SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] Annual Report Pursurant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (Fee Required)
For the fiscal year ended December 31, 1995, Commission file number 0-12055
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
Farmers National Banc Corp.
(Exact name of registrant as specified in its charter)
Ohio 34-1371693
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
20 South Broad Street
Canfield, Ohio 44406 44406
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: 216-533-3341
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $2.50 per share
(Title of Class)
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The registrant estimates that as of February 5, 1996, the aggregate market
value of the voting stock held by non-affiliates of the registrant (including
113,490 shares held by officers and directors of the registrant) was
approximately $66,193,500.
As of February 5, 1996, the registrant had outstanding 1,644,559 shares of
common stock having a par value of $2.50 per share.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of Form 10-K
into which
Document Document is Incorporated
1995 Annual Report to Shareholders II
Definitive proxy statement for the 1995 Annual
Meeting of Shareholders to be held on March 28, 1996 III
FARMERS NATIONAL BANC CORP.
FORM 10-K
1995
INDEX
Part I. Page
Item 1. Business:
General I-2
Statistical Information I-7
Item 2. Properties I-24
Item 3. Legal Proceedings I-24
Item 4. Submission of Matters to a Vote of Security Holders I-24
Part II.
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters II-1
Item 6. Selected Financial Data II-1
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations II-1
Item 8. Financial Statements and Supplementary Data II-1
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures II-1
Part III.
Item 10. Directors and Executive Officers of the Registrant III-1
Item 11. Executive Compensation III-2
Item 12. Security Ownership of Certain Beneficial Owners and
Management III-2
Item 13. Certain Relationships and Related Transactions III-2
Part IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K IV-1
Part I
Item 1. Business General
The Corporation
The registrant, Farmers National Banc Corp. (herein sometimes referred to
as the Corporation), is a one-bank holding company registered under the
Bank Holding Company Act of 1956, as amended. The only subsidiary is The
Farmers National Bank of Canfield, which was acquired March 31, 1983. The
Corporation and its subsidiary operate in one industry, domestic banking.
The Corporation conducts no business activities except for investment in
securities permitted under the Bank Holding Company Act. Bank holding
companies are permitted under Regulation Y of the Board of Governors of
the Federal Reserve System to engage in other activities such as leasing
and mortgage banking.
The Bank
The Bank is a full-service national bank engaged in commercial and retail
banking in Mahoning and Columbiana Counties, Ohio. The Bank's commercial
banking services include checking accounts, savings accounts, time deposit
accounts, commercial, mortgage and installment loans, home equity loans,
home equity lines of credit, night depository, safe deposit boxes, money
orders, bank checks, automated teller machines and travelers checks, "E"
Bond transactions, utility bill payments, MasterCard and Visa credit
cards, and other miscellaneous services normally offered by Commercial
Banks. In addition, the Bank offers Discount Brokerage Service.
Supervision and Regulation
The Corporation is a one bank holding company and is regulated by the
Federal Reserve Bank (the "FRB"). The bank is a national bank and is
regulated by the Office of the Comptroller of the Currency (the "OCC"),
as well as the Federal Deposit Insurance Corporation (the "FDIC").
Changes have developed over the past several years regarding minimum
capital requirements for financial institutions. A listing of the
minimum requirements for capital and the Corporation's capital position
as of December 31, 1995 are presented on page 18 of the annual report to
shareholders for the year ended December 31, 1995 and is hereby
incorporated by reference.
The Corporation is subject to regulation under the Bank Holding Company
Act of 1956, as amended. This Act restricts the geographic and product
range of bank holding companies by defining the types and locations of
institutions the holding companies can own or acquire. This act also
regulates transactions between the Corporation and the bank and generally
prohibits tie-ins between credit and other products and services.
Supervision and Regulation (Continued)
The bank is subject to regulation under the National Banking Act and is
periodically examined by the OCC and is subject to the rules and
regulations of the FRB. As an insured institution and member of the Bank
Insurance Fund ("BIF"), the bank is also subject to regulation by the
FDIC. Establishment of branches is subject to approval of the OCC and
geographic limits established by state law. Ohio branch banking law
permits a bank having its principal place of business in the State of
Ohio to establish branch offices in any county in Ohio without geographic
restrictions.
FDICIA
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA")revised the bank regulatory and funding provisions of the
Federal Deposit Insurance Act and several other federal banking statutes.
Among other things, FDICIA requires federal banking agencies to broaden
the scope of corrective action taken with respect to banks that do not
meet minimum capital requirements and to take such actions promptly in
order to minimize losses to the FDIC.
FDICIA established five capital tiers: "well capitalized"; "adequately
capitalized"; "undercapitalized"; "significantly undercapitalized"; and
"critically undercapitalized" and imposes significant restrictions on the
operations of a depository institution that is not in either of the first
two of such categories. A depository institution's capital tier will
depend upon the relationship of its capital to various capital measures.
A depository institution will be deemed to be "well capitalized" if it is
significantly exceeds the minimum level required by regulation for each
relevant capital measure, "adequately capitalized" if it meets each such
measure, "undercapitalized" if it significantly below any such measure
and "critically undercapitalized" if it fails to meet any critical
capital level set forth in regulations. An institution may be deemed to
be in a capitalization category that is lower than is indicated by its
actual capital position if it receives an unsatisfactory examination
rating or is deemed to be in an unsafe or unsound condition or to be
engaging in unsafe or unsound practices.
Under regulations adopted under these provisions, for an institution to be
well capitalized it must have a total risk-based capital ratio of at least
10%, a Tier I risk-based capital ratio of at least 6% and a Tier I leverage
ratio of at least 5% and not be subject to any specific capital order or
directive. For an institution to be adequately capitalized, it must have a
total risk-based capital ratio of at least 8%, a Tier I risk-based capital
ratio of at least 4% and a Tier I leverage ratio of at least 4% (or in some
cases 3%). Under the regulations, an institution will be deemed to be
undercapitalized if the bank has a total risk-based capital ratio that is
less than 8%, a Tier I risk-based capital ratio that is less than 4% or a
Tier I leverage ratio of less than 4% (or in some cases 3%). An institution
will be deemed to be significantly undercapitalized if the bank has a total
risk-based capital ratio that is less than 6%, a Tier I risk-based capital
ratio that is less than 3%, or a leverage ratio that is less than 3% and will
be deemed to be critically undercapitalized if it has a ratio of tangible
equity to total assets that is equal to or less than 2%.
Supervision and Regulation (Continued)
FDICIA generally prohibits a depository institution from making a
capital distribution (including payment of dividends) or paying
management fees to any entity that controls the institution if it
thereafter would be undercapitalized.
If an institution becomes undercapitalized, it will be generally
restricted from borrowing from the Federal Reserve, increasing its
average total assets, making any acquisitions, establishing any branches
or engaging in any new line of business. An undercapitalized
institution must submit an acceptable capital restoration plan to the
appropriate federal banking agency, which plan must, in the opinion of
such agency, be based on realistic assumptions and be "likely to
succeed" in restoring the institution's capital. In connection with the
approval of such a plan, the holding company of the institution must
guarantee that the institution will comply with the plan, subject to a
limitation of liability equal to a portion of the institution's assets.
If an undercapitalized institution fails to submit an acceptable plan or
fails to implement such a plan, it will be treated as if it is
significantly undercapitalized.
Under FDICIA, bank regulators are directed to require "significantly
undercapitzlized" institutions, among other things, to restrict business
activities, raise capital through a sale of stock, merge with another
institution and/or take any other action which the agency determines
would better carry out the purposes of FDICIA.
Within 90 days after an institution is determined to be "critically
undercapitalized", the appropriate federal banking agency must, in most
cases, appoint a receiver or conservator for the institution or take
such other action as the agency determines would better achieve the
purposes of FDICIA. In general, "critically undercapitalized"
institutions will be prohibited from paying principal or interest on
their subordinated debt and will be subject to other substantial
restrictions.
Under FDICIA, an institution that is not well capitalized is generally
prohibited from accepting brokered deposits. Undercapitalized
institutions are prohibited from offering interest rates on deposits
significantly higher than prevailing rates.
The provisions of FDICIA governing capital regulations became effective
on December 19, 1992. FDICIA also directs that each federal banking
agency prescribe standards for depository institutions and depository
institution holding companies relating to internal controls, information
systems, internal audit systems, loan documentation, credit underwriting,
interest rate exposure, asset growth, a maximum ratio of classified
assets to capital, a minimum ratio of market value to book value for
publicly traded shares (if feasible) and such other standards as the
agency deems appropriate.
Supervision and Regulation (Continued)
FDICIA also contains a variety of other provisions that could affect the
operations of the Corporation, including new reporting requirements,
regulatory standards for real estate lending, "truth in savings"
provisions, the requirement that a depository institution give 90 days'
prior notice to customers and regulatory authorities before closing any
branch, limitations on credit exposure between banks, restrictions on
loans to a bank's insiders and guidelines governing regulatory
examinations.
Pursuant to FDICIA, the FDIC has developed a transitional risk-based
assessment system, under which, beginning on January 1, 1993, the
assessment rate for an insured depository institution varied according to
its level of risk. An institution's risk category will depend upon
whether the institution is well capitalized, adequately capitalized or
less than adequately capitalized and whether it is assigned to Subgroup
A, B or C. Subgroup A institutions are financially sound institutions
with few minor weaknesses; Subgroup B institutions are institutions that
demonstrate weaknesses which, if not corrected, could result in
significant deterioration; and Subgroup C institutions are institutions
for which there is a substantial probability that the FDIC will suffer a
loss in connection with the institution unless effective action is taken
to correct the area of weakness. Based on its capital and supervisory
subgroups, each BIF member institution will be assigned an annual FDIC
assessment rate per $100 of insured deposits.
INTERSTATE BANKING AND BRANCHING LEGISLATION
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "IBBEA") authorizes interstate acquisitions of banks and bank
holding companies without geographic constraint beginning September 29,
1995. Beginning June 1, 1997, the IBBEA also authorizes banks to merge
with banks located in another state provided that neither state has
"opted out" of interstate branching between September 29, 1994 and May
31, 1997. States also may enact legislation permitting interstate merger
transactions prior to June 1, 1997. After acquiring interstate branches
through a merger, a bank may establish additional branches in that state
at the same locations as any bank involved in the merger could have
established branches under state and federal law. In addition, a bank
may establish a de novo branch in another state that expressly permits
the establishment of such branches. A bank that establishes a de novo
interstate branch may thereafter establish additional branches on the
same basis as a bank that has established interstate branches through a
merger transaction.
If a state "opts out" of interstate branching, no bank from another state
may establish a branch in that state, whether through a merger or de novo
establishment. Several states are considering legislation to opt out of
the interstate branching provisions of the IBBEA or, alternatively, to
permit interstate branching prior to the June 1, 1997 statutory effective
date. It is not possible to predict the full impact of these actions on
the Bank or the Corporation until May 31, 1997, the date by which all
such statutes must be adopted.
Competition
The Bank competes with state and national banks located in Mahoning and
Columbiana counties.
The Bank also competes with a large number of other financial
institutions, such as savings and loan associations, insurance companies,
consumer finance companies, credit unions and commercial finance and
leasing companies, for deposits, loans and service business. Money
market mutual funds, brokerage houses and similar institutions provide in
a relatively unregulated environment many of the financial services
offered by the Bank.
Many competitors have substantially greater resources than the Bank. In
the opinion of management, the principal methods of competition are the
rates of interest charged for loans, the rates of interest paid for
funds, the fees charged for services and the availability of services.
Employees
As of December 31, 1995, the Corporation and its subsidiaries had 162
employees. The registrant considers its relations with its employees to
be satisfactory.
Statistical Information
1. Distribution of Assets, Liabilities and Stockholders Equity:
Interest Rates and Interest Differential
<TABLE>
AVERAGE BALANCE SHEETS
The following shows consoldiated average balances of assets, liabilities and
stockholders equity for the years indicated.
<CAPTION>
(In Thousands of Dollars)
ASSETS 1995 1994 1993
<S> <C> <C> <C>
Cash and due from banks 11,437 10,610 10,190
Federal funds sold 13,181 5,721 10,701
Total Cash & Cash Equivalents 24,618 16,331 20,891
Interest Bearing Deposits In Other Banks 0 0 71
Investment Securities:
U.S. Treasury Securities 27,148 28,250 25,571
U.S. Government Agencies and corporations 2,298 2,251 5,032
Obligations of states and political subdivisions 7,266 7,364 6,683
Other securities 9,721 11,851 15,614
TOTAL INVESTMENT SECURITIES 46,433 49,716 52,900
Loans:
Total Loans 221,955 210,148 194,708
Less allowance for possible credit losses 2,897 2,745 2,528
NET LOANS 219,058 207,403 192,180
Property and equipment, net 4,671 4,165 4,698
Other assets 2,379 2,224 2,115
297,159 279,839 272,855
</TABLE>
<TABLE>
AVERAGE BALANCE SHEETS, (Continued)
<CAPTION>
(In Thousands of Dollars)
LIABILITIES AND STOCKHOLDERS EQUITY 1995 1994 1993
<S> <C> <C> <C>
Deposits (All domestic):
Noninterest-bearing demand deposits 20,631 21,224 19,417
Interest-bearing demand deposits 48,267 49,280 45,508
Savings 74,752 80,969 78,292
Time 108,626 90,750 95,568
TOTAL DEPOSITS 252,276 242,223 238,785
Other Borrowings
U.S. Treasury interest-bearing demand note & 804 551 548
other borrowings
Securities sold under repurchase agreements 10,032 8,832 7,955
TOTAL OTHER BORROWINGS 10,836 9,383 8,503
Accrued expenses and other liabilities 2,870 1,012 1,532
TOTAL LIABILITIES 265,982 252,618 248,820
Stockholders equity:
Common stock 3,960 3,739 3,518
Additional paid-in capital 14,121 11,913 10,324
Retained earnings 13,096 11,569 10,193
TOTAL STOCKHOLDERS EQUITY 31,177 27,221 24,035
297,159 279,839 272,855
</TABLE>
ANALYSIS OF NET INTEREST EARNINGS
(In Thousands of Dollars)
<TABLE>
The following schedules show the average amounts of interest-earning assets,
interest-bearing liabilities, the related amounts of interest earned or paid
and the related average yields or interest rates paid for the year indicated:
<CAPTION>
Year ended December 31, 1995 Interest Average
Average Earned Yield or
Outstanding or Paid Rate
<S> <C> <C> <C>
Interest-earning assets:
Investment securities:
U.S. Treasury securities and U.S. 29,446 1,636 5.6%
Govt. agencies and corporations
Obligations of states and political 7,266 670 9.2%
subdivisions (1)
Other securities 9,721 547 5.6%
Total investment securities (1) 46,433 2,853 6.1%
Federal funds sold 13,181 761 5.8%
Total loans (2) 221,955 18,580 8.4%
Total interest-earning assets 281,569 22,194 7.9%
Interest-bearing liabilities:
Interest-bearing demand deposits 48,267 1,009 2.1%
Savings 74,752 1,986 2.7%
Time 108,626 6,205 5.7%
Total 231,645 9,200 4.0%
Other borrowings:
U.S. Treasury interest-bearing demand note & 804 48 6.0%
other borrowings
Securities sold under repurchase agreements 10,032 440 4.4%
Total other borrowings 10,836 488 4.4%
Total interest-bearing liabilities 242,481 9,688 4.0%
Net yield on interest-earning assets (3) 12,506 4.4%
</TABLE>
<TABLE>
ANALYSIS OF NET INTEREST EARNINGS, (Continued)
<CAPTION>
(In Thousands of Dollars)
Year ended December 31, 1994 Interest Average
Average Earned or Yield or
Outstanding Paid Rate
<S> <C> <C> <C>
Interest-earning assets:
Investment securities:
U.S. Treasury securities and U.S. 30,501 1,462 4.8%
Government agencies and corporations
Obligations of states and political 7,364 651 8.8%
subdivisions (1)
Other securities 11,851 700 5.9%
Total investment securities (1) 49,716 2,813 5.6%
Federal funds sold 5,721 234 4.1%
Total loans (2) 210,148 16,911 8.0%
Total interest-earning assets 265,585 19,958 7.5%
Interest-bearing liabilities:
Interest-bearing demand deposits 49,280 1,141 2.3%
Savings 80,969 2,256 2.8%
Time 90,750 4,298 4.7%
Total 220,999 7,695 3.5%
Short-term borrowings:
U.S. Treasury interest-bearing demand note 551 16 2.9%
Securities sold under repurchase agreements 8,832 289 3.3%
Total short-term borrowings 9,383 305 3.3%
Total interest-bearing liabilities 230,382 8,000 3.5%
Net yield on interest-earning assets (3) 11,958 4.5%
</TABLE>
<TABLE>
ANALYSIS OF NET INTEREST EARNINGS, (Continued)
<CAPTION>
(In Thousands of Dollars)
Year ended December 31, 1993 Interest Average
Average Earned or Yield or
Outstanding Paid Rate
<S> <C> <C> <C>
Interest-earning assets:
Interest-bearing bank deposits 71 6 8.5%
Investment securities:
U.S. Treasury securities and U.S. 30,603 1,599 5.2%
Government Agencies and corporations
Obligations of states and political 6,683 598 8.9%
subdivisions (1)
Other securities 15,614 871 5.6%
Total investment securities (1) 52,900 3,068 5.8%
Federal funds sold 10,701 324 3.0%
Total loans (2) 194,708 16,971 8.7%
Total interest-earning assets 258,380 20,369 7.9%
Interest-bearing liabilities:
Interest-bearing demand deposits 45,508 1,257 2.8%
Savings 78,292 2,429 3.1%
Time 95,568 4,764 5.0%
Total 219,368 8,450 3.9%
Short-term borrowings:
U.S. Treasury interest-bearing demand note 548 12 2.2%
Securities sold under repurchase agreements 7,955 276 3.5%
Total short-term borrowings 8,503 288 3.4%
Total interest-bearing liabilities 227,871 8,738 3.8%
Net yield on interest-earning assets (3) 11,631 4.5%
</TABLE>
ANALYSIS OF NET INTEREST EARNINGS, (Continued)
(1) The amounts are reflected on a fully taxable equivalent basis using
the statutory tax rate of 35% in 1995, 1994 and 1993. Tax-free income from
states and political subdivisions, and loans amounted to 156,662 and
278,671, respectively for 1995, 173,707 and 249,416 for 1994, and 212,097
and 182,883 for 1993.
(2) Average outstanding loans include the average balance outstanding of
all loans including non-accruing loans.
(3) Net yield on interest-earning assets is calculated by dividing the
difference between total interest earned and total interest paid by total
interest-earning assets.
