Form 8-K FARMERS NATIONAL BANC For: Apr 16

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): April 16, 2015

 

 

Farmers National Banc Corp.

(Exact name of registrant as specified in its charter)

 

 

 

Ohio		001-35296		34-1371693
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

20 South Broad Street, P.O. Box 555, Canfield, Ohio		44406-05555
(Address of principal executive offices)		(Zip Code)

(330) 533-3341

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

x	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On April 22, 2015, Farmers National Banc Corp. (the “Company”) announced earnings for the quarter ended March 31, 2015. A copy of the press release and certain financial information for this period is attached as Exhibit 99.1 hereto and incorporated by reference herein. In addition, on April 22, 2015, the Company first mailed a letter to shareholders regarding its first quarter results, a copy of which is attached hereto as Exhibit 99.2. The shareholder letter also included an update on the Company’s Agreement and Plan of Merger (the “Merger Agreement”) with National Bancshares Corporation (“National Bancshares”), which provides for, among other things, the merger of National Bancshares with and into the Company (the “Merger”).

Pursuant to General Instruction B.2 of Current Report on Form 8-K, the information in this Item 2.02 is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Furthermore, the information in this Item 2.02 shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended.

ITEM 5.07 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

On April 16, 2015, the Company held its 2015 Annual Meeting of Shareholders (the “2015 Annual Meeting”) for the purposes of: (i) electing three directors for a term expiring at the 2018 Annual Meeting of Shareholders; (ii) approving a non-binding advisory vote regarding the compensation of the Company’s named executive officers as disclosed in its proxy statement; and (iii) ratifying the appointment of Crowe Horwath LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2015. As of the close of business on March 3, 2015, the record date for the 2015 Annual Meeting, 18,408,612 common shares were outstanding and entitled to vote. At the Annual Meeting, 14,641,464, or approximately 79.54%, of the outstanding common shares entitled to vote were represented in person or by proxy.

The results of the voting at the 2015 Annual Meeting are as follows:

 

1.	The three nominees for director were elected to serve a three-year term ending at the 2017 Annual Meeting of Shareholders:

 

Name		Votes For				Votes Withheld				Broker Non-Votes
Lance J. Ciroli			10,358,012				385,554				3,897,897
Anne Frederick Crawford			10,278,565				465,001				3,897,897
David Z. Paull			10,335,749				407,818				3,897,897

 

2.	By the following vote, the shareholders approved an advisory vote on the 2014 compensation paid to the Company’s named executive officers, with over [90]% of shares voted cast in favor of the “Say on Pay” proposal:

 

Votes For		Votes Against				Abstentions				Broker Non-Votes
9,863,475			737,036				143,055				3,897,897

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3.	The selection of Crowe Horwath LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2015 was ratified by shareholders:

 

Votes For		Votes Against				Abstentions				Broker Non-Votes
14,469,008			134,276				38,180				—

ITEM 8.01 OTHER EVENTS.

On April 22, 2015, the Company first mailed a letter to shareholders regarding its first quarter results, a copy of which is attached hereto as Exhibit 99.2. The shareholder letter also included an update on the Merger Agreement with National Bancshares, which provides for, among other things, the Merger.

The shareholder letter is furnished herein, as part of this Item 8.01, as Exhibit 99.2. Pursuant to General Instruction B.2 of Current Report on Form 8-K, the information in this Item 7.01 and Exhibit 99.3 shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section. Furthermore, the information in this Item 8.01 and Exhibit 99.2 shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as may be expressly set forth by specific reference in such filing.

Important Additional Information About the Merger.

In connection with the proposed Merger, the Company has filed with the Securities and Exchange Commission (the “SEC”) a Registration Statement on Form S-4 includes a joint proxy statement and a Company prospectus, as well as other relevant documents concerning the proposed transaction.

SHAREHOLDERS OF THE COMPANY AND NATIONAL BANCSHARES AND OTHER INVESTORS ARE URGED TO CAREFULLY READ THE PROXY STATEMENT/PROSPECTUS TO BE INCLUDED IN THE FINAL EFFECTIVE REGISTRATION STATEMENT ON FORM S-4, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT THE COMPANY, NATIONAL BANCSHARES, THE PROPOSED MERGER, THE PERSONS SOLICITING PROXIES WITH RESPECT TO THE PROPOSED MERGER AND THEIR INTERESTS IN THE PROPOSED MERGER AND RELATED MATTERS.

