Farmers National Banc Corp. Annual Report 2015

FY2015 Annual Report · Farmers National Banc Corp.

Loading PDF…

Corporate Proﬁ le

Farmers National Banc Corp. (the “Company”) is a
multi-bank holding company registered under the
Bank Holding Company Act of 1956, as amended.
The Company provides full banking services through
its nationally chartered subsidiary, The Farmers
National Bank of Canﬁ eld (“Farmers National Bank”.)
The Company provides trust services through its
subsidiary, Farmers Trust Company, retirement
planning and consultancy services through its
subsidiary, National Associates, Inc. and insurance
services through Farmers National Bank’s subsidiary,
Farmers National Insurance. Farmers Trust Company
has a state-chartered bank license to conduct trust
business from the Ohio Department of Commerce –
Division of Financial Institutions.

Farmers National Bank, chartered in 1887, is a
full-service financial services company engaged
in commercial and retail banking with a total of
thirty eight (38) banking locations and three (3)
trust ofﬁ ces located in the counties of Mahoning,
Trumbull, Columbiana, Stark, Summit, Wayne, Medina

and Cuyahoga in the State of Ohio and Beaver in
Pennsylvania. In addition, Farmers National Bank
provides 24-hour access to a network of Automated
Teller Machines and offers Internet and telephone
banking services. Farmers National Bank competes
with state and national banks, as well as with a large
number of other ﬁ nancial institutions, such as thrifts,
insurance companies, consumer ﬁ nance companies,
credit unions and commercial finance leasing
companies for deposits, loans and other ﬁ nancial
service business. The principal methods by which
Farmers National Bank competes are loan interest
rates, the rates paid for funds, the fees charged for
services and the availability of services.

As a national banking association, Farmers National
Bank is a member of the Federal Reserve System, is
subject to the supervision and regulation of the Ofﬁ ce
of the Comptroller of the Currency, and deposits are
insured by the Federal Deposit Insurance Corporation
to the extent provided by law.

Financial Highlights

(Amounts in Thousands Except for Per Share Data)

For the Year
Net Income
Return on Average Assets
Return on Average Equity
Cash Dividends

Per Share
Net Income (Basic)
Net Income (Diluted)
Book Value at Year-end

Balances at Year-End
Total Assets
Earning Assets
Total Deposits
Net Loans
Total Stockholders’ Equity

2015
$8,055
0.54%
4.97%
2,683

$0.36
0.36
7.35

2014
$8,965
0.79%
7.45%
2,236

2013
$7,780
0.68%
6.66%
2,248

$0.48
0.48
6.71

$0.41
0.41
6.02

$1,869,902
1,735,843
1,409,047
1,287,887
198,047

$1,136,967
1,074,434
915,703
656,220
123,560

$1,137,326
1,076,073
915,216
623,116
113,007

Common Shares Outstanding

26,944

18,409

18,776

Annual Meeting Notice
The Annual Meeting of Shareholders will be held at the St. Michael Family Life Center at 300 North
Broad Street, Canfield, OH 44406 at 3:30pm EST, on Thursday, April 21, 2016.

Our company has changed dramatically since its founding, most significantly
in the past year, but, at its center, it remains a true community bank and
a vital participant in our regional economy.

Fellow Shareholders,

“ G e o g r a p h y h a s
made us neighbors.
History has made us
friends. Economics
has made us partners,
and necessity has
made us allies.”

This quote was not
o r i g i n a l l y a b o u t
community banking, but it is completely
on-point as we look back at 2015 and
the relationships Farmers values with its
communities, customers and shareholders.
This historical quote is from President John
F. Kennedy’s 1961 speech before the
Canadian Parliament; twenty-one simple
yet powerful words describing the mutual
benefits of a long-time friendship.

Relationships matter to Farmers. In fact,
relationships of the type President Kennedy
described – interdependent, reliable and
a strong foundation from which all manner
of goals can be achieved – are the core
of Farmers’ identity as a community bank.
Our company has changed dramatically
since its founding, most significantly in the
past year, but, at its center, it remains a
true community bank and a vital participant
in our regional economy.

Geography has made us Neighbors
History has made us Friends
Back in 1887, when Farmers was formed, all
banks were community banks. Customers
were neighbors by virtue of the fact
that proximity mattered when traveling
on horseback. Customer service was a
truly personal experience because bank
employees knew the people at their tellers’
windows and in their offices.

Northeast Ohio has evolved and grown
since our founding. And Farmers has
been a rock-solid presence during every

economic cycle; every boom and bust
phase, every growth and stagnant period
in our history. We served our customers
during the collapse of steel in the late 70’s
and early 80’s and were still doing our part
during the economic resurgence of the
last decade. Necessity truly did make us
allies with local businesses and families
through it all.

It is not an exaggeration to say small
business is the very backbone of our
regional economy. These companies of
500 employees or fewer provide livelihoods
for 57% of our country’s private sector
workforce and pay 44% of America’s total
payroll. We know jobs drive the economy,
and 60% to 80% of all new jobs come from
small businesses.

And now, as other financial institutions
abandon community banking in hopes
of catching the next fad-driven business
model, Farmers sees the value in
maintaining the relationships that define
community banking. We focus time and
attention on the needs of the local families
and businesses that are our neighbors.
We streamline approvals through local
decision-making so our customers don’t
have to defer dreams of homeownership
or entrepreneurship but, instead, can
seize them. We can look beyond the
numbers and consider attributes – such
as character – when considering a loan
because we can. We know our customers.

Outside the walls of the branch offices,
Farmers continues its commitment to
community. Our associates are committed
to community outreach and can be found
volunteering and serving deserving non-
profits throughout the region. In addition,
as a Company, Farmers continues to offer
philanthropic support to our communities
so that they can continue to develop
and prosper. It’s what good friends and
neighbors do for one another.

Economics has made us Partners
Of all the time-proven reasons Farmers
devotes itself to community banking,
the single most important reason is this:
small businesses need Farmers and our
community needs small businesses.

Yet, for all their critical importance, small
businesses are not a priority to the big
banks. 46% of all small business lending
is done by community banks like Farmers
and we take seriously our role of partner
to small business. There is perhaps no
better way Farmers can contribute to the
improving welfare of our host communities
than to continue as a primary source of
funding for the small businesses that
sustain the economy.

Loan Growth
As the Farmers’ footprint grew, so did
our loan business. We are pleased with
our ability to maintain outstanding levels
of growth in our loan portfolio throughout
2015, while adhering to our diligent
credit principles. In 2015, we achieved
20% organic growth in loans over 2014.
Some categories that reported increases
included commercial and commercial real
estate, residential real estate, agricultural
and farmland and indirect automobile
lending. Another highlight has been the
emergence of a robust mortgage banking
program as a significant component of
noninterest income. The growth in the
overall portfolio reflects our commitment to
community banking values as we meet the
financing needs of our customers. As we
closed 2015 with a strong loan pipeline, we
are optimistic for continued growth in 2016.

Farmers further responded to the expanding
needs of its mortgage customers by

There is perhaps no better way Farmers can contribute to the improving
welfare of our host communities than to continue as a primary source of
funding for the small businesses that sustain the economy.

making significant investments in our
mortgage processing capabilities and
talent. Farmers also recruited several top
mortgage loan officers located throughout
the counties the bank serves. In preparation
for a busy 2016, Farmers invested capital
in a state-of-the-art tech infrastructure to
process loans more efficiently.

Fee Revenue – Noninterest Income
Our fee-based businesses continue to
thrive and provide valuable revenue to
the Company. A solid Trust Company,
flourishing retirement services business,
National Associates, Inc., and a robust
Investment group, Farmers National
Investments, contributed to a 20%
increase in noninterest income in 2015.
The percentage of overall fee income
generated has increased substantially
over the past six years contributing to
the Company’s overall growth. In 2009,
fee income represented 14.5% of total
gross income and in 2015 fee income
has increased to represent 25.2% of total
gross income.