RATE AND VOLUME ANALYSIS
<TABLE>
The following tables analyze by rate and volume the dollar amount of changes
in the components of the interest differential:
<CAPTION>
(In Thousands of Dollars)
1995 Change from 1994
Total Change Change Due Change Due
to volume to rate
<S> <C> <C> <C>
Interest Income
Interest-earning assets:
Investment securities:
U.S. Treasury securities and U.S. 174 (56) 230
Government agencies and corporations
Obligations of states and political 19 (9) 28
subdivsions
Other securities (153) (125) (28)
Total investment securities 40 (190) 230
Federal funds sold 527 306 221
Total loans 1,669 974 695
Total interest income 2,236 1,090 1,146
Interest Expense
Interest-bearing demand deposits (132) (29) (103)
Savings (270) (184) (86)
Time 1,907 831 1,076
Total 1,505 618 887
Other borrowings:
U.S. Treasury interest-bearing demand note 32 7 25
& other borrowings
Securities sold under repurchase agreements 151 40 111
Total other borrowings 183 47 136
Total interest expense 1,688 665 1,023
</TABLE>
<TABLE>
RATE AND VOLUME ANALYSIS, (Continued)
<CAPTION>
(In Thousands of Dollars)
1994 Change from 1993
Total Change Due Change Due
Change to Volume to Rate
<S> <C> <C> <C>
Interest Income
Interest-earning assets:
Interest-bearing bank deposits (6) (6) 0
Investment securities:
U.S. Treasury securities and U.S. (137) (7) (130)
Government agencies and corporations
Obligations of states and political 53 69 (16)
subdivisions
Other securities (171) (210) 39
Total investment securities (255) (148) (107)
Federal funds sold (90) (151) 61
Total loans (60) 1,330 (1,390)
Total interest income (411) 1,025 (1,436)
Interest Expense
Interest-bearing demand deposits (116) 118 (234)
Savings (173) 92 (265)
Time (466) (241) (225)
Total (755) (31) (724)
Short-term borrowings:
U.S. Treasury interest-bearing demand note 4 (31) 34
Securities sold under repurchase agreements 13 (4) 18
Total short-term borrowings 17 (35) 52
Total interest expense (738) (66) (672)
<FN>
The amount of change not solely due to rate or volume changes was allocated
between the change due to rate and the change due to volume based on the
relative size of the rate and volume changes.
</FN>
</TABLE>
II. INVESTMENT PORTFOLIO
<TABLE>
The following table sets forth the carrying amount of investment securities
and securities available for sale at the date indicated.
<CAPTION>
(In Thousands of Dollars)
December 31, 1995 December 31, 1994
Securities Securities Securities Securities
Held To Available Held To Available
Maturity For Sale Maturity For Sale
<S> <C> <C> <C> <C>
U.S. Treasury & U.S. 0 31,692 921 28,966
Government Agencies
Obligations of States & 0 6,943 8,013 0
Political Subdivsions
Other Securities 853 7,845 559 9,547
TOTALS 853 46,480 9,493 38,513
</TABLE>
<TABLE>
The following table sets forth the maturities of securities as of December
31, 1995 including weighted average yield, on a taxable equivalent basis:
<CAPTION>
(In Thousands of Dollars)
December 31, 1995
TYPE AND MATURITY GROUPING Weighted
Book Average
Value Yield (1)
<S> <C> <C>
U.S. Treasury & U.S. Government Agencies
Maturing within one year 8,041 5.13%
Maturing after one year but within five years 21,949 5.66%
Maturing after ten years 1,702 6.69%
TOTAL U.S. TREASURY & U.S. GOVERNMENT AGENCIES 31,692 5.58%
Obligations of States and Political Subdivisions
Maturing within one year 763 9.79%
Maturing after one year but within five years 1,273 9.04%
Maturing after five years but within ten years 1,897 8.79%
Maturing after ten years 3,010 9.15%
TOTAL OBLIGATIONS OF STATES & POLITICAL SUBDIVISIONS 6,943 9.09%
Other Securities
Maturing within one year 4,037 5.22%
Maturing after one year but within five years 3,657 6.66%
Maturing after ten years 1,004 5.74%
TOTAL OTHER SECURITIES 8,698 5.89%
</TABLE>
II. INVESTMENT PORTFOLIO (CONTINUED)
(1) The weighted average yield has been computed by dividing the total
interest income adjusted for amortization of premium or accretion of discount
over the life of the security by the par value of the securities outstanding.
The weighted average yield of tax-exempt obligations of states and political
sub-divisions has been calculated on a fully taxable equivalent basis. The
amounts of adjustments to interest which is based on the statutory tax rate
of 35% were $25,398, $38,186 , $56,693 and $93,610 for the four ranges of
maturities.
The Corporation's total investment securities decresased slightly from
$48,006,000 in 1994 to $47,333,000 in 1995. In the same period however, the
net unrealized gains (losses) of the portfolio increased from $(1,064,000) in
1994 to $328,000. This increase in valuation is a result of the general
decline of interest rates in 1995.
During December, 1995, the Corporation transferred its portfolio of
securities held-to-maturity to the available for sale classification. The
transfer was made upon adoption of the Special Report "A Guide To
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities" issued by the Financial Accounting Standards Board.
The amortized cost of the transferred securities was $4,543,695 and the
related unrealized gain was $120,287. Mangement executed this transfer to
give the Corporation more flexibiltiy in managing interest rate risk and
liquidity in future years.
The Coproration's objective in managing the investment portfolio is to
preserve and enhance corporate liquidity through investment in short and
intermediate term securities which are readily marketable and of the highest
credit quality. In general, investment in securities is limited to those
funds the bank feels it has in excess of funds used to satisfy loan demand
and operating considerations.
III. LOAN PORTFOLIO
<TABLE>
The following schedule shows the composition of loans at the dates indicated:
<CAPTION>
(In Thousand of Dollars)
December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Commercial, financial and agricultural 22,677 24,477 24,373 24,572 26,445
Real Estate - Mortgage 98,678 92,773 81,726 73,043 61,490
Installment loans to indivduals 110,805 100,484 97,515 94,432 92,069
Lease Financing 0 0 0 41 117
232,160 217,734 203,614 192,088 180,121
Less Unearned Income 0 0 0 1 27
Total Loans 232,160 217,734 203,614 192,087 180,094
</TABLE>
MATURITIES AND SENSITIVITIES OF LOANS TO INTEREST RATES
<TABLE>
The following schedule sets forth maturities based on remaining scheduled
repayments of principal for various categories of loans listed above as of
December 31, 1995.
<CAPTION>
(In Thousands of Dollars)
1 year 1 to 5 Over 5
or less years years
<S> <C> <C> <C>
Commercial, financial and agricultural 5,066 5,207 12,404
</TABLE>
<TABLE>
The amounts of loans as of December 31, 1995, based on remaining scheduled
repayments of principal are shown in the following table:
<CAPTION>
(In Thousands of Dollars)
Loan Types 1 year Over 1 Total
or less year
<S> <C> <C> <C>
Floating or adjustable rates of interest 2,124 5,942 8,066
Fixed rates of interest 2,942 11,669 14,611
Totals 5,066 17,611 22,677
</TABLE>
Total net loans were $229,248,832 at year-end 1995 compared to $214,987,926
at year-end 1994. This is an increase of $14,260,906, or 6.63%. Loans
comprised 78.8% of the Bank's average earning assets during 1995, compared to
79.1% in 1994. The product mix in the Loan Portfolio shows Commercial Loans
comprising 9.7%, Real Estate Mortgage Loans 42.5% and Installment Loans to
Individuals 47.8% at December 31, 1995, compared with 11.2%, 42.6% and 46.2%,
respectively, at December 31, 1994.
III. LOAN PORTFOLIO (CONTINUED)
Loans contributed 84.6% of total interest income in 1995 compared to 85.7% in
1994. Loan yield was 8.37% in 1995, 49 basis points greater than the average
rate for total earning assets. Management recognizes that while the Loan
Portfolio holds some of the Bank's highest yielding assets, it is inherently
the most risky portfolio. Accordingly, Management attempts to balance credit
risk versus return with conservative credit standards. Management has
developed and maintains comprehensive underwriting guidelines and a loan
review function which monitors credits during and after the approval process.
To minimize risks associated with changes in the borrower's future repayment
capacity, the Bank generally requires scheduled periodic principal and
interest payments on all types of loans and normally requires collateral.
Installment Loans to Individuals increased from $100,484,000 on December 31,
1994 to $110,805,000 on December 31, 1995 which represents a 10.3% increase.
Management continues to target the automobile dealer network to purchase
indirect Installment Loans. Dealer paper was purchased using strict
underwriting guidelines with an emphasis on quality. Indirect Loans comprise
75% of the Installment Loan Portfolio. Net loan losses on the Installment
Loan portfolio were $148,000 in 1995 as compared to $59,000 in 1994. This
represents .14% of total Installments Loans outstanding for 1995 and .06% for
1994.
Real Estate Mortgage Loans increased to $98,678,000 at December 31, 1995, an
increase of 6.4% over 1994. This $98,678,000 includes $18,890,000 of
commercial real estate loans. These loans are all made within the Bank's
primary market area. The corporation originated both fixed rate and
adjustable rate mortgages during 1995. All mortgage loans made in 1995 are
held in the Mortgage Loan portfolio and are not sold on the secondary market.
Fixed rate terms are limited to fifteen year terms while adjustable rate
products are offered with maturities up to thirty years.
Commercial Loans at December 31, 1995 decreased slightly from year-end 1994
with outstanding balances of $22,677,000. This portfolio is primarily
variable rate loans. The Bank's commercial loans are granted to customers
within the immediate trade area of the Bank. The mix is diverse, covering a
wide range of borrowers and business types. The Bank monitors and controls
concentrations within a particular industry or segment of the economy. These
loans are made for purposes such as equipment purchases, capital
improvements, the purchase of inventory, general working capital purposes and
small business lines of credit.
RISK ELEMENTS
<TABLE>
The following table sets forth aggregate loans in each of the following
categories for the years indicated:
<CAPTION>
December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Loans accounted for on a nonaccrual 125 302 349 453 1,599
basis
Loans contractually past due 90 days or 1,384 1,475 2,343 2,232 2,226
more as to interest or principal
payments (not included in nonaccrual
loans above
Loans considered troubled debt 75 0 108 0 113
restructurings (not included in
nonaccrual loans or contractually past
due above)
<FN>
Management is not aware of any loans not included in the table above where
serious doubt exists as to the ability of borrower to comply with the current
loan repayment terms.
</FN>
</TABLE>
<TABLE>
The following shows the amounts of contracted interest income and interest
income reflected in income on loans accounted for on a nonaccrual basis and
loans considered troubled debt restructuring for the periods indicated:
<CAPTION>
Years Ended December 31,
(In Thousands of Dollars)
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Gross interest income that would have 5 21 40 51 115
been recorded if the loans had been
current in accordance with their
original terms
Interest income included in income on 0 0 0 0 0
the loans
<FN>
Non-accrual loans are loans which are 90 days past due and with respect to
which, in Management's opinion, collection of interest is doubtful. These
loans no longer accrue interest and are accounted for on a cash basis. Loans
which are 90 days or more past due but continue to accrue interest are loans
which, in Management's opinion, are well secured and are in the process of
collection.
</FN>
</TABLE>
As of December 31, 1995, there were no concentrations of loans exceeding 10%
of total loans which are not disclosed as a category of loans. As of that
date also, there are no other interest-earning assets that are either
nonaccrual, past due or restructured.
I-19
IV. SUMMARY OF LOAN LOSS EXPERIENCE
<TABLE>
The following is an analysis of the Allowance for Loan and Lease Losses for
the periods indicated:
<CAPTION>
(In Thousands of Dollars)
Years Ended December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Balance at beginning of year 2,746 2,621 2,274 1,630 1,440
Loan losses:
Commercial, financial and (1) (185) (69) (411) (174)
agricultural
Real estate - mortgage 0 0 (16) (63) (51)
Installment loans to individuals (275) (202) (351) (332) (310)
Total Loan Losses (276) (387) (436) (806) (535)
Recoveries on previous loan losses:
Commercial, financial and 44 39 36 36 30
agricultural
Real estate - mortgage 0 0 7 0 0
Installment loans to individuals 127 143 120 104 87
Total recoveries 171 182 163 140 117
Net loan losses (105) (205) (273) (666) (418)
Provisions charged to operations (1) 270 330 620 1,310 608
Balance at end of year 2,911 2,746 2,621 2,274 1,630
Ratio of net loan and lease losses .05% .10% .14% .36% .23%
to average net loans and leases
outstanding
<FN>
(1) The provision for possible credit losses charged to operating expense is
based on management's judgement after taking into consideration all factors
connected with the collectibility of the existing loan portfolio. Management
evaluates the loan portfolio in light of economic conditions, changes in the
nature and volume of the loan portfolio, industry standards and other
relevant factors. Specific factors considered by management in determining
the amounts charged to operating expenses include previous credit loss
experience, that 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.
</FN>
</TABLE>
SUMMARY OF CREDIT LOSS EXPERIENCE, (Continued)
<TABLE>
The allowance for possible loan and lease losses has been allocated according
to the amount deemed to be reasonably necessary to provide for the
possibility of losses being incurred within the following categories of loans
as of the dated indicated.
<CAPTION>
(In Thousands of Dollars)
Years Ended December 31,
1995 1994 1993 1992 1991
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
to to to to to
Total Total Total Total Total
Loans Loans Loans Loans Loans
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, 1,800 9.7% 1,700 11.2% 1,692 11.9% 1,599 12.8% 1,180 14.7%
financial and
agricultural
Real estate - 250 42.5% 200 42.6% 170 40.1% 75 38.0% 50 34.1%
mortage
Installment 861 47.8% 846 46.2% 759 48.0% 600 49.2% 400 51.1%
loans to
individuals
Lease 0 .0% 0 .0% 0 .0% 0 .0% 0 .1%
financing
2,911 100% 2,746 100% 2,621 100% 2,274 100% 1,630 100%
<FN>
The allocation of the allowance as shown in the table above should not be
interpreted as an indication that charge-offs in 1996 will occur in the same
proportions or that the allocation indicates future charge-off trends.
Furthermore, the portion allocated to each loan category is not the total
amount available for future losses that might occur within such categories
since the total allowance is a general allowance applicable to the entire
portfolio.
</FN>
</TABLE>
LOAN COMMITMENTS AND LINES OF CREDIT
In the normal course of business, the banking subsidiary has extended various
commitments for credit. Commitments for mortgages, revolving lines of credit
and letters of credit generally are extended for a period of one month up to
one year. Normally no fees are charged on any unused portion. A fee of two
percent is charged for the issuance of a letter of credit.
DEPOSITS (All Domestic)
Deposits represent the Corporation's principal source of funds. The deposit
base consists of demand deposits, savings and money market accounts and other
time deposits. During 1995, the Corporation's total deposits grew from
244,302,000 in 1994 to $267,955,000 in 1995, which equates to an increase of
9.7% . Most of this growth occurred in time deposits, which increased from
$91,984,000 in 1994 to $119,467,918 in 1995. This increase was fueled by
customer demand as the result of substantial increases in rates paid on time
deposits that the banking industry experienced during 1995. Some of this
increase was the result of a movement by customers from the lower yielding
savings deposits, which saw a decrease in balances in 1995 of 5.24%. The
Corporation also offered a special rate on certificates of deposit in the
first quarter of 1995 that generated approximately $12,000,000 in new
accounts.
In September of 1995, the Corporation acquired the fixed assets, certain
loans, deposits and related accruals of the Leetonia, Ohio branch of Bank One.
This transaction resulted in an increase of approximately $6 million in
deposits.
AVERAGE DEPOSITS
<TABLE>
The following table shows the classification of average deposits for the
periods indicated:
<CAPTION>
(In Thousands of Dollars)
Average Balance 1995 1994 1993
<S> <C> <C> <C>
Noninterest-bearing demand deposits 20,631 21,224 19,417
Interest-bearing demand deposits 48,267 49,280 45,508
Savings deposits 74,752 80,969 78,292
Time deposits 108,626 90,750 95,568
Total average deposits 252,276 242,223 238,785
</TABLE>
<TABLE>
The following shows the average rate paid on the following deposit categories
for the periods indicated:
<CAPTION>
Type 1995 1994 1993
<S> <C> <C> <C>
Interest-bearing demand deposits 2.09% 2.32% 2.76%
Savings deposits 2.66% 2.79% 3.10%
Time deposits 5.71% 4.74% 4.98%
</TABLE>
A summary of time deposits of $100,000 or more as of December 31, 1995 by
maturity range is shown below:
3 months or less remaining until maturity 2,317
3 to 6 months remaining until maturity 3,523
6 to 12 months remaining until maturity 8,804
Over 12 months remaining until maturity 3,776
Total outstanding 18,420
VI. Return on Equity and Assets
<TABLE>
Information for the years indicated as follows:
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Net income to average total assets 1.20% 1.22% 1.16%
Net income to average equity 11.45% 12.58% 12.85%
Dividends per share to net income per share 36.04% 34.96% 33.94%
Average equity to average total assets 10.49% 9.73% 8.81%
</TABLE>
VII. SHORT-TERM BORROWINGS
Securities sold under repurchase agreements generally mature within one to
ninety days from the transaction date.
The details of these borrowings (in thousands) relating to the year 1995
are as follows:
Balance at December 31: 9,847
Weighted average interest rate at year end 4.45%
Maximum amount outstanding at any months end 11,850
Average amount outstanding during the year 9,498
Weighted average interest rate during the year 4.39%
VIII. INTEREST RATE SENSITIVITY
<TABLE>
<CAPTION>
(In Thousands of Dollars)
December 31, 1995 December 31, 1994 December 31,1993
Total Within Total Within Total Within
3 month 12 month 3 month 12 month 3 month 12 month
<S> <C> <C> <C> <C> <C> <C>
Loans 27,433 73,388 29,941 74,965 30,254 73,507
Securities 2,001 12,640 4,016 18,189 3,002 18,205
Federal funds sold 14,630 14,630 2,983 2,983 6,063 6,063
Total Interest-Sensitive 44,064 100,658 36,940 96,137 39,319 97,775
Assets
Total Interest-Sensitive 55,706 103,701 53,912 77,970 50,417 77,158
Liabilities
Total Senstivity Gap (11,642) (3,043) (16,972) 18,167 (11,098) 20,617
Ratio of Interest-Sensitive 0.79 0.97 0.69 1.23 0.78 1.27
Assets to Interest-Sensitive
Liabilities
</TABLE>
VIII INTEREST RATE SENSITIVITY (CONTINUED)
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.
Core deposits and loans with non-contractual maturities are distributed or
spread among the two repricing categories based upon historical patterns of
repricing which are reveiwed at least annually.
Item 2. Properties
Farmers National Banc Corp.'s Properties
The Farmers National Banc Corp. owns no property. Operations are conducted
at 20 South Broad Street, Canfield, Ohio.
Bank Property
The Main Office is located at 20 S. Broad Street, Canfield, Ohio. The other
eight offices of the bank are:
Austintown Office 22 N. Niles-Canfield Rd., Youngstown, Ohio
Lake Milton Office 17817 Mahoning Avenue, Lake Milton, Ohio
Cornersburg Office 3619 S. Meridian Rd., Youngstown, Ohio
Colonial Plaza Office Colonial Plaza, Canfield, Ohio
Western Reserve Office 102 W. Western Reserve Rd., Youngstown, Ohio
Salem Office 1858 E. State Street, Salem, Ohio
Columbiana Office 340 State Rt. 14, Columbiana, Ohio
Leetonia Office 16 Walnut St., Leetonia, Ohio
The bank owns the Main Office, Austintown, Cornersburg, Lake Milton, Salem,
Columbiana and Leetonia Offices. The Colonial Plaza and Western Reserve
offices are occupied under operating leases expiring at various times to
1999. All of the leases provide for renewal options in favor of the bank.
Item 3. Legal Proceedings
There are no material pending legal proceedings to which the registrant or
its subsidiary is a party or of which any of its property is subject,
except proceedings which arise in the ordinary course of business. In the
opinion of managment, pending legal proceedings will not have a material
affect on the consolidated financial position of the registrant or its
subsidiary.
Item 4. Submission of Matters to a Vote of Security Holders
There are no matters submitted to a vote of security holders through the
solicitation of proxies or otherwise during the fourth quarter of 1995.
PART II
Information relating to Items 5, 6, 7 & 8 is set forth in the registrant's
1995 Annual Report to Shareholders under the captions and on the pages set
forth below and is incorporated herein by reference.
