Farmers National Banc Corp. Reports Solid Earnings and Improving Margin for the Fourth Quarter of 2024

• 168 consecutive quarters of profitability
• Net interest margin improved from 2.66% in the third quarter of 2024 to 2.72% in the fourth quarter of 2024
• Efficiency ratio declined to 56.4% for the fourth quarter of 2024
• Continued strong performance in fee-based businesses
• Completed acquisition of Crest Retirement Advisors LLC based in Dublin, OH
• Wealth management assets under management increased to $4.2 billion at December 31, 2024 including the Crest addition

Farmers National Banc Corp. ("Farmers" or the "Company") (NASDAQ:FMNB) today reported net income of $14.4 million, or $0.38 per diluted share, for the quarter ended December 31, 2024, compared to $14.6 million, or $0.39 per diluted share, for the quarter ended December 31, 2023. Net income for the fourth quarter of 2024 included certain pretax items. Excluding these items (non-GAAP), net income for the fourth quarter of 2024 was $14.5 million, or $0.39 per diluted share.

Kevin J. Helmick, President and CEO, stated "Our team has done an outstanding job navigating a dynamic economic and interest rate cycle in 2024. We are proud to provide our Ohio and Pennsylvania communities with diverse, personalized, and market-leading financial solutions and are excited about expanding our fee business into the greater Columbus market with the acquisition of Crest Retirement. Our fourth quarter performance highlights the positive momentum underway in our business and we continue to believe Farmers is very well positioned to grow earnings in 2025."

Balance Sheet

Total assets were $5.12 billion at December 31, 2024, compared to $5.24 billion at September 30, 2024, and $5.08 billion at December 31, 2023. Loans declined slightly to $3.27 billion at December 31, 2024 from $3.28 billion at September 30, 2024, but increased $70.2 million from December 31, 2023. The decrease from the prior quarter was primarily due to declines in residential real estate and indirect lending, while the increase from December 31, 2023, was driven by increased commercial real estate balances along with increased HELOC balances.

Securities available for sale totaled $1.27 billion at December 31, 2024, compared to $1.29 billion at September 30, 2024 and $1.30 billion at December 31, 2023. Gross unrealized losses on the portfolio totaled $244.1 million at December 31, 2024 compared to $189.4 million at September 30, 2024 and $217.1 million at December 31, 2023. Interest rates rose sharply in the fourth quarter of 2024 from the third quarter of 2024 driving the increase in gross unrealized losses during the quarter. Volatility in the bond market is expected to continue in 2025.

Total deposits declined to $4.27 billion at December 31, 2024 from $4.36 billion at September 30, 2024, but increased $89.4 million from $4.18 billion at December 31, 2023. The increase since December 31, 2023, was driven by the acquisition of $75.0 million in brokered deposits in the third quarter of 2024 and growth in customer deposits (non-brokered) of $14.4 million. The decline since September 30, 2024 was driven by the seasonal decline in public funds which totaled approximately $113.2 million.

Total stockholders' equity declined to $406.0 million at December 31, 2024, compared to $439.7 million at September 30, 2024 and $404.4 million at December 31, 2023. The decrease from September 30, 2024 was primarily driven by an increase in the unrealized losses on investment securities. The increase since December 31, 2023 was primarily driven by an increase in retained earnings offset by an increase in unrealized losses on investment securities.

Credit Quality

Non-performing loans increased to $22.8 million at December 31, 2024, compared to $19.1 million at September 30, 2024 and $15.1 million at December 31, 2023. The increase since September 30, 2024 was primarily driven by the addition of a single commercial credit with a balance of $2.6 million. The increase from December 31, 2023 resulted from the addition of a single commercial real estate credit with a remaining balance of $8.1 million and the $2.6 million commercial credit mentioned above offset by declines in the balances of other non-performing loans. The Company expects that a single non-performing loan with a balance of $1.2 million will be paid off in the first quarter of 2025 and two other non-performing loans totaling $1.6 million will be sold in the first quarter of 2025 at par. Non-performing loans to total loans were 0.70% at December 31, 2024 compared to 0.58% at September 30, 2024 and 0.47% at December 31, 2023. The Company's loans which were 30-89 days delinquent were $13.0 million at December 31, 2024, or 0.40% of total loans. This is down from $15.6 million at September 30, 2024 and $16.7 million at December 31, 2023.

