FARMERS NATIONAL BANC CORP /OH/

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 of1956, 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 Form10-Q and Article10 of Regulation S-X. Accordingly, they donot 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’s2024 Annual Report to Shareholders included in the Company’s Annual Report on Form10-K for the year ended* December 31, 2024* (“2024 Form10-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 arenot necessarily indicative of the results that* maybe expected for a full year. Certain items included in the prior period financial statements were reclassified to conform to the current period presentation. There wasno* 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 intwo lines of business, the Bank segment and the Trust segment.

Equity:

There are 50,000,000 shares authorized and available for issuance as of* March 31, 2025*. Outstanding shares at* March 31, 2025* were37,614,634.

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 ASU2024*-02, Codification Improvements—Amendments to Remove References to the Concepts Statements. ASU2024-02 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. ASU2024-02 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 doesnot expect these updates to have a significant effect on current accounting practice. The amendments in ASU2024-02 are effective for public business entities for fiscal years beginning after* December 15, 2024.Early adoption is permitted. The adoption of this standard isnot* expected to have a material effect on the Company’s operating results or financial condition.

In* December 2023,the FASB issued ASU2023*-09, Income Taxes (Topic740*) 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 isnot* expected to have a material effect on the Company’s operating results or financial condition.

In* November 2023,the FASB issued ASU2023*-07, Segment Reporting (Topic280*) 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 andfootnote16* - Segment information has been updated per the ASU.

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Business Combinations:

On* December 16, 2024,Farmers Trust acquired substantially all of the assets of Crest Retirement Advisors, LLC, for $600 thousand, with an additional $400 thousand in contingent consideration payable overtwo* years. Intangible assets of $770 thousand were recorded along with goodwill of $4 thousand.

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). No allowance for credit losses have been recognized for the securities portfolio at* March 31, 2025* or* December 31, 2024*.

The proceeds from sales of available-for-sale securities and the associated gains and losses are as follows:

The amortized cost and fair value of the debt securities portfolio are shown in the table below by expected maturity. Expected maturities* maydiffer from contractual maturities if issuers have the right to call or prepay obligations with or without call, or prepayment penalties. Securitiesnot* due at a single maturity date are shown separately.

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The following table summarizes the investment securities with unrealized losses for which an allowance for credit losses hasnot 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.

As of* March 31, 2025*, the Company’s security portfolio consisted of 924 securities,808 of which were in an unrealized loss position. The treasury, agency, mortgage-backed securities, collateralized mortgage obligations and small business administration securities that the Company owns are all issued by government sponsored entities and therefore containno potential for credit loss. The Company doesnot consider any of its available-for-sale securities with unrealized losses to be attributable to credit-related factors, as the unrealized losses have occurred as a result of changes in noncredit related factors such as changes in interest rates, market spreads and market conditions subsequent to purchase,not credit deterioration. The vast majority of the Company's state and political subdivisions holdings are of high credit quality and are rated AA or higher. In addition, management has both the ability and intent to hold the securities for a period of time sufficient to allow for the recovery in fair value. As of* March 31, 2025*, the Company hasnot recorded an allowance for credit losses on available for sale (“AFS”) securities.

At* December 31, 2024*, the Company’s security portfolio consisted of 946 securities,842 of which were in an unrealized loss position. The treasury, agency, mortgage-backed securities, collateralized mortgage obligations and small business administration securities that the Company owns are all issued by government sponsored entities and therefore containno potential for credit loss. At* December 31, 2024,the Company didnot* consider any of its available-for-sale securities with unrealized losses to be attributable to credit-related factors, as the unrealized losses have occurred as a result of changes in noncredit related factors such as changes in interest rates, market spreads and market conditions subsequent to purchase,not credit deterioration. The vast majority of the Company's state and political subdivisions holdings are of high credit quality and are rated AA or higher. In addition, management had both the ability and intent to hold the securities for a period of time sufficient to allow for the recovery in fair value. At* December 31, 2024*, the Company hadnot recorded an allowance for credit losses on available for sale (“AFS”) securities.