Pages in 1995
Annual Report
Item No. Caption in the Annual Report to Shareholders to Shareholders
Item 5. Market for Registrants Common Stock and
Related Stockholders Matters 20
Item 6. Selected Financial Data 10-11
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12-19
Item 8. Financial Statements and Supplementary Data 21-36
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosures NONE
PART III
Item 10. Directors and Executive Officers of the Registrant
Information relating to Directors is set forth in the registrant's definitive
proxy statement, which was used in connection with its annual meeting of
shareholders which was held March 28, 1996. The proxy statement is attached
hereto.
Executive Officers of the Registrant
The names, ages and positions of the executive officers as of March 1, 1996
Name Age Position Held
William D. Stewart 66 President & Secretary, Director
Richard L. Calvin 69 Exec. Vice Pres. & Treasurer,
Director
Frank L. Paden 45 Exec. Vice President
Carl D. Culp 32 Controller
Adrianne R. Kempers 38 Auditor
Officers are elected annually by the Board of Directors immediately following
the annual meeting of shareholders. The term of office for all the above
executive officers is for the period ending with the next annual meeting.
Principal Occupation and Business Experience of Executive Officers
Mr. William D. Stewart has served as President and Secretary since the
inception of registrant on March 31, 1983, President of the Bank since 1972
and has held various other executive positions with the Bank.
Mr. Richard L. Calvin has served as Executive Vice President and Treasurer of
the registrant since its inception on March 31, 1983, Executive Vice
President of the bank since 1972 and has held various other executive
positions with the Bank.
Mr. Frank L. Paden has served as Executive Vice President of the registrant
since March 1995, Executive Vice President of the Bank since March 1995 and
has held various other executive positions with the Bank.
Mr. Carl D. Culp has served as Controller of the registrant since November
1995 and as Controller of the Bank since November 1995.
Ms. Adrianne R. Kempers has served as Auditor of the registrant since
November 1995 and as Auditor of the Bank since November 1995.
Part III, (Continued)
Item 11. Executive Compensation
Information regarding this item is set forth in the registrant's definitive
proxy statement, which was used in connection with its annual meeting of
shareholders which was held March 28, 1996. The proxy statement is attached
hereto.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information relating to this item is set forth in the registrant's definitive
proxy statement, which was used in connection with its annual meeting of
shareholders which was held March 28, 1996. The proxy statement is attached
hereto.
Item 13. Certain Relationships and Related Transactions
Information regarding this item is set forth in the registrant's definitive
proxy statement, which was used in connection with its annual meeting of
shareholders which was held March 28, 1996. The proxy statement is attached
hereto.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)1. Financial Statements
Included in Part II of this report
Item 8., Financial Statements and Supplementary Datais
set forth in the registrant's 1995 Annual Report to
Shareholders and is incorporated by reference in Part II
of this report
(a)2. Financial Statement Schedules Page
Accountant's consent IV-2
All schedules are omitted because they are
not applicable.
(a)3. Exhibits
The exhibits filed or incorporated by reference as a part of
this report are listed in the Index of Exhibits, which
appears at page IV-4 hereof and is incorporated herein by
reference.
(b) Report on Form 8-K
No reports on Form 8-K were filed for three months ended
December 31, 1995.
INDEPENDENT AUDITORS' CONSENT
FARMERS NATIONAL BANC CORP.:
We hereby consent to the incorporation by reference in this Registration
Statement of our report dated January 26, 1996, relating to the consolidated
financial statements of Farmers National Banc Corp. and subsidiary.
/S/ HILL, BARTH & KING, INC.
Warren, Ohio
March 15, 1996
SIGNATURES
Pursuant to the requirements of Section 13 or 15(D) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the under signed, thereunto duly authorized.
Farmers National Banc Corp. Farmers National Banc Corp.
by___________________________________ by__________________________________
William D. Stewart Carl D. Culp
President & Chief Executive Officer Controller & Chief Financial Officer
________________________ President & Director March 25, 1996
William D. Stewart
________________________ Director March 25, 1996
Benjamin R. Brown
________________________ Executive Vice President March 25, 1996
Richard L. Calvin and Director
________________________ Director March 25, 1996
Joseph O. Lane
________________________ Director March 25, 1996
David C. Myers
________________________ Director March 25, 1996
Edward A. Ort
________________________ Executive Vice President March 25, 1996
Frank L. Paden and Director
________________________ Director March 25, 1996
Ronald V. Wertz
INDEX TO EXHIBITS
The following exhibits are filed or incorporated by references as part of
this report:
3.1. Not applicable.
3.2. Not applicable.
4.1. The registrant agrees to furnish to the Commission upon request
copies of all instruments not filed herewith defining the rights
of holders of long-term debt of the registrant and its
subsidiaries.
9.1. Not applicable.
10.1. Not applicable.
11.1. Not applicable.
12.1. Not applicable.
13.1. Annual Report to security holders (filed herewith).
18.1. Not applicable.
19.1. Not applicable.
22.1. Subsidiaries of the registrant (filed herewith).
23.1. Not applicable.
24.1. Not applicable.
25.1. Not applicable.
27.1 Financial Data Schedule (filed herewith)
28.1. Not applicable.
99.1 Definitive Proxy Statement (filed herewith)
Copies of any exhibits will be furnished to shareholders upon written
request. Request should be directed to Richard L. Calvin, Executive Vice
President, Farmers National Banc Corp., 20 S. Broad Street, Canfield, Ohio
44406.
<TABLE>
Highlights of 1995
Selected Financial Data (In Thousands except Per Share Data)
<CAPTION>
For the Year 1995 1994 Percent Change
<S> <C> <C> <C>
Net Income 3,576 3,424 +4.45%
Return on Average Assets 1.20% 1.22% -1.64%
Return on Average Equity 11.45% 12.58% -8.98%
Per Share
Net Income 2.22 2.22 0%
Book Value 20.66 18.57 +11.25%
Balances at Year-End
Assets 314,229 284,445 +10.46%
Securities 47,333 48,006 -1.40%
Net Loans 229,249 214,988 +6.63%
Deposits 267,955 244,302 +9.68%
Stockholders Equity 33,976 28,915 +17.50%
Shares Outstanding 1,645 1,577 +5.65%
Cash Dividends 1,268 1,180 +7.46%
<FN>
* Adjusted to reflect weighted outstanding shares and adjusted for stock
dividends.
</FN>
</TABLE>
Table of Contents
Highlights of 1995....................1
Report to Stockholders........... .2-4
Officers................................5
Board of Directors................... 6
Description of Business........... 7
Selected Financial Data.......... 8-11
Management's Discussion....... 12-19
Stock Prices and Dividends..... 20
Accountants' Report................ 21
Financial Data......................22-36
Form 10- K
A copy of the Annual Report filed with the Securities and Exchange Commission
will be available on April 1, 1996 without charge upon written request to:
Mr. Richard L. Calvin, Treasurer
Farmers National Banc Corp.
20 South Broad Street P.O. Box 555
Canfield, Ohio 44406
Mailing address and phone:
Farmers National Banc Corp.
20 South Broad Street P.O. Box 555
Canfield, Ohio 44406
Phone: (330) 533-3341
The Annual Meeting of the Shareholders of Farmers National Banc Corp. will be
held at Colonial Catering at 429 Lisbon St., Canfield, Ohio on Thursday,
March 28, 1996 at 4:30 p.m.
Presidents Letter to Stockholders
In this era of continuing consolidation of financial institutions and the
resulting creation of "superregional banks", your Bank's performance
validates the role, necessity and vitality of community banks. Our growth
demonstrates that community banks that retain traditional standards of
personal service, while adapting to evolving financial and technological
trends, are well-positioned for the 21st Century.
Your Corporation completed an exceptionally prosperous year in 1995.
Corporate assets reached record levels of $314,000,000 which represented an
11% increase over the previous year. Net income was $3,577,000, or $2.22 per
common share. Return on Average Assets was 1.20% and Return on Average
Equity was 11.45%. 1995 marked the thirteenth consecutive year that net
income has increased from the previous year. The higher earnings were a
direct result of excellent asset growth, deposit and loan growth, active
capital management, proper management of interest rate risk and control of
overhead expenses. Net income for 1995 represents a 4.45% increase over
1994.
Management embarked on numerous projects in 1995 in order to better position
the bank for the future. Understandably, these changes had some impact on
the overall earnings of the Corporation.
Spurred by the consolidation of two separate bank mergers that closed two
banking offices in Columbiana, Farmers National Bank decided to select
Columbiana as our next location to expand our branch office network.
In October 1994, we received regulatory authority to open a new branch office
in the Village of Columbiana. In December 1994, we opened a full banking
office in a temporary trailer facility, while the plans for our new permanent
location were being finalized.
Construction for this new 5,300 square foot branch bank started in July 1995.
This state of the art facility was designed with an emphasis on giving the
customer a community banking office to transact all financial transactions
conveniently and confidentially. I am glad to report that on January 8,
1996, we relocated to our permanent location in the Oakmont Plaza on Rt. 14
in Columbiana. We are excited about being a part of this fine community and
look forward to a long and rewarding relationship.
Two Pictures (Exterior & Interior) of Newly built Columbiana Branch
In April 1995, Farmers National Bank successfully bid for the Purchase and
Assumption of the Leetonia Branch Banking Office from Bank One, Youngstown
NA. Farmers purchased the banking office, real estate, furniture and
fixtures and all deposit accounts. This $6,700,000 transaction was
consummated in September 1995.
Farmers National Bank was able to retain the entire branch employee staff
from Bank One which helped make this conversion be completed with the least
amount of inconvenience to our new customers. This additional office gives
Farmers National Bank nine community offices offering full banking services.
Picture of Newly Acquired Leetonia Branch
The third project that was completed in 1995 focused on technology. The Bank
has strategically positioned itself to better prepare for the information
highway and a new age of expanding, technology-driven, financial
opportunities.
The Bank's total communications system between the main office and all
branches was upgraded. These improvements included the installation of
personal computer workstations along with various software enhancements.
As we move into 1996, we plan to complete the second phase of this project
which will be to install a new and improved delivery system for customer
information and the implementation of a platform automation system for both
loans and new accounts. These new systems will enable the bank to be more
efficient in delivering new products and services.
Risk Management is being stressed by all regulatory agencies as a way to
better manage your Bank. Throughout 1995, we continued to move forward to
put the bank in a better position to manage and monitor these various risks.
The Bank was approved as a member of the Federal Home Loan Bank of
Cincinnati. This membership gives us accessibility to various financial
tools to be used in asset liability management, interest rate risk management
and liquidity.
Your bank has Capital ratios that far exceed the regulatory guidelines. As
of December 31, 1995, the Bank's Tier 1 Risk Based Capital Ratio was 15% as
compared to the 8% minimum level required by the Regulators. The
Stockholders Equity grew to $33,976,000 in 1995 which represents an increase
of 17.5% over 1994 or $5,061,000. In addition to net income, this capital
account has grown from a very well participated dividend reinvestment plan
along with the optional cash contributions that was received from the
dividend reinvestment participants. During 1995, dividend reinvestors made
cash contributions in excess of $1,150,000 which was used to purchase
additional common stock. Cash dividends amounted to $.80 per share. The
Board of Directors also approved and paid a 2% stock dividend in October
1995. This strong capital position reaffirms the Bank's commitment to the
community and affords the Bank more opportunity to pursue additional
acquisitions, expansion, and the development of new products and services.
The year-end market value of Farmers National Banc Corp. stock is listed at
$39.50 as compared to $31.00 per share in December 1994, which equates to a
27% increase in market value over the past year. Book value per share
increased by 11% over this same period.
Asset quality continues to be a top priority for management as we monitor
credit risk. Net charge-offs to average loans was .05% for 1995, more
favorable than our industry peer group ratio of .14%. Management gives
credit to this favorable ratio due to a more stable local economy and sound
credit underwriting policies.
Loan interest income and loan fee income represents approximately 80% of the
gross income generated from the Bank during 1995. The loan mix of our Bank
continues to put more emphasis on the retail market. Loan growth in 1995 was
$15,000,000 or 7% with all of the growth concentrated in retail installment
loans and residential one-to-four family home mortgage loans.
Farmers has historically been an active participant in the indirect
automobile dealer financing market. These types of loans represent 36% of
the banks overall loan portfolio. In order to become more efficient, the
indirect loan operations and approval process have been centralized. This
$82,000,000 portfolio is managed by Mr. Alfred F. Ridel, Assistant Vice
President/Installment Loan Manager and is under the direct supervision of Mr.
Roy A. Jackson, Assistant Vice President/Indirect Lending Administration.
A result of your Bank's growth was a need for additional work space, making
it necessary for management to expand into additional facilities near our
main office in Canfield. During 1995, the bank relocated various departments
into buildings located on South Broad Street -- directly south of the main
banking office. The Compliance, Loan Review, Electronic Funds Transfer,
Training, and the Mastercard/Visa operations departments were relocated to
these new facilities. In addition, the bank designed a formal
training/meeting room available for bank use.
Several personnel changes have been made in 1995 to fill vacancies caused
from retirements and reassignments. Mr. Carl D. Culp was appointed
Controller for the Bank and Farmers National Banc Corp. Mr. Culp had
previously been the bank's Auditor. Ms. Adrianne R. Kempers joined the Bank
in 1995 and was recently appointed as Auditor to replace Culp. Other changes
included Mr. Bradley S. Henderson who was transferred from our branch system
and was appointed Assistant Vice President for Branch Administration and
Security Officer; Mr. Larry A. Staub, Assistant Cashier relocated as Branch
Manager from our Cornersburg Office to our Western Reserve Office; and Mr.
Robert L. Rozeski, who joined the Bank in 1995, has been appointed Branch
Manager at the Cornersburg Office.
We would also like to extend a special appreciation to Gene A. Dean and
Doris K. Paskey, whom both retired in December 1995. Mr. Dean, a prominent
banker in this community for over thirty years, played a critical role in the
financial management as Controller of Farmers for the past eighteen years.
Ms. Paskey served Farmers as a Branch Manager, consumer loan officer and most
recently a mortgage loan officer. Both will be greatly missed. We we wish
them well and thank them for being a part of our Bank.
In closing, I encourage you to review Management's Discussion of the
financial condition of the Bank along with the Accountant's Report. I would
like to thank my associates for their professionalism, commitment and highly
productive work during this past year. I look forward to their continued
strong efforts in the year ahead. I also want to express my appreciation to
our customers for their continued business relationship, and to our Board of
Directors for their counsel and guidance on behalf of the shareholders.
The common sense manner of conducting business that is our heritage, leavened
by an openness to future trends in banking, positions your Bank for continued
growth.
Sincerely,
William D. Stewart
President
Picture of Employees in New Technology Training Session Officers
Officers of the Farmers National Banc Corp.
William D. Stewart Richard L. Calvin
President & Secretary Executive Vice President & Treasuer
Frank L. Paden Carl D.Culp Adrianne R. Kempers
Executive Vice President Controller Auditor
Executive Officers of the Farmers National Bank of Canfield
William D. Stewart Richard L. Calvin
President Executive Vice President & Cashier
Frank L. Paden Carl D. Culp Donald F. Lukas
Executive Vice President & Sr. Loan Officer Controller Vice President
Data Processing
Senior Officers of Farmers National Bank of Canfield
Anthony F. Peluso Bradley S. Henderson
Assistant Vice President Human Resources Asst Vice President Branch Admin.
Mark L. Graham Alfred F. Ridel
Asst. Vice President Comm'l Loans Asst. Vice President Consumer Loans
Roy A. Jackson Charles L. Burgoyne
Asst. Vice President Indirect Loans Asst. Vice President Loan Review
Barbara C. Fisher Adrianne R. Kempers
Assistant Cashier Deposit Operations Auditor
Officers and Managment of the Farmers National Bank of Canfield
Andrew A. Baird Assistant Cashier
Susan E. Miller Assistant Cashier
Phyllis A. Welton Assistant Cashier
Joseph E. Chapman Assistant Cashier
Clare F. Baldwin Assistant Cashier
Larry A. Staub Assistant Cashier
Joanie Orr Accounting Officer
Gary J. Rosati In-House Legal Counsel
Dorothy J. Weeden Assistant Cashier
Pamela J. Cleghorn Manager
Larry E. White Asst. Vice President
Michele M. Ossoff Assistant Manager
Geraldine A. Gbur Assistant Cashier
Jane C. Logan Assistant Manager
Robert L. Rozeski Manager
Barbara J. Sitler Assistant Manager
Merle C. Garritano Assistant Cashier
Daniel B. Cerroni, Assistant Cashier
Lynnita J. Kaschak Loan Officer
Janine Cox Credit Administration
Kay A. Hedl, Manager
Keith A. Leonard Assistant Cashier
Patricia C. Rosko Assistant Cashier
Dennis S. Vitt Assistant Cashier
Marjorie I. Yerman Assistant Manager
BOARD OF DIRECTORS
Picture of Board of Directors
William D. Stewart, President and Secretary of Farmers National Banc Corp;
President of the Farmers National Bank of Canfield
Richard L. Calvin, Executive Vice President and Treasurer of Farmers National
Banc Corp; Executive Vice President and Cashier of the Farmers National Bank
of Canfield
Frank L. Paden, Executive Vice President of Farmers National Banc Corp;
Executive Vice Presidnet and Senior Loan Officer of the Farmers National Bank
of Canfield
Benjamin R. Brown, President - Castruction Co.
Joseph O. Lane, President - Lane Funeral Homes, Inc. and Lane Life Corp.
David C. Myers, Co-Owner Myers Equipment Co.
Edward A. Ort, President - Ort Furniture Manufacturing Co.
Ronald V. Wertz, President - Boyer Insurance Co.
Brief Description of Business
Farmers National Banc Corp.
Farmers National Banc Corp. (the "Corporation") is a one-bank holding company
formed under the Bank Holding Company Act of 1956, as amended, operating
under regulations of the Board of Governors of the Federal Reserve System.
Its principal subsidiary is The Farmers National Bank of Canfield, which was
acquired March 31, 1983. Presently the Corporation and its subsidiary operate
in one industry, domestic banking.
The Corporation conducts no business activities except for investment in
securities permitted under the Bank Holding Company Act. The Board of
Directors of the Corporation and the Bank are identical. The officers of the
Corporation are William D. Stewart, President and Secretary, Richard L.
Calvin, Executive Vice President and Treasurer, Frank L. Paden, Executive
Vice President, Carl D. Culp, Controller and Adrianne R. Kempers, Auditor.
Bank holding companies are permitted under Regulation Y of the Board of
Governors of the Federal Reserve System to engage in other activities
considered closely related to banking such as leasing and mortgage banking.
The Corporation has no other subsidiaries engaged in such activities at this
time.
The Farmers National Bank of Canfield
The Bank is a full service national bank engaged in commercial and retail
banking with the exception of trust services. The Bank's commercial banking
services include checking accounts, savings accounts, time deposit accounts,
commercial, mortgage and installment loans, night depository, automatic
teller machines, safe deposit boxes, money order services, travelers checks,
government bond sales, food stamp redemption, utility bill payments,
MasterCard and Visa Credit Cards, and other miscellaneous services normally
offered by commercial banks. In addition, the Bank offers discount brokerage
service through a correspondent bank.
The Bank's main office is located at 20 South Broad Street, Canfield, Ohio.
Business is conducted at a total of nine (9) offices located in the counties
of Mahoning and Columbiana in Ohio. As a national banking association, the
Bank is a member of the Federal Reserve System, subject to supervision and
regulation of the Comptroller of the Currency and its deposits are insured by
the Federal Deposit Insurance Corporation to the extent provided by law. The
Bank is affected also by the monetary and fiscal policies of the United
States and of various regulatory agencies.
The Bank competes with state and national banks located in Mahoning and
Columbiana counties.
The Bank also competes with a large number of other financial institutions,
such as savings and loan associations, insurance companies, consumer finance
companies, credit unions and commercial finance and leasing companies, for
deposits, loans and service business. Money market mutual funds, brokerage
houses and similar institutions provide, in a relatively unregulated
environment, many of the financial services offered by the Bank. In the
opinion of management, the principal methods of competition are the rates of
interest charged for loans, the rates of interest paid for funds, the fees
charged for services and the availability of services.