The Company's provision for credit losses and unfunded commitments totaled $295,000 for the quarter ended December 31, 2024, compared to $286,000 for the quarter ended December 31, 2023. Annualized net charge-offs as a percentage of average loans were 0.08% for the fourth quarter of 2024, compared to 0.10% for the fourth quarter of 2023. The allowance for credit losses to total loans was 1.10% at December 31, 2024, compared to 1.10% at September 30 2024, and 1.08% at December 31, 2023.

Net Interest Income

The Company recorded $32.7 million of net interest income in the fourth quarter of 2024 compared to $32.8 million in the fourth quarter of 2023. Average interest earning assets increased to $4.91 billion in the fourth quarter of 2024 compared to $4.82 billion for the fourth quarter of 2023. The increase was driven by an increase in average loan balances of $82.2 million and an increase in federal funds sold and other earning assets of $39.1 million. These increases were offset by a decline in the average balance of investment securities. The net interest margin declined to 2.72% in the fourth quarter of 2024 compared to 2.78% in the fourth quarter of 2023 but was up sharply from the 2.66% margin reported in the third quarter of 2024. The year-over-year decline in net interest margin was due to higher funding costs outstripping the increase in yields on earning assets. The current rate cutting cycle by the Federal Reserve that began in September of 2024 had a significant impact on funding costs in the fourth quarter of 2024 and was the primary reason for the net interest margin increasing during the fourth quarter. The yield on interest bearing liabilities declined from 2.84% in the third quarter of 2024 to 2.72% in the fourth quarter of 2024. The Company expects its net interest margin will continue to expand in 2025 as funding costs reprice lower. Excluding acquisition marks and PPP interest, non-GAAP, the Company's net interest margin was 2.56% in the fourth quarter of 2024 compared to 2.48% in the third quarter of 2024 and 2.58% in the fourth quarter of 2023.

Noninterest Income

Noninterest income declined from $12.2 million in the fourth quarter of 2023 to $11.4 million in the fourth quarter of 2024 primarily due to a decline of $1.0 million in the net gain on sale of loans. During the fourth quarter of 2023, the Company recognized a gain on the sale of commercial loans totaling $915,000. No gain was recognized on commercial loan sales in 2024.

Income from service charges on deposit accounts increased $213,000 to $1.9 million for the fourth quarter of 2024 compared to $1.7 million for the fourth quarter in 2023. 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. Trust fees in the fourth quarter of 2024 increased by $318,000 to $2.7 million compared to $2.4 million in the fourth quarter of 2023. The increase was due to continued growth in the business unit. Insurance agency commissions declined to $1.3 million in the fourth quarter of 2024 from $1.5 million in the fourth quarter of 2023. The fourth quarter of 2023 included an accrual adjustment that did not occur in 2024. Retirement plan consulting fees increased from $631,000 in the fourth quarter of 2023 to $719,000 in the fourth quarter of 2024. The increase was due to increased business in the division. The acquisition of Crest Retirement Advisors LLC in late December of 2024 is expected to further bolster this unit in 2025. Other mortgage banking fee income increased to $285,000 during the fourth quarter of 2024 from $139,000 in the fourth quarter of 2023. The increase was driven by a recovery on the Company's mortgage servicing rights in the fourth quarter of 2024. Debit card income grew to $2.2 million in the fourth quarter of 2024 from $1.7 million in the fourth quarter of 2023 as better volumes were realized in the current period. Other noninterest income declined to $856,000 in the fourth quarter of 2024 from $1.6 million in the fourth quarter of 2023. The Company recorded $1.1 million in SBIC income in the fourth quarter of 2023 compared to $527,000 in the fourth quarter of 2024. SBIC investments continue to generate solid returns but income can fluctuate wildly quarter to quarter.