The Digital Experience
The digital channels continue to dominate
the retail banking market space with banks
committing significant resources to the
technology platform. Farmers’ commitment
to mobile enhancement is competitive
with the big regional and national banks
and consistent with our “Bigger Small
Banking” philosophy. In 2014, Farmers
primary initiative was to introduce a new
best-in-class mobile banking platform
and adoption rates in 2015 were robust to
say the least. Online and mobile banking
continue to thrive, experiencing significant
growth in both users and utilization.
Year-over-year growth in mobile banking
users was 248% with another staggering
260% percent increase in transactions in
the same time period. We acknowledge

the importance of this banking channel
to our customers and will continue to
roll-out several additional enhancements
throughout 2016.

Strategic Growth through Merger
2015 was the most transformative year in
Farmers’ 129-year history. Our company
grew dramatically through two mergers:
both strategic opportunities for expanding
our unique brand of community banking to
new markets.

In June, we finalized our merger with First
National Bank of Orrville. Our banking
office locations grew from 19 to 33,
we increased our presence in Stark
County while introducing ourselves to new
customers in Wayne and Medina Counties
and we gained both a robust agricultural
lending business while developing new
territory for our growing portfolio of wealth
management services.

In October, Farmers acquired 1st National
Community Bank of East Liverpool and
completed the conversion to Farmers
in the first quarter of 2016. With this
step, Farmers took on an additional five
banking locations, including our first
ever Pennsylvania office. In addition, we
strengthened our already strong presence
in Columbiana County where we are
second in market share.

The sum effect of these mergers is
Farmers’ growth to now become the third
largest community bank in Northeast Ohio.
Asset size and strength give us the ability
to do more for our valued customers in
terms of services and technology, and we
welcome those new abilities. However,
growth, no matter how robust, would be
counter-productive if it did not advance
Farmers’ established culture of customer
and shareholder service. Fortunately,

our process ensured a smooth transition
of core operating systems, policies
and procedures and culture. We took
everything that worked well at each
company and sacrificed nothing. Your
management team has high expectations
for our newly combined company in 2016.

Kevin J. Helmick
President & Chief Executive Officer

Top Row from Left to Right: Ralph D. Macali, Gregory C. Bestic, Terry A. Moore, Earl R. Scott, David Z. Paull, Gregg Strollo and
Anne Frederick Crawford Bottom Row from Left to Right: James R. Smail, Lance J. Ciroli, Kevin J. Helmick and Howard J. Wenger

Board of Directors

Lance J. Ciroli 4, 5
Chairman of the Board
Co-founder of NBE Bank Consulting
Services. Retired Assistant Deputy
Comptroller in the Cleveland/Detroit
Field Office, Office of the Comptroller
of the Currency

James R. Smail 4, 5
Vice Chairman of the Board
Chairman, Director and CEO
J.R. Smail, Inc., Chairman and Director,
Monitor Bancorp.

Gregory C. Bestic 1, 3
CPA, CGMA, Certified Forensic Accountant,
DABFA, FACFEI
Principal with Schroedel, Scullin & Bestic,
LLC - Certified Public Accountants and
Strategic Advisors

Anne Frederick Crawford 2, 3
Attorney-at-Law
Self-employed/Sole Proprietor

Kevin J. Helmick 5
President and Chief Executive Officer
Farmers National Bank

Ralph D. Macali 1, 3
Vice President of Palmer J. Macali, Inc.
Partner in P.M.R.P. Partnership

Terry A. Moore 2, 3, 5
Managing Director of Krugliak, Wilkins,
Griffiths and Dougherty

David Z. Paull 2, 4
Vice President, Human Resources
Operations and Labor Relations, RTI
International Metals, Inc.

Earl R. Scott 1, 4
Certified Public Accountant (CPA) and
President, Reali, Giampetro & Scott

Gregg Strollo 1, 4
Partner, Architect and President,
Strollo Architects

Howard J. Wenger 2, 3
President and CEO,
Wenger Excavating Inc., Northstar Asphalt,
Inc., Massillon Materials Inc., Stark Materials
Inc., Lake Region Oil Inc., The Pines Golf
Club, Perry Development, Inc.

1 Audit Committee
2 Compensation Committee
3 Corporate Governance and Nominating Committee
4 Board Enterprise Risk Management Committee
5 Executive Committee

Farmers National Banc Corp. Officers

Kevin J. Helmick,
President and Chief Executive Officer

Carl D. Culp,
Executive Vice President, Secretary & Treasurer

Management Team and Board of Directors

Kevin J. Helmick,
President and Chief
Executive Officer
Farmers National Bank

Mark Witmer,
Senior Executive Vice
President and Chief
Banking Officer
Farmers National Bank

Carl D. Culp,
Executive Vice President,
Cashier and Chief
Financial Officer
Farmers National Bank

Mark L. Graham,
Executive Vice President,
Chief Credit Officer
Farmers National Bank

Joseph Gerzina,
Senior Vice President,
Chief Lending Officer,
Regional President
West Region
Farmers National Bank

Brian E. Jackson,
Senior Vice President,
Chief Information Officer
Farmers National Bank

Mark Nicastro,
Senior Vice President,
Director of Human
Resources
Farmers National Bank

Timothy Shaffer,
Senior Vice President,
Regional President,
East Region
Farmers National Bank

James VanSickle,
Senior Vice President,
Chief Risk Officer
Farmers National Bank

Amber Wallace,
Senior Vice President,
Chief Retail and
Marketing Officer
Farmers National Bank

Wealth Management Executive Officers

James H. Sisek, Esq.,
Chairman and Chief
Legal Counsel
Farmers Trust Company

Joseph J. DePascale,
CPA, CFP®, AIFA®,
CMFS, President
Farmers Trust Company

William Hanshaw, Esq.,
Executive V.P. & Secretary
Farmers Trust Company

Daniel A. Cvercko,
Vice President
Farmers National Investments
Farmers National Insurance

Aubrey Christ,
President
National Associates

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, deviations from performance expectations related to National Bancshares and its subsidiary and Tri-State 1st
Banc, Inc. 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.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)
⌧ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2015

(cid:133) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file number 001-35296

Farmers National Banc Corp.

(Exact name of registrant as specified in its charter)

Ohio
(State or other jurisdiction of
incorporation or organization)

20 South Broad Street, Canfield, Ohio
(Address of principal executive offices)

34-1371693
(I.R.S. Employer
Identification No.)

44406
(Zip Code)

Registrant’s telephone number, including area code: 330-533-3341
Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Common Shares, no par value

Name of each exchange on which registered
The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:133) No ⌧

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:133) No ⌧

Indicate by check mark 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 ⌧ No (cid:133)

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes ⌧ No (cid:133)

Indicate by check mark 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. ⌧

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer
Non-accelerated filer

(cid:133)
(cid:133) (Do not check if a smaller reporting company)

Accelerated filer
Smaller reporting company

⌧
(cid:133)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (cid:133) No ⌧

As of June 30, 2015, the estimated aggregate market value of the ’registrant’s common shares, no par value (the only common equity of the
registrant), held by non-affiliates of the registrant was approximately $211.8 million based upon the last sales price as of June 30, 2015 reported on
NASDAQ. (The exclusion from such amount of the market value of the common shares owned by any person shall not be deemed an admission by
the registrant that such person is an affiliate of the registrant).

As of March 7, 2016, the registrant had outstanding 26,935,484 common shares, no par value.

FARMERS NATIONAL BANC CORP.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2014

TABLE OF CONTENTS

PART I
Business. ..........................................................................................................................................................................
Item 1.
Item 1A. Risk Factors. ....................................................................................................................................................................
Item 1B. Unresolved Staff Comments. ...........................................................................................................................................
Properties. ........................................................................................................................................................................
Item 2.
Legal Proceedings. ...........................................................................................................................................................
Item 3.
Mine Safety Disclosures. .................................................................................................................................................
Item 4.

PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. ......
Selected Financial Data. ..................................................................................................................................................
Item 6.
Management’s Discussion and Analysis of Financial Condition and Results of Operations...........................................
Item 7.
Item 7A. Quantitative and Qualitative Disclosure about Market Risk. ...........................................................................................
Financial Statements and Supplementary Financial Data. ...............................................................................................
Item 8.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. .........................................
Item 9.
Item 9A. Controls and Procedures. .................................................................................................................................................
Item 9B. Other Information. ...........................................................................................................................................................