As of December 31, 1995, the Corporation and its subsidiary had 162
employees. The bank considers its relations with its employees to be
satisfactory.
Picture of Exterior of Main Office
Bar Graph Depicting Total Deposits in Thousands
Year Amount
1991 225,569
1992 231,671
1993 240,440
1994 244,302
1995 267,955
Bar Graph Depicting Total Assets in Thousands
Year Amount
1991 250,496
1992 265,440
1993 275,385
1994 284,445
1995 314,229
Bar Graph Depicting Return on Average Assets
Year Rate
1991 1.04%
1992 1.10%
1993 1.16%
1994 1.22%
1995 1.20%
Bar Graph Depicting Net Income in Thousands
Year Amount
1991 2,518
1992 2,825
1993 3,160
1994 3,424
1995 3,576
Bar Graph Depiciting Net Loans in Thousands
Year Amount
1991 178,464
1992 189,813
1993 200,993
1994 214,988
1995 229,249
Bar Graph Depicting Net Income Per Share
Year Amount
1991 1.83
1992 1.98
1993 2.13
1994 2.22
1995 2.22
Bar Graph Depicting Efficency Ratio
Year Rate
1991 60.29%
1992 56.62%
1993 58.98%
1994 59.66%
1995 59.63%
<TABLE>
Bar Graph Depicting Dividends and Earnings Per Share
<CAPTION>
Year Dividends Earnings
Per Share Per Share
<S> <C> <C>
1991 0.68 1.83
1992 0.71 1.98
1993 0.75 2.13
1994 0.79 2.22
1995 0.80 2.22
</TABLE>
Bar Graph Depicting Common Stock - Book Value
Year Amount
1991 15.7
1992 16.44
1993 17.8
1994 18.57
1995 20.66
Bar Graph Depiciting Common Stock - Market Value
Year Amount
1991 13.25
1992 16.00
1993 21.00
1994 29.50
1995 39.50
<TABLE>
FARMERS NATIONAL BANC CORP. AND SUBSIDIARY
Selected Financial Data (in Thousands except Per Share Data)
<CAPTION>
For the Years Ending 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Summary of Earnings
Total Interest Income (including fees on loans) 21,961 19,731 20,166 21,464 22,328
Total Interest Expense 9,688 8,000 8,738 10,273 12,741
Net Interest Income 12,273 11,731 11,428 11,191 9,587
Provision for Loan Losses 270 330 620 1,310 609
Total Other Income 1,342 1,357 1,298 1,271 1,081
Total Other Expense 8,119 7,755 7,473 7,013 6,432
Income Before Federal Income Taxes 5,226 5,003 4,633 4,139 3,627
Federal Income Taxes 1,650 1,579 1,473 1,312 1,109
NET INCOME 3,576 3,424 3,160 2,825 2,518
Per Share Data (Note)
Net Income 2.22 2.22 2.13 1.98 1.83
Cash Dividends Paid 0.80 0.79 0.75 0.71 0.68
Book Value at Year-End 20.66 18.57 17.80 16.44 15.70
Balances At Year-End
Total Assets 314,229 284,445 275,385 265,440 250,496
Earning Assets 294,122 268,724 260,965 248,484 235,492
Total Deposits 267,955 244,302 240,440 231,671 225,569
Net Loans 229,249 214,988 200,993 189,813 178,464
Total Stockholder's Equity 33,976 28,915 25,996 22,698 19,978
Average Balances
Total Assets 297,159 279,839 273,257 256,160 242,049
Total Stockholder's Equity 31,177 27,221 24,557 21,390 18,708
Significant Ratios
Return on Average Assets (ROA) 1.20% 1.22% 1.16% 1.10% 1.04%
Return on Average Equity (ROE) 11.45% 12.58% 12.85% 13.12% 13.46%
Average Earning Assets/Average Assets 94.75% 94.91% 94.55% 94.24% 94.33%
Net Loans/Deposits 85.56% 88.00% 83.59% 81.93% 79.12%
Allowance for Loan Losses/Total Loans 1.25% 1.26% 1.29% 1.18% 0.91%
Allowance for Loan Losses/Nonperforming Loans 192.87% 154.63% 97.35% 84.69% 42.61%
Efficiency Ratio 59.63% 59.66% 58.98% 56.62% 60.29%
Cash Dividends as a Percentage of Net Income 35.46% 34.45% 33.41% 32.83% 33.09%
<FN>
Note: Per share data is based on weighted average shares outstanding
adjusted for stock dividends.
</FN>
</TABLE>
<TABLE>
SELECTED FINANCIAL DATA
Average Balance Sheets and Related Yields and Rates
<CAPTION>
(In Thousands of Dollars)
Years Ended December 31, 1995 1994 1993
EARNING ASSETS AVERAGE INTEREST RATE AVERAGE INTEREST RATE AVERAGE INTEREST RATE
BALANCE BALANCE BALANCE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans 221,955 18,580 8.37% 210,148 16,911 8.05% 194,705 16,971 8.72%
Taxable securities 39,167 2,183 5.57% 42,352 2,162 5.10% 46,217 2,470 5.34%
Tax-exempt securities 7,266 670 9.22% 7,364 651 8.84% 6,683 608 9.10%
Federal funds sold 13,181 761 5.77% 5,721 234 4.09% 10,701 324 3.03%
Interest earning deposits 0 0 71 6 8.45%
Total Earning Assets 281,569 22,194 7.88% 265,585 19,958 7.51% 258,377 20,379 7.89%
NONEARNING ASSETS
Cash and due from banks 11,437 10,610 10,595
Premises and equipment 4,671 4,165 4,250
Allowance for Loan Losses (2,897) (2,745) (2,528)
Other assets 2,379 2,224 2,563
Total Assets 297,159 279,839 273,257
INTEREST-BEARING LIABILITIES
Time deposits 108,626 6,205 5.71% 90,750 4,298 4.74% 95,568 4,764 4.98%
Savings deposits 74,752 1,986 2.66% 80,969 2,256 2.79% 78,292 2,429 3.10%
Demand deposits 48,267 1,009 2.09% 49,280 1,141 2.32% 45,508 1,257 2.76%
Repurchase agreements 10,032 440 4.39% 8,832 289 3.27% 7,955 276 3.47%
Borrowings 804 48 5.97% 551 16 2.90% 551 12 2.18%
Total Interest-Bearing Liabilities 242,481 9,688 4.00% 230,382 8,000 3.47% 227,874 8,738 3.83%
NONINTEREST -BEARING LIABILITIES
Demand deposits 20,631 21,224 19,415
Other liabilities 2,870 1,012 1,411
Stockholders' equity 31,177 27,221 24,557
Total Liabilities and Stockholders' Equity 297,159 279,839 273,257
Net interest income 12,506 11,958 11,641
Net interest income to earning assets 4.44% 4.50% 4.51%
<FN>
Fully taxable equivalent basis computed at 35% in 1995, 1994 and 1993.
</FN>
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations
The Corporation's net income totaled $3,576,229 during 1995, an increase of
4.45% from $3,423,950 for 1994. On a per share basis, net income was $2.22
for 1995 as compared to $2.22 and $2.13 for 1994 and 1993, respectively.
Common comparative ratios for results of operations include the return on
average assets and return on average stockholders equity. For 1995, the
return on average equity was 11.45% as compared to 12.58% for 1994 and 12.85%
for 1993. The return on average assets was 1.20% for 1995 as compared to
1.22% and 1.16% for 1994 and 1993, respectively.
These results of operations are the direct result of management's concerted
efforts to control expenses and increase interest from our interest bearing
assets. Overall growth in deposits and the use of those funds in the loan
portfolio, particularly installment and mortgage loans, together with control
over the bank's general expenses have produced these results.
Net Interest Income
Net interest income, the principal source of the Corporation's earnings,
represents the difference between interest income on interest-earning assets
and interest expense on interest-bearing liabilities. For 1995, net interest
income increased $542,000 or 4.62% over 1994. The increase for 1994 was
$303,000 or 2.65% over 1993. Interest-earning assets averaged $281,569,000
during 1995 representing a 6.02% increase over 1994, while 1994 averaged
$265,585,000 or a 2.79% increase over 1993.
The Corporation finances its earning assets with a combination of
interest-bearing and interest-free funds. The interest-bearing funds are
composed of deposits, short-term borrowings and long-term debt. Interest
paid for the use of these funds is the second factor in the net interest
income equation. Interest-free funds, such as demand deposits and
stockholders equity, require no interest expense and, therefore, contribute
significantly to net interest income.
The profit margin, or spread, on invested funds is a key performance measure.
The Corporation monitors two key performance indicators - net interest spread
and net interest margin. The net interest spread represents the difference
between the average rate earned on interest-earning assets and the average
rate paid on interest-bearing liabilities. The net interest margin represents
the overall profit margin: net interest income as a percentage of total
interest-earning assets. This performance indicator gives effect to interest
earned for all investable funds including the substantial volume of
interest-free funds. For 1995 the net interest margin, measured on a fully
taxable equivalent basis, totaled 4.44% in comparison to 4.50% and 4.51% for
1994 and 1993, respectively. The decrease in net interest income margin in
1995 was due in part to the interest rate environment applied to the
Corporation's liability sensitive balance sheet and in part to the increased
deposit volume, as presented in the Asset/Liability section of this
discussion.
Total interest income was $21,961,000 for 1995 as compared to $19,731,000 and
$20,166,000 for 1994 and 1993, respectively. The 11.3% increase in interest
income is largely attributed to a 6.6% increase in outstanding loan balances
and an increase in the interest rate earned from 8.05% to 8.37%. Net loans
were $229,249,000 at year-end 1995 as compared to $214,988,000 at year-end
1994.
Total interest expense amounted to $9,688,000 for 1995, representing a 21.10%
increase from 1994 while interest expense of $8,000,000 for 1994 represents a
8.45% decrease from 1993. The increase in interest expense is primarily due
to an increase in the level of time deposits and the average rate paid on
these deposits. The average balances for time deposits increased by 20% over
1994 while the interest rate paid on those deposits increased by 97 basis
points.
<TABLE>
Return on Equity and Assets
<CAPTION>
Information for the years indicated as follows: 1995 1994 1993
<S> <C> <C> <C>
Net income to average total assets 1.20% 1.22% 1.16%
Net income to average equity 11.45% 12.58% 12.85%
Dividends per share to net income per share 36.04% 34.96% 33.94%
Average equity to average total assets 10.49% 9.73% 9.01%
</TABLE>
Other Income
Other income decreased $15,000 or 1.11% from 1994. Total other income for
1994 increased $59,000 or 4.56% from 1993. Management will continue to try
to improve our other income contribution to our net income.
Other Expenses
Total other expenses for 1995 increased 4.69% over 1994 as compared to an
increase of 3.78% from 1994 over 1993. The increase is due to increased
depreciation, salary and other employee benefits, state and local taxes, and
other operating expenses as compared to 1994 and 1993. Every effort is
being made to control other expenses of the bank. These expenses are
increasing each year due primarily to the increased volume of the operations
of the bank. Management will continue to hold these increases to a minimum.
Income Taxes
Federal income taxes are computed using the appropriate effective tax rates
for each period. The effective tax rates are less than the statutory tax
rate primarily due to nontaxable interest and dividend income. The effective
federal income tax rate was 32% for the periods ending 1995, 1994 and 1993.
Asset/Liability Management
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 yields on 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
Corporation, the management of interest rate sensitivity focuses on the
structure of these assets and liabilities with respect to maturity and
repricing characteristics. Balancing 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.
Although the Corporation does not match each of its interest sensitive assets
against specific interest sensitive liabilities, it does monitor total assets
and liabilities to determine the overall interest rate position over various
time frames.
As of year-end 1995, the Corporation had a negative gap at both three month
and twelve month time periods. This liability sensitive position typically
produces a favorable contribution to earnings during a period of decreasing
rates. Although in general rates may rise, the Corporation has the capacity
to take steps to minimize the negative effect of such movement.
With the largest amount of interest sensitive assets and liabilities maturing
within twelve months, the Corporation monitors this area most closely. The
Corporation does not emphasize interest sensitivity analysis beyond this time
frame because it believes various unpredictable factors could result in
erroneous interpretations. Early withdrawal of deposits, prepayments of
loans and loan delinquencies are some of the factors that could have such an
effect. In addition, changes in rates on interest sensitive assets and
liabilities may not be equal, which could result in a change in net margin.
<TABLE>
Interest Rate Sensitivity
<CAPTION>
(In Thousands of Dollars)
December 31, 1995 December 31, 1994 December 31, 1993
Total Within Total Within Total Within
3 month 12 month 3 month 12 month 3 month 12 month
<S> <C> <C> <C> <C> <C> <C>
Total Interest-Sensitive Assets 44,064 100,658 36,940 96,137 39,319 97,775
Total Interest-Sensitive Liabilities 55,706 103,701 53,912 77,970 50,417 77,158
Total Sensitivity Gap (11,642) (3,043) (16,972) 18,167 (11,098) 20,617
Ratio of Interest-Sensitive Assets to .79% .97% .69% 1.23% .78% 1.27%
Interest-Sensitive Liabilities
</TABLE>
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.
Liquidity
The Corporation maintains, in the opinion of management, liquidity
sufficient to satisfy depositors' requirements and meet the credit needs of
customers. The Corporation depends on its ability to maintain its market
share of deposits as well as acquiring new funds. The Corporation's
ability to attract deposits and borrow funds depends in large measure on
its profitability, capitalization and overall financial condition.
Principal sources of liquidity for the Corporation include assets
considered relatively liquid such as short- term investment securities,
federal funds sold and cash and due from banks.
Along with its liquid assets, the Corporation has additional sources of
liquidity available which help to insure that adequate funds are available
as needed. These other sources include, but are not limited to, loan
repayments, 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 three major domestic banks. At December 31,
1995, the Corporation had not borrowed against these lines of credit.
Management feels that its liquidity position is more than adequate and will
continue to monitor the position on a monthly basis. The Corporation also
has additional borrowing capacity with the Federal Home Loan Bank of
Cincinnati, as well as access to the Federal Reserve Discount Window, which
provides an additional source of funds. Cash flows generated from
operating activities increased 5.3% to $5,263,000 in 1995 compared to
$4,997,000 in 1994. This increase is a result of an increase in total
interest received, as explained in the Net Interest Income section of this
report. Cash flows used in investing activities increased 17% to
$15,681,000 in 1995 compared to $13,407,000 in 1994. This is a result of
increased loan demand, as net loans increased 6.6%. Cash flows provided
from financing activities amount to $25,305,000 as compared to $6,093,000
in 1994. These funds were the result of increased levels of time deposits.
Loan Portfolio
Outstanding loans increased $14,425,000 or 7% in 1995, with the most growth
occurring primarily in the installment loan portfolio. While the interest
rates remained relatively stable, homeowners continued to take advantage of
refinancing opportunities throughout the year. Real estate mortgage loan
increased from $92,773,000 in 1994 to $98,678,000 in 1995 which represents a
6% increase over the past year.
The bank's consumer loan portfolio represents approximately 47% of the banks
total loans outstanding. These loans, which consist of automobile loans,
home improvement loan, home equity lines of credit and credit card plans
reported a 10% growth in 1995. Consumers continue to take advantage of the
low interest rate environment with loans to purchase new automobiles and make
capital improvements to their homes.
The commercial loan balances outstanding have remained relatively stable over
the past few years. All commercial loans are made to local small businesses
for various purposes such as equipment purchases, capital improvements, the
purchase of inventory or general working capital needs. This portfolio of
$22,677,000 is primarily variable rate loans that play an important role in
the banks monitoring of rate sensitive assets.
<TABLE>
Maturities and Sensitivities of Loans to Interest Rates
The following schedule shows the composition of loans and the percentage of
loans in each category at the dates indicated:
<CAPTION>
(In Thousands of Dollars)
Years Ended December 31, 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, Financial and Agricultural 22,677 9.7% 24,477 11.2% 27,373 11.9% 24,572 12.8% 26,445 14.7%
Real Estate-Mortgage 98,678 42.5% 92,773 42.6% 81,726 40.1% 73,043 38.0% 61,490 34.1%
Installment Loans to Individuals 110,805 47.8% 100,484 46.2% 97,515 48.0% 94,432 49.2% 92,069 51.1%
Lease Financing 0 .0% 0 .0% 0 .0% 41 .0% 117 .1%
232,160 100.0% 217,734 100.0% 203,614 100.0% 192,088 100.0% 180,121 100.0%
Less Unearned Income 0 0 0 1 27
Total Loans 232,160 100.0% 217,734 100.0% 203,614 100.0% 192,087 100.0% 180,094 100.0%
</TABLE>
<TABLE>
The following schedule sets forth maturities based on remaining scheduled
repayments of principal for various categories of loans listed above as of
December 31, 1995:
<CAPTION>
(In Thousands of Dollars)
Types of Loans 1 Year 1 to 5 Over 5
or less years years
<S> <C> <C> <C>
Commercial, Financial and Agricultural 5,066 5,207 12,404
</TABLE>
<TABLE>
The amounts of commercial, financial and agricultural loans as of December
31, 1995, based on remaining scheduled repayments of principal, are shown in
the following table:
<CAPTION>
(In Thousands of Dollars)
Loan Sensitivities 1 Year Over 1 Total
or less year
<S> <C> <C> <C>
Floating or Adjustable Rates of Interest 2,124 5,942 8,066
Fixed Rates of Interest 2,942 11,669 14,611
Total Loans 5,066 17,611 22,677
</TABLE>
<TABLE>
Summary of Loan Loss Experience
The following is an analysis of the allowance for loan and lease losses for
the periods indicated:
<CAPTION>
(In Thousands of Dollars)
Years Ended December 31, 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Balance at Beginning of Year 2,746 2,621 2,274 1,630 1,440
Loan Losses
Commercial, Financial and Agricultural (1) (185) (69) (411) (174)
Real Estate-Mortgage 0 0 (16) (63) (51)
Installent Loans to Individuals (275) (202) (351) (332) (310)
Total Loan Losses (276) (387) (436) (806) (535)
Recoveries on previous Loan Losses:
Commercial, Financial and Agricultural 44 39 36 36 30
Real Estate- Mortgage 0 0 7 0 0
Installment Loans to Individuals 127 143 120 104 87
Total Recoveries 171 182 163 140 117
Net Loan Losses (105) (205) (273) (666) (418)
Provision Charged to Operations (1) 270 330 620 1,310 608
Balance at End of Year 2,911 2,746 2,621 2,274 1,630
Ratio of Net Loan and Lease Losses to Average .05% .10% .14% .36% .23%
Net loans and leases outstanding
<FN>
(1) The provisions for possible credit losses charged to operating
expense is based on management's judgment after taking into consideration
all factors connected with the collectability of the existing loan
portfolio. Management evaluates the loan portfolio in light of economic
conditions, changes in the nature and volume of the loan portfolio,
industry standards and other relevant factors. 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.
</FN>
</TABLE>
Provisions charged to operations decreased from $330,000 in 1994 to $270,000
in 1995. The balance in the allowance for credit losses has increased
substantially since 1991 to $2,910,000 or 1.25% of loans at December 31,1995.