The respective directors and executive officers of the Company and National Bancshares and other persons may be deemed to be participants in the solicitation of proxies from shareholders of the Company and National Bancshares with respect to the proposed Merger. Information regarding the directors and executive officers of the Company is available in its proxy statement filed with the SEC on March 13, 2015. Information regarding directors and executive officers of National Bancshares is available on its website at

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http://www.discoverfirstnational.com/. Other information regarding the participants in the solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement/prospectus to be included in the Registration Statement on Form S-4 and other relevant materials filed with the SEC when they become available.

Investors and security holders will be able to obtain free copies of the registration statement (when available) and other documents filed with the SEC by Farmers through the website maintained by the SEC at http://www.sec.gov. Copies of the documents filed with the SEC by Farmers will be available free of charge on Farmers’ website at https://www.farmersbankgroup.com.

This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities nor shall there be any sale of securities in any jurisdiction in which the offer, solicitation or sale is unlawful before registration or qualification of the securities under the securities laws of the jurisdiction. No offer of securities shall be made except by means of a prospectus satisfying the requirements of Section 10 of the Securities Act.

Forward Looking Statements.

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not historical facts, but rather statements based on the Company’s current expectations regarding its business strategies and its intended results and future performance. Forward-looking statements are preceded by terms such as “expects,” “believes,” “anticipates,” “intends” and similar expressions, as well as any statements related to future expectations of performance or conditional verbs, such as “will,” “would,” “should,” “could” or “may.”

Forward-looking statements are not guarantees of future performance. Numerous risks and uncertainties could cause or contribute to the Company’s actual results, performance, and achievements to be materially different from those expressed or implied by the forward-looking statements. Factors that may cause or contribute to these differences include, without limitation, the Company’s failure to integrate National Bancshares and its subsidiary in accordance with expectations; deviations from performance expectations related to National Bancshares and its subsidiary; general economic conditions, including changes in market interest rates and changes in monetary and fiscal policies of the federal government; legislative and regulatory changes; competitive conditions in the banking markets served by the Company’s subsidiaries; the adequacy of the allowance for losses on loans and the level of future provisions for losses on loans; and other factors disclosed periodically in the Company’s filings with the SEC.

Because of the risks and uncertainties inherent in forward-looking statements, readers are cautioned not to place undue reliance on them, whether included in this report or made elsewhere from time to time by the Company or on the Company’s behalf. The Company assumes no obligation to update any forward-looking statements.

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ITEM 9.01

FINANCIAL STATEMENTS AND EXHIBITS.

 

(d)

Exhibits.

 

Exhibit Number		Description
99.1		Press Release—Quarterly Financial Results, dated April 22, 2015 (filed herewith).
99.2		Letter to Shareholders, dated April 22, 2015 (filed herewith).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: April 22, 2015

Exhibit 99.1

April 22, 2015

Press Release

 

Source:		Farmers National Banc Corp.
		Kevin J. Helmick, President and CEO
		20 South Broad Street P.O. Box 555
		Canfield, OH 44406
		330.533.3341
		Email: [email protected]

FARMERS NATIONAL BANC CORP. ANNOUNCES

2015 FIRST QUARTER FINANCIAL RESULTS

 

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129 consecutive quarters of profitability

 

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Net income for quarter ended March 31, 2015 was $2.2 million compared to $2.1 million for most recent quarter

 

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Efficiency ratio improved to 70.7%, compared to 71.2% for most recent quarter

 

•

Noninterest income increased 17.6% compared to same quarter in 2014

 

•

Loans increased 7.6% since March 31, 2014

 

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Non-performing assets to total assets remain at low levels, 0.71% at March 31, 2015

CANFIELD, Ohio (April 22, 2015) – Farmers National Banc Corp. (Farmers) (NASDAQ: FMNB) today reported financial results for the three months ended March 31, 2015.