Equity Securities

The Company also holds equity securities which include $15.7 million in Small Business Investment Company (“SBIC”) partnership investments as well as $299 thousand in local and regional bank holdings and other miscellaneous equity funds at* March 31, 2025*. At* December 31, 2024*, the Company held $14.5 million in SBIC investments and $277 thousand in local and regional bank holdings and other miscellaneous equity funds. These investments are held at modified cost and any changes in the modified costs are recognized in income in both2025 and2024.

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Loans:

Loan balances were as follows:

Allowance for credit loss activity

The following tables present the activity in the allowance for credit losses by portfolio segment for thethree month periods ended* March 31, 2025and2024*:

Three Months Ended March 31, 2025**

Three Months Ended March 31, 2024**

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, 2011to 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.

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The following tables present the amortized cost basis of loans on nonaccrual status and loans past due over89 days still accruing as of* March 31, 2025* and* December 31, 2024*:

The above table for the period ending* March 31, 2025* doesnot include $1.68 million in farmland loans and $163 thousand in agricultural loans that were held-for-sale and in nonaccrual status. The above table for the period ending* December 31, 2024* doesnot include a $1.52 million owner occupied commercial real estate loan and $77 thousand commercial & industrial loan that were held for sale and in nonaccrual status.

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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*:

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.

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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 thethree 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:

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The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty during thethree months ended* March 31, 2025* and* March 31, 2024*:

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 thethree months ended* March 31, 2025* and* March 31, 2024*:

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As of* March 31, 2025*, the Company hadno 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 thethree months ended* March 31, 2025* and* March 31, 2024* , and were modified in thetwelve months prior to that default to borrowers experiencing financial difficulty. For purposes of this disclosure a default occurs when within12 months of the original modification, a loan is30 days contractually past due under the modified terms:

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 $3 million, management monitors the loans on an ongoing basis for any changes in the borrower’s ability to service their debt. Management also affirms the risk ratings for the loans in their respective portfolios on an annual basis. The Company uses the following definitions for risk ratings:

**Special Mention.Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses mayresult in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Special mention assets arenot adversely classified and donot 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 arenot 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.

Loansnot 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 due90 days and still accruing interest and nonaccrual loans.

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The following table presents total loans by risk categories and year of origination:

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The previous table for the period ending* March 31, 2025* doesnot include $1.68 million in farmland loans and $163 thousand in agricultural loans that were held for sale and risk rated substandard. The previous table for the period ending* December 31, 2024* doesnot include a $1.63 million non-owner occupied commercial real estate loan that was held for sale and risk rated substandard. In the1-4 family residential real estate portfolio at* March 31, 2025* other real estate owned and foreclosure properties were $52 and $172 thousand, respectively. At* December 31, 2024*, other real estate owned and foreclosure properties were $52 thousand and $631 thousand, respectively.

The Company follows ASU2016-13 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 usestwo 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 arenot 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 as90 days past due, placed on non-accrual, loan restructuring for borrowers experiencing financial difficulty or is partially, or wholly, charged-off. Typically, aone-year time period is used to assess probability of default (“PD”). PD can be measured and applied using various risk criteria. Risk rating isone 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.

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The following table presents the loan pools and the associated methodology used during the calculation of the allowance for credit losses in2025.

According to the accounting standard, an entity* maymake an accounting policy electionnot* 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 electionnot 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 being90 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 Topic326 requires the Company to establish a liability for anticipated credit losses for unfunded commitments. To accomplish this, the Company mustfirst 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 commitmentsnot 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 $683 million in unfunded commitments and set aside $1.34 million in anticipated credit losses. At* December 31, 2024*, the Company had $692 million in unfunded commitments and set aside $1.56 million in anticipated credit losses. The $9 million decrease in unfunded commitments and $226 thousand decrease in the reserve for anticipated credit losses is due to existing construction loan projects that are moving forward and advances are being made to the loan. This reserve is recorded in other liabilities as opposed to the ACL.