The allowance balance improved by $165,000 and was aided by the lowest dollar
amount of net loan losses since 1991. Management attributes this decrease in
net loan losses to an overall improvement in the local economy and sound
credit underwriting standards set forth in lending policies. The allowance
for possible loan and lease losses has been allocated according to the amount
deemed to be reasonably necessary to provide for the possibility of losses
being incurred within the following categories of loans as of the dates
indicated:
<TABLE>
<CAPTION>
(In Thousands of Dollars)
December 31, 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Commercial, Financial and Agricultural 1,800 1,700 1,692 1,599 1,180
Real Estate-Mortgage 250 200 170 75 50
Installment Loans to Individuals 861 846 759 600 400
2,911 2,746 2,621 2,274 1,630
<FN>
The allocation of the allowance as shown in the table above should not be
interpreted as an indication that charge-offs in 1996 will occur in the
same proportions or that the allocation indicates future charge-off trends.
Furthermore, the portion allocated to each loan category is not the total
amount available for future losses that might occur within such categories
since the total allowance is a general allowance applicable to the entire
portfolio.
</FN>
</TABLE>
Loan Commitments and Lines of Credit
In the normal course of business, the banking subsidiary has extended
various commitments for credit. Commitments for mortgages, revolving lines
of credit and letters of credit generally are extended for a period of one
month up to one year. Normally no fees are charged on any unused portion.
A fee of two percent is charged for the issuance of a letter of credit.
<TABLE>
Risk Elements
The following table sets forth aggregate loans in each of the following
categories for the years indicated:
<CAPTION>
(In Thousands of Dollars)
December 31, 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Loans Accounted for on a Nonaccrual Basis 125 302 349 453 1,599
Loans Contractually Past Due 90 Days or More 1,384 1,475 2,343 2,232 2,226
as to Interest or Principal Payments (Not
Included in Nonaccrual Loans Above)
Loans Considered Troubled Debt Restructuring 75 0 108 0 113
(Not Included in Nonaccrual Loans or
Contractually Past Due Above)
<FN>
Management is not aware of any loans not included in the table above
where serious doubt exists as to the ability of the borrower to comply
with the current loan repayment terms.
</FN>
</TABLE>
Non-accrual loans are loans which are 90 days past due and with respect
to which, in Management's opinion, collection of interest is doubtful. These
loans no longer accrue interest and are accounted for on a cash basis.
Loans which are 90 days or more past due but continue to accrue interest
are loans which, in Management's opinion, are well secured and are in the
process of collection.
As of December 31, 1995, there were no concentrations of loans
exceeding 25% of total loans which are not disclosed as a category of loans.
As of that date also, there were no other interest-earning assets that are
either nonaccrual, past due or restructured.
The following shows the amounts of contracted interest income and interest
income reflected in income on loans accounted for on a nonaccrual basis and
loans considered troubled debt restructuring for the periods indicated:
<TABLE>
<CAPTION>
(In Thousands of Dollars)
Years ended December 31, 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Gross Interest Income That Would have been 5 21 40 51 115
Recorded if the Loans had been Current in
Accordance with Their Original Terms
Interest Income Included in Income on the Loans 0 0 0 0 0
</TABLE>
Investment Securities
The investment securities portfolio decreased during 1995. Holdings of
U. S. Treasury and U. S. Government Agency securities totaled
$31,692,000 on December 31, 1995. Obligations of states and political
subdivisions totaled $6,943,000 at year-end. Other securities at year-end
totaled $8,730,000. Our objective in managing the investment portfolio is
to preserve and enhance corporate liquidity through investment in short and
intermediate term securities which are readily marketable and of the highest
credit quality.
In general investment in securities is limited to those funds the bank feels
it has in excess of funds used to satisfy loan demand and operating
considerations.
The following table shows the book value of investment securities by type of
obligation at the dates indicated:
<TABLE>
<CAPTION>
(In Thousands of Dollars)
December 31, 1995 1994 1993
<S> <C> <C> <C>
U.S. Treasury and Government Agencies 31,692 29,887 31,694
Obligations of States and Political Subdivisions 6,943 8,013 6,326
Other Securities 8,698 10,106 13,269
47,333 48,006 51,289
</TABLE>
<TABLE>
A summary of securities held at December 31, 1995, classified according to
maturity and including weighted average yield for each range of maturities is
set forth below:
<CAPTION>
(In Thousands of Dollars)
December 31, 1995
Types and Maturity Grouping Book Weighted
Value Avg. Yield (1)
<S> <C> <C>
U.S. Treasury and U.S. Government Agencies Securities:
Maturing Within One Year 8,041 5.13%
Maturing After One Year But Within Five Years 21,949 5.66%
Maturing After Five Years But Within Ten Years 0 0
Maturing After Ten Years 1,702 6.69%
Total U.S. Treasury and U.S. Government Agencies Securities 31,692 5.58%
Obligations of States and Political Subdivision:
Maturing Within One Year 763 9.79%
Maturing After One Year But Within Five Years 1,273 9.04%
Maturing After Five Years But Within Ten Years 1,897 8.79%
Maturing After Ten Years 3,010 9.15%
Total Obligations of States and Political Subdivisions 6,943 9.09%
Other Securities:
Maturing Within One Year 4,037 5.22%
Maturing After One Year But Within Five Years 3,657 6.66%
Maturing After Five Years But Within Ten Years 0 0
Maturing After Ten Years 1,004 5.74%
Total Other Securities 8,698 5.89%
<FN>
(1) The weighted average yield has been computed by dividing the total
interest income adjusted for amortization of premium or accretion of
discount over the life of the security by the par value of the securities
outstanding. The weighted average yield of tax-exempt obligations of
states and political subdivisions has been calculated on a fully taxable
equivalent basis. The amounts of adjustments to interest which are based
on the statutory tax rate of 34% were $25,398, $38,186, $56,693 and
$93,610 for the four ranges of maturities.
</FN>
</TABLE>
Deposits
Deposits represent the Corporation's principal source of funds. The deposit
base consists of demand deposits, savings and money market accounts and
other time deposits.
<TABLE>
Average Deposits
The following table shows the classification of average deposits for the
periods indicated:
<CAPTION>
(In Thousands of Dollars)
Average Balances on December 31, 1995 1994 1993
<S> <C> <C> <C>
Noninterest-Bearing Demand Deposits 20,631 21,227 19,418
Interest-Bearing Demand Deposits 48,267 49,281 45,507
Savings Deposits 74,752 80,969 78,292
Time Deposits 108,626 90,750 95,568
Total Average Deposits 252,276 242,227 238,785
</TABLE>
<TABLE>
The following shows the average rate paid on the following deposit
categories for the periods indicated:
<CAPTION>
Years ended December 31, 1995 1994 1993
<S> <C> <C> <C>
Interest-Bearing Demand Deposits 2.09% 2.32% 2.76%
Savings 2.66% 2.79% 3.10%
Time Deposits 5.71% 4.74% 4.98%
</TABLE>
A summary of time deposits of 100,000 or more as of December 31, 1995 by
maturity range is shown below:
(In Thousand of Dollars)
3 Months or Less Remaining Until Maturity 2,317
3 to 6 Months Remaining Until Maturity 3,523
6 to 12 Months Remaining Until Maturity 8,804
Over 12 Months Remaining Until Maturity 3,776
Total Outstanding 18,420
The steady increase in total deposits over the years reflects managements'
efforts to continue to insure the growth of the bank and to maintain a viable
banking institution. During 1995, the bank has attracted deposits due to its
effort to remain competitive in the local community as to rates paid for all
types of deposits particularly in the time deposit area. The bank has been
at or near the top in interest rates paid to depositors throughout 1995.
Capital Resources
The capital management function is a continuous process which consists of
providing capital for both the current financial position and the
anticipated future growth of the Corporation. Important to this process is
internal equity generation, particularly through earnings retention.
Internal capital generation is measured as the percent of return on equity
multiplied by the percent of earnings retained. The return on average
equity was 11.45%, 12.58% and 12.85% for 1995, 1994 and 1993, respectively.
Total cash dividends declared in 1995 represented 35.42% of net income as
compared to 34.45% in 1994 and 33.41% in 1993. The resulting internal
equity growth percentage amounted to 7.39% in 1995 as compared to 8.25% in
1994 and 8.56% in 1993.
The bank subsidiary, as a national bank, is subject to the dividend
restrictions set forth by the Comptroller of the Currency. The Comptroller
of the Currency must approve declaration of any dividends in excess of the
sum of profits for the current year and retained net profits for the
preceding two years (as defined). As of December 31,1995, the bank
subsidiary had $6,681,283 of retained earnings available for distribution
and $9,638,228 not available for distribution to the company as dividends
without prior approval of the Comptroller of the Currency. The bank
subsidiary is also required to maintain minimum amounts of capital to
total "risk weighted" assets, as defined by the banking regulators. At
December 31, 1995, the bank subsidiary is required to have a minimum Tier 1
and Total Capital ratios of 4.00% and 8.00%, respectively. The bank
subsidiary's actual Tier 1 and Total Capital ratios at that date were
15.58% and 16.84% respectively. The bank subsidiary's leverage ratio at
December 31, 1995 was 10.69%.
Audit
The Company's internal auditor, who is responsible to the Audit Committee
of the Board of Directors, reviews the results and performance of
operating units within the Company for adequacy, effectiveness and
reliability of accounting and reporting systems, as well as managerial and
operating controls.
The Audit Committee consists of four nonemployee directors whose duties
include: consideration of the adequacy of the internal controls of the
Company and the objectivity of financial reporting; inquiry into the
number, extent, adequacy and validity of regular and special audits
conducted by independent public accountants and the internal auditors; the
recommendation to the Board of Directors of independent accountants to
conduct the normal annual audit and special purpose audits as may be
required; and reporting to the Board of Directors the Committee's findings
and any recommendation for changes in scope, methods or procedures of the
auditing functions. The Audit Committee held four meetings during 1995.
Compliance
There are many activities in today's banking that are subject to
compliance regulations. It is a very large task to implement the many
requirements of compliance and to determine that all requirements are met.
For example, many of the forms used in opening deposit accounts and loan
accounts must subscribe to standards of format that ensures that
information solicited from customers and information to be disclosed to
customers is in conformance with regulations that are designed to protect
and to inform the customer.
It is an ongoing task to absorb the many changes that take place during
the course of the year and to implement them in the banking system. To do
this, it is necessary to provide training to bank personnel. The training
segment of compliance has become extremely important in recent years.
Scarcely a month goes by without some form of formal training taking place
in our bank. During the past year, the Compliance Department moved into
new quarters adjacent to the Main Office. The move has afforded good
facilities in which to hold training sessions. Quite often, two to three
sessions are required to reach all persons who need training due to
conflicting schedules.
From training, compliance objectives follow to monitoring or testing
procedures. Monitoring can focus on a broad range of compliance issues
and procedures, or it can be applied to limited areas. Often, the extent
of monitoring relates to the complexity or length of the regulation. Upon
the completion of monitoring projects, areas where training is needed may
be revealed. The cycle of training, to monitoring, to training is ever
continuing.
It is our bank's mission to keep our employees well informed. We urge
them to ask questions and to use initiative in becoming informed, as
compliance regulations have become very complex. This all translates into
efficient and better service for our customers.
Stock Prices and Dividends
Information as to Stock Prices and Dividends
The common stock of the Corporation is traded mostly through a local
brokerage firm and some private sales. Set forth in the accompanying table
are per share prices at which common stock of the Corporation has actually
been purchased and sold in transactions during the periods indicated, to
the knowledge of the Corporation. Also included in the table are dividends
per share paid on the outstanding common stock and any stock dividends
paid. As of December 31, 1995, there were 1,358 shareholders of record of
common stock.
<TABLE>
Market and Dividend Summary
<CAPTION>
Dividend Date High Low Dividend
<S> <C> <C> <C>
March 1994 44.00 41.75 0.38
April 1994 2-for-1 stock split
June 1994 24.00 21.25 0.20
September 1994 25.50 23.50 0.20
October 1994 2% Stock Dividend
December 1994 31.00 25.00 0.20
March 1995 32.00 31.00 0.20
June 1995 34.25 32.00 0.20
September 1995 36.50 34.25 0.20
October 1995 2% Stock Dividend
December 1995 39.50 36.50 0.20
<FN>
Note: Per share data is adjusted to reflect a 2-for-1 stock split in
1994.
</FN>
</TABLE>
<TABLE>
Bar Graph Depicting Common Stock Book and Market Value
<CAPTION>
Year Book Value Market Value
<S> <C> <C>
1991 15.70 13.25
1992 16.44 16.00
1993 17.80 21.00
1994 18.57 29.50
1995 20.66 39.50
</TABLE>
Hill, Barth & King, Inc.
Certified Public Accountants
255 East Market Street
Warren, Ohio 44481
Telephone (216) 373-1737
FAX (216) 373-1861
January 25, 1996
Board of Directors
Farmers National Banc Corp.
Canfield, Ohio
Independent Auditors' Report
We have audited the accompanying consolidated balance sheets of Farmers
National Banc Corp. and subsidiary as of December 31, 1995 and 1994 and
the related consolidated statements of income, stockholders equity and
cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Farmers National Banc Corp. and subsidiary as of December
31, 1995 and 1994 and the consolidated results of their operations and
their consolidated cash flows for each of the three years in the period
ended December 31, 1995 in conformity with generally accepted accounting
principles.
Hill, Barth & King, Inc.
Certified Public Accountants
<TABLE>
CONSOLIDATED BALANCE SHEETS
Farmers National Banc Corp. and Subsidiary
December 31, 1995 and 1994
<CAPTION>
ASSETS 1995 1994
<S> <C> <C>
Cash and due from banks 14,766,117 11,525,724
Federal funds sold 14,630,000 2,983,000
TOTAL CASH AND CASH EQUIVALENTS 29,396,117 14,508,724
Securities available for sale - NOTE B 46,479,885 38,513,343
Securities held to maturity (fair value of 0 9,122,505
$9,434,831 for 1994) - NOTE C
Other securities 852,900 370,500
Loans - NOTE D 232,159,670 217,734,346
Less allowance for credit losses - NOTE E 2,910,838 2,746,420
NET LOANS 229,248,832 214,987,926
Premises and equipment, net - NOTE F 5,563,232 4,121,382
Other assets 2,687,806 2,820,447
314,228,772 284,444,827
LIABILITIES AND STOCKHOLDERS EQUITY
Deposits (all domestic):
Noninterest-bearing 23,586,312 24,598,424
Interest-bearing - NOTE H 244,368,461 219,703,940
TOTAL DEPOSITS 267,954,773 244,302,364
Short-term borrowings:
U.S. Treasury interest-bearing demand note 748,470 792,011
Securities sold under repurchase agreements 9,847,119 9,211,919
- NOTE I
TOTAL SHORT-TERM BORROWINGS 10,595,589 10,003,930
Other liabilities and deferred credits 1,702,145 1,223,266
TOTAL LIABILITIES 280,252,507 249,388,904
Commitments and contingent liabilities - NOTE J
Stockholders equity - NOTE K:
Common Stock - $2.50 par value per share 4,111,398 3,892,480
Authorized 2,400,000 shares; issued and
outstanding 1,644,559 in 1995 and
1,556,992 in 1994.
Additional paid-in capital 16,059,118 13,300,977
Retained earnings 13,591,018 12,385,429
Unrealized appreciation (depreciation) on debt 214,731 (663,619)
securities, net of applicable income taxes
TOTAL STOCKHOLDERS EQUITY 33,976,265 28,915,267
314,228,772 284,444,827
<FN>
See accompanying notes to consolidated financial statements
</FN>
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
Farmers National Banc Corp. and Subsidiary
Years Ended December 31, 1995,1994 and 1993
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans 18,580,412 16,911,283 16,971,479
Interest and dividends on securities:
Taxable interest 2,154,188 2,141,376 2,451,230
Nontaxable interest 435,332 423,123 394,980
Dividends 25,987 20,527 18,415
Interest on deposits with banks 3,447 0 5,844
Interest on federal funds sold 761,257 234,334 324,171
TOTAL INTEREST INCOME 21,960,623 19,730,643 20,166,119
INTEREST EXPENSE
Deposits 9,199,760 7,694,588 8,450,275
Short-term borrowings 488,110 305,297 287,967
TOTAL INTEREST EXPENSE 9,687,870 7,999,885 8,738,242
NET INTEREST INCOME 12,272,753 11,730,758 11,427,877
Provision for credit losses 270,000 330,000 620,000
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 12,002,753 11,400,758 10,807,877
OTHER INCOME
Service charges on deposit accounts 972,325 940,077 933,791
Investment security gains (losses) (197) 88,327 56,509
Other operating income 370,261 329,179 308,096
TOTAL OTHER INCOME 1,342,389 1,357,583 1,298,396
13,345,142 12,758,341 12,106,273
OTHER EXPENSES
Salaries and employee benefits - NOTE L 4,127,380 3,748,069 3,543,575
Net occupancy expense of premises 540,242 466,006 464,014
Furniture and equipment expense, including 463,097 540,810 524,105
depreciation
Federal deposit insurance 283,869 540,895 529,407
State and local taxes 439,918 389,988 347,613
Other operating expenses 2,264,407 2,069,623 2,064,535
TOTAL OTHER EXPENSES 8,118,913 7,755,391 7,473,249
INCOME BEFORE FEDERAL INCOME TAXES 5,226,229 5,002,950 4,633,024
FEDERAL INCOME TAXES - NOTE M 1,650,000 1,579,000 1,473,000
NET INCOME 3,576,229 3,423,950 3,160,024
NET INCOME PER SHARE 2.22 2.22 2.13
<FN>
See accompanying notes to consolidated financial statements
</FN>
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
Farmers National Banc Corp. and Subsidiary
Years Ended December 31, 1995, 1994, and 1993
<CAPTION>
Years ended December 31, 1995 1994 1993
<S> <C> <C> <C>
COMMON STOCK
Balance at beginning of year 3,892,480 3,652,140 3,451,745
31,956 shares issued as a 2% stock dividend in 1995, 79,890 75,525 70,980
30,210 in 1994 and 14,196 in 1993, including
fractional shares
55,611 shares sold in 1995, 57,973 in 1994 and 139,028 164,815 129,415
25,833 in 1993.
Balance at end of year 4,111,398 3,892,480 3,652,140
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year 13,300,977 11,260,621 9,893,789
Excess proceeds over par value of shares sold 1,735,549 1,360,631 877,070
Excess of fair value over par value of shares 1,022,592 679,725 489,762
issued as stock dividends, including
fractional shares
Balance at end of year 16,059,118 13,300,977 11,260,621
RETAINED EARNINGS
Balance at beginning of year 12,385,429 10,896,312 9,352,933
Net income 3,576,229 3,423,950 3,160,024
Dividends declared:
$.80 cash dividends per share in 1995, (1,268,158) (1,179,583) (1,055,903)
$.98 in 1994 and $1.50 in 1993.
Stock dividends (1,102,482) (755,250) (560,742)
Balance at end of year 13,591,018 12,385,429 10,896,312
UNREALIZED APPRECIATION (DEPRECIATION) ON DEBT SECURITIES
Balance at beginning of year (663,619) 187,006 0
Net change in unrealized appreciation (depreciation) 878,350 (850,625) 187,006
on debt securities, net of income taxes.