Net income for the three months ended March 31, 2015 was $2.2 million, or $0.12 per diluted share, which compares to $2.2 million, or $0.12 per diluted share for the first quarter ended March 31, 2014. In comparing the first quarter’s results to the most recent previous quarter, net income of $2.2 million increased 3% compared to $2.1 million for the quarter ended December 31, 2014.

Kevin J. Helmick, President and CEO, stated, “We are pleased with our improvement in net income for the quarter ended March 31, 2015. The increase in earnings is a result of the growth of our loan portfolio, the continued improvement in our level of noninterest income and stable asset quality. We have also experienced an increase in our net interest margin, mainly as a result of lower funding costs.”

2015 First Quarter Financial Highlights

 

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Loan growth

Total loans were $673.8 million at March 31, 2015, compared to $626.2 million at March 31, 2014. This represents an increase of 7.6%. The increase in loans is a direct result of Farmers’ focus on loan growth utilizing a talented lending and credit team, while adhering to a sound underwriting discipline. Most of the increase in loans has occurred in the commercial real estate, commercial and industrial and residential real estate loan portfolios. Loans comprised 62.5% of the Bank’s average earning assets in 2015, an improvement compared to 58.2% in 2014. This improvement has resulted in a 2.8% increase in tax equated loan income from the first quarter of 2014 to the same quarter in 2015.

 

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Loan quality

Non-performing assets to total assets remain at a safe level, currently at 0.71%. Early stage delinquencies also continue to remain at low levels, at $4.3 million or 0.64% of total loans at March 31, 2015. The allowance to non-performing loans ratio improved from 86.97% at March 31, 2014 to 97.28% at March 31, 2015.

 

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Net interest margin

The net interest margin for the quarter ended March 31, 2015 was 3.64%, an 8 basis points increase from the quarter ended March 31, 2014. In comparing the first quarter of 2015 to the same quarter in 2014, asset yields decreased 1 basis point, while the cost of interest-bearing liabilities decreased 7 basis points.

 

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Noninterest income

Noninterest income increased 17.6% to $4.0 million for the quarter ended March 31, 2015 compared to $3.4 million in 2014. Trust fees increased $150 thousand or 10% and retirement plan consulting fees also increased $140 thousand or 38.5% in the current year’s quarter compared to the same quarter in 2014. Investment commissions also increased $104 thousand or 54% in comparing the same two quarters.

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2015 Outlook

Mr. Helmick added, “We are excited about our recently announced merger with National Bancshares Corporation. We believe that the combination of our Company with National Bancshares, a strong community bank headquartered in Orrville, Ohio, will create a top-performing Midwest community bank that has the scale, product depth and efficiencies to compete effectively and deliver best-in-class service to our combined customers, while creating long-term value for our shareholders. This transaction is an important step in the long-term strategy to expand our footprint and enhance profitability.”

Important Additional Information About the Merger.

In connection with the proposed merger, Farmers has filed with the Securities and Exchange Commission (the “SEC”) a Registration Statement on Form S-4 that includes a joint proxy statement and a Farmers prospectus, as well as other relevant documents concerning the proposed transaction.

SHAREHOLDERS OF FARMERS AND NATIONAL BANCSHARES AND OTHER INVESTORS ARE URGED TO CAREFULLY READ THE PROXY STATEMENT/PROSPECTUS TO BE INCLUDED IN THE FINAL EFFECTIVE REGISTRATION STATEMENT ON FORM S-4, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT FARMERS, NATIONAL BANCSHARES, THE PROPOSED MERGER, THE PERSONS SOLICITING PROXIES WITH RESPECT TO THE PROPOSED MERGER AND THEIR INTERESTS IN THE PROPOSED MERGER AND RELATED MATTERS.

The respective directors and executive officers of Farmers and National Bancshares and other persons may be deemed to be participants in the solicitation of proxies from shareholders of Farmers and National Bancshares with respect to the proposed merger. Information regarding the directors and executive officers of Farmers is available in its proxy statement filed with the SEC on March 13, 2015. Information regarding directors and executive officers of National Bancshares is available on its website at http://www.discoverfirstnational.com/. Other information regarding the participants in the solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement/prospectus to be included in the Registration Statement on Form S-4 and other relevant materials filed with the SEC when they become available.