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 $35.5 million at* March 31, 2025* and $35.9 million at* December 31, 2024*. The decrease of $314 thousand was due to decreases in loan balances and adjustments to Portfolio Composition and Growth and Commercial Concentration qualitative factors of certain loan pools. These factors were partially offset by the increase of the specific reserve for a commercial real estate non-owner occupied loan.

Purchased Loans

Under ASU Topic326, 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. During2025, the Company hasnot acquired any additional PCD loans. The outstanding balance at* March 31, 2025* and related allowance on PCD loans is as follows:

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Revenue from Contracts with Customers:

All material revenue from contracts with customers in the scope of ASC606 is recognized within noninterest income. ASC606 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 thethree months ended* March 31, 2025and2024*.

A description of the Company’s revenue streams under ASC606 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 wouldnot 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 areno 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 areno 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 isno contingent portion associated with these commission checks. There* maybe 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 doesnot* 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 areno contingent amounts associated with these payments that* maybe clawed back by the carrier in the future. Similar to the monthly commissions explained in the preceding paragraph, there maybe 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 doesnot* materially impact the recognition of Insurance revenue. If there were any amounts that would need to be refunded forone specific Insurance customer, management believes the reversal wouldnot be significant.

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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 athird-party broker-dealer. When the commissions are received and recorded into income on the Bank’s income statement, there isno 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 ASC606 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 arethree levels of inputs that* may*be used to measure fair values:

Level1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level2 – Significant other observable inputs other than Level1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that arenot active; or other inputs that are observable or can be corroborated by observable market data.

Level3 – 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 athird 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 asecond 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 (Level1). The equity securities change in fair value is recorded in the income statement. For securities where quoted prices arenot available, fair values are calculated based on quoted prices for similar assets in active markets, quoted prices for similar assets in markets that arenot active or inputs other than quoted prices, which provide a reasonable basis for fair value determination. Such inputs* mayinclude interest rates and yield curves, prepayment speeds, credit risks and default rates. The inputs used are principally derived from observable market data (Level2*). For securities where quoted prices or market prices of similar securities arenot available, fair values are calculated using discounted cash flows or other market indicators (Level3). The fair values of Level3 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 thatno securities had a fair value less than amortized cost that was as a result of credit deterioration as outlined in ASU2016-13.

Loans Held For Sale, at Fair Value

The fair value of loans held for sale is estimated based upon binding contracts or quotes fromthird party investors (Level2).

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 (Level2).

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 independentthird 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 (Level2).

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 athird 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 independentthird party and are based upon valuation models that use observable market data as of the measurement date (Level2).

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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 independentthird party to perform a market valuation analysis for this derivative (Level2).

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 in2024 and2025. For collateral dependent loans, fair value is commonly based on recent real estate appraisals or in quoted sales price in certain instances. Appraisals* mayutilize 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 Level3* classification of the inputs for determining fair value. Non-real estate collateral* maybe 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 Level3* 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* mayuse 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 Level3* 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:

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There wereno significant transfers between Level1 and Level2 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 (Level3):

Assets measured at fair value on a non-recurring basis are summarized below:

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The following table presents quantitative information about Level3 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*:

The carrying amounts and estimated fair values of financial instrumentsnot previously disclosed at* March 31, 2025* and* December 31, 2024* are as follows:

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Goodwill and Intangible Assets:

Goodwill associated with the Company’s past acquisitions totaled $167.4 million at* March 31, 2025* and* December 31, 2024*. Impairment exists when a reporting unit’s carrying value of goodwill exceeds its fair value, which is determined through an impairment test. Management performs goodwill impairment testing on an annual basis as of* September 30,or whenever events or changes in circumstances indicate that the fair value of a reporting unit maybe below its carrying value. As of March**31,* 2025, no events or changes in circumstances indicated that the fair value of the reporting unit was below its carrying value. The Company will continue to monitor its goodwill for possible impairment.

