Earnings call transcript: Farmers National Q3 2025 misses EPS forecast

Farmers National Banc Corp (FMNB), a regional bank with a market capitalization of $505 million, reported its third-quarter earnings for 2025, revealing earnings per share (EPS) of $0.33, which fell short of the anticipated $0.405, marking an 18.52% negative surprise. The revenue of $47.74 million also slightly missed the forecast of $48 million. Following the announcement, the company’s stock declined by 3.66% in pre-market trading, reflecting investor disappointment. According to InvestingPro analysis, the stock currently appears undervalued, presenting a potential opportunity for value investors. Get access to detailed valuation metrics and 5 exclusive ProTips for FMNB with an InvestingPro subscription.

Key Takeaways

• Farmers National Banc Corp reported its 171st consecutive quarter of profitability.
• The company experienced solid loan growth, with commercial loans increasing by $30.1 million.
• Stock price fell by 3.66% in pre-market trading following the earnings miss.
• Farmers National is transitioning to a new core platform, expected to save $2 million annually.

Company Performance

Farmers National Banc Corp continued its long-standing streak of profitability, marking its 171st consecutive profitable quarter. The company, trading at an attractive P/E ratio of 9.94x, reported significant growth in its loan portfolio, particularly in commercial lending, which saw a $30.1 million increase, representing a 6% annualized growth. This expansion aligns with the company’s strategic focus on enhancing its presence in Ohio and Western Pennsylvania. Notably, FMNB has maintained dividend payments for 32 consecutive years, demonstrating strong financial stability.

Financial Highlights

• Revenue: $47.74 million, slightly below the $48 million forecast.
• Earnings per share: $0.33, compared to a forecast of $0.405.
• Net interest margin expanded to 3%, the first increase in 2.5 years.

Earnings vs. Forecast

Farmers National’s third-quarter EPS of $0.33 missed the forecasted $0.405, resulting in an 18.52% negative surprise. This miss is notable against the backdrop of the company’s historical trend of meeting or exceeding expectations. Revenue also slightly missed expectations, coming in at $47.74 million against a forecast of $48 million, a 0.54% shortfall.

Market Reaction

In response to the earnings announcement, Farmers National’s stock dropped by 3.66% in pre-market trading, with the price falling to $13.65. This decline is significant as it moves the stock closer to its 52-week low of $11.58, reflecting investor concerns over the earnings miss. However, the stock offers an attractive dividend yield of 4.95%, well above its 10-year average of 4%. For comprehensive analysis including Fair Value estimates and growth potential, visit InvestingPro, where you’ll find detailed research reports and expert insights.

Outlook & Guidance

Looking forward, Farmers National has outlined ambitious plans, including a merger with Middlefield Bancorp expected to close in 2026. The merger is anticipated to result in a 7% diluted EPS accretion by 2027, despite a 4.4% tangible book value per share dilution, which is expected to recover within three years. Analysts maintain a positive outlook, with price targets ranging from $15 to $16, and InvestingPro’s Financial Health Score of 2.25 indicates FAIR overall company health. Unlock the complete financial analysis and discover why 2 analysts have recently revised their earnings estimates upward with an InvestingPro subscription.

Executive Commentary

CEO Kevin Helmut emphasized the strategic importance of the Columbus market, stating, "Columbus is recognized on a national stage from their economic development and growth perspective." CFO Troy Adair highlighted the potential in the company’s loan portfolio, noting, "We think we’ve got a lot of runway with both CRE and C&I buckets."

Risks and Challenges

• Integration risks related to the upcoming merger with Middlefield Bancorp.
• Potential challenges in successfully transitioning to the new core platform.
• Market volatility impacting stock performance and investor sentiment.
• Economic uncertainties that could affect loan growth and interest margins.

Q&A

During the earnings call, analysts queried the management on balance sheet growth potential and the company’s ability to manage commercial real estate concentration. Executives also addressed the timing of cost savings and strategies for optimizing funding costs, providing reassurance on their strategic direction.