Investors and security holders will be able to obtain free copies of the registration statement (when available) and other documents filed with the SEC by Farmers through the website maintained by the SEC at http://www.sec.gov. Copies of the documents filed with the SEC by Farmers will be available free of charge on Farmers’ website at https://www.farmersbankgroup.com.

This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities nor shall there be any sale of securities in any jurisdiction in which the offer, solicitation or sale is unlawful before registration or qualification of the securities under the securities laws of the jurisdiction. No offer of securities shall be made except by means of a prospectus satisfying the requirements of Section 10 of the Securities Act.

Founded in 1887, Farmers National Banc Corp. is a diversified financial services company headquartered in Canfield, Ohio, with more than $1.1 billion in Banking assets and $1 billion in Trust assets. Farmers National Banc Corp.’s wholly-owned subsidiaries are comprised of The Farmers National Bank of Canfield, a full-service national bank engaged in commercial and retail banking with 19 banking locations in Mahoning, Trumbull, Columbiana, Stark and Cuyahoga Counties in Ohio, Farmers Trust Company, which operates two trust offices and offers services in the same geographic markets and National Associates, Inc. Farmers National Insurance, LLC, a wholly-owned subsidiary of The Farmers National Bank of Canfield, offers a variety of insurance products.

Non-GAAP Disclosure

This press release includes disclosures of Farmers tangible common equity ratio and pre-tax, pre-provision income, which are financial measures not prepared in accordance with generally accepted accounting principles in the United States (GAAP). A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are required to be disclosed by GAAP. Farmers believes that these non-GAAP financial measures provide both management and investors a more complete understanding of the underlying operational results and trends and Farmers’ marketplace performance. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the numbers prepared in accordance with GAAP. The reconciliations of non-GAAP financial measures are included in the tables following Consolidated Financial Highlights below.

Forward-Looking Statements

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about Farmers’ financial condition, results of operations, asset quality trends and profitability. Forward-looking statements are not historical facts but instead represent only management’s current expectations and

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forecasts regarding future events, many of which, by their nature, are inherently uncertain and outside of Farmers’ control. Farmers’ actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Factors that could cause Farmers’ actual results to differ materially from those described in the forward-looking statements can be found in Farmers’ Annual Report on Form 10-K for the year ended December 31, 2014, which has been filed with the Securities and Exchange Commission and is available on Farmers’ website (www.farmersbankgroup.com) and on the Securities and Exchange Commission’s website (www.sec.gov). Forward-looking statements are not guarantees of future performance and should not be relied upon as representing management’s views as of any subsequent date. Farmers does not undertake any obligation to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.

Farmers National Banc Corp. and Subsidiaries

Consolidated Financial Highlights

(Amounts in thousands, except per share results) Unaudited

Consolidated Statements of Income

 