Acquired Intangible Assets

Acquired intangible assets were as follows:

Aggregate amortization expense was $735 thousand and $688 thousand for thethree month periods ended* March 31, 2025*

Estimated amortization expense for each of the nextfive periods and thereafter:

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 17.3 years, some of which had options to extend the lease for up to 15 years, while the Fairlawn lending building lease was terminated in* Aprilof2025.* The Fairview Park building lease was scheduled to terminate in* Aprilof2025,* but has been extended until* Aprilof2028.* The Beachwood branch lease located at24755 Chagrin Blvd. was terminated effective* January, 31 2025,and the Branch was moved into a new location at22835* Chagrin Blvd on* February 3, 2025.This new lease location was effective in Decemberof2024,* with an initial right of use asset and lease liability recorded of $971 thousand.

The right of use assets and lease liabilities were $7.9 million and $8.2 million as of* March 31, 2025*, respectively, and $9.7 million and $9.9 million at* December 31, 2024*, respectively. The right of use assets are included in other assets while the lease liabilities are included in other liabilities on the balance sheet.

Lease expense for thethree month periods ended* March 31, 2025and2024*, was $293 thousand and $331 thousand, respectively. The weighted-average remaining lease term for all leases was 9.18 years as of* March 31, 2025*. The weighted-average discount rate was 3.46% for all leases as of* March 31, 2025*.

Maturities of lease liabilities are as follows as of* March 31, 2025*:

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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 $69.7 million and fair value of $2.6 million in other assets and $2.6 million in other liabilities at* March 31, 2025*. At* December 31, 2024*, the Company had interest rate swaps associated with commercial loans with a notional value of $65.7 million and fair value of $3.8 million in other assets and $3.8 million in other liabilities. The interest rate swaps with both the customers andthird parties arenot designated as hedges under FASB ASC815. As the interest rate swaps are structured to offset each other, changes to the underlying benchmark interest rates considered in the valuation of these instruments donot result in an impact to earnings; however, there* maybe fair value adjustments related to credit quality variations between counterparties, which mayimpact earnings as required by FASB ASC820.*

There wereno net gains or losses for interest rate swaps for thethree month periods ended* March 31, 2025and2024*.

Interest Rate Swap Designated as a Fair Value Hedge

The Company hasone interest rate swap with a notional amount of $100.0 million that was in place at both* March 31, 2025* and* December 31, 2024*. This swap is designated as 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 gross aggregate fair value of the swap at* March 31, 2025* is $(647) thousand and is recorded as a $(648) thousand mark to market adjustment in other assets and $1 thousand recorded to other assets for the accrued interest receivable in the Consolidated Balance Sheet. At* December 31, 2024*, the gross aggregate fair value of the swap was $(168) thousand and was recorded as a $418 thousand mark to market adjustment in other liabilities, and $250 thousand was recorded to other assets for the accrued interest receivable in the Consolidated Balance Sheet. The Company expects the hedge to remain in effect for the remaining term of the swap, which matures* August 2026.*A summary of the interest rate swap designated as a fair value hedge is presented below:

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 tothird-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 arenot 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, 2025and March 31, 2024*:

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*:

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Earnings Per Share:

The computation of basic and diluted earnings per share is shown in the following table:

There were 119,258 restricted stock awards that were considered anti-dilutive for thethree month period ended* March 31, 2025* and 125,918 restricted stock awards that were considered anti-dilutive for thethree month period ended* March 31, 2024.*

Stock Based Compensation:

In* Aprilof2022,* the Company, with the approval of shareholders, created the2022 Equity Incentive Plan (the*“2022* Plan”). The2022 Plan permits the award of up toone million 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. The2022 Plan replaced the2017 Plan. There were 35,566 service time based share awards and 95,404 performance based share awards granted under the2022 Plan during thethree month period ended* March 31, 2025*, as shown in the table below. The actual number of performance based shares issued will depend on the relative performance of the Company’s average return on equity compared to a group of peer companies over athree year vesting period, ending* December 31, 2027.As of March 31, 2025*,416,711 shares are still available to be awarded from the2022 Plan. The2017 Plan has been sunset.