Full transcript - Farmers National Banc Corp (FMNB) Q3 2025:

Moderator/Operator: And thank you for joining us today to review Farmers National Bancorp’s and Middlefield Bancorp’s announcement of a definitive merger agreement. Before we continue, I remind you that forward looking statements made during this presentation are made to the safe harbor statement found in the presentation and our filings with the Securities and Exchange Commission, including Farmers’ 2024 annual report on Form 10 k and subsequent SEC filings. These statements are not historical facts, but rather statements based on Farmer’s current expectations regarding its business strategies and its intended results in future performance, including the intended benefits of the merger. Forward looking statements are not guarantees of future performance and actual future results could differ materially from those contained in forward looking information. Because forward looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict, and many of which are outside Farmers’ control.

Numerous risks, uncertainties, and changes could cause or contribute to Farmers’ actual results, performance, and achievements, and the intended benefits of the merger to be materially different from those expressed or implied by the forward looking statements. For further information concerning factors that could materially affect actual results, performance and achievements related to the forward looking statements, please refer to the factors disclosed periodically in Farmers’ filings with the SEC as well as the disclosure statement in the presentation in Farmers and Middlefield’s joint press release dated 10/22/2025. Forward looking statements speak as of the date made, and Farmers assumes no obligation to update update any forward looking statements to reflect future events, information, or circumstances that arise after the date of this presentation. A joint press release and presentation on the merger with Middlefield are available on the investor relations section of Farmers website. In addition, this call is being webcast and a replay will be available on Farmers Investor Relations website.

And now I’m pleased to introduce Kevin Helmut, Farmers chief executive officer. Kevin, please go ahead.

Kevin Helmut, Chief Executive Officer, Farmers National Bancorp: Good morning, and thank you for your time today. We are excited to share with you that this morning, Farmers National Bancorp and Middlefield Bancorp jointly announced the signing of a merger agreement to merge Middlefield into Farmers. Middlefield Bancorp is headquartered in Middlefield, Ohio and is the holding company for the Middlefield Banking Company. On a consolidated basis, Middlefield has $2,000,000,000 in assets with 21 full service locations and one loan production office throughout multiple compelling Ohio markets. When added to Farmers 5,200,000,000.0 in assets, this transaction will increase our assets to 7,200,000,000.0.

At this scale, we believe our financial model will quickly benefit from significant operating leverage and drive increased financial performance. So today, I wanna share with you the strategic rationale and financial implications of this exciting opportunity. Our transaction with Middlefield is strategically important as it provides a unique opportunity to acquire scale in set several attractive Ohio communities and creates a foundation for future success as the community bank of choice in our markets. With six established locations and a 163,000,000 of deposit market share in Greater Columbus markets, Middlefield will meaningfully expand our presence throughout Central Ohio. Coupled with the establishment of our Dublin, Ohio loan production office and the fourth quarter twenty twenty four acquisition of Dublin based Crest Retirement Advisors by our subsidiary National Associates, our Columbus strategic growth plan will be significantly accelerated.

The Columbus market is a natural fit for our diversified financial services platform, and Middlefield’s strong community presence is well aligned with our strategic initiatives to grow in Ohio’s largest and fastest growing region. Middlefield is also highly complementary to our Northeast Ohio franchise, creating significant market fill in opportunities. For example, Geauga County has one of the highest median household incomes in the state. While Farmers currently maintains one office in the county and a modest share of local deposits, Middlefield is the number one community bank and number two in deposit market share overall. The combination will establish Farmers as the leading community bank in Geo County while broadening our reach and deepening relationships across key Northeast Ohio markets.

We are very familiar with Middlefield’s markets, culture, and communities. It is a well run institution with an emphasis on strong core and lower cost deposits. There are a number of benefits that will transpire from this transaction, such as an opportunity to better compete for loan growth in new demographically rich markets with a larger legal lending limit. We’re also excited to offer Farmers’ robust wealth management services to Middlefield’s customers to include Farmers Trust Company, Farmers National Investments, Farmers National Insurance, Farmers Retirement Services, and our private banking program. Both Middlefield and Farmers take pride in their strong customer centric cultures, making this transaction a great fit for both organizations.

Like Farmers, Middlefield has a one hundred plus year history of serving its communities. The combined company will consist of 83 branch locations throughout Northeast, Central, And Western Ohio and Western Pennsylvania. We’ll acquire Middlefield Bank and merge into one combined company that will operate under the Farmers National Bank of Canfield name. We look forward to welcoming our esteemed Middlefield colleagues into the Farmers family. Additionally, two Middlefield board members will join the Farmers board to represent the legacy franchise and provide thoughtful guidance as we combine these two great companies.