Balance at end of year 214,731 (663,619) 187,006
TOTAL STOCKHOLDERS EQUITY AT END OF YEAR 33,976,265 28,915,267 25,996,079
<FN>
See accompanying notes to consolidated financial statements
</FN>
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Farmers National Banc Corp. and Subsidiary
Years Ended December 31, 1995, 1994, and 1993
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received 22,784,609 20,697,876 21,242,839
Fees and commissions received 1,342,586 1,291,231 1,260,112
Interes paid (9,399,584) (8,006,238) (8,869,251)
Cash paid to suppliers and employees (7,792,000) (7,294,773) (7,106,554)
Income taxes paid (1,685,000) (1,690,726) (1,803,603)
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,263,411 4,997,370 4,723,543
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of investment 18,140,000 14,123,630 0
securities available for sale
Proceeds from maturities of investment 2,343,086 5,966,905 20,072,870
securities held to maturity
Proceeds from sales of securities available 1,999,687 4,081,530 0
for sale
Proceeds from sales of securities held to 0 0 3,061,033
maturity
Purchase of other securities and securities (18,114,267) (18,414,362) (17,526,244)
available for sale
Purchase of investment securities held to (2,639,035) (4,041,914) (10,528,788)
maturity
Net increase in loans made to customers (16,079,770) (14,615,389) (12,004,114)
Purchase of premises and equipment (1,582,773) (343,288) (163,685)
Purchase of other real estate 0 (164,433) (128,851)
Proceeds from sale of other real estate 252,291 0 752,569
NET CASH USED IN INVESTING ACTIVITIES (15,680,781) (13,407,321) (16,465,210)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits, NOW (3,148,523) 3,339,998 11,704,054
accounts and savings accounts
Net increase (decrease) in time deposits 27,746,071 2,227,314 (5,121,729)
Dividends paid (1,167,362) (999,957) (1,007,330)
Proceeds from sale of common stock 1,874,577 1,525,446 1,006,485
NET CASH PROVIDED BY FINANCING ACTIVITIES 25,304,763 6,092,801 6,581,480
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 14,887,393 (2,317,150) (5,160,187)
CASH AND CASH EQUIVALENTS
Beginning of year 14,508,724 16,825,874 21,986,061
End of year 29,396,117 14,508,724 16,825,874
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES
Net income 3,576,229 3,423,950 3,160,024
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 379,012 379,224 375,036
Amortization and accretion 966,775 958,468 898,412
Provision for credit losses 270,000 330,000 620,000
Deferred income taxes (12,636) (197,613) (83,533)
Gain on sale of investment securities 197 (88,327) (56,509)
Other 83,834 191,668 (189,887)
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,263,411 4,997,370 4,723,543
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
Supplemental schedule of noncash investing
and financing activities:
Unrealized loss on available for sale 67,517 1,005,950 34,016
securities
Transfer of investment securities 4,663,982 0 39,827,141
available for sale
Land exchanged for other borrowing 250,000 0 0
<FN>
See accompanying notes to consolidated financial statements
</FN>
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Farmers National Banc Corp. and Subsidiary
December 31,1995, 1994, and 1993
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principals of Consolidation: The consolidated financial statements include
the accounts of the company and its wholly-owned subsidiary, The Farmers'
National Bank of Canfield. All significant intercompany balances and
transactions have been eliminated.
Nature of Operations: The company's wholly owned subsidiary, The Farmers
National Bank of Canfield, operates under a national bank charter and
provides full banking services. As a national bank, the Bank is subject to
regulation of the Office of the Comptroller of the Currency and the Federal
Deposit Insurance Corporation. The area served by the Bank is the
northeastern region of Ohio and service is provided at nine (9) locations.
Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents: Cash and cash equivalents include cash on hand,
due from banks and federal funds sold. Generally, federal funds are
purchased and sold for one-day periods.
Securities Available for Sale: Securities available for sale are carried at
fair value. Fair value is based on market price if available. If market
price is not available, fair value is based on broker quotations. Deferred
income taxes are provided on any unrealized appreciation or decline in value.
Such appreciation or decline in value, net of deferred taxes, is reflected as
a separate component of stockholders equity. The company does not utilize a
trading account.
Securities Held to Maturity: Securities held to maturity are carried at
amortized cost. Premiums and discounts on debt securities held to maturity
are amortized to expense and accreted to income over the life of the
securities using the interest method. These securities are classified as
held to maturity based on management's intent and the company's ability to
hold such securities to maturity.
Other Securities: Other securities include stock in the Federal Reserve Bank
and the Federal Home Loan Bank and are recorded at amortized cost.
Loans: Interest on loans is accrued and credited to income based on the
principal amount outstanding. The accrual of interest income is ordinarily
discontinued when a loan becomes 90 days past due as to principal or
interest; however, management may elect to continue the accrual when the
estimated net realizable value of collateral is sufficient to cover the
principal balance and the accrued interest. When interest accruals are
discontinued, interest credited to income in the current year is reversed.
When the loan is determined to be uncollectible, interest accrued in prior
years and the principal are charged to the allowance for loan losses. This
policy applies to the bank's installment, real estate and commercial and
industrial loans.
Loan Origination Fees and Costs: Loan origination fees and certain direct
origination costs are capitalized and recognized as an adjustment of the
yield on the related loan.
Impaired Loans: Impaired loans are classified according to the Financial
Accounting Standards Board Statement 114, "Accounting by creditors for
impairment of loans". Under this standard, the 1995 reserve for loan losses
related to loans that are considered impaired would be based on discounted
cash flows using the loan's initial effective interest rate and the fair
value of the collateral for certain collateral dependent loans. At the
present time, management did not have any loans it considers to be impaired.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Farmers National Banc Corp. and Subsidiary
December 31,1995, 1994, and 1993
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Allowance for Credit Losses: the allowance for credit losses represent the
amounts which, in management's judgment, are adequate to absorb charge-offs,
of existing loans which may become uncollectible. The allowance is base on
management's judgment taking into consideration past loss experience, reviews
of individual credits, current economic conditions and other factors
considered relevant by management at the financial statement date. While
management uses the best information available to establish the allowance,
future adjustments to the allowance may be necessary, which may be material,
if economic conditions differ substantially from the assumptions used in
estimating the allowances. If additions to the original estimate of the
allowance for credit losses are deemed necessary, they will be reported in
earning in the period in which they become reasonably estimable.
Premises and Equipment: Premises and equipment are stated at cost.
Depreciation is computed on the straight-line method.
Income Taxes: Income taxes, based on filing a consolidated return with the
company's subsidiary, are provided for amounts currently due and deferred
amounts arising form temporary differences between the financial accounting
and income tax basis of assets and liabilities. Deferred taxes are computed
on the liability method as prescribed in Statement of Financial Accounting
Standards (SFAS) no. 109, "Accounting for Income Taxes".
Per Share Amounts: Earnings per share are based on weighted average shares
outstanding. Average shares outstanding, per share amounts and reference to
number of shares in notes to consolidated financial statements have been
restated to give effect to stock dividends. Weighted average shares
outstanding were 1,609,160 for 1995, 1,545,539 for 1994 and 1,486,513 for
1993.
<TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Farmers National Banc Corp. and Subsidiary
December 31,1995, 1994, and 1993
NOTE B - SECURITIES AVAILABLE FOR SALE
Securities available for sale at December 31, 1995 and 1994 are summarized as
follows:
<CAPTION>
1995 1994
<S> <C> <C>
U.S Treasury and U.S. Government agencies 31,691,768 28,966,063
Corporate debt securities 7,702,820 9,547,280
Obligations of states and political subdivisions 6,943,089 0
Collateralized mortgage obligations 142,208 0
TOTALS 46,479,885 38,513,343
</TABLE>
<TABLE>
Net unrealized gains (losses) for securities available for sale at December
31, 1995 and 1994 are summarized below:
<CAPTION>
December 31, 1995 Unrealized Unrealized Net Unrealized
Gains Losses Gains (Losses)
<S> <C> <C> <C>
U.S. Treasury and U. S. Government Agencies 208,710 (53,309) 155,401
Corporate debt securities 59,924 (11,490) 48,434
Obligations of states and political subdivisions 120,542 (59) 120,483
Collateralized mortgage obligations 3,691 0 3,691
TOTALS 392,867 (64,858) 328,009
December 31, 1994
U.S. Treasury and U.S. Government Agencies 466 (785,396) (784,930)
Corporate debt securities 0 (220,554) (220,554)
TOTALS 466 (1,005,950) (1,005,484)
</TABLE>
<TABLE>
The fair value and book value of securities available for sale by contractual
maturities at December 31, 1995 are summarized below:
Fair Value Book Value
<S> <C> <C>
Due in one year or less 12,840,773 12,839,599
Due in one year through five years 26,878,711 26,631,845
Due after five years through ten years 1,896,580 1,837,025
Due after ten years 4,863,821 4,843,407
TOTALS 46,479,885 46,151,876
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Farmers National Banc Corp. and Subsidiary
December 31,1995, 1994, and 1993
NOTE B - SECURITIES AVAILABLE FOR SALE (CONTINUED)
Proceeds from sale of a security available for sale were $1,199,687 at
December 31, 1995. A loss of $197 was realized on this sale.
Securities with a carrying value of $28,000,000 at December 31,1995 and
$26,000,000 at December 31,1994 were pledged to secure deposits in
accordance with federal and state requirements and to secure repurchase
agreements sold.
During December 1995, the Bank transferred its portfolio of securities
held-to-maturity to the available-for-sale classification. The transfer was
made upon adoption of the Special Report "A Guide To Implementation of
Statement 115 on Accounting for Certain Investments in Debt and Equity
Securities" issued by the Financial Accounting Standards Board. The
amortized cost of the transferred securities was $4,543,695 and the related
unrealized gain was $120,287.
NOTE C - SECURITIES HELD TO MATURITY
<TABLE>
The book value and fair value of securities classified as held to maturity at
December 31, 1994 are as follows:
<CAPTION>
BOOK VALUE FAIR VALUE
<S> <C> <C>
U.S. Treasury and U.S.Government agencies 921,377 847,759
Obligations of states and political subdivisions 8,013,420 8,043,862
Collateralized mortgage obligations 187,708 172,710
TOTALS 9,122,505 9,064,331
</TABLE>
<TABLE>
Unrealized gains and losses for securities held to maturity at December 31,
1994 are summarized as follows:
<CAPTION>
UNREALIZED UNREALIZED NET UNREALIZED
GAINS LOSSES GAINS (LOSSES)
<S> <C> <C> <C>
U.S. Treasury and U.S.Government agencies 0 (73,618) (73,618)
Obligations of states and political subdivisions 49,680 (19,238) 30,442
Collateralized mortgage obligations 0 (14,998) (14,998)
TOTALS 49,680 (107,854) (58,174)
<FN>
Proceeds from early maturities of callable securities classified as held to
maturity were $522,675 in 1994. Gross gains of $17,675 were realized on
these early maturities.
</FN>
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Farmers National Banc Corp. and Subsidiary
December 31,1995, 1994, and 1993
NOTE D - LOANS
<TABLE>
Following is a summary of loans:
<CAPTION>
December 31, 1995 1994
<S> <C> <C>
Real estate 98,677,572 92,773,065
Installment 110,805,473 100,483,979
Commercial and Industrial 22,676,625 24,477,302
TOTAL LOANS 232,159,670 217,734,346
<FN>
Nonperforming loans have not been separately classified because such loans
are not material compared to total loans and nonaccrued interest is not
material in relation to net income.
</FN>
</TABLE>
NOTE E - ALLOWANCE FOR CREDIT LOSSES
<TABLE>
Following is an analysis of changes in the allowance for credit losses for
the years ended December 31:
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Balance at beginning of year 2,746,420 2,620,741 2,273,870
Additions:
Provision for credit losses 270,000 330,000 620,000
Recoveries on loans previously charged off 170,879 183,050 162,569
TOTAL ADDITIONS 3,187,299 3,133,791 3,056,439
Credits charged off (276,461) (387,371) (435,698)
Balance at end of year 2,910,838 2,746,420 2,620,741
<FN>
The allowance for federal income tax purposes amounted to $752,962 at
December 31, 1995, which is $2,157,856 less than the allowance for financial
accounting purposes.
</FN>
</TABLE>
NOTE F - PREMISES AND EQUIPMENT
<TABLE>
Following is a summary of premises and equipment:
<CAPTION>
December 31, 1995 1994
<S> <C> <C>
Land 1,180,876 816,515
Premises 4,780,574 3,768,748
Equipment 3,803,326 3,286,271
Leasehold improvements 178,123 293,166
9,942,899 8,164,700
Less accumulated depreciation 4,379,666 4,043,318
NET BOOK VALUE 5,563,232 4,121,382
<FN>
Depreciation expense was $379,012 for the year ended December 31,1995,
$379,224 for 1994 and $375,036 for 1993.
</FN>
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Farmers National Banc Corp. and Subsidiary
December 31,1995, 1994, and 1993
NOTE G - BRANCH ACQUISITION
In September of 1995, the bank subsidiary acquired the fixed assets, certain
loans, deposits and related accruals of the Leetonia branch of Bank One.
Total assets acquired were $351,485. Liabilities assumed exceeded assets by
$6,060,782, which was received in cash. The acquisition cost of the branch
exceeded the book value of net assets by $373,422 which has been recorded as
goodwill and is included in other assets in the accompanying balance sheet.
Proforma consolidated financial information for the branch acquisition is not
included because it was not a purchase of complete business.
NOTE H - INTEREST-BEARING DEPOSITS
Following is a summary of certificates of deposit of $100,000 or more by
remaining maturities as of December 31, 1995:
Three months or less 2,317,427
Three to six months 3,522,663
Six to twelve months 8,803,990
Over twelve months 3,776,170
TOTAL 18,420,250
NOTE I - SECURITIES SOLD UNDER REPURCHASE AGREEMENTS AND UNUSED LINES OF CREDIT
The bank subsidiary enters into sales of securities under repurchase
agreements (reverse repurchase agreements). Securities underlying the
agreements are U.S. Government securities with a book value including accrued
interest of $12,819,579 for the year ended December 31, 1995 and $10,941,647
for 1994. The market value was $12,829,848 for 1995 and $10,556,926 for
1994. At December 31, 1995, these agreements had a weighted average interest
rate of 4.45% and will mature January through March 1996. The securities,
although held in safekeeping outside the bank subsidiary, were under the bank
subsidiary's control. Securities sold under repurchase agreements averaged
$9,498,008 in 1995 and $8,329,370 in 1994. Maximum amounts outstanding at
any month end during 1995 and 1994 were $11,849,736 and $10,381,008,
respectively.
The bank subsidiary has access to short term credit facilities at the Federal
Home Loan Bank, which totaled $4,216,590 at December 31, 1995, and if used
would require collateralization. No amounts were used as of December 31,
1995.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Farmers National Banc Corp. and Subsidiary
December 31,1995, 1994, and 1993
NOTE J - COMMITMENTS AND CREDIT RISK
The bank subsidiary utilizes equipment and conducts certain of its branch
operations under noncancelable operating leases extending to 1999. The
building leases include options for renewal in five to ten year increments.
Rental expense charged to operations totaled $120,750 for 1995, $94,106 for
1994 and $99,111 for 1993. Following is a summary of future minimum rental
payments under operating leases that have initial or remaining noncancelable
terms in excess of one year as of December 31, 1995:
Year ending:
December 31, 1996 85,728
December 31, 1997 85,728
December 31, 1998 56,720
December 31, 1999 30,000
TOTAL 258,176
The bank subsidiary maintains deposit at various banks for services such as
check clearing. Such deposits, which are not legally restricted form
withdrawal, amounted to $4,178,000 at December 31, 1995.
The bank subsidiary is a part to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit,
standby letters of credit and financial guarantees. Those instruments
involve, to varying degrees, elements of credit risk in excess of the amount
recognized on the consolidated balance sheet. The contract or notional
amounts of those instruments reflect the extent of involvement the bank
subsidiary has in particular classed of financial instruments.
The bank subsidiary's exposure to credit loss in the event of nonperformance
by the other party to the financial instrument for commitments to extend
credit and standby letters of credit and financial guarantees written is
represent by the contractual notional amount of those instruments. The bank
subsidiary uses the same credit policies in making commitments and
conditional obligations as it does for on-balance sheet instruments.
CONTRACT OR NOTIONAL AMOUNT
Financial instruments whose contract amounts
represent credit risk:
Commitments to extend credit 9,868,007
Standby letters of credit and financial guarantees written 123,604
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments are
expected to expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. The bank subsidiary
evaluates customers creditworthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary by the bank subsidiary upon
extension of credit, is base on management's credit evaluation of the
counter-party. Collateral held varies but may include accounts receivable,
inventory, property, plant and equipment and income producing commercial
properties.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Farmers National Banc Corp. and Subsidiary
December 31,1995, 1994, and 1993
NOTE J - COMMITMENTS AND CREDIT RISK (CONTINUED)
Standby letters of credit and financial guarantees written are conditional
commitments issued by the bank subsidiary to guarantee the performance of a
customer to a third party. Those guarantees are primarily issued 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.
Most of the bank subsidiary's business activity is with a diversified
customer base located within Mahoning and Columbiana Counties in Ohio. The
concentrations of credit by type of loan are presented in Note D.
NOTE K - REGULATORY MATTERS
The bank subsidiary, as a national bank, is subject to the dividend
restrictions set forth by the Comptroller of the Currency. The Comptroller
of the Currency must approve declaration of any dividends in excess of the
sum of profits for the current year and retained net profits for the
preceding two years (as defined). As of December 31, 1995, the bank
subsidiary had $6,681,283 of retained earnings available for distribution and
$9,638,228 not available for distribution to the company as dividends without
prior approval of the Comptroller of the Currency. The bank subsidiary is
also required to maintain minimum amounts of capital to total "risk weighted"
assets, as defined by the banking regulators. At December 31,1995, the bank
subsidiary is required to have minimum Tier 1 and Total Capital ratios of
4.00% and 8.00%, respectively. The bank subsidiary's actual Tier 1 and Total
Capital ratios at that date were 15.58% and 16.84% respectively. The bank
subsidiary's leverage ratio at December 31, 1995 was 10.69%.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Farmers National Banc Corp. and Subsidiary
December 31,1995, 1994, and 1993
NOTE L - PENSION PLAN
The bank subsidiary has a noncontributory defined benefit pension plan
covering substantially all employees. Normal retirement age is 65. Benefit
payments for normal retirement are base on a percentage of employees' average
monthly compensation during the last five years of employment. Funding of
the plan, which is invested principally in domestic bank certificates of
deposit, is based upon current service cost plus amortization of past service
cost over 15 years. The company's funding policy is to generally contribute
annually the maximum amount that can be deducted for federal income tax
purposes. Pension expense in 1995, 1994 and 1993 was $156,253, $183,157,
and $180,836 respectively.