		For the Three Months Ended
		March 31, 2015				Dec. 31, 2014				Sept. 30, 2014				June 30, 2014				March 31, 2014
Total interest income		$	9,999			$	10,321			$	10,413			$	10,118			$	10,063
Total interest expense			1,007				1,078				1,128				1,166				1,207
Net interest income			8,992				9,243				9,285				8,952				8,856
Provision for loan losses			450				825				425				300				330
Other income			4,037				4,193				3,880				3,797				3,433
Other expense			9,751				9,867				9,776				9,378				9,141
Income before income taxes			2,828				2,744				2,964				3,071				2,818
Income taxes			617				597				688				720				627
Net income		$	2,211			$	2,147			$	2,276			$	2,351			$	2,191
Average shares outstanding			18,409				18,436				18,706				18,781				18,778
Pre-tax pre-provision income		$	3,278			$	3,569			$	3,389			$	3,371			$	3,148
Basic and diluted earnings per share			0.12				0.12				0.12				0.13				0.12
Cash dividends			552				552				559				563				563
Cash dividends per share			0.03				0.03				0.03				0.03				0.03
Performance Ratios
Net Interest Margin (Annualized)			3.64	%			3.63	%			3.58	%			3.54	%			3.56	%
Efficiency Ratio (Tax equivalent basis)			70.71	%			71.20	%			70.17	%			69.68	%			69.87	%
Return on Average Assets (Annualized)			0.79	%			0.75	%			0.79	%			0.83	%			0.78	%
Return on Average Equity (Annualized)			7.14	%			6.91	%			7.37	%			7.85	%			7.65	%
Dividends to Net Income			24.97	%			25.71	%			24.56	%			23.95	%			25.70	%
Consolidated Statements of Financial Condition
		March 31, 2015				Dec. 31, 2014				Sept. 30, 2014				June 30, 2014				March 31, 2014
Assets
Cash and cash equivalents		$	26,929			$	27,428			$	28,294			$	28,070			$	29,333
Securities available for sale			369,919				389,829				404,895				409,285				427,625
Loans held for sale			146				511				895				275				1,026
Loans			673,784				663,852				646,981				637,774				626,186
Less allowance for loan losses			7,723				7,632				7,333				7,356				7,387
Net Loans			666,061				656,220				639,648				630,418				618,799
Other assets			70,596				62,979				66,007				65,238				64,217
Total Assets		$	1,133,651			$	1,136,967			$	1,139,739			$	1,133,286			$	1,141,000

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Liabilities and Stockholders’ Equity
Deposits		$	909,408			$	915,703			$	913,000			$	907,443			$	923,033
Other interest-bearing liabilities			80,338				87,517				90,649				93,807				92,815
Other liabilities			17,134				10,187				14,689				11,016				7,829
Total liabilities			1,006,328				1,013,407				1,018,338				1,012,266				1,023,677
Stockholders’ Equity			126,771				123,560				121,401				121,020				117,323
Total Liabilities and Stockholders’ Equity		$	1,133,651			$	1,136,967			$	1,139,739			$	1,133,286			$	1,141,000
Period-end shares outstanding			18,409				18,409				18,559				18,781				18,781
Book value per share		$	6.89			$	6.71			$	6.54			$	6.44			$	6.25
Tangible book value per share			6.42				6.23				6.02				5.91				5.71
Capital and Liquidity
Tier 1 Common Capital Ratio (a)			14.26	%			N/A				N/A				N/A				N/A
Total Capital to Risk Weighted Assets (a)			15.22	%			16.48	%			16.54	%			16.60	%			16.51	%
Tier 1 Capital to Risk Weighted Assets (a)			14.26	%			15.43	%			15.52	%			15.57	%			15.47	%
Tier 1 Capital to Average Assets (a)			10.26	%			10.03	%			9.89	%			9.87	%			9.73	%
Equity to Asset Ratio			11.18	%			10.87	%			10.65	%			10.68	%			10.28	%
Tangible Common Equity Ratio			10.50	%			10.17	%			9.88	%			9.89	%			9.48	%
Net Loans to Assets			58.75	%			57.72	%			56.12	%			55.63	%			54.23	%
Loans to Deposits			74.09	%			72.50	%			70.86	%			70.28	%			67.84	%
Asset Quality
Non-performing loans		$	7,939			$	8,481			$	7,219			$	8,140			$	8,494
Other Real Estate Owned			144				148				381				352				174
Non-performing assets			8,083				8,629				7,600				8,492				8,668
Loans 30 - 89 days delinquent			4,344				5,426				4,938				3,460				2,473
Charged-off loans			618				891				756				650				836
Recoveries			259				365				308				319				325
Net Charge-offs			359				526				448				331				511
Annualized Net Charge-offs to Average Net Loans Outstanding			0.22	%			0.33	%			0.28	%			0.21	%			0.34	%
Allowance for Loan Losses to Total Loans			1.15	%			1.15	%			1.13	%			1.15	%			1.18	%
Non-performing Loans to Total Loans			1.18	%			1.28	%			1.12	%			1.28	%			1.36	%
Allowance to Non-performing Loans			97.28	%			89.99	%			101.58	%			90.37	%			86.97	%
Non-performing Assets to Total Assets			0.71	%			0.76	%			0.67	%			0.75	%			0.76	%

 