Item 10. Directors, Executive Officers and Corporate Governance. ..............................................................................................
Item 11. Executive Compensation. ................................................................................................................................................
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. .......................
Item 13. Certain Relationships and Related Transactions, and Director Independence. ................................................................
Item 14. Principal Accountant Fees and Services. .........................................................................................................................

PART III

Item 15. Exhibits, Financial Statement Schedules. ........................................................................................................................

SIGNATURES ...................................................................................................................................................................................

PART IV

1
11
19
19
21
21

22
23
27
41
43
92
92
93

94
96
96
96
96

PART I

Item 1. Business.
General
Farmers National Banc Corp.

Farmers National Banc Corp. (the “Company,” “Farmers,” “we,” “our” or “us”), is a one-bank holding company organized in
1983 under the laws of the State of Ohio and registered under the Bank Holding Company Act of 1956, as amended (the “BHCA”).
The Company operates principally through its wholly-owned subsidiaries, The Farmers National Bank of Canfield (the “Bank” or
“Farmers Bank”), Farmers Trust Company (“Trust” or “Farmers Trust”) and National Associates, Inc. (“NAI”). Farmers National
Insurance, LLC (“Insurance” or “Farmers Insurance”) and Farmers of Canfield Investment Co. (“Investments or “Farmers
Investments”) are wholly-owned subsidiaries of the Bank. The Company and its subsidiaries operate in the domestic banking, trust,
retirement consulting, insurance and financial management industries.

The Company’s principal business consists of owning and supervising its subsidiaries. Although Farmers’ directs the overall
policies of its subsidiaries, including lending practices and financial resources, most day-to-day affairs are managed by their respective
officers. Farmers and its subsidiaries had 432 full-time equivalent employees at December 31, 2015.

The Company’s principal executive offices are located at 20 South Broad Street, Canfield, Ohio 44406, and its telephone

number is (330) 533-3341. Farmers’ common shares, no par value, are listed on the NASDAQ Capital Market (the “NASDAQ”)
under the symbol “FMNB.” Farmers’ business activities are managed and financial performance is primarily aggregated and reported
in three lines of business, the Bank segment, the Trust segment and the Retirement planning/consulting segment. For a discussion of
Farmers’ financial performance for the fiscal year ended December 31, 2015, see the Consolidated Financial Statements and Notes to
the Consolidated Financial Statements found in Item 8 of this Annual Report on Form 10-K.

The Farmers National Bank of Canfield

During 2015 the Company acquired all outstanding stock of National Bancshares Corporation (“NBOH”), the parent company

of First National Bank of Orrville (“First National Bank”) and Tri-State 1stBanc, Inc. (“Tri-State”), the parent company of 1st National
Community Bank (“FNCB”). Additional discussion about the acquisitions can be found in the Notes to Consolidated Financial
Statements in item 8 of this Annual Report on Form 10-K. The Bank is a full-service national banking association engaged in
commercial and retail banking mainly in Mahoning, Trumbull, Columbiana, Wayne, Medina and Stark Counties in Ohio and with the
acquisition of Tri-State, one location in Beaver County, Pennsylvania. The Bank’s commercial and retail 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, internet banking,
travel cards, “E” Bond transactions, MasterCard and Visa credit cards, brokerage services and other miscellaneous services normally
offered by commercial banks.

A discussion of the general development of the Bank’s business and information regarding its financial performance throughout

2015, is discussed in Item 7, Management Discussion and Analysis of Financial Condition and Results of Operations of this Annual
Report on Form 10-K.

The Bank faces significant competition in offering financial services to customers. Ohio has a high density of financial service
providers, many of which are significantly larger institutions that have greater financial resources than the Bank, and all of which are
competitors to varying degrees. Competition for loans comes principally from savings banks, savings and loan associations,
commercial banks, mortgage banking companies, credit unions, insurance companies and other financial service companies. The most
direct competition for deposits has historically come from savings and loan associations, savings banks, commercial banks and credit
unions. Additional competition for deposits comes from non-depository competitors such as the mutual fund industry, securities and
brokerage firms and insurance companies.

Farmers Trust Company

Farmers Trust offers a full complement of personal and corporate trust services in the areas of estate settlement, trust

administration and employee benefit plans. Farmers Trust operates two offices located in Boardman and Howland, Ohio.

National Associates, Inc.

During 2013, the Company completed the acquisition of all outstanding stock of the retirement planning consultancy National
Associates, Inc. of Cleveland, Ohio. The transaction involved both cash and stock totaling $4.4 million, including up to $1.5 million
of future payments, contingent upon NAI meeting income performance targets. The acquisition is part of the Company’s plan to
increase the levels of noninterest income and to complement the existing retirement service currently being offered. NAI operates
from its office located in Rocky River, Ohio.

Farmers National Insurance, LLC

Farmers Insurance was formed during 2009 and offers a variety of insurance products through licensed representatives. Farmers

Insurance is a subsidiary of Farmers Bank and does not account for a material portion of the revenue and, therefore, will not be
discussed individually, but as part of the Bank.

Farmers of Canfield Investment Company

Farmers of Canfield Investment Company was formed during 2014 with the primary purpose of investing in municipal

securities. Farmers Investments is a subsidiary of Farmers Bank and does not account for a material portion of the revenue and,
therefore, will not be discussed individually, but as part of the Bank.

Investor Relations

The Company maintains an Internet site at http://www.farmersbankgroup.com, which contains an Investor Relations section that
provides access to the Company’s filings with the Securities and Exchange Commission (the “Commission”) Farmers makes available
free of charge on or through its website the Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K and amendments to such documents filed or furnished pursuant to the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) as soon as reasonably practicable after the Company has filed these documents with the Commission. In addition,
the Company’s filings with the Commission may be read and copied at the Commission’s Public Reference Room at 100 F Street, NE,
Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
These filings are also available on the Commission’s web-site at http://www.sec.gov free of charge as soon as reasonably practicable
after the Company has filed the above referenced reports.

Supervision and Regulation
Introduction

The Company and its subsidiaries are subject to extensive regulation by federal and state regulatory agencies. The regulation of

bank holding companies and their subsidiaries is intended primarily for the protection of consumers, depositors, borrowers, the
Deposit Insurance Fund and the banking system as a whole and not for the protection of shareholders. This intensive regulatory
environment, among other things, may restrict the Company’s ability to diversify into certain areas of financial services, acquire
depository institutions in certain markets or pay dividends on its common shares. It also may require the Company to provide financial
support to its banking and other subsidiaries, maintain capital balances in excess of those desired by management and pay higher
deposit insurance premiums as a result of the deterioration in the financial condition of depository institutions in general.

Significant aspects of the laws and regulations that have, or could have a material impact on Farmers and its subsidiaries are
described below. These descriptions are qualified in their entirety by reference to the full text of the applicable statutes, legislation,
regulations and policies, as they may be amended or revised by the U.S. Congress or state legislatures and federal or state regulatory
agencies, as the case may be. Changes in these statutes, legislation, regulations and policies may have a material adverse effect on the
Company and its business, financial condition or results of operations.

Regulatory Agencies

Bank Holding Company. As a bank holding company, Farmers is subject to regulation under the BHCA and to inspection,

examination and supervision by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”). The Federal
Reserve Board has extensive enforcement authority over bank holding companies and may initiate enforcement actions for violations
of laws and regulations and unsafe or unsound practices. The Federal Reserve Board may assess civil money penalties, issue cease and
desist or removal orders and may require that a bank holding company divest subsidiaries, including subsidiary banks. Farmers is also
required to file reports and other information with the Federal Reserve Board regarding its business operations and those of its
subsidiaries.

Subsidiary Bank. The Bank is subject to regulation and examination primarily by the Office of the Comptroller of the Currency

(the “OCC”) and secondarily by the Federal Deposit Insurance Corporation (the “FDIC”). OCC regulations govern permissible
activities, capital requirements, dividend limitations, investments, loans and other matters. The OCC has extensive enforcement
authority over Farmers Bank and may impose sanctions on Farmers Bank and, under certain circumstances, may place Farmers Bank
into receivership.