Noninterest Expense

Noninterest expense declined to $26.2 million for the fourth quarter of 2024 compared to $27.0 million for the fourth quarter of 2023. Salaries and employee benefits were $14.4 million for the fourth quarter of 2024 compared to $14.9 million for the fourth quarter of 2023. The decrease was primarily driven by lower healthcare expenses. FDIC and state and local taxes were lower by $465,000 in the fourth quarter of 2024 compared to the fourth quarter of 2023. The decrease was primarily driven by a decrease in FDIC premiums. Professional fees declined to $785,000 for the period ended December 31, 2024, compared to $1.0 million for the period ended December 31, 2023 due to lower legal and consulting expense in the fourth quarter of 2024. The fourth quarter of 2024 included $92,000 of merger related charges for the Crest acquisition compared to $452,000 of merger related charges in the fourth quarter of 2023 for the Emclaire acquisition. Advertising expense declined to $191,000 in the fourth quarter of 2024 compared to $414,000 in the fourth quarter of 2023. The decline was due to an over accrual for advertising expense that was not recognized. Intangible amortization increased to $914,000 in the fourth quarter of 2024 from $578,000 for the fourth quarter of 2023. This increase was driven by acceleration in the amortization from the Cortland acquisition. Other noninterest expense increased to $3.5 million in the fourth quarter of 2024 up from the $3.2 million recognized in the fourth quarter of 2023. The increase was primarily due to $208,000 of operational losses during the fourth quarter of 2024 compared to operational recoveries of $102,000 in the fourth quarter of 2024.

Liquidity

At December 31, 2024, the Company had access to an additional $549.7 million of FHLB borrowing capacity, along with $414.0 million in available for sale securities that are available for additional pledging. The Company's loan to deposit ratio was 76.6% at December 31, 2024 while the Company's average deposit balance per account (excluding collateralized deposits) was $25,188 for the same period.

About Farmers National Banc Corp.

Founded in 1887, Farmers National Banc Corp. is a diversified financial services company headquartered in Canfield, Ohio, with $5.1 billion in banking assets. Farmers National Banc Corp.'s wholly-owned subsidiaries are comprised of The Farmers National Bank of Canfield, a full-service national bank engaged in commercial and retail banking with 62 banking locations in Mahoning, Trumbull, Columbiana, Portage, Stark, Wayne, Medina, Geauga and Cuyahoga Counties in Ohio and Beaver, Butler, Allegheny, Jefferson, Clarion, Venango, Clearfield, Mercer, Elk and Crawford Counties in Pennsylvania, and Farmers Trust Company, which operates five trust offices and offers services in the same geographic markets. Total wealth management assets under care at December 31, 2024 are $4.2 billion. Farmers National Insurance, LLC, a wholly-owned subsidiary of The Farmers National Bank of Canfield, offers a variety of insurance products.

Non-GAAP Disclosure

This press release includes disclosures of Farmers' tangible common equity ratio, return on average tangible assets, return on average tangible equity, net income excluding costs related to acquisition activities and certain items, return on average assets excluding merger costs and certain items, return on average equity excluding merger costs and certain items, net interest margin excluding acquisition marks and related accretion and PPP interest and fees and efficiency ratio less certain items, which are financial measures not prepared in accordance with generally accepted accounting principles in the United States (GAAP). A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are required to be disclosed by GAAP. Farmers believes that these non-GAAP financial measures provide both management and investors a more complete understanding of the underlying operational results and trends and Farmers' marketplace performance. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the numbers prepared in accordance with GAAP. The reconciliations of non-GAAP financial measures to their GAAP equivalents are included in the tables following Consolidated Financial Highlights below.

Cautionary Statements Regarding Forward-Looking Statements

We make statements in this news release and our related investor conference call, and we may from time to time make other statements, that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about Farmers' financial condition, results of operations, asset quality trends and profitability. Forward-looking statements are not historical facts but instead represent only management's current expectations and forecasts regarding future events, many of which, by their nature, are inherently uncertain and outside of Farmers' control. Forward-looking statements are preceded by terms such as "expects," "believes," "anticipates," "intends" and similar expressions, as well as any statements related to future expectations of performance or conditional verbs, such as "will," "would," "should," "could" or "may." Farmers' actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Factors that could cause Farmers' actual results to differ materially from those described in certain forward-looking statements include significant changes in near-term local, regional, and U.S. economic conditions including those resulting from continued high rates of inflation, tightening monetary policy of the Board of Governors of the Federal Reserve, and possibility of a recession; and the other factors contained in Farmers' Annual Report on Form 10-K for the year ended December 31, 2023 and subsequent Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission (SEC) and available on Farmers' website (www.farmersbankgroup.com) and on the SEC's website (www.sec.gov). Forward-looking statements are not guarantees of future performance and should not be relied upon as representing management's views as of any subsequent date. Farmers does not undertake any obligation to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.