<TABLE>
The components of pension expense are as follows:
<CAPTION>
Years ended December 31, 1995 1994
<S> <C> <C>
Service cost 132,605 145,518
Interest cost 134,030 138,907
Return on assets (39,659) (168,933)
Other (70,723) 67,665
TOTALS 156,253 183,157
</TABLE>
<TABLE>
Following is the funded status of the plan:
<CAPTION>
Years ended December 31, 1995 1994
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation 1,557,215 1,868,684
Accumulated benefit obligation 1,573,680 1,887,156
Projected benefit obligation (2,119,606) (2,383,023)
Plan assets at fair value 1,738,082 2,127,866
Projected benefit obligation in excess of plan assets (381,524) (255,157)
Unrecognized transition gain (9,070) (10,582)
Unrecognized prior service cost (70,006) (65,178)
Unrecognized net loss 529,188 380,304
Prepaid pension cost 68,588 49,387
</TABLE>
Assumptions used to develop the net periodic pension cost were:
December 31, December 31,
1995 1994
Assumed discount rate 6.25% 6.25%
Assumed rate of compensation increase 4.00% 4.00%
Expected rate of return on plan assets 6.25% 6.25%
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Farmers National Banc Corp. and Subsidiary
December 31,1995, 1994, and 1993
NOTE M - FEDERAL INCOME TAXES
<TABLE>
The provision for income taxes (credit) consists of the following:
<CAPTION>
Years ended December 31, 1995 1994 1993
<S> <C> <C> <C>
Current 1,662,636 1,776,613 1,556,553
Deferred (12,636) (197,613) (83,553)
TOTALS 1,650,000 1,579,000 1,473,000
</TABLE>
<TABLE>
Following is a reconciliation between federal income taxes at statutory rates
and actual taxes base on income before federal income taxes:
<CAPTION>
Years ended December 31, 1995 1994 1993
Amount Percent of Amount Percent of Amount Percent of
pretax income pretax income pretax income
<S> <C> <C> <C> <C> <C> <C>
Statutory tax 1,829,180 35% 1,751,050 35% 1,621,558 35%
Effect of nontaxable interest (152,360) (3) (148,100) (3) (134,293) (3)
Other (26,820) 0 (23,950) 0 (14,265) 0
ACTUAL TAX 1,650,000 32% 1,579,000 32% 1,473,000 32%
</TABLE>
<TABLE>
Deferred taxes (credit) result from certain temporary differences in the
recognition of income and expenses for financial reporting and income tax
purposes. The sources and tax effects of significant temporary differences
are as follows:
<CAPTION>
Years ended December 31, 1995 1994 1993
<S> <C> <C> <C>
Depreciation 17,176 1,330 5,387
Provision for credit losses (57,546) (137,931) (22,736)
Deferred loan fees and origination costs 29,038 (59,708) (64,899)
Other (1,304) (1,304) (1,305)
TOTALS (12,636) (197,613) (83,553)
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Farmers National Banc Corp. and Subsidiary
December 31,1995, 1994, and 1993
NOTE M - FEDERAL INCOME TAXES (CONTINUED)
<TABLE>
Deferred tax liabilities (assets) are comprised of the following as of
December 31:
<CAPTION>
Deferred tax asset: 1995 1994
<S> <C> <C>
Allowance for credit losses (720,279) (664,377)
Deferred loan fee income (169,733) (244,063)
Mark-to-market adjustment - securities 0 (341,865)
available for sale
Gross deferred tax assets (890,012) (1,250,305)
Deferred tax liabilities:
Depreciation 376,428 356,216
Prepaid loan origination costs 100,005 150,007
Mark-to-market adjustment - securities 110,619 0
available for sale
Other 23,515 24,790
Gross deferred tax liabilities 610,567 531,013
(279,445) (719,292)
<FN>
No valuation allowance for deferred tax assets was recorded at December 31,
1995. Federal income taxes applicable to investment securities gains were
$70 for 1995, $30,100 for 1994 and $19,200 for 1993.
</FN>
</TABLE>
NOTE N - LOANS TO RELATED PARTIES
Certain directors, executive officers and associates of such persons were
loan customers during 1995. Such loans were made in the ordinary course of
business under normal credit terms and do not represent more that a normal
risk of collection. Following is an analysis of the amount of loans in which
the aggregate of the loans to any such person exceeded $60,000 during 1995:
Total loans at December 31, 1994 866,748
New loans 60,000
Repayments 121,812
Total loans at December 31, 1995 804,936
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Farmers National Banc Corp. and Subsidiary
December 31,1995, 1994, and 1993
NOTE O - DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments at December 31, 1995:
Cash and cash equivalents: The carrying amounts in the consolidated balance
sheets of cash and cash equivalents approximates their fair value.
Investment securities: The fair value of securities available for sale and
held to maturity equals quoted market price, if available. If a quoted
market price is not available, fair value is estimated using quoted market
prices for similar securities.
Loans: For certain homogeneous categories of loans, such as credit card
receivables, and other consumer loans, fair value is estimated using the
quoted market prices for similar loans, adjusted for differences in loan
characteristics. The fair value of other types of loans is estimated by
discounting the future cash flows using the current rates at which similar
loans would be make to borrower with similar credit rating and for the same
remaining maturities.
Deposits: The fair value of demand deposits, savings accounts and certain
money market deposits is the amount payable on demand at the reporting date.
The fair value of fixed-maturity certificates of deposit is estimated using
the rates currently offered for deposits of similar remaining maturities.
Securities sold under repurchase agreements: The carrying amount for
securities sold under repurchase agreement approximates their fair value.
Short term borrowings: The carrying amounts of short-term borrowings
approximates their fair value.
Commitments to extend credit, standby letters of credit and financial
guarantees written: The fair value of commitments is estimated using the
fees currently charged to enter similar agreements, taking into account the
remaining terms of the agreements and the present creditworthiness of the
counterparties. For fixed-rate loan commitments, fair value also considers
the difference between current levels of interest rates and the committed
rates. The fair value of guarantees and letters of credit is based on fees
currently charged for similar agreements or on the estimated cost to
terminate them or otherwise settle the obligations with the counterparties at
the reporting date.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Farmers National Banc Corp. and Subsidiary
December 31,1995, 1994, and 1993
NOTE O - DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
<TABLE>
The estimated fair values of the company's financial instruments as of
December 31, 1995 and 1994 are as follows:
<CAPTION>
1995 1994
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents 29,396,117 29,396,117 14,508,724 14,508,724
Investment securities:
Available for sale 46,479,885 46,601,970 38,513,343 38,513,343
Held to maturity 0 0 9,122,505 9,064,331
Other securities 852,900 852,900 370,500 370,500
Loans - Net 229,248,832 229,711,573 214,987,926 211,267,542
TOTAL FINANCIAL ASSETS 305,977,734 306,562,560 277,502,998 273,724,440
Financial liabilities:
Deposits 267,954,773 269,381,383 244,302,364 244,740,039
Securities sold under repurchase agreements 9,847,119 9,847,119 9,211,919 9,211,919
Short term borrowings 748,470 748,470 792,011 792,011
TOTAL FINANCIAL LIABILITIES 278,550,362 279,976,972 254,306,294 254,743,969
Unrecognized financial instruments:
Commitments to extend credit 9,868,007 9,868,007 7,407,313 7,407,313
Standby letters of credit and financial 123,604 123,604 615,763 615,763
guarantees
</TABLE>
NOTE P - CONDENSED FINANCIAL INFORMATION
Below is condensed financial information of Farmers National Banc Corp.
(parent company only). In this information, the parent's investment in bank
subsidiary is stated at cost plus equity in undistributed earning of the
subsidiary since acquisition. This information should be read in conjunction
with the consolidated financial statements and related notes.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Farmers National Banc Corp. and Subsidiary
December 31,1995, 1994, and 1993
NOTE P - CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
BALANCE SHEETS December 31, 1995 December 31, 1994
<S> <C> <C>
Assets:
Cash 692,398 639,734
Receivables 7,918 7,918
Investment in bank subsidiary 33,756,098 29,526,621
34,456,414 30,174,273
Liabilities:
Accounts payable 694,880 595,387
Stockholders equity
Common stock 4,111,398 3,892,480
Additional paid-in capital 16,059,118 13,300,977
Retained earnings 13,591,018 12,385,429
TOTAL STOCKHOLDERS EQUITY 33,761,534 29,578,886
34,456,414 30,174,273
</TABLE>
<TABLE>
STATEMENTS OF INCOME
<CAPTION>
Years ended December 31,1995 December 31, 1994 December 31, 1993
<S> <C> <C> <C>
Income from subsidiary:
Dividends 1,267,017 1,283,911 1,060,199
Equity in undistributed net income 2,354,903 2,188,157 2,138,095
TOTAL INCOME FROM SUBSIDIARY 3,621,920 3,472,068 3,198,294
Other expenses (45,691) (48,118) (38,270)
NET INCOME 3,576,229 3,423,950 3,160,024
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Farmers National Banc Corp. and Subsidiary
December 31,1995, 1994, and 1993
NOTE P - CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
STATEMENTS OF CASH FLOWS
<CAPTION>
Years ended December 31, December 31, December 31,
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net income 3,576,229 3,423,950 3,160,024
Adjustments to reconcile net income to net
cash provided by operating activities
Increase (decrease) in deferred director (1,302) (1,233) (1,293)
fees
Income from subsidiary (3,621,920) (3,472,068) (3,198,294)
Dividends received from subsidiary 1,267,017 1,283,911 1,060,199
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,220,024 1,234,560 1,020,636
Cash flows from investing activities:
Investment in subsidiary (1,874,575) (1,525,446) (1,006,485)
NET CASH USED IN INVESTING ACTIVITIES (1,874,575) (1,525,446) (1,006,485)
Cash flows from financing activities:
Dividends paid (1,167,362) (999,957) (1,007,330)
Proceeds from sale of common stock 1,874,577 1,525,446 1,006,485
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 707,215 525,489 (845)
NET INCREASE IN CASH 52,664 234,603 13,306
CASH
Beginning of year 639,734 405,131 391,825
End of year 692,398 639,734 405,131
</TABLE>
NOTE Q - RECLASSIFICATIONS
Certain items for 1994 and 1993 have been reclassified to conform with the
1995 presentation. Such reclassifications had no effect on retained earnings
or stockholders equity as previously reported.
Drawing of Map of Ohio Highlighting Branch Locations
MAIN OFFICE
20 S. Broad St., Canfield, OH 44406 533-3341
AUSTINTOWN
22 N. Niles-Canfield Rd. Youngstown, OH 44515 792-1411
COLONIAL PLAZA
401 E. Main St. Canfield, OH 44406 533-2686
CORNERSBURG
3619 S. Meridian Rd. Youngstown, OH 44511 793-3971
LAKE MILTON
17817 Mahoning Ave. Lake Milton, OH 44429 654-3351
SALEM
1858 E. State St. Salem, OH 44460 332-1558
WESTERN RESERVE
102 W. Western Reserve Rd. Youngstown, OH 44514 726-8896
COLUMBIANA
340 State Rt. 14 Columbiana, OH 44408 482-1974
LEETONIA
16 Walnut St. Leetonia, OH 44431 427-2436
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000709337
<NAME> FARMERS NATIONAL BANC CORP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 14,766
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 14,630
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 46,480
<INVESTMENTS-CARRYING> 853
<INVESTMENTS-MARKET> 853
<LOANS> 232,160
<ALLOWANCE> 2,911
<TOTAL-ASSETS> 314,229
<DEPOSITS> 267,955
<SHORT-TERM> 11,596
<LIABILITIES-OTHER> 1,701
<LONG-TERM> 0
0
0
<COMMON> 20,171
<OTHER-SE> 13,806
<TOTAL-LIABILITIES-AND-EQUITY> 314,229
<INTEREST-LOAN> 18,580
<INTEREST-INVEST> 3,381
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 21,961
<INTEREST-DEPOSIT> 9,200
<INTEREST-EXPENSE> 9,688
<INTEREST-INCOME-NET> 12,273
<LOAN-LOSSES> 270
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 8,119
<INCOME-PRETAX> 5,226
<INCOME-PRE-EXTRAORDINARY> 5,226
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,576
<EPS-PRIMARY> 2.22
<EPS-DILUTED> 2.22
<YIELD-ACTUAL> 7.88
<LOANS-NON> 125
<LOANS-PAST> 1,384
<LOANS-TROUBLED> 75
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,746
<CHARGE-OFFS> 276
<RECOVERIES> 171
<ALLOWANCE-CLOSE> 2,911
<ALLOWANCE-DOMESTIC> 2,911
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
SCHEDULE 14A-INFORMATION REQUIRED IN PROXY STATEMENT
(Last amended in Exch Act Rel No. 35113, Eff. 1/30/95.)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by Rule 14a-6(e)
(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
_________________________Farmers National Banc Corp._________________________
(Name of Registrant as Specified in its Charter)
_____________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
............................................................................
2) Aggregate number of securities to which transaction applies:
............................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
............................................................................
4) Proposed maximum aggregate value of transaction:
............................................................................
5) Total fee paid:
............................................................................
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
............................................................................
2) Form, Schedule or Registration Statement No.:
............................................................................
3) Filing Party:
............................................................................
4) Date Filed:
............................................................................
(Amended by Exch Act Rel No. 35113, eff 1/30/95.)
FARMERS NATIONAL BANC CORP
20 SOUTH BROAD STREET
CANFIELD, OHIO 44406
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
March 4, 1996
TO THE HOLDERS OF SHARES OF COMMON STOCK:
NOTICE IS HEREBY GIVEN that pursuant to call of its Directors, the
regular annual meeting of the Shareholders of FARMERS NATIONAL BANC CORP,
Canfield, Ohio will be held at Colonial Catering located at 429 Lisbon Street,
Canfield, Ohio on Thursday March 28, 1996, at four-thirty o'clock (4:30) P.M.,
Eastern Standard Time, for the purpose of considering and voting upon the
following matters:
(1) ELECTION OF DIRECTORS. Fixing the number of Directors to be
elected at eight (8) and the election of the eight (8) persons
listed in the accompanying Proxy Statement.
(2) AMENDMENT TO ARTICLE IV. Increasing the authorized number of
shares to 5,000,000 shares of stock with no par value from
2,400,000 shares of stock with a par value of $2.50 per share.
(3) SUCH OTHER BUSINESS as may properly come before the meeting or
any adjournment thereof.
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS
POSSIBLE (whether or not you plan to attend the meeting in person).
IF YOU DO ATTEND THE MEETING, YOU MAY THEN WITHDRAW YOUR PROXY. THE
PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS EXERCISE.
Only those shareholders of record at the close of business on February
28, 1996 shall be entitled to notice of meeting and to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
WILLIAM D. STEWART, PRESIDENT
FARMERS NATIONAL BAN C CORP
CANFIELD, OHIO 44406
PROXY STATEMENT
ANNUAL MEETING OF SH AREHOLDERS
MARCH 28, 1996
Farmers National Banc Corp, herein referred to as "Farmers" or the
"Corporation" is furnishing this Proxy Statement to its shareholders in
connection with the solicitation, by order of the Board of Directors of
Farmers, of proxies to be used at the Annual Meeting of Shareholders to be
held on Thursday, March 28, 1996 at 4:30 P.M., Eastern Standard Time, at
Colonial Catering, 429 Lisbon Street, Canfield, Ohio 44406, and at any
adjournments thereof. The cost for solicitation of proxies will be borne by
Farmers. Brokerage firms and other custodians, nominees and fiduciaries may
be requested to forward soliciting material to their principals and to obtain
authorization for the execution of proxies. Farmers will, upon request,
reimburse brokerage firms, and other custodians, nominees and fiduciaries for
the execution of proxies and for their expenses in forwarding proxy material
to their principals. The proxy statements and the form of proxy are being
mailed on March 4, 1996 or as soon thereafter as practicable to all
shareholders entitled to vote at the meeting. In addition to the use of
mails, proxies may be solicited by officers, directors and employees of
Farmers by personal interview, telephone and telegraph.
VOTING RIGHTS
Only shareholders of record at the close of business on February 28,
1996 will be entitled to vote at the meeting. As of February 28, 1996,
Farmers had issued and outstanding 1,644,559 shares of common stock with a par
value of $2.50 per share. Each outstanding share entitles the recordholder to
one vote. The number of shares present at the meeting in person or by proxy
will constitute a quorum for the transaction of business.
It is important that your stock be represented at the meeting regardless
of the number of shares you may own. We would appreciate your signing and
returning the enclosed proxy. The shares represented by each proxy, which is
properly executed and returned to Farmers, will be voted in the manner
described in this proxy statement and the proxy. In the absence of
instructions, the proxy will be voted "FOR" the election of the eight (8)
persons listed and "FOR" the amendment to Article IV as stated in this Proxy
Statement. The proxy may be revoked at any time prior to its exercise, by
delivering notice of revocation or a duly executed proxy bearing a later date
to the Treasurer of the Corporation at any time before the proxy is voted.
Shareholders who attend the meeting in person may vote their stock even though
they may have sent in a proxy. No officer or employee of Farmers may be named
as a proxy. If you received two or more proxy forms because of difference in
addresses or registration of shareholdings, each should be executed and
returned in order to assure a complete tabulation of all shares.
The Corporation will appoint two officers to act as inspectors for
purposes of tabulating the votes cast by proxy. Broker non-votes and
abstentions are not treated as votes cast for purposes of any of the matters
to be voted on at the meeting.
The Annual Report of Farmers for the calendar year 1995 has been mailed
to Shareholders.
THE FORM 10-K ANNUAL REPORT TO THE SECURITIES & EXCHANGE COMMISSION WILL
BE FURNISHED WITHOUT CHARGE UPON WRITTEN REQUEST TO RICHARD L. CALVIN,
EXECUTIVE VICE PRESIDENT AND TREASURER, FARMERS NATIONAL BANC CORP, 20 SOUTH
BROAD STREET, PO BOX 555, CANFIELD, OHIO 44406.
PROPOSAL TO AMEND ARTICLES OF INCORPORATION:
AMEND ARTICLE IV TO INCREASE
AUTHORIZED SHARES TO 5,000,000
NEW PARAGRAPH:
Among the proposals to be submitted to the shareholders for approval at
the Annual Meeting is the proposed amendment to Article IV of the Amended
Articles of Incorporation of the Corporation, which would increase the number
of authorized shares from 2,400,000 shares of $2.50 par value common stock to
5,000,000, all of which would be without par value. The availability of
additional authorized and unissued shares, which could be issued by the Board
into friendly hands for the purpose of diluting a potential acquiror's
ownership of the Corporation, would have an anti-takeover effect. Moreover,
the issuance of all or any part of the additional authorized and unissued
shares, unless made on a pro-rata basis to all existing shareholders, would
have the effect of diluting the ownership interest of existing shareholders.
Although the Board believes the availability of additional authorized and
unissued shares would afford management and the Board greater flexibility in
meeting future capital needs of the Corporation, the Board has no current
plans for the issuance of any common shares to any person or entity for any
purpose.
Farmers' Amended Articles of Incorporation (the "Articles") presently
authorize the issuance of 2,400,000 shares of $2.50 par value common stock, of
which 1,644,559 shares were issued and outstanding as of December 31, 1995.
The Board of Directors believes that an increase in the number of authorized
shares to 5,000,000 would be in the best interest of Farmers and its
shareholders. The authorization of additional shares in the Articles of
Incorporation will in no way affect the rights of current shareholders. The
existing voting rights, dividend rights, redemption rights and similar rights
of shareholders will in no way be affected by the proposed amendment to the
Articles of Incorporation. The Board unanimously recommends adoption by the
shareholders of the following resolution:
BE IT RESOLVED: that Article IV of the Amended Articles of
Incorporation of the Corporation be amended to read in its entirety as
follows:
The aggregate number of common shares which the corporation
shall have the authority to issue is Five Million (5,000,000)
shares each of no par value. The total number of authorized
and outstanding shares of common stock shall be changed from
time to time to reflect economic conditions of the corporation
and business opportunities available to the shareholders of the
corporation. Shares of the authorized and outstanding common
stock may be redeemed by the corporation at a regularly or
specially called meeting for said purpose. Furthermore, the
corporation, through its Board of Directors, shall have the
power to purchase, hold, sell, and transfer the shares of its
capital, except where otherwise permitted by law, and provided
further that shares of its own capital stock belonging to it
are not voted upon directly or indirectly.
Adoption of the foregoing resolution by the shareholders will enable the
Board of Directors to continue issuing additional shares through Farmers'
Dividend Reinvestment Plan and afford the Board additional corporate
flexibility.
ADOPTION OF THE PROPOSED AMENDMENT REQUIRES THE AFFIRMATIVE VOTE OF THE
HOLDERS OF TWO THIRDS (2/3) OF THE COMMON SHARES. THE BOARD OF DIRECTORS
RECOMMENDS THAT YOU VOTE "FOR" THE AMENDMENT.
ELECTION OF DIRECTORS
Pursuant to the Code of Regulations, the authorized number of directors
of Farmers has been set at eight (8). The Board of Directors has nominated
the eight (8) persons named below to serve as directors until the next Annual
Meeting or until their earlier death, resignation or removal from office.
Each of the eight (8) nominees is presently a member of the Board of Directors
and has consented to serve another term as director if re-elected. If any of
the nominees should be unavailable to serve for any reason (which is not
anticipated), the Board of Directors may designate a substitute nominee or
nominees (in which case the persons named on the enclosed proxy card will vote
all valid proxy cards for the election of such substitute nominee or
nominees), allow the vacancy or vacancies to remain open until a suitable
candidate or candidates are located, or by resolution provide for a lesser
number of directors.