Farmers Bank is also subject to certain restrictions imposed by the Federal Reserve Act and Federal Reserve Board regulations

regarding such matters as the maintenance of reserves against deposits, extensions of credit to Farmers or any of its subsidiaries,
investments in the stock or other securities of Farmers or its subsidiaries and the taking of such stock or securities as collateral for
loans to any borrower.

Non-Banking Subsidiaries. Farmers’ non-banking subsidiaries are also subject to regulation by the Federal Reserve Board and
other applicable federal and state agencies. In particular, Farmers National Insurance is subject to regulation by the Ohio Department
of Insurance, which requires, amongst other things, the education and licensing of agencies and individual agents and imposes
business conduct rules.

Securities and Exchange Commission and The NASDAQ Stock Market LLC. The Company is also under the regulation and

supervision of the Commission and certain state securities commissions for matters relating to the offering and sale of its securities.
The Company is subject to disclosure and regulatory requirements of the Securities Act of 1933, as amended (the “Securities Act”),
and the Exchange Act, and the regulations promulgated there under. Farmers common shares are listed on the NASDAQ under the
symbol “FMNB” and the Company is subject to the rules for NASDAQ listed companies.

Federal Home Loan Bank. Farmers Bank is a member of the Federal Home Loan Bank of Cincinnati (the “FHLB”), which
provides credit to its members in the form of advances. As a member of the FHLB, the Bank must maintain an investment in the
capital stock of the FHLB in a specified amount. Upon the origination or renewal of a loan or advance, the FHLB is required by law to
obtain and maintain a security interest in certain types of collateral. The FHLB is required to establish standards of community
investment or service that its members must maintain for continued access to long-term advances from the FHLB. The standards take
into account a member’s performance under the Community Reinvestment Act of 1977 (the “CRA”) and its record of lending to first-
time home buyers.

The Federal Deposit Insurance Corporation. The FDIC is an independent federal agency that insures the deposits, up to
prescribed statutory limits, of federally-insured banks and savings associations and safeguards the safety and soundness of the
financial institution industry. The Bank’s deposits are insured up to applicable limits by the Deposit Insurance Fund of the FDIC and
subject to deposit insurance assessments to maintain the Deposit Insurance Fund.

The FDIC may terminate insurance coverage upon a finding that an insured depository institution has engaged in unsafe or
unsound practices, is in an unsafe or unsound condition, or has violated any applicable law, regulation, rule, order or condition enacted
or imposed by the institution’s regulatory agency.

Dodd-Frank Act

In July 2013, the Federal banking regulators approved a final rule to implement the revised capital adequacy standards of the

Basel Committee on Banking Supervision, commonly called Basel III, and to address relevant provisions of the Dodd-Frank Act. The
final rule strengthens the definition of regulatory capital, increases risk-based capital requirements, makes selected changes to the
calculation of risk-weighted assets, and adjusts the prompt corrective action thresholds. Community banking organizations, such as
the Company and the Bank, became subject to the new rule on January 1, 2015 and certain provisions of the new rule will be phased
in over the period of 2015 through 2019.

The final rule:

•

Permits banking organizations that had less than $15 billion in total consolidated assets as of December 31, 2009 to
include in Tier 1 capital trust preferred securities and cumulative perpetual preferred stock that were issued and
included in Tier 1 capital prior to May 19, 2010, subject to a limit of 25% of Tier 1 capital elements, excluding any
non-qualifying capital instruments and after all regulatory capital deductions and adjustments have been applied to
Tier 1 capital.

Establishes new qualifying criteria for regulatory capital, including new limitations on the inclusion of deferred tax
assets and mortgage servicing rights.

Requires a minimum ratio of common equity Tier 1 capital to risk-weighted assets of 4.5%.

Increases the minimum Tier 1 capital to risk-weighted assets ratio requirement from 4% to 6%.

Retains the minimum total capital to risk-weighted assets ratio requirement of 8%.

Establishes a minimum leverage ratio requirement of 4%.

Retains the existing regulatory capital framework for 1-4 family residential mortgage exposures.

Permits banking organizations that are not subject to the advanced approaches rule, such as the Company and the
Bank, to retain, through a one-time election, the existing treatment for most accumulated other comprehensive
income, such that unrealized gains and losses on securities available for sale will not affect regulatory capital
amounts and ratios.

Implements a new capital conservation buffer requirement for a banking organization to maintain a common equity
capital ratio more than 2.5% above the minimum common equity Tier 1 capital, Tier 1 capital and total risk-based
capital ratios in order to avoid limitations on capital distributions, including dividend payments, and certain
discretionary bonus payments. The capital conservation buffer requirement will be phased in beginning on January
1, 2016 at 0.625% and will be fully phased in at 2.50% by January 1, 2019. A banking organization with a buffer of
less than the required amount would be subject to increasingly stringent limitations on such distributions and
payments as the buffer approaches zero. The new rule also generally prohibits a banking organization from making
such distributions or payments during any quarter if its eligible retained income is negative and its capital
conservation buffer ratio was 2.5% or less at the end of the previous quarter. The eligible retained income of a
banking organization is defined as its net income for the four calendar quarters preceding the current calendar
quarter, based on the organization’s quarterly regulatory reports, net of any distributions and associated tax effects
not already reflected in net income.

Increases capital requirements for past-due loans, high volatility commercial real estate exposures, and certain short-
term commitments and securitization exposures.

Expands the recognition of collateral and guarantors in determining risk-weighted assets.

Removes references to credit ratings consistent with the Dodd Frank Act and establishes due diligence requirements
for securitization exposures.

The Company’s continues to evaluate the provisions of the final rule. Many aspects of the Dodd Frank Act continue to be
subject to rulemaking and will take effect over several additional years, making it difficult to anticipate the overall financial impact on
the Company.

Various legislation affecting financial institutions and the financial industry will likely continue to be introduced in Congress,

and such legislation may further change banking statutes and the operating environment of the Company in substantial and
unpredictable ways, and could increase or decrease the cost of doing business, limit or expand permissible activities or affect the
competitive balance depending upon whether any of this potential legislation will be enacted, and if enacted, the effect that it or any
implementing regulations, would have on the financial condition or results of operations of the Company or any of its subsidiaries.
With the enactment of the Dodd-Frank Act, the nature and extent of future legislative and regulatory changes affecting financial
institutions remains very unpredictable at this time.

Also, such statutes, regulations and policies are continually under review by Congress and state legislatures and federal and state

regulatory agencies and are subject to change at any time, particularly in the current economic and regulatory environment. Any such
change in statutes, regulations or regulatory policies applicable to the Company could have a material effect on the business of the
Company.

Bank Holding Company Regulation

As a bank holding company, Farmers’ activities are subject to extensive regulation by the Federal Reserve Board under the
BHCA. Generally, the BHCA limits the business of bank holding companies to banking, managing or controlling banks and other
activities that the Federal Reserve Board has determined to be closely related to banking as to be a proper incident thereto. Under
Federal Reserve Board policy, a bank holding company is expected to serve as a source of financial and managerial strength to each
subsidiary bank and to commit resources to support those subsidiary banks. Under this policy, the Federal Reserve Board may require
a bank holding company to contribute additional capital to an undercapitalized subsidiary bank and may disapprove of the payment of
dividends to the holding company’s shareholders if the Federal Reserve Board believes the payment of such dividends would be an
unsafe or unsound practice. The Dodd-Frank Act codified this policy as a statutory requirement.

The BHCA requires prior approval by the Federal Reserve Board for a bank holding company to directly or indirectly acquire

more than a 5.0% voting interest in any bank or its parent holding company. Factors taken into consideration in making such a
determination include the effect of the acquisition on competition, the public benefits expected to be received from the acquisition, the
projected capital ratios and levels on a post-acquisition basis, and the acquiring institution’s record of addressing the credit needs of
the communities it serves.