(a)	March 31, 2015 ratio is estimated

Reconciliation of Common Stockholders’ Equity to Tangible Common Equity

 

		March 31,				Dec. 31,				Sept. 30,				June 30,				March 31,
		2015				2014				2014				2014				2014
Stockholders’ Equity		$	126,771			$	123,560			$	121,401			$	121,020			$	117,323
Less Goodwill and other intangibles			8,646				8,813				9,768				9,960				10,151
Tangible Common Equity		$	118,125			$	114,747			$	111,633			$	111,060			$	107,172

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Reconciliation of Total Assets to Tangible Assets

 

		March 31,				Dec. 31,				Sept. 30,				June 30,				March 31,
		2015				2014				2014				2014				2014
Total Assets		$	1,133,651			$	1,136,967			$	1,139,739			$	1,133,286			$	1,141,000
Less Goodwill and other intangibles			8,646				8,813				9,768				9,960				10,151
Tangible Assets		$	1,125,005			$	1,128,154			$	1,129,971			$	1,123,326			$	1,130,849
Reconciliation of Income Before Taxes to Pre-Tax, Pre-Provision Income
		For the Three Months Ended
		March 31,				Dec. 31,				Sept. 30,				June 30,				March 31,
		2015				2014				2014				2014				2014
Income before income taxes		$	2,828			$	2,744			$	2,964			$	3,071			$	2,818
Provision for loan losses			450				825				425				300				330
Pre-tax, pre-provision income		$	3,278			$	3,569			$	3,389			$	3,371			$	3,148

Exhibit 99.2

 

April 23, 2015

Dear Fellow Shareholders:

Once again, Farmers National Bank closes the books on another quarter of positive earnings. Prudent stewardship and strategic long-range planning have elevated Farmers to where it is today, and it is those same bedrock principles of sound management that will help transition us to our next level of success. As always, I am happy to share with you an overview of first quarter’s financial highlights as found in the attached earnings release.

We have positioned ourselves well for continued growth, vitality and acquisition with a strong capital position, steadily improving profitability, a talented management team and a diversity of revenue not common to most community banks. This diversity in revenue comes from our sophisticated wealth management platform that includes Trust, Investments, Insurance, Retirement Plan Services and Private Banking.

Thanks in large part to our consistent track record of strategic execution and reputation for strong management principles, we have attracted a top performing partner to create an exciting merger that will benefit all stakeholders. Completing and successfully integrating our proposed merger with National Bancshares Corporation (NBOH) is a top priority in 2015 as it will serve as an important growth catalyst for us going forward. Therefore, I would like to dedicate the majority of my letter to focus on, what I believe to be, the most exciting opportunity for Farmers in recent history.

Taking a Critical Strategic Step Forward…

As I reported to you last quarter, your Board unanimously agreed to merge with NBOH, which was just recently cited by SNL Financial, a leading financial services research organization, as being among the “100 Best Performing Community Banks” in 2014 with $500 million to $5 billion in assets. We believe this deal is in the best long-term interests of our employees, customers, shareholders and communities because it:

 

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Combines NBOH’s attractively growing loan portfolio with our deep wealth management resources and strong capital base

 

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Creates exciting opportunities that accelerates our growth and geographic footprint

 

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Enhances the depth and breadth of the leadership team, as well as fortifies the Board of Directors

 

•

Preserves the venerable Farmers brand, our “customer-first” culture and emphasis on superb service

 

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Expands our ability to be an active corporate citizen in our communities and serve as an economic development engine in the region

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Provides even greater professional development opportunities for our employees

 

•

Improves liquidity and grows long-term value creation for shareholders

… With Your Help

In the coming weeks, we will be sending you proxy materials inviting you to attend a Special Meeting of Shareholders, where we hope to receive your approval to merge these two high-quality institutions and create the third largest community bank headquartered in Northeastern Ohio¹ that will retain the Farmers National Bank name. We respectfully request that you vote your shares immediately upon receipt by signing, dating and returning the proxy card in the pre-addressed, stamped envelope that you will receive with your materials. You can also vote by internet or telephone by following the instructions on the proxy card. Please know that your vote is very important to us, no matter the size of your holdings. Not voting will have the same effect as voting against the merger with NBOH. If you have any questions about this transaction, please do not hesitate to contact me directly at (330) 533-5001. In the meantime, we will continue to update you throughout the merger process as we maintain our commitment to transparency and open dialog.