INFORMATION WITH RESPECT TO NOMINEES
Certain information in the following tabulation has been furnished to
Farmers by the respective nominees for director.
Shares Owned
Name Principal Occupation Beneficially
Age And Five Year at 12/31/95 &
Director Since(A) Business Experience % of Class (B)
- ----------------------------------------------------------------------
Benjamin R. Brown President and Owner, Castruction 13,094
Age 50 Company, incorporated in 1965 - .80%
Director - 1991 designs and manufactures pre-cast
shapes and associated products for
the steel industry.
Richard L. Calvin Executive Vice President/Cashier 17,888
Age 69 of Farmers National Bank since 1972 1.09%
Director - 1975 Executive Vice President/Treasurer of
Farmers National Banc Corp-1983
Joseph O. Lane Owner and President of Lane Funeral 36,835
Age 71 Homes, Inc. since 1950, Lane Life 2.24%
Director - 1965 Paramedics, Inc. and Lane Monument Co.
- operates three funeral homes, and EMT
and ambulance service.
David C. Myers Co-owner of Myers Equipment Company 11,680
Age 67 since 1955 - sales of truck equipment .71%
Director - 1988 and school buses. Mr. Myers operates
a 2000 acre farm since 1946.
Edward A. Ort President of Ort Furniture Mfg Co. 2,701
Age 66 since 1973 - manufacture of upholstered .16%
Director - 1993 furniture which is shipped to retail
furniture stores in northeastern United
States since 1957.
Frank L. Paden EVP/Sr. Loan Officer of Farmers National 3,774
Age 44 Bank since 1995. Executive Vice Pres. .23%
Director - 1992 of Farmers National Banc Corp. since 1995.
Previously, Sr. Vice Pres./Loan Dept. Mgr.
of Farmers National Bank since 1991.
William D. Stewart President of Farmers National Bank 14,288
Age 66 since 1972, President & Secretary of .87%
Director - 1972 Farmers National Banc Corp since 1983.
Ronald V. Wertz President since 1981 and Director 11,133
Age 48 since 1974 of Boyer Insurance Inc. - .68%
Director - 1989 provides risk management analysis and
policies for individuals, families and
business insurance plans, including
property, liability, health, life and
bonding.
(A) Includes the period served as a director of The Farmers National Bank of
Canfield prior to its reorganization into a wholly owned subsidiary of this
Corporation.
(B) Beneficial Ownership includes those shares over which the nominee has
either sole or shared voting and/or investment powers, such as beneficial
interest of a spouse, children, grandchildren or business affiliates. There
are no family relationships between any of the above named nominee-directors
or any of the principal officers of Farmers.
FIVE PERCENT EQUITY SECURITY OWNERS
At the record date, no persons or groups (as that term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934) owned of record, or
to the Corporation's knowledge owned beneficially, 5% or more of the
Corporation's outstanding stock.
SECURITY OWNERSHIP OF MANAGEMENT
The total shares held beneficially by Directors, Nominees and Executive
Officers as a group (113,490) is 6.90% of shares issued and outstanding as of
December 31, 1995.
COMMITTEES OF THE BOARD OF DIRECTORS
At the Directors' organizational meeting, held immediately following
the last annual shareholders' meeting of The Farmers National Banc Corp, held
on March 30, 1995, the following committees were appointed by the Chairman:
EXECUTIVE COMPENSATION AND EMPLOYEES SALARY COMMITTEE: Joseph O. Lane,
Chairman; Benjamin R. Brown, David C. Myers, Edward A. Ort and Ronald V.
Wertz.
EXAMINING COMMITTEE: David C. Myers, Chairman; Benjamin R. Brown, Edward A.
Ort and Ronald V. Wertz.
DISCOUNT COMMITTEE: William D. Stewart, Chairman; Benjamin R. Brown, Richard
L. Calvin, Joseph O. Lane, David C. Myers, Edward A. Ort, Frank L. Paden and
Ronald V. Wertz.
BUILDING COMMITTEE: Richard L. Calvin, Chairman; Ad Hoc.
LONG RANGE AND STRATEGIC PLANNING: William D. Stewart, Chairman; Benjamin R.
Brown, Richard L. Calvin, Joseph O. Lane, David C. Myers, Edward A. Ort, Frank
L. Paden and Ronald V. Wertz.
NOMINATING COMMITTEE: William D. Stewart, Chairman; Benjamin R. Brown,
Richard L. Calvin, Joseph O. Lane, David C. Myers, Edward A. Ort, Frank L.
Paden, and Ronald V. Wertz.
RISK MANAGEMENT AND INSURANCE COMMITTEE: Ronald V. Wertz, Chairman; Benjamin
R. Brown, Richard L. Calvin and Gene Dean, Comptroller.
The Executive Compensation and Employees Salary Committee reviews the
compensation of the official staff and makes recommendations regarding all
employee benefits to the Board of Directors. This committee met one time in
1995.
The Examining Committee directs the activities of the internal audit
staff, reviews the internal auditor's reports, reviews all examinations of the
Comptroller of the Currency and makes recommendations to the Board regarding
the engagement of an external auditing firm to perform the annual audit and
prepare income tax returns. This committee met four times during 1995.
The Discount Committee meets weekly to review all loans made during the
previous week and to approve all loan commitments which are either above the
assigned lending limits of the loan officers or are not in keeping with
existing bank policy.
The Nominating Committee makes decisions with respect to: (a) nominees
for election as director at the annual meeting of shareholders; (b) nominees
to fill Board vacancies between annual meetings; and (c) the composition of
membership of the various other standing committees. This committee did not
meet in 1995.
The Building Committee oversees site selection, office additions and
modifications. The committee did not specifically meet in 1995, however, the
chairman did report to the directors at other meetings.
The Long Range and Strategic Planning Committee is responsible for
formulation and implementation of the Strategic Plan for the operation of the
Corporation. This committee met once in 1995.
The Risk Management and Insurance Committee is responsible for reviewing
coverage and protection levels of insurance maintained by the Bank. This
committee met once in 1995.
During 1995, each director standing for re-election was present for more
than 75% of the combined number of meetings of the Board of Directors and of
each committee of the Board on which such director served. There were twelve
regular and seven special meetings of the Board of Directors in 1995.
Members of the Board of Directors receive $300.00 for each board meeting
they attend, and $200.00 for each committee meeting they attend with the
exception of inside directors who receive no compensation for committee
meetings.
NOTE: THE ABOVE COMMITTEES ARE COMMITTEES OF THE FARMERS NATIONAL BANK OF
CANFIELD (the Bank), A WHOLLY OWNED SUBSIDIARY OF FARMERS NATIONAL BANC CORP.
CURRENTLY, THE MEMBERS OF FARMERS' BOARD OF DIRECTORS ALSO SERVE AS THE
DIRECTORS OF THE BANK, AND ATTEND BOARD MEETINGS FOR BOTH FARMERS AND THE
BANK. ALTHOUGH THESE MEETINGS ARE CONDUCTED SEPARATELY ON THE SAME DAY, A
MEMBER RECEIVES COMPENSATION (WHICH IS PAID BY FARMERS) FOR ONLY ONE MEETING.
CONSEQUENTLY, MEMBERS ATTENDING A MEETING OF THE BOARDS OF BOTH FARMERS AND
THE BANK ON A SINGLE DAY ARE CREDITED WITH ONE BOARD MEETING FOR ATTENDANCE
AND COMPENSATION PURPOSES.
RETIREMENT PENSION PLAN
The following table sets forth the estimated benefits payable on
retirement to eligible employees, including all executive officers under The
Farmers National Bank of Canfield Salaried Employees Pension Plan ("Pension
Plan"), a Defined Benefit Plan. The Pension Plan provides for a monthly
benefit based upon the highest average monthly compensation, as actually paid,
for the highest five consecutive years of service to termination of
employment. The formula is 30% of compensation, reduced 1/20 for each year of
service less than twenty, plus 20% of compensation in excess of Social
Security base, reduced 1/30 for each year of service less than thirty, at
normal retirement age. The Summary Compensation Table shown elsewhere does
reflect the compensation which is used to calculate the benefit as stated.
The table below sets forth the annual benefits payable under the Pension Plan
to employees assuming they reached the normal retirement age (age 65) on
November 1, 1995.
PENSION PLAN DISCLOSURE TABLE
Final Average Years of Credited Service
Earnings ($)
15 20 25 30 35
.
70,000 20,478 27,304 28,880 30,456 30,456
90,000 26,978 35,971 38,213 40,456 40,456
110,000 33,478 44,637 47,547 50,456 50,456
130,000 39,978 53,304 56,880 60,456 60,456
The amounts shown in the foregoing table represent the annual benefit
payable to an employee for life on a ten year certain basis and reflect the
Social Security integration provisions of the Pension Plan. Optional forms of
payment of benefit may commute or reduce the amount shown in the table.
The Executive Officers that remain active participants in the plan have
approximate years of credited service as of November 1, 1995 for Pension Plan
purposes as follows: Frank L. Paden, 22; Barbara C. Fisher, 20; Mark L.
Graham, 18; Donald F. Lukas, 18; Bradley S. Henderson, 15; Anthony F. Peluso,
10; Carl D. Culp, 7. For the Plan Year beginning November 1, 1995 there were
114 eligible Plan Participants, net of terminations, including the Auxiliary
Fund.
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other All
Name Annual Other
and Compen- Compen-
Principal sation sation
Position Year Salary($) Bonus($) ($) ($)
- ------------------------------------------------------------------------------
W.D. Stewart 1995 $118,727 $2,000 $3,861 N/A N/A
President 1994 107,950 2,000 1,505
1993 99,860 2,000 1,544
Listed is the total compensation paid by the Corporation's subsidiary,
The Farmers National Bank of Canfield during the latest fiscal year to the
named person(s) for services in all capacities, specifically setting forth the
direct compensation to the President. No other executive officer of Farmers
receives total annual salary and bonus in excess of $100,000.
In 1991, as a result of certain changes in the Internal Revenue Code,
the Bank's pension plan was amended to reduce significantly the benefits of
several key employees, including those of Mr. Stewart. As a result the Bank
has entered into Deferred Compensation Agreements with certain of its
executive officers, including Mr. Stewart. Under the terms of Mr. Stewart's
Deferred Compensation Agreement he will receive monthly payments of $1,665.00
for a period of two hundred and four (204) months, commencing with his
retirement at the age of 65. This Agreement also provides that Mr. Stewart
will be available to perform consulting services for the Bank during the
period he is receiving these payments, and prohibits him from entering into
competition with the Corporation during that same period. In the event that
any payments should still remain due and payable to Mr. Stewart under the
Agreement at the time of his death, those payments would be made to his
surviving spouse. In the event that any payment should still remain due and
payable to either Mr. Stewart or his spouse under the Agreement at the death
of the survivor of them, those payments would be reduced to their then present
value at a predetermined rate of interest and paid to the estate of the
survivor in a lump sum. Payments will be prorated in the event Mr. Stewart
retires before the age of 65, and will be increased proportionately if he
retires after the age of 65. The Agreement is funded by a life insurance
policy owned by the Bank, on which the Bank is the beneficiary and the
premiums of which are paid by the Bank.
NOTE: Tables containing disclosures of Stock Appreciation Rights Plans and
Long Term Incentive Plans have been omitted because no such programs exist for
either Farmers National Banc Corp or The Farmers National Bank of Canfield.
No Employment contracts or Golden Parachute Agreements exist between any
executive officer and either Farmers National Banc Corp or The Farmers
National Bank of Canfield.
INDEBTEDNESS OF MANAGEMENT
Farmers has had, and expects to have in the future, banking transactions
in the ordinary course of business with directors, executive officers and
their associates on the same terms, including interest rates and collateral on
loans, as those prevailing at the same time for comparable transactions with
others. Since the beginning of 1995, the largest aggregate extensions of
credit to officers, directors and their associates during the year ended
December 31, 1995 was $1,032,388 or 3.04% of Equity Capital Accounts. In the
opinion of the management of Farmers, these transactions do not involve more
than a normal risk of collectability or present other unfavorable features.
NOTE: THE INDEBTEDNESS OF MANAGEMENT INDICATED IN THE ABOVE PARAGRAPH APPLIES
TO THE OFFICERS AND DIRECTORS AND THE PERCENTAGE OF DEBT HELD BY THIS GROUP
WITH RESPECT TO THE EQUITY CAPITAL ACCOUNTS OF THE CORPORATION'S SUBSIDIARY,
THE FARMERS NATIONAL BANK OF CANFIELD.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is made up of all of
the outside directors of Farmers. No officers of the corporation sit on this
committee. This committee reports back to the full board but its' decisions
are not subject to full board approval. The committee has the purpose and
responsibility of providing the Bank, its staff and the communities it serves
with consistent long-term leadership of the highest quality possible while
protecting the interests of the shareholders.
The committee sets the limits for increases in the aggregate for all staff,
reviews performance of executive officers and sets their salaries for the
coming year. In addition, any incentive/bonus program is set by the board
based on the recommendation of the compensation committee.
The committee takes a straightforward approach to the review of
executives and bases its consideration of salaries on specific job
performance, contribution to target levels of growth, profitability,
stability, capital, return on equity (ROE) and return on assets (ROA). Also
considered is the executive's contribution to the general success of the Bank
and its business plan and community standing, which cannot necessarily be
quantified in an appropriate manner but is weighted heavily in a community
bank which is located exclusively in small communities. Successful bank
operations are contingent upon accomplishments in all areas and integration
with the business community's direction and success in our market areas.
Executive performance must therefore be evaluated by using these factors as
well. Specific results of each executive's area of responsibility are
evaluated and considered, but would not be appropriately discussed here as a
matter of confidentiality.
The committee evaluates the President on the same bases as other executive
officers with weight being given to the achievement of target levels of
growth, capital and return on equity and, in addition, specific target goals
of the overall strategic plan of the Bank. The accomplishment of meeting the
goals and targets are reflected in the Summary Compensation Table.
The members of the Compensation Committee are Joseph O. Lane, Chairman;
Benjamin R. Brown, David C. Myers, Edward A. Ort and Ronald V. Wertz. None
has registered a disagreement with the above report.
Compensation Committee Interlocks and Insider Participation.
No member of the Compensation Committee is currently or was at any time, an
officer or an employee of, or had an employment agreement with the Corporation
or the Bank. No corporate or committee interlocks exist which require
disclosure under SEC regulations.
PERFORMANCE GRAPH
The Securities and Exchange Commission requires a line graph comparing the
cumulative annual shareholders return of the Corporation, over a five year
period against an overall stock market index and an industry index, as
presented below. The per share price for each quarter, which is the price for
each quarterly dividend and is used in the calculations of this graph, is
established by the stock's market maker, Butler Wick and Company of Youngstown
Ohio.
[PERFORMANCE GRAPH FILED IN FORM SE]
TOTAL RETURN GRAPH DATA
At December 31 1990 1991 1992 1993 1994 1995
Farmers National Banc Corp 100 111 146 203 265 389
NASDAQ Stock Mkt - US 100 161 187 215 210 296
NASDAQ Bank 100 164 239 272 271 404
NOTE: This graph contains two comparison indices, NASDAQ Stock Mkt-US and
NASDAQ Bank, which are broad based indices, and will be used in future graphs
as a more appropriate comparison for our bank than the S&P indices.
RELATIONSHIP WITH
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has elected Hill, Barth and King to serve as the
corporation's independent public accountant for the fiscal year ending
December 31, 1996. Hill, Barth and King also served as the corporation's
independent public accountant for the fiscal year ended December 31, 1995.
Hill, Barth and King is expected to have a representative present at the
annual meeting and will be available to respond to shareholders' questions
and, if they desire, will have an opportunity to make any statement they
consider appropriate.
SHAREHOLDER PROPOSALS
Any Shareholder proposal intended to be placed in the Proxy Statement
for the 1996 annual meeting to be held in March 1997 must be received by the
Corporation no later than December 1, 1996. Written proposals should be sent
to Richard L. Calvin, Executive Vice President and Treasurer, Farmers National
Banc Corp, 20 South Broad Street, P. O. Box 555, Canfield, Ohio 44406. Each
proposal submitted should be accompanied by the name and address of the
shareholder submitting the proposal and the number of shares owned. If the
proponent is not a shareholder of record, proof of beneficial ownership should
also be submitted. All proposals must be a proper subject for action and
comply with the proxy rules of the Securities and Exchange Commission.
MISCELLANEOUS
The Board of Directors does not know of matters other than the review of
1995, the election of Directors and the amendment to Article IV as described
in this Proxy Statement to be acted upon at the annual meeting. If any other
matters should come before the meeting, the proxy holders will vote upon them
in accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
WILLIAM D. STEWART, PRESIDENT
(APPENDIX)
FARMERS NATIONAL BANC CORP
PROXY FOR ANNUAL MEETING
20 South Broad St., P.O. Box 555, Canfield, Ohio 44406
SOLICITED BY THE BOARD OF DIRECTORS
KNOW ALL MEN BY THESE PRESENTS, that I, the Undersigned Shareholder of Farmers
National Banc Corp of Canfield, Ohio, do hereby nominate and appoint William
D. Calhoun, Ronald V. Wertz and David W. Yeany (no officer or employee of the
Corporation may be named as proxy) or any one of them (with full power to act
alone), my true and lawful attorney(s) with full power of substitution, for me
and in my name, place and stead to vote all the Common Stock of said
Corporation standing in my name on its books on February 28, 1996, at the
annual meeting of its Shareholders to be held at Colonial Catering, 429 Lisbon
Street, Canfield, Ohio 44406, on Thursday, March 28, 1996, at 4:30 P.M.,
Eastern Standard Time, or any adjournment thereof with all the powers the
undersigned would possess if personally present as follows:
1. ELECTION OF DIRECTORS: Fixing the number of Directors to be elected
at eight (8) and the election of the eight (8) persons listed in the Proxy
Statement dated March 4, 1996 accompanying the notice of said meeting.
FOR (all nominees except as indicated below) ________ WITHHOLD
AUTHORITY (as to all nominees) ________
To withhold your vote from certain nominees, strike a line through
their name.
Benjamin R. Brown, Richard L. Calvin, Joseph O. Lane,
David C. Myers, Edward A. Ort, Frank L. Paden,
William D. Stewart, Ronald V. Wertz
2. AMENDMENT TO ARTICLE IV. Increasing the authorized number of shares
to 5,000,000 shares of stock with no par value from 2,400,000 shares of stock
with a par value of $2.50 per share.
FOR ________ AGAINST ________ ABSTAIN ________
3. SUCH OTHER BUSINESS as may properly come before the meeting or any
adjournment thereof.
(Please sign on reverse side and return promptly.)
THIS PROXY CONFERS AUTHORITY TO VOTE "FOR" EACH PROPOSITION LISTED
UNLESS OTHERWISE INDICATED. If any other business is presented at said
meeting, this Proxy shall be voted in accordance with the recommendations of
the Board of Directors.
The Board of Directors recommends a vote "FOR" each of the listed
propositions. This proxy is solicited on behalf of The Board of Directors and
may be revoked prior to its exercise.
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS
POSSIBLE (whether or not you plan to attend the meeting in person).
IF YOU DO ATTEND THE MEETING, YOU MAY THEN WITHDRAW YOUR PROXY. THE
PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS EXERCISE.
DATED______________________________________
NUMBER OF SHARES HELD _____________________
____________________________________ (L.S.)
____________________________________ (L.S.)
Signature of Shareholder(s)*
*When signing as attorney, executor, administrator, trustee or guardian,
please give full title. If more than one trustee, all should sign. All
joint owners must sign.