The BHCA also governs interstate banking and restricts Farmers’ nonbanking activities to those determined by the Federal

Reserve Board to be financial in nature, or incidental or complementary to such financial activity, without regard to territorial
restrictions. Transactions among the Bank and its affiliates are also subject to certain limitations and restrictions of the Federal
Reserve Board, as described more fully under the caption “Dividends and Transactions with Affiliates” in this Item 1.

The Gramm-Leach-Bliley Act of 1999 permits a qualifying bank holding company to elect to become a financial holding
company and thereby affiliate with securities firms and insurance companies and engage in other activities that are financial in nature
and not otherwise permissible for a bank holding company. Farmers has not elected to seek financial holding company status.

Regulation of Nationally-Chartered Banks

As a national banking association, Farmers Bank is subject to regulation under the National Banking Act and is periodically

examined by the OCC. OCC regulations govern permissible activities, capital requirements, dividend limitations, investments, loans
and other matters. Furthermore, Farmers Bank is subject, as a member bank, to certain rules and regulations of the Federal Reserve
Board, many of which restrict activities and prescribe documentation to protect consumers. Under the Bank Merger Act, the prior
approval of the OCC is required for a national bank to merge with, or purchase the assets or assume the deposits of, another bank. In
reviewing applications to approve merger and other acquisition transactions, the OCC and other bank regulatory authorities may
include among their considerations the competitive effect and public benefits of the transactions, the capital position of the combined
organization, the applicant’s performance under the CRA, and fair housing laws, and the effectiveness of the entities in restricting
money laundering activities. In addition, the establishment of branches by Farmers Bank is subject to the prior approval of the OCC.
The OCC has the authority to impose sanctions on the Bank and, under certain circumstances, may place Farmers Bank into
receivership.

The Bank is also an insured institution as a member of the Deposit Insurance Fund. As a result, it is subject to regulation and

deposit insurance assessments by the FDIC.

Dividends and Transactions with Affiliates

The Company is a legal entity separate and distinct from the Bank and its other subsidiaries. The Company’s principal source of

funds to pay dividends on its common shares and service its debt is dividends from Farmers Bank and its other subsidiaries. Various
federal and state statutory provisions and regulations limit the amount of dividends that Farmers Bank may pay to Farmers without
regulatory approval. Farmers Bank generally may not, without prior regulatory approval, pay a dividend in an amount greater than its
undivided profits after deducting statutory bad debt in excess of the bank’s allowance for loan losses. In addition, prior approval of the
OCC is required for the payment of a dividend if the total of all dividends declared in a calendar year would exceed the total of
Farmers Bank’s net income for the year combined with its retained net income for the two preceding years.

In addition, Farmers and Farmers Bank are subject to other regulatory policies and requirements relating to the payment of

dividends, including requirements to maintain adequate capital above regulatory minimums. The federal banking agencies are
authorized to determine under certain circumstances that the payment of dividends would be an unsafe or unsound practice and to
prohibit payment thereof. The federal banking agencies have stated that paying dividends that deplete a bank’s capital base to an
inadequate level would be an unsafe and unsound banking practice and that banking organizations should generally pay dividends
only out of current operating earnings. In addition, in the current financial and economic environment, the Federal Reserve Board has
indicated that bank holding companies should carefully review their dividend policy and has discouraged payment ratios that are at
maximum allowable levels, unless both asset quality and capital are very strong. Thus, the ability of Farmers to pay dividends in the
future is currently influenced, and could be further influenced, by bank regulatory policies and capital guidelines.

The Bank is subject to restrictions under federal law that limit the transfer of funds or other items of value to the Company and

its nonbanking subsidiaries and affiliates, whether in the form of loans and other extensions of credit, investments and asset purchases,
or other transactions involving the transfer of value from a subsidiary to an affiliate or for the benefit of an affiliate. These regulations
limit the types and amounts of transactions (including loans due and extensions of credit) that may take place and generally require
those transactions to be on an arm’s-length basis. In general, these regulations require that any “covered transaction” by Farmers Bank
with an affiliate must be secured by designated amounts of specified collateral and must be limited, as to any one of Farmers or its
non-bank subsidiaries, to 10% of Farmers Bank’s capital stock and surplus, and, as to Farmers and all such non-bank subsidiaries in
the aggregate, to 20% of Farmers Bank’s capital stock and surplus. The Dodd-Frank Act significantly expanded the coverage and
scope of the limitations on affiliate transactions within a banking organization including, for example, the requirement that the 10% of
capital limit on covered transactions apply to financial subsidiaries. “Covered transactions” are defined by statute to include a loan or
extension of credit, as well as a purchase of securities issued by an affiliate, a purchase of assets (unless otherwise exempted by the
Federal Reserve Board) from the affiliate, certain derivative transactions that create a credit exposure to an affiliate, the acceptance of
securities issued by the affiliate as collateral for a loan, and the issuance of a guarantee, acceptance or letter of credit on behalf of an
affiliate.

Capital loans from the Company to the Bank are subordinate in right of payment to deposits and certain other indebtedness of

the Bank. In the event of Farmers’ bankruptcy, any commitment by Farmers to a federal bank regulatory agency to maintain the
capital of Farmers Bank will be assumed by the bankruptcy trustee and entitled to a priority of payment.

The Federal Deposit Insurance Act of 1950, as amended, provides that, in the event of the “liquidation or other resolution” of an

insured depository institution such as the Bank, the insured and uninsured depositors, along with the FDIC, will have priority in
payment ahead of unsecured, nondeposit creditors, including the Company, with respect to any extensions of credit they have made to
such insured depository institution.

Capital Adequacy

Both Farmers and Farmers Bank are subject to risk-based capital requirements imposed by their respective primary federal

banking regulator. The Federal Reserve Bank monitors the capital adequacy of Farmers and the FDIC monitors the capital adequacy
of Farmers Bank. The revised risk-based capital requirements applicable to bank holding companies and insured depository
institutions, including the Company and the Bank, to make them consistent with agreements that were reached by the Basel
Committee on Banking Supervision (“Basel III”) became effective for the Company and the Bank on January 1, 2015. The Basel III
Rules require the maintenance of minimum amounts and ratios of common equity tier 1 capital, tier 1 capital and total capital to risk-
weighted assets, and of tier 1 capital to adjusted quarterly average assets.

Under the Basel III Rules, common equity tier 1 capital consists of common stock and paid-in capital (net of treasury stock) and

retained earnings. Common equity tier 1 capital is reduced by goodwill, certain intangible assets, net of associated deferred tax
liabilities, deferred tax assets that arise from tax credit and net operating loss carryforwards, net of any valuation allowance, and
certain other items as specified by the Basel III Rules.

Tier 1 capital includes common equity tier 1 capital and certain additional tier 1 items as provided under the Basel III Rules.

Basel III Rules allow for insured depository institutions to make a one-time election not to include most elements of
accumulated other comprehensive income in regulatory capital and instead effectively use the existing treatment under the general
risk-based capital rules. The Company and Bank made this opt-out election in the first quarter of 2015 to avoid significant variations
in the level of capital depending upon the impact of interest rate fluctuations on the fair value of our investment securities portfolio.

The Basel III Rules also changed the risk-weights of assets in an effort to better reflect credit risk and other risk exposures.
These include a 150% risk weight (up from 100%) for certain high volatility commercial real estate acquisition, development and
construction loans and the unsecured portion of non-residential mortgage loans that are 90 days past due or otherwise on nonaccrual
status; a 20% (up from 0%) credit conversion factor for the unused portion of a commitment with an original maturity of one year or
less that is not unconditionally cancellable; a 250% risk weight (up from 100%) for mortgage servicing rights and deferred tax assets
that are not deducted from capital; and increased risk weights (from 0% to up to 600%) for equity exposures.