This is truly an exciting time for Farmers and our shareholders. The opportunities before us are numerous and compelling. With your continued support, we will be ideally positioned to deliver the next level of growth and development for all stakeholders.

As always, I am open to your calls, letters, and emails…so please do not hesitate to reach out to me if you have an idea or some insight you’d like to share.

Very truly yours,

 

Kevin J. Helmick

President & CEO

 

1	Community Banks defined as those with assets less than $20.0 billion. Northeast Ohio includes area codes 216, 330 and 440

Important Additional Information About the Merger.

In connection with the proposed merger, Farmers has filed with the Securities and Exchange Commission (the “SEC”) a Registration Statement on Form S-4 that includes a joint proxy statement and a Farmers prospectus, as well as other relevant documents concerning the proposed transaction.

  SHAREHOLDERS OF FARMERS AND NATIONAL BANCSHARES AND OTHER INVESTORS ARE URGED TO CAREFULLY READ THE PROXY STATEMENT/PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT ON FORM S-4, BECAUSE IT CONTAINS IMPORTANT INFORMATION ABOUT FARMERS, NATIONAL BANCSHARES, THE PROPOSED MERGER, THE PERSONS SOLICITING PROXIES WITH RESPECT TO THE PROPOSED MERGER AND THEIR INTERESTS IN THE PROPOSED MERGER AND RELATED MATTERS.

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The respective directors and executive officers of Farmers and National Bancshares and other persons may be deemed to be participants in the solicitation of proxies from shareholders of Farmers and National Bancshares with respect to the proposed merger. Information regarding the directors and executive officers of Farmers is available in its proxy statement filed with the SEC on March 13, 2015. Information regarding directors and executive officers of National Bancshares is available on its website at http://www.discoverfirstnational.com/. Other information regarding the participants in the solicitation and a description of their direct and indirect interests, by security holdings or otherwise, are contained in the proxy statement/prospectus included in the Registration Statement on Form S-4 and other relevant materials filed with the SEC when they become available.

Investors and security holders will be able to obtain free copies of the registration statement (when available) and other documents filed with the SEC by Farmers through the website maintained by the SEC at http://www.sec.gov. Copies of the documents filed with the SEC by Farmers will be available free of charge on Farmers’ website at https://www.farmersbankgroup.com.

This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities nor shall there be any sale of securities in any jurisdiction in which the offer, solicitation or sale is unlawful before registration or qualification of the securities under the securities laws of the jurisdiction. No offer of securities shall be made except by means of a prospectus satisfying the requirements of Section 10 of the Securities Act.

Forward Looking Statements.

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not historical facts, but rather statements based on Farmer’s current expectations regarding its business strategies and its intended results and future performance. Forward-looking statements are preceded by terms such as “expects,” “believes,” “anticipates,” “intends” and similar expressions, as well as any statements related to future expectations of performance or conditional verbs, such as “will,” “would,” “should,” “could” or “may.”

Forward-looking statements are not guarantees of future performance. Numerous risks and uncertainties could cause or contribute to Farmers’ actual results, performance, and achievements to be materially different from those expressed or implied by the forward-looking statements. Factors that may cause or contribute to these differences include, without limitation, Farmers’ failure to integrate National Bancshares and its subsidiary in accordance with expectations; deviations from performance expectations related to National Bancshares and its subsidiary; general economic conditions, including changes in market interest rates and changes in monetary and fiscal policies of the federal government; legislative and regulatory changes; competitive conditions in the banking markets served by Farmers’ subsidiaries; the adequacy of the allowance for losses on loans and the level of future provisions for losses on loans; and other factors disclosed periodically in Farmers’ filings with the SEC.

Because of the risks and uncertainties inherent in forward-looking statements, readers are cautioned not to place undue reliance on them, whether included in this report or made elsewhere from time to time by Farmers or on Farmers’ behalf. Farmers assumes no obligation to update any forward-looking statements.

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