priorities across the financial regulatory landscape. These developments may have varying and unpredictable effects on the banking and financial services industry that, which makes it difficult to anticipate and mitigate attendant risks. Compliance with changing federal and regulatory priorities could, among other things, increase the costs of operating our business, reduce the demand for our products and services, impact our ability to achieve our business goals, and increase our legal, operational and reputational risks, any or all of which could materially adversely affect our results of operations.
The current U.S. administration also has implemented rapid shifts in macroeconomic policies, such as those relating to trade restrictions and tariffs, which have created significant uncertainties regarding U.S. economic growth, the potential for recession, and concerns over inflation. In order to mitigate the impact of unpredictable U.S. actions, global companies and governments may reduce the use of the U.S. dollar in world trade and financial transactions, which could result in further volatility in the financial markets and U.S. economy. Slow economic growth, economic contraction or recession, or shifts in broader consumer and business trends in the U.S. generally and regions we serve could significantly impact our ability to originate loans, the ability of borrowers to repay loans, and the value of the collateral securing loans.
Other political and economic events within the United States, including changes in or disagreements over U.S. monetary policy and actions of the Federal Reserve, disagreements over long-term federal budget and deficit reduction plans, the threat of a U.S. government shutdown, disagreements over, or threats not to increase, the U.S. government’s borrowing limit, and risk of further downgrade of the ratings of U.S. government debt obligations, also may negatively impact financial markets and the U.S. and regional economy.
Further, the perception of the potential for additional, significant changes in federal regulatory or economic policy also has increased uncertainty and may exacerbate declines in investor and consumer confidence, which in turn may adversely impact financial markets and the broader economy of the U.S. and the economy of regions we serve, perhaps suddenly and to a significant degree.
Regional business and economic conditions are a major driver of our results of operations. Difficult conditions in the regional business and economic environment, including those caused by the lack of stability and predictability of U.S. policymaking, may materially adversely affect our operating expenses, the quality of our assets, credit losses, and the demand for our products and services.
For further discussion of risk factors related to the Company, refer to Part 1, Item 1A, “Risk Factors,” contained in the Company’s 2024 Annual Report on Form10-K. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition.
Additional risk factors not currently known to us or that we currently deem immaterial may also adversely affect us.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Purchases of equity securities by the issuer.
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 2019 share repurchase program. The 2023 Repurchase Program may be modified, suspended or terminated by the Company at any time.
| Total Number of |
Maximum Number |
|||||||||||||||
| Shares Purchased |
of Shares that May |
|||||||||||||||
| Total Number of |
Average Price |
as Part of Publicly |
Yet be Purchased |
|||||||||||||
| Period |
Shares Purchased |
Paid per Share |
Announced Program |
Under the Program |
||||||||||||
| Beginning balance |
497,047 | |||||||||||||||
| January 1 - 31 |
2,358 | $ | 13.91 | 0 | 497,047 | |||||||||||
| February 1 - 28 |
45,194 | 14.40 | 0 | 497,047 | ||||||||||||
| March 1 - 31 |
0 | 0 | 0 | 497,047 | ||||||||||||
| Ending balance |
47,552 | 14.37 | 0 | 497,047 | ||||||||||||
There was no treasury stock activity under the program during the three month period ended March 31, 2025.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Securities Trading Plans of Directors and Executive Officers
During the three months ended March 31, 2025, of our directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any “non-Rule 10b5-1 trading arrangement” (as defined in Item 408(c) of Regulation S-K).
The following exhibits are filed or incorporated by reference as part of this report:
| 3.1 |
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| 3.2 |
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| 3.3 |
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| 3.4 |
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| 10.1* | Farmers National Banc Corp. 2025 Form of Notice of Grant of Long-term Incentive Plan Awards under 2022 Equity Incentive Plan (filed herewith). |
| 10.2* | Farmers National Banc Corp. 2025 Form of Performance-based Equity Award under 2022 Equity Incentive Plan (filed herewith). |
| 10.3* | Farmers National Banc Corp. 2025 Form of Service-based Restricted Stock Award under 2022 Equity Incentive Plan (filed herewith). |
| 10.4* | Farmers National Banc Corp. 2025 Form of Performance-based Cash Award under 2022 Equity Incentive Plan (filed herewith). |
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|
| 31.1 |
|
| 31.2 |
|
| 32.1 |
|
| 32.2 |
|
| 101 |
The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, 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 Unaudited Consolidated Financial Statements. |
| 104 |
The cover page from the Company’s Quarterly report on Form 10-Q for the quarter ended March 31, 2025, has been formatted in Inline XBRL. |
* Constitutes a management contract or compensatory plan or arrangement.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
FARMERS NATIONAL BANC CORP.
| Dated: May 8, 2025 |
| /s/ Kevin J. Helmick |
| Kevin J. Helmick President and Chief Executive Officer |
| Dated: May 8, 2025 |
| /s/ A. Troy Adair |
| A. Troy Adair Senior Executive Vice President, Chief Financial Officer and Secretary |