The Basel III Rules limit capital distributions and certain discretionary bonus payments if the banking organization does not
hold a “capital conservation buffer” consisting of 2.5% of common equity tier 1 capital, tier 1 capital and total capital to risk-weighted
assets in addition to the amount necessary to meet minimum risk-based capital requirements. The capital conservation buffer will be
phased in beginning January 1, 2016, at 0.625% of risk-weighted assets, increasing each year by that amount until fully implemented
at 2.5% on January 1, 2019. When fully phased in on January 1, 2019, the Basel III Rules will require the Company and Bank to
maintain (i) a minimum ratio of common equity tier 1 capital to risk-weighted assets of at least 4.5%, plus a 2.5% capital conservation
buffer, which effectively results in a minimum ratio of 7.0% upon full implementation, (ii) a minimum ratio of tier 1 capital to risk-
weighted assets of at least 6.0%, plus a 2.5% capital conservation buffer, which effectively results in a minimum ratio of 8.50% upon
full implementation, (iii) a minimum ratio of total capital to risk-weighted assets of at least 8.0%, plus a 2.5% capital conservation
buffer, which effectively results in a minimum ratio of 10.5% upon full implementation and (iv) a minimum leverage ratio of 4.0%.

Prior to January 1, 2015, federal regulatory agencies required the Company and Bank to maintain minimum tier 1 and total
capital to risk-weighted assets of 4.0% and 8.0%, respectively, and tier 1 capital to average assets (tier 1 leverage ratio) of at least
4.0%. In order to be considered well capitalized under the rules in effect prior to January 1, 2015, the Company had to maintain tier 1
and total capital to risk-weighted assets of 6.0% and 10.0%, respectively, and a leverage ratio of 5.0%. Tier 1 capital consisted of
common equity, retained earnings, certain types of preferred stock, qualifying minority interest and trust preferred securities, subject
to limitations, and excluded goodwill and various intangible assets.

When fully phased in on January 1, 2019, Basel III will require banks to maintain: (i) as a newly adopted international standard,

a minimum ratio of Common Equity Tier 1 (“CET1”) to risk-weighted assets of 4.5%, plus a 2.5% “capital conservation buffer”
(which is added to the 4.5% CET1 ratio as that buffer is phased in, which will effectively result in a minimum ratio of CET1 to risk-
weighted assets of 7.0%); (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of 6.0%, plus the capital conservation buffer
(which is added to the 6.0% Tier 1 capital ratio as that buffer is phased in, effectively resulting in a minimum Tier 1 capital ratio of
8.5% on full implementation); (iii) a minimum ratio of Total (Tier 1 plus Tier 2) capital to risk-weighted assets of at least 8.0%, plus
the capital conservation buffer (which is added to the 8.0% total capital ratio as that buffer is phased in, effectively resulting in a
minimum total capital ratio of 10.5% upon full implementation); and (iv) as a newly adopted international standard, a minimum
leverage ratio of 3.0%, calculated as the ratio of Tier 1 capital to balance sheet exposures plus certain off-balance sheet exposures
(computed as the average for each quarter of the month-end ratios for the quarter).

The Basel III final framework provides for a number of new deductions from and adjustments to CET1, including the deduction

of mortgage servicing rights, deferred tax assets dependent upon future taxable income and significant investments in non-
consolidated financial entities if any one such category exceeds 10.0% of CET1 or if all such categories in the aggregate exceed
15.0% of CET1.

The following is a summary of the other major changes from the current general risk-based capital rule:

•

replacement of the external credit ratings approach to standards of creditworthiness with a simplified supervisory
formula approach;

stricter limitations on the extent to which mortgage servicing assets, deferred tax assets and significant investments
in unconsolidated financial institutions may be included in common equity tier 1 capital and the risk weight to be
assigned to any amounts of such assets not deducted; and

increased risk weights for past-due loans, certain commercial real estate loans and some equity exposures, and
selected other changes in risk weights and credit conversion factors.

Notwithstanding its release of the Basel III framework as a final framework, the Basel Committee is considering further

amendments to Basel III, including imposition of additional capital surcharges on globally systemically important financial
institutions. In addition to Basel III, the Dodd-Frank Act requires or permits federal banking agencies to adopt regulations affecting
capital requirements in a number of respects, including potentially more stringent capital requirements for systemically important
financial institutions. Accordingly, the regulations ultimately applicable to the Company may differ substantially from the currently
published final Basel III framework. Requirements of higher capital levels or higher levels of liquid assets could adversely impact the
Company’s net income and return on equity.

Volcker Rule

In December 2013, five federal agencies adopted a final regulation implementing the Volcker Rule provision of the Dodd-Frank

Act (the "Volcker Rule"). The Volcker Rule places limits on the trading activity of insured depository institutions and entities
affiliated with a depository institution, subject to certain exceptions. The trading activity includes a purchase or sale as principal of a
security, derivative, commodity future or option on any such instrument in order to benefit from short-term price movements or to
realize short-term profits. The Volcker Rule exempts specified U.S. Government, agency and/or municipal obligations, and it excepts
trading conducted in certain capacities, including as a broker or other agent, through a deferred compensation or pension plan, as a
fiduciary on behalf of customers, to satisfy a debt previously contracted, repurchase and securities lending agreements and risk-
mitigating hedging activities.

The Volcker Rule also prohibits a banking entity from having an ownership interest in, or certain relationships with, a hedge

fund or private equity fund, with a number of exceptions.

The Bank does not engage in any of the trading activities or own any of the types of funds prohibited by the Volcker Rule.

Prompt Corrective Action

The federal banking agencies have established a system of prompt corrective action to resolve certain of the problems of

undercapitalized institutions. This system is based on five capital level categories for insured depository institutions: “well
capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.”

The federal banking agencies may (or in some cases must) take certain supervisory actions depending upon a bank’s capital

level. For example, the banking agencies must appoint a receiver or conservator for a bank within 90 days after it becomes “critically
undercapitalized” unless the bank’s primary regulator determines, with the concurrence of the FDIC, that other action would better
achieve regulatory purposes. Banking operations otherwise may be significantly affected depending on a bank’s capital category. For
example, a bank that is not “well capitalized” generally is prohibited from accepting brokered deposits and offering interest rates on
deposits higher than the prevailing rate in its market, and the holding company of any undercapitalized depository institution must
guarantee, in part, specific aspects of the bank’s capital plan for the plan to be acceptable.

Federal law permits the OCC to order the pro rata assessment of shareholders of a national bank whose capital stock has become

impaired, by losses or otherwise, to relieve a deficiency in such national bank’s capital stock. This statute also provides for the
enforcement of any such pro rata assessment of shareholders of such national bank to cover such impairment of capital stock by sale,
to the extent necessary, of the capital stock owned by any assessed shareholder failing to pay the assessment. As the sole shareholder
of Farmers Bank, the Company is subject to such provisions.

Deposit Insurance

Substantially all of the deposits of the Bank are insured up to applicable limits by the Deposit Insurance Fund of the FDIC, and
Farmers Bank is assessed deposit insurance premiums to maintain the Deposit Insurance Fund. Insurance premiums for each insured
institution are determined based upon the institution’s capital level and supervisory rating provided to the FDIC by the institution’s
primary federal regulator and other information deemed by the FDIC to be relevant to the risk posed to the Deposit Insurance Fund by
the institution. The assessment rate is then applied to the amount of the institution’s deposits to determine the institution’s insurance
premium.

On February 7, 2011, the FDIC approved a final rule that changed the deposit insurance assessment base, as required by the

Dodd-Frank Act. As adopted, the final rule changed the deposit insurance assessment base from domestic deposits to average assets
minus average tangible equity. In addition, the final rule also adopted a new large-bank pricing assessment scheme and established a
target size for the Deposit Insurance Fund. Specifically, the final rule set a target size for the Deposit Insurance Fund at 2 percent of
insured deposits and implements a lower assessment rate schedule when the fund reaches 1.15 percent and, in lieu of dividends,
provides for a lower rate schedule when the reserve ratio reaches 2 percent and 2.5 percent. The final rule also created a scorecard-
based assessment system for banks with more than $10 billion in assets. The final rule went into effect beginning with the second
quarter of 2011.

As insurer, the FDIC is authorized to conduct examinations of and to require reporting by federally-insured institutions. It also

may prohibit any federally-insured institution from engaging in any activity the FDIC determines by regulation or order to pose a
serious threat to the Deposit Insurance Fund. The FDIC also has the authority to take enforcement actions against insured institutions.
Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged or is engaging in unsafe and
unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule,
order or condition imposed by the FDIC or written agreement entered into with the FDIC. The management of the Bank does not
know of any practice, condition or violation that might lead to termination of deposit insurance.