The transaction is expected to close in the 2026, and we are working towards a conversion date in August 2026, where both organizations will transition to Jack Henry, a new core platform. The core conversion will offer enhanced digital capabilities for our customers as well as a significant cost savings for our combined company. This will be the largest transaction in Farmers history when measured by our by banking assets, bringing our total acquisitions to nine in the last ten years to include seven bank acquisitions. We have demonstrated a successful track record on our previous mergers as experience, talent, and passion run deep in the farmers’ ranks. We have confidence that our acquisition experience should help mitigate integration risk with this transaction.

Additionally, we expect our growth rates and profitability to be significantly enhanced as a combined company. I’m now happy to turn the call over to Troy Adair, our CFO, to review our third quarter financial results and provide additional details around the financial implications of this

Unidentified Speaker, Farmers National Bancorp: deal. Troy?

Troy Adair, Chief Financial Officer, Farmers National Bancorp: Thank you, Kevin, and good morning, everyone. We’re very excited to make this announcement this morning. And in conjunction with this announcement, we’re also going to talk a little bit about our third quarter financial results, which reflects solid operating and financial performance. Some highlights from our third quarter. We had our one hundred and seventy first consecutive quarter of profitability, well over forty years of profitability that we’ve seen.

We experienced solid loan growth of $34,400,000 representing an annualized growth rate of 4.2%. We had commercial loans, which led our growth in the quarter, increased by 30,100,000 or 6% at an annualized rate. Over the past three months, we’ve seen our net interest margin expand to 3%, which is the first time we’ve been over 3% in almost two point five years. We opportunistically restructured $28,500,000 worth of securities, and we’ve expanded the yield on this amount by two twenty basis points on the reinvestment. As Kevin mentioned, Farmers also made the strategic decision to transition to a new core platform.

While we incurred an upfront charge of $3,100,000 associated with this action during the third quarter, it will result in over $2,000,000 of annual savings once the conversion is complete in August 2026. Our efforts drove another strong quarter of profitability and earnings growth. We’re proud of our performance in the third quarter and excited by the opportunities the Middlefield acquisition will have on our future financial performance. The Middlefield acquisition is structured as an all stock transaction whereby shareholders of Middlefield will receive 2.6 shares of Farmers common stock for each share of Middlefield that they hold. Based on Farmers closing share price of $13.91 on October 20, the total value of the transaction is $299,000,000 or $36.17 per share.

The purchase price was approximately 163.5% of tangible book value and 14.1x Middlefield’s earnings for the last twelve months. This purchase price represents an attractive pay to trade ratio of 87.4%. We published a presentation that is available on the Investors section of our website in which we lay out several key assumptions. Regarding credit due diligence, management completed an in-depth review of Middlefield’s $1,600,000,000 loan portfolio. Our due diligence team consisted of senior commercial credit and commercial banking personnel as well as senior consumer, mortgage underwriting, and collections personnel.

Management also engaged a third party specialist to assess the loan due diligence, portfolio analytics, and development of the credit mark. This gross credit mark is estimated at $28,500,000 and represents 1.74% of Middlefield’s gross loan portfolio. The due diligence team reviewed approximately 57% of the target’s loan portfolio, including the bank’s classified and delinquent loans. We believe this comprehensive review provides an accurate assessment of the loan portfolio and the credit mark is both conservative and prudent in today’s environment. Diluted earnings per share accretion for 2027 is estimated at approximately 7%, and the tangible book value per share dilution of approximately 4.4% is expected to be earned back in approximately three years using the crossover method.

This includes a cost savings estimate of 38% based upon a Middlefield’s expense run rate. The acquisition will also push us over $6,000,000,000 in deposits and approximately $5,000,000,000 in loans, while our capital levels will remain strong. We anticipate our pro form a total risk based capital ratio to be approximately 13.7%, and TCE to tangible assets will increase to approximately 6.4%. I will now turn the call back over to Kevin for his final comments.

