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Business Combinations | 9 Months Ended
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Sep. 30, 2023
Business Combinations [Abstract] |
Business Combinations | Business Combinations: On January 1, 2023, the Company completed its previously announced merger with Emclaire Financial Corp., a Pennsylvania corporation and registered financial holding company (“Emclaire”), pursuant to the Agreement and Plan of Merger dated as of March 23, 2022. The Farmers National Bank of Emlenton, the banking subsidiary of Emclaire, merged with and into The Farmers National Bank of Canfield, the national banking subsidiary of the Company, with Farmers Bank as the surviving bank. Pursuant to the terms of the Merger Agreement, at the effective time of the Merger (the “Effective Time”) Emclaire merged with and into Merger Sub (the “Merger”), with Merger Sub as the surviving entity in the Merger. Promptly following the consummation of the Merger, Merger Sub was dissolved and liquidated and The Farmers National Bank of Emlenton, the banking subsidiary of Emclaire, merged with and into The Farmers National Bank of Canfield, the national banking subsidiary of the Company, with Farmers Bank as the surviving bank. Pursuant to the terms of the Merger Agreement, at the effective time of the merger, each common share, without par value, of Emclaire common shares issued and outstanding was converted into the right to receive, without interest, $40.00 in cash or 2.15 common shares, without par value, of the Company's common shares, subject to an overall limitation of 70% of the Emclaire common shares being exchanged and the remaining 30% of Emclaire common shares being exchanged for the cash. The transaction created expansion for the Company in Pennsylvania and into the Pittsburgh market. The Company issued 4.2 million shares of its common stock along with cash of $33.4 million, which represented a transaction value of approximately $92.6 million based on its closing stock price of $14.12 on December 31, 2022. In accordance with ASC 805, the Company expensed approximately $5.0 million of merger related costs, for the Emclaire acquisition, during the nine month period ended September 30, 2023, in addition to $2.0 million expensed for the entire year of 2022. The Company recorded goodwill of $73.4 million as a result of the combination. Goodwill represents the future economic benefits arising from net assets acquired that are not individually identified and separately recognized and is attributable to synergies, including the reduction of personnel and overlapping contracts, expected to be derived from the Company’s strategy to enhance and expand its presence in Pennsylvania. The merger offers the Company the opportunity to increase profitability by introducing existing products and services to the acquired customer base as well as add new customers in the expanded market area. The goodwill was determined not to be deductible for income tax purposes. The fair value estimates included in these financial statements are based on preliminary valuations; certain loan, deferred tax, and premises and equipment measurements have not been finalized and are subject to change. The Company does not expect material variances from these estimates and expects that final valuation estimates will be completed prior to December 31, 2023. The following table summarizes the consideration paid for Emclaire and the amounts of the assets acquired and liabilities assumed on the closing date of the acquisition.
(In Thousands of Dollars) |  |
Consideration |  |
Cash | $ | 33,440 |
Stock |  | 59,202 |
Fair value of total consideration transferred | $ | 92,642 |
Fair value of assets acquired |  |
Cash and cash equivalents | $ | 20,265 |
Securities available for sale |  | 126,970 |
Other investments |  | 7,795 |
Loans, net |  | 740,659 |
Premises and equipment |  | 16,103 |
Bank owned life insurance |  | 22,485 |
Core deposit intangible |  | 19,249 |
Current and deferred taxes |  | 17,246 |
Other assets |  | 6,387 |
Total assets acquired |  | 977,159 |
Fair value of liabilities assumed |  |
Deposits |  | 875,813 |
Short-term borrowings |  | 75,000 |
Accrued interest payable and other liabilities |  | 7,104 |
Total liabilities |  | 957,917 |
Net assets acquired | $ | 19,242 |
Goodwill created |  | 73,400 |
Total net assets acquired | $ | 92,642 |
The fair value of net assets acquired includes fair value adjustments to certain receivables that were considered performing as of the acquisition date. The fair value adjustments were determined using the income method, discounted cash flow approach. However, the Company believes that all contractual cash flows related to these financial instruments will be collected. As such, these receivables were not considered purchase credit deteriorated ("PCD") at the acquisition date and were not subject to the guidance relating to PCD loans. Receivables acquired that were not subject to these requirements had a fair value and gross contractual amounts receivable of $714.4 million and $764.8 million on the date of acquisition. The fair value of purchased financial assets that were classified as PCD loans are discussed in the loan footnote. The following table presents unaudited pro forma information as if the Emclaire acquisition that occurred on January 1, 2023 actually took place on January 1, 2022. The unaudited pro forma information for the period ended September 30, 2022 includes adjustments of interest income on loans, amortization of core deposit intangibles arising from the transaction, interest expense on deposits and borrowings acquired. The unaudited pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transaction been effective on the assumed date.
(In thousands of dollars except per share results) | For Three Months Ended September 30, 2022 |  |  | For Nine Months Ended September 30, 2022 |
Net interest income | $ | 43,770 |  |  | $ | 128,897 |
Provision for credit losses |  | 588 |  |  |  | 8,834 |
Noninterest income |  | 9,710 |  |  |  | 38,844 |
Noninterest expense |  | 27,804 |  |  |  | 97,337 |
Income before income taxes |  | 25,088 |  |  |  | 61,570 |
Income tax expense |  | 4,547 |  |  |  | 10,322 |
Net income | $ | 20,541 |  |  | $ | 51,248 |
Basic earnings per share | $ | 0.54 |  |  | $ | 1.35 |
Diluted earnings per share | $ | 0.54 |  |  | $ | 1.35 |
On July 1, 2022, Farmers National Insurance, LLC acquired substantially all of the assets of Randy L. Jones Agency, Inc., doing business as Champion Insurance for $900 thousand. Intangible assets of $633 thousand were recorded along with goodwill of $267 thousand.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 805 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479907/805-20-50-5 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//805/tableOfContent + Details
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