Fiscal and Monetary Policies

The Company’s business and earnings are affected significantly by the fiscal and monetary policies of the federal government

and its agencies. The Company is particularly affected by the policies of the Federal Reserve Board, which regulates the supply of
money and credit in the United States in order to influence general economic conditions, primarily through open market operations in
U.S. government securities, changes in the discount rate on bank borrowings and changes in the reserve requirements against
depository institutions’ deposits. These policies and regulations significantly affect the overall growth and distribution of loans,
investments and deposits, as well as interest rates charged on loans and paid on deposits.

The monetary policies of the Federal Reserve board have had a significant effect on operations and results of financial
institutions in the past and are expected to have significant effects in the future. In view of the changing conditions in the economy,
the money markets and activities of monetary and fiscal authorities, Farmers can make no predictions as to future changes in interest
rates, credit availability or deposit levels.

Community Reinvestment Act

The CRA requires depository institutions to assist in meeting the credit needs of their market areas consistent with safe and

sound banking practice. Under the CRA, each depository institution is required to help meet the credit needs of its market areas by,
among other things, providing credit to low- and moderate-income individuals and communities. Depository institutions are
periodically examined for compliance with the CRA and are assigned ratings. In order for a bank holding company to commence any
new activity permitted by the BHCA, or to acquire any company engaged in any new activity permitted by the BHCA, each insured
depository institution subsidiary of the bank holding company must have received a rating of at least “satisfactory” in its most recent
examination under the CRA. Furthermore, banking regulators take into account CRA ratings when considering approval of a proposed
transaction. Farmers received a rating of “satisfactory” in its most recent CRA examination.

Customer Privacy

Farmers Bank is subject to regulations limiting the ability of financial institutions to disclose non-public information about

consumers to nonaffiliated third parties. These limitations require disclosure of privacy policies to consumers and, in some
circumstances, allow customers to prevent disclosure of certain personal information to a nonaffiliated third party. These regulations
affect how consumer information is transmitted and conveyed to outside vendors.

Anti-Money Laundering and the USA Patriot Act

The Uniting and Strengthening of America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of

2001 (the “USA Patriot Act”) and its related regulations require insured depository institutions, broker-dealers and certain other
financial institutions to have policies, procedures, and controls to detect, prevent, and report money laundering and terrorist financing.
The USA Patriot Act and its regulations also provide for information sharing, subject to conditions, between federal law enforcement
agencies and financial institutions, as well as among financial institutions, for counter-terrorism purposes. Failure of a financial
institution to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of
the relevant laws or regulations, could have serious legal and reputational consequences for the institution. In addition, federal banking
agencies are required, when reviewing bank holding company acquisition and bank merger applications, to take into account the
effectiveness of the anti-money laundering policies, procedures and controls of the applicants.

Corporate Governance

The Sarbanes-Oxley Act of 2002 effected broad reforms to areas of corporate governance and financial reporting for public
companies under the jurisdiction of the Commission. The Company’s corporate governance policies include an Audit Committee
Charter, a Compensation Committee Charter, Corporate Governance and Nominating Committee Charter, and Code of Business
Conduct and Ethics. The Board of Directors reviews the Company’s corporate governance practices on a continuing basis. These and
other corporate governance policies have been provided previously to shareholders and are available, along with other information on
Farmers’ corporate governance practices, on the Company’s website at www.farmersbankgroup.com.

As directed by Section 302(a) of the Sarbanes-Oxley Act, the Company’s chief executive officer and chief financial officer are
each required to certify that the Company’s Quarterly and Annual Reports do not contain any untrue statement of a material fact. The
rules have several requirements, including having these officers certify that: they are responsible for establishing, maintaining, and
regularly evaluating the effectiveness of the Company’s internal controls, they have made certain disclosures about the Company’s
internal controls to its auditors and the audit committee of the Board of Directors, and they have included information in the
Company’s Quarterly and Annual Reports about their evaluation and whether there have been significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent to the evaluation.

Executive and Incentive Compensation

In June 2010, the Federal Reserve Board, OCC and FDIC issued joint interagency guidance on incentive compensation policies

(the “Joint Guidance”) intended to ensure that the incentive compensation policies of banking organizations do not undermine the
safety and soundness of such organizations by encouraging excessive risk-taking. This principles-based guidance, which covers all
employees that have the ability to materially affect the risk profile of an organization, either individually or as part of a group, is based
upon the key principles that a banking organization’s incentive compensation arrangements should: (i) provide incentives that do not
encourage risk-taking beyond the organization’s ability to effectively identify and manage risks; (ii) be compatible with effective
internal controls and risk management; and (iii) be supported by strong corporate governance, including active and effective oversight
by the organization’s board of directors.

Pursuant to the Joint Guidance, the Federal Reserve Board will review as part of a regular, risk-focused examination process, the

incentive compensation arrangements of financial institutions such as Farmers. Such reviews will be tailored to each organization
based on the scope and complexity of the organization’s activities and the prevalence of incentive compensation arrangements. The
findings of the supervisory initiatives will be included in reports of examination and deficiencies will be incorporated into the
institution’s supervisory ratings, which can affect the institution’s ability to make acquisitions and take other actions. Enforcement
actions may be taken against an institution if its incentive compensation arrangements, or related risk-management control or
governance processes, pose a risk to the organization’s safety and soundness and prompt and effective measures are not being taken to
correct the deficiencies.

On February 7, 2011, the federal banking agencies jointly issued proposed rules on incentive-based compensation arrangements

under applicable provisions of the Dodd-Frank Act (the “Proposed Rules”). The Proposed Rules generally apply to financial
institutions with $1.0 billion or more in assets that maintain incentive-based compensation arrangements for certain covered
employees. The Proposed Rules: (i) prohibit covered financial institutions from maintaining incentive-based compensation
arrangements that encourage covered persons to expose the institution to inappropriate risk by providing the covered person with
“excessive” compensation; (ii) prohibit covered financial institutions from establishing or maintaining incentive-based compensation
arrangements for covered persons that encourage inappropriate risks that could lead to a material financial loss; (iii) require covered
financial institutions to maintain policies and procedures appropriate to their size, complexity and use of incentive-based
compensation to help ensure compliance with the Proposed Rules; and (iv) require covered financial institutions to provide enhanced
disclosure to regulators regarding their incentive-based compensation arrangements for covered persons within 90 days following the
end of the fiscal year.

Public companies will also be required, once stock exchanges impose additional listing requirements under the Dodd-Frank Act,

to implement “clawback” procedures for incentive compensation payments and to disclose the details of the procedures which allow
recovery of incentive compensation that was paid on the basis of erroneous financial information necessitating a restatement due to
material noncompliance with financial reporting requirements. This clawback policy is intended to apply to compensation paid within
a three year look-back window of the restatement and would cover all executives who received incentive awards.

The Dodd-Frank Act also provides shareholders the opportunity to cast a non-binding vote on executive compensation practices,

imposes new executive compensation disclosure requirements, and contains additional considerations of the independence of
compensation advisors.

Future Legislation

Various and significant legislation affecting financial institutions and the financial industry is from time to time introduced in

the U.S. Congress and state legislatures, as well as by regulatory agencies. Such initiatives may include proposals to expand or
contract the powers of bank holding companies and depository institutions or proposals to substantially change the financial institution
regulatory system. Such legislation could change the operating environment for Farmers and its subsidiaries in substantial and
unpredictable ways and could significantly increase or decrease the costs of doing business, limit or expand permissible activities or
affect the competitive balance among financial institutions. With the enactment of the Dodd-Frank Act and the continuing
implementation of final rules and regulations thereunder, the nature and extent of future legislative and regulatory changes affecting
financial institutions remains very unpredictable. Farmers cannot predict the scope and timing of any such future legislation and, if
enacted, the effect that it could have on its business, financial condition or results of operations.