Kevin Helmut, Chief Executive Officer, Farmers National Bancorp: Well, very good, and thank you, Troy. You can see, we are very excited about this opportunity that will help us expand into the demographically attractive Central And Western Ohio markets while deepening our commitment to our legacy markets in Northeast Ohio and Western Pennsylvania. Middlefield is a high quality company that offers tremendous upside for our shareholders. Farmers has continued to demonstrate a successful track record for executing on m and a and will strive to complete another successful transaction. So we would like to take thank you for joining our call today, and that’s all for now.

Moderator/Operator: At this time, we will begin the question and answer session. During today’s q and a, management will only take questions from farmers and middle fields analysts. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We ask analysts to limit themselves to one question and one follow-up so that others may have the opportunity to do so as well. One moment please while we poll for questions.

Thank you. Our first question comes from the line of Daniel Tamayo with Raymond James. Please proceed with your question.

Unidentified Speaker, Farmers National Bancorp: Thank you. Good morning, everyone. Congratulations on the deal. I guess, first, just on the on the balance sheet. You know, curious what you think, if any, this the deal has the impact has on on the growth rate for for farmers.

Obviously, you guys haven’t been growing a whole lot for for a while, but, you know, does this accelerate your ability and willingness to to grow the balance sheet? You know, where where you think that that shakes out going forward?

Troy Adair, Chief Financial Officer, Farmers National Bancorp: Danny, hi. This is Troy Adair. This was one of the reasons that we found Middlefield to be attractive with the Columbus market. The way they’ve been growing loans over the last couple of years, we felt that this would enhance our ability to grow organically. We’d opened up the LPO in Columbus earlier this year, but obviously it’s a smaller operation.

So we really think that it will enhance our organic growth capabilities moving forward.

Unidentified Speaker, Farmers National Bancorp: Great. Thanks, Troy. And then you know, just from a, a balance sheet actions perspective, any anticipated changes to the balance sheet once the deal closes or going into the close on on either side of, on either from either bank?

Troy Adair, Chief Financial Officer, Farmers National Bancorp: I I think the marketplace is really creating opportunities for us. In regards to to our investment portfolio, I think restructuring opportunities will be possible. I think rates are down another 20 basis points since the end of the quarter. So if we get even better loan growth, we’ve got easy opportunities to fund that growth. So we can restructure, reduce some of our asset or liability sensitivity moving forward.

We just think it opens up a lot of possibilities for us over the next twelve to eighteen months.

Kevin Helmut, Chief Executive Officer, Farmers National Bancorp: Yeah, Danny. This is Kevin. Thanks for the questions. And I think just to add a little bit to what Troy said, he said it well. And obviously in our earlier comments, you know, Columbus, recognize is on a national stage from their, you know, economic development and and growth perspective.

And so, you know, adding it to what we now consider the triangle of Cleveland, Pittsburgh, Columbus, you know, creates a fair bit of excitement for us. It’s well documented that we’ve been able to acquire and execute on a number of transactions in the past. And I I think, you know, thinking about just loan growth in this transaction maybe undersells it a bit in that, you know, one one of the things we’re really excited about is wealth management. That just doesn’t grow fees. It grows relationships.

And I think, you know, based on what we’ve been able to do in Pittsburgh and some of the early returns there and the early wins we’re seeing in the market, the playbook will continue to be similar in Columbus. We did close the fee acquisition in early January with Crest Retirement. And then as Troy mentioned, the LPO. And so just being able to add to our kind of the spark we’ve created down and around the greater Columbus market with this as well as the Western markets in Hardin and Logan Counties that that Middlefield had is very exciting. And we love the fill in opportunities.

The fill in opportunities in Northeast Ohio are communities that we know, great sources of funding. So we we think it’s it’s the right opportunity, and and we often talk about the strategic aspects of our acquisitions. And that’s first and foremost. So loan growth on its own, we’re optimistic about. But I I I think as it fits into the overall plan, that’s what what makes us particularly excited.

So Danny, as always, we appreciate, you know, the the the thoughtful questions.

Unidentified Speaker, Farmers National Bancorp: That’s helpful color, Kevin and Troy. Thank you. I’ll I’ll step back.

Moderator/Operator: Thank you. As a reminder, if you would like to ask a question, press star one on your telephone keypad. Our next question comes from the line of Daniel Cardenas with Janney.