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 $642 thousand and $662 thousand for thethree months ended* March 31, 2025and2024*, respectively. As of* March 31, 2025*, there was $3.8 million of total unrecognized compensation expense related to the nonvested shares granted under the Plan. The remaining cost is expected to be recognized over 2.9 years.

The following is the activity under the Plans during thethree month period ended* March 31, 2025*.

The following is the activity under the Plans during thethree month period ended* March 31, 2024*.

The 109,847 shares that vested during thethree month period ended* March 31, 2025* had a weighted average fair value of $14.37 per share.

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Other Comprehensive Income (Loss):

The following tables represent the changes in accumulated other comprehensive income (loss) by component, net of tax, for thethree month periods ended* March 31, 2025and2024*.

Amounts reclassified out of each component of accumulated other comprehensive income (loss) werenot material for thethree month periods ended* March 31, 2025and2024*.

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 tier1 capital, tier1 capital and total capital ratios are calculated by dividing the respective capital amounts by risk-weighted assets. The leverage ratio is calculated by dividing tier1 capital by adjusted average total assets.

Basel III limits capital distributions and certain discretionary bonus payments if the banking organization doesnot hold a “capital conservation buffer” consisting of 2.5% of common equity tier1 capital, tier1 capital and total capital to risk-weighted assets in addition to the amount necessary to meet minimum risk-based capital requirements. Excluding the additional buffer, Basel III requires the Company and the Bank to maintain (i) a minimum ratio of common equity tier1 capital to risk-weighted assets of at least 4.5%, (ii) a minimum ratio of tier1 capital to risk-weighted assets of at least 6.0%, (iii) a minimum ratio of total capital to risk-weighted assets of at least 8.0% and (iv) a minimum leverage ratio of at least 4.0%.

Prompt corrective action regulations providefive classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms arenot 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 areno conditions or events since that notification that management believes have changed the institution’s category.

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Actual and required capital amounts and ratios, which donot include the capital conservation buffer, are presented below at* March 31, 2025* and* December 31, 2024*:

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:

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• The Bank segment includes Farmers National Insurance and Farmers of Canfield Investment Co.

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Short-term borrowings:

The Bank had short-term advances from the Federal Home Loan Bank ("FHLB") of $102.0 million at* March 31, 2025*, and $305.0 million at* December 31, 2024*. The interest rate on these borrowings was 4.45% for both period ends* March 31, 2025*, and* December 31, 2024* These short-term borrowings were borrowed using the FHLB's overnight repurchase advance program, as this product allows the most flexibility to meet the Bank's varying liquidity needs. These FHLB advances were secured by pledged assets which are described in the following Long-Term Borrowings footnote.

The Bank has access to a line of credit for $25.0 million at a major domestic bank that is below prime rate. The line and terms are periodically reviewed by the lending bank and is generally subject to withdrawal at their discretion. There wereno outstanding borrowings under this line at* March 31, 2025*, or* December 31, 2024*.

Farmers hasone unsecured revolving line of credit for $5.0 million. This line can be renewed annually and has an interest rate ofprime with a floor of 3.5%. There wasno outstanding balance on this line at either* March 31, 2025*, or* December 31, 2024*.

Long-term borrowings:

There wereno long-term advances from the FHLB at* March 31, 2025*, or at* December 31, 2024*.