Summary

To the extent that the foregoing information describes statutory and regulatory provisions applicable to the Company or its
subsidiaries, it is qualified in its entirety by reference to the full text of those provisions or agreements. Also, such statutes, regulations
and policies are continually under review by the U.S. Congress and state legislatures as well as federal and state regulatory agencies
and are subject to change at any time, particularly in the current economic and regulatory environment. Any such change in applicable
statutes, regulations or regulatory policies could have a material effect on Farmers and its business, financial condition or results of
operations.

Item 1A. Risk Factors.

The following are certain risk factors that could materially and negatively affect our business, results of operations, cash flows

or financial condition. These risk factors should be considered in connection with evaluating the forward-looking statements contained
in this Annual Report on Form 10-K because these factors could cause our actual results or financial condition to differ materially
from those projected in forward-looking statements. The risks that are discussed below are not the only ones we face. If any of the
following risks occur, our business, financial condition or results of operations could be negatively affected. Additional risks that are
not presently known or that we presently deem to be immaterial could also have a material, adverse impact on our business, financial
condition or results of operations.

Risks Relating to Economic and Market Conditions

Difficult market conditions and economic trends have adversely affected our industry and our business.

Beginning in the latter half of 2007 through 2009, the U.S. economy was in recession and business activity across a wide range
of industries and regions in the U. S. was greatly reduced. Although economic conditions have improved, certain sectors, such as real
estate and manufacturing, remain weak and unemployment remains high. It is also possible that recent improvements may be reversed
if current economic turmoil in Europe becomes global or the United States Congress fails to resolve certain critical fiscal policies it is
now facing, including the automatic budget cuts contemplated in the sequester arrangement and raising the federal government’s debt
ceiling in time to avoid a default. In addition, many local governments and many businesses are still in serious difficulty due to
depressed consumer spending and continued decreased liquidity in the credit markets.

Market conditions have also led to poor financial performance resulting in the failure and merger of a number of financial
institutions. These failures, as well as possible future failures, have had a significant negative impact on the capitalization levels and of
the Deposit Insurance Fund, which has led to a significant increase in deposit insurance premiums paid by financial institutions.

Our success depends, to a certain extent, upon economic and political conditions, local and national, as well as governmental

monetary policies. Conditions such as inflation, recession, unemployment, changes in interest rates, money supply, governmental
fiscal policies, and other factors beyond our control may adversely affect our asset quality, deposit levels and loan demand and,
therefore, our earnings. Because we have a significant amount of real estate loans, additional decreases in real estate values could
adversely affect the value of property used as collateral and our ability to sell the collateral upon foreclosure. Adverse changes in the
economy may also have a negative effect on the ability of our borrowers to make timely repayments of their loans, which would have
an adverse impact on our earnings. If during a period of reduced real estate values we are required to liquidate the collateral securing
loans to satisfy the debt or to increase our allowance for loan losses, it could materially reduce our profitability and adversely affect
our financial condition. Moreover, the Financial Accounting Standards Board may change its requirements for establishing the loan
loss allowance. The majority of our loans are to individuals and businesses in Northeast Ohio. Consequently, further significant
declines in the economy in the area could have a material adverse effect on our business, financial condition or results of operations. It
is uncertain when the negative credit trends in our market will reverse, and, therefore, future earnings are susceptible to further
declining credit conditions in the market in which we operate.

Changes in interest rates could adversely affect income and financial condition.

Our earnings and cash flow are dependent upon our net interest income. Net interest income is the difference between the
interest income generated by our interest-earning assets (consisting primarily of loans and, to a lesser extent, securities) and the
interest expense generated by our interest-bearing liabilities (consisting primarily of deposits and wholesale borrowings). Our level of
net interest income is primarily a function of the average balance of our interest-earning assets, the average balance of our interest-
bearing liabilities and the spread between the yield on such assets and the cost of such liabilities. These factors are influenced by both
the pricing and mix of our interest-earning assets and our interest-bearing liabilities which, in turn, are impacted by external factors,
such as the local economy, competition for loans and deposits, the monetary policy of the Federal Reserve Board and market interest
rates.

Interest rates are beyond our control, and they fluctuate in response to general economic conditions and the policies of various

governmental and regulatory agencies, in particular, the Federal Reserve Board. Changes in monetary policy, including changes in
interest rates, will influence the origination of loans, the purchase of investments, the generation of deposits and the rates received on
loans and investment securities and paid on deposits. While we have taken measures intended to manage the risks of operating in a
changing interest rate environment, there can be no assurance that such measures will be effective in avoiding undue interest rate risk.
See additional interest rate risk discussion under the Market Risk section found in Item 7A of this Annual Report on Form 10-K.

Defaults by another larger financial institution could adversely affect financial markets generally.

The commercial soundness of many financial institutions may be closely interrelated as a result of credit, trading, clearing or

other relationships between institutions. As a result, concerns about, or a default or threatened default by, one institution could lead to
significant market-wide liquidity and credit problems, losses or defaults by other institutions. This is sometimes referred to as
“systemic risk” and may adversely affect financial intermediaries, such as clearing agencies, clearing houses, banks, securities firms
and exchanges, with which we and our subsidiaries interact on a daily basis, and therefore could adversely affect our business,
financial condition or results of operations.

Risks Related to Our Business

We extend credit to a variety of customers based on internally set standards and judgment. We manage credit risk through a
program of underwriting standards, the review of certain credit decisions and an on-going process of assessment of the quality of
credit already extended. Our credit standards and on-going process of credit assessment might not protect us from significant
credit losses.

We take credit risk by virtue of making loans, extending loan commitments and letters of credit and, to a lesser degree,
purchasing non-governmental securities. Our exposure to credit risk is managed through the use of consistent underwriting standards
that emphasize “in-market” lending, while avoiding highly leveraged transactions as well as excessive industry and other
concentrations. Our credit administration function employs risk management techniques to ensure that loans adhere to corporate
policy and problem loans are promptly identified. While these procedures are designed to provide us with the information needed to
implement policy adjustments where necessary, and to take proactive corrective actions, there can be no assurance that such measures
will be effective in avoiding undue credit risk.

We have significant exposure to risks associated with commercial real estate and residential real estate.

As of December 31, 2015, approximately 68.2% of our loan portfolio consisted of commercial real estate and residential real

estate loans, including real estate development, construction and residential and commercial mortgage loans. Consequently, real
estate-related credit risks are a significant concern for us. The adverse consequences from real estate-related credit risks tend to be
cyclical and are often driven by national economic developments that are not controllable or entirely foreseeable by us or our
borrowers. General difficulties in our real estate markets have recently contributed to increases in our non-performing loans, charge-
offs, and decreases in our income.

Our business depends significantly on general economic conditions in Ohio. Accordingly, the ability of our borrowers to repay
their loans, and the value of the collateral securing such loans, may be significantly affected by economic conditions in the regions we
serve or by changes in the local real estate markets. A significant decline in general economic conditions caused by inflation,
recession, unemployment, acts of terrorism, or other factors beyond our control could therefore have an adverse effect on our business,
financial condition or results of operations.

Our indirect lending exposes us to increased credit risks.

A portion of our current lending involves the purchase of consumer automobile installment sales contracts from automobile
dealers located in Northeastern Ohio. These loans are for the purchase of new or late model used cars. We serve customers over a
broad range of creditworthiness, and the required terms and rates are reflective of those risk profiles. While these loans have higher
yields than many of our other loans, such loans involve significant risks in addition to normal credit risk. Potential risk elements
associated with indirect lending include the limited personal contact with the borrower as a result of indirect lending through dealers,
the absence of assured continued employment of the borrower, the varying general creditworthiness of the borrower, changes in the
local economy, and difficulty in monitoring collateral. While indirect automobile loans are secured, such loans are secured by
depreciating assets and characterized by loan to value ratios that could result in us not recovering the full value of an outstanding loan
upon default by the borrower. Due to the economic slowdown in our primary market area, we currently are experiencing higher
delinquencies, charge-offs and repossessions of vehicles in this portfolio. If the economy continues to contract, we may continue to
experience higher levels of delinquencies, repossessions and charge-offs.

Commercial and industrial loans may expose us to greater financial and credit risk than other loans.

As of December 31, 2015, approximately 17.6% of our loan portfolio consisted of commercial