Daniel Cardenas, Analyst, Janney: Hey, morning, guys. Congratulations on the on the transaction. Just just quickly, what what does this deal do to your, CRE concentration ratio?

Troy Adair, Chief Financial Officer, Farmers National Bancorp: Dan, it raises it a little bit, but we’re still well below the 300% regulatory limit. We think we’ve got a lot of opportunities, not only in the CRE space, but really more so in the C and I space. Middlefield has been doing a very nice job of growing that book of business. We think it will augment our efforts. And we think we’ve got a lot of runway with both of those buckets in the loan portfolio.

Kevin Helmut, Chief Executive Officer, Farmers National Bancorp: Dan, I would just add that, know, Middlefield has done a great job in the last couple of years of focus and C and I too, which is of particular interest to us. And so I I think it’ll be a balanced approach. As Troy said, as opportunities come up with CRE, you know, we have ample room there. But as excited about the C and I prospects as anything in this. So yeah.

Daniel Cardenas, Analyst, Janney: Okay. Great. And then in in in terms of of additional deals, or do you guys have capacity or appetite to look at multiple deals at once? And and would if you did, would these be pure play Ohio deals, or would you look at expanding in Pennsylvania as well?

Kevin Helmut, Chief Executive Officer, Farmers National Bancorp: Yeah. Thanks again, Dan. So, you know, our, our thought process here is just it’s really solely on Middlefield and their stakeholders. We have, as we mentioned in the release, our core conversion that we’re very excited about as well. The Middlefield and Farmers sides both have Jack Henry histories.

You might remember the Cortland acquisition. They were on Jack Henry. We still have a number of associates as well as Middlefield’s acquisition of Liberty where CEO Ron Zimmerli came from. They also have they were on Jack Henry. So we’re very excited about the resources we have there and the ability to convert successfully in August.

And so I I think we’re solely focused on, as I said, middle field and stakeholders in that conversion right now. So we’ll we’ll kinda I’ll kinda punt on that question for now. You know, I I I you know as well, and and we’ve been acquisitive. But for right now, that’s where our focus is.

Daniel Cardenas, Analyst, Janney: Okay. Makes sense. Thank you. I’ll step back.

Moderator/Operator: Our next question is a follow-up from Daniel Tamayo with Raymond James. Please proceed with your question.

Unidentified Speaker, Farmers National Bancorp: Hello again. Well

Kevin Helmut, Chief Executive Officer, Farmers National Bancorp: Hey, Danny.

Unidentified Speaker, Farmers National Bancorp: If I’ve got if I’ve got the floor here, I’ll ask a few questions. Excuse me. May maybe just a follow-up on the expense the expense side, the cost savings. So so you talked about, I think Troy mentioned, 2,000,000 annual savings from the from the core conversion, and that’s happening in August. Maybe just walk us through the timing of the of the cost savings as a whole if you’re gonna get some, you know, initially in the first quarter or in the second quarter kind of post closing and then the the bulk of it post conversion, is that is that the best way to think about it?

And and that 2,000,000 you’re talking about, I’m assuming that that’s, you know, fully baked into the the cost savings you’re talking about.

Kevin Helmut, Chief Executive Officer, Farmers National Bancorp: Yeah. Dan, that’s a great question. I’m sure, you know, many people on the call wanna understand that. So let me lay out the timing so so you understand and then throw comment on that, you kind of financials behind it that that we’ve talked a lot about. So, you know, we we it’s no it it it it’s not unusual for us to see, you know, this this length of time between, you know, signing in a conversion.

We we’ve managed through other transactions, benefit of doing a number of transactions recently with the same team. We’re excited about that, but that, you know, that we have that scheduled for August. So, you know, as you can imagine, you know, we’re thinking about, you know, end of first quarter close. And so we’ll be, you know, running out the balance of that through conversion. You know, and so I think that would extend the time of the cost saves out to the end of the quarter.

But Troy has some more specifics. But I just wanted to make sure that we kind of painted a picture there. Our last transaction with Farmers of Emblems and our experience was from announcement to conversion was about eleven months. And we actually anticipate that this one will be based on that August time frame even shorter than that. So again, we’re well versed.