Long-term and short-term FHLB advances are secured by a blanket pledge of residential mortgage, commercial real estate, and multi-family loans totaling $1.7 billion for both periods ending* March 31, 2025* and* December 31, 2024*. Based on this collateral, the Bank is eligible to borrow an additional $749.3 million at* March 31, 2025*.

In* November 2021,the Company completed the issuance of $75.0 million aggregate principal amount, fixed-to-floating rate subordinated notes due December 15, 2031,in a private offering exempt from the registration requirements under the Securities Act of1933,* as amended. The notes carry a fixed rate of 3.125% forfive years at which time they will convert to a floating rate based on thethree-month term secured overnight funding rate, plus a spread of 220 basis points. The net proceeds from the sale were approximately $73.8 million, after deducting the offering expenses. The Company’s intent was to use the proceeds from the sale for general corporate purposes, which* may*include, without limitation, providing capital to support its growth organically or through acquisitions, in financing investments, capital expenditures, repurchasing its common shares and for investments in the Bank as regulatory capital. The subordinated debentures are included in Total Capital under current regulatory guidelines and interpretations.

In* August 2024,the Company bought back and retired $3 million of the outstanding subordinated notes. The Company may,at its option, beginning December 15, 2026,*redeem additional portions of the notes, in whole or in part, from time to time, subject to certain conditions.

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 $4.3 million, held in a wholly-owned statutory trust whose common securities were wholly-owned by Cortland. 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 bythird*-party investors. The securities bear interest at a rate of 1.45% over the3-month term SOFR rate that includes an additional spread adjustment of 26 basis points. The rate at* March 31, 2025* was 6.01% and at* December 31, 2024* the rate was 6.07%.

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 bythird*-party investors. The securities bear interest at a rate of 1.70% over the3-month term SOFR rate that includes an additional spread adjustment of 26 basis points. The rate at* March 31, 2025* was 6.36% and at* December 31, 2024* the rate was 6.42%.

In2015, 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 bythird*-party investors. The securities bear interest at a rate of 1.80% over the3-month term SOFR rate that includes an additional spread adjustment of 26 basis points. The rate at* March 31, 2025* was 6.26% and at* December 31, 2024* the rate was 6.32%.

In allthree instances, the Company* mayredeem the junior subordinated debentures at any quarter-end, in whole, or in part, at par. This type of subordinated debenture qualifies as Tier1* capital for regulatory purposes in determining and evaluating the Company’s capital adequacy.

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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*:

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 $21.5 million and $22.0 million, respectively. Total unfunded commitments related to the investments in qualified affordable housing projects totaled $12.4 million and $13.9 million at* March 31, 2025* and* December 31, 2024*. The Company expects to complete the fulfillment of these commitments during the year ending2038.

In thefirst quarters ended* March 31, 2025and March 31, 2024*, the Company recognized amortization expense of $473 thousand and $406 thousand, respectively, from its investment in qualified affordable housing projects. This amortization expense was included within income tax expense on the consolidated statements of income.

Additionally, during thefirst quarters ended* March 31, 2025and March 31, 2024*, the Company recognized tax credits and other benefits from its investment in affordable housing tax credits of $564 thousand and $501 thousand, respectively. The qualified affordable housing investment credits are included in the net changes in other assets and liabilities in the cash flows from operating activities in the consolidated statements of cash flows. During thefirst quarters ended* March 31, 2025and March 31, 2024*, the Company didnot incur impairment losses related to its investment in affordable housing tax credits.

In thefirst quarter of2025, the Company began investing in solar investment tax credits and at* March 31, 2025* the balance of the investment was $10.0 million. Total unfunded commitments related to the investments in solar investment tax credits totaled $9.3 million at* March 31, 2025*. The Company expects this investment to be fully funded during2025. There wereno investments in solar tax credits at* December 31, 2024*.

The Company hasnot recognized any amortization expense or tax credits from its investment in solar investment tax credits in thefirst quarter ended* March 31, 2025*.

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