We’re well prepared for that type of time frame. It’s not unusual for us. It does have an impact on those expenses, as you said though. Yeah.

Troy Adair, Chief Financial Officer, Farmers National Bancorp: And Danny, the 2,000,000 that we referenced in the press release, that is relative to ARMOR’s on a standalone basis. The cost savings associated with Middlefield’s core would be part of their 38% cost savings that we referenced. So the two really are additive. So significant cost savings with this contract negotiation. And we were gonna have to go through this anyway.

Our core was gonna be sunsetting over the next several years. So this was gonna be a necessary step for both organizations. Because one of the benefits of this merger too in the conversion, Middlefield is on the same exact core as us. They’re using the same exact general ledger system. So it creates some ease in the conversion process.

Relative to your question pertaining to cost savings, because of the longer time between closing conversion, a lot of the cost savings will be a little more back end loaded in ’26. It’s really why we were referencing 27 earning run rate because ’26 results are going to be so lumpy. We will have some cost savings immediately post close, certain contracts, things of that nature. But a lot of the cost saves will be back half of the year, back fourth quarter.

Unidentified Speaker, Farmers National Bancorp: Okay. Alright. Very helpful. So the 2,000,000 in savings are incremental to the deal cost savings. Is it fair to say there’ll be additional kinda onetime cost then related to the the core conversion that you’ll recognize later in the year?

Troy Adair, Chief Financial Officer, Farmers National Bancorp: We we will have some costs. I I would estimate probably 750,000, you know, later in ’26 related to that. But it but again, that run rate will improvement will start immediately post conversion.

Unidentified Speaker, Farmers National Bancorp: Okay. Great. And are are those savings in the the 2027 numbers that you gave, the the one fifty ROA? Are. Okay.

Okay.

Troy Adair, Chief Financial Officer, Farmers National Bancorp: Yep.

Unidentified Speaker, Farmers National Bancorp: Great.

Troy Adair, Chief Financial Officer, Farmers National Bancorp: Yeah. We we anticipate most of the cost savings being in our run rate by December and into the ’27. So

Daniel Cardenas, Analyst, Janney: Okay. Alright. Helpful.

Unidentified Speaker, Farmers National Bancorp: Alright. And then So, on the funding side, Middlefield’s got a little bit higher cost funding than than Farmers does. You know, how do you think about your ability to to lower that to, to kinda match what you’ve got happening now in terms of timing as well on that?

Troy Adair, Chief Financial Officer, Farmers National Bancorp: Sure. I think there’s two things going on. Number one, on the farmer side, we’ve got a pretty long history of managing expenses, both operating expenses as well as deposit costs. Middlefield’s had the benefit of growing their loan book fairly rapidly. They’ve been a little bit more aggressive on pricing.

Obviously our deposit base, our low loan to deposit ratio offers us some opportunities to continue to allow that group to grow the loan book, but manage the deposit costs in a more efficient way. So we think there’s some opportunities there, some possible additional margin expansion, additive to our liability sensitivity that we could see over the next eighteen to twenty four months.

Unidentified Speaker, Farmers National Bancorp: Okay. Great. And lastly, just to follow-up on that. The loan to deposit ratio goes up for you guys, as you mentioned. What’s a comfortable number for you now post the merger?

Kevin Helmut, Chief Executive Officer, Farmers National Bancorp: Danny, I think it yeah. It goes, you know, we’re we’re, say, roughly 82. I mean, we we’ve been, you know, 90 to 95 before. So I I mean, I’ll tell you near term, it’s it’s probably 90. And I think that presents a lot of opportunity, as Troy said, on on both sides of the balance sheet.

So if I had to give you a number thinking about it today, you know, it it would probably be 90.

Unidentified Speaker, Farmers National Bancorp: Terrific. Okay. Well, I think that’s that’s all for me. I don’t know if Dan has any other follow ups as well, but I appreciate the time today, guys.

Kevin Helmut, Chief Executive Officer, Farmers National Bancorp: Absolutely, Danny. Thanks again.

Moderator/Operator: A final reminder, if you would like to ask a question, press star one on your telephone keypad. One moment, while we repoll for any additional questions. Thank you. It appears we have no further questions at this time. And with that, the conclusion of today’s call.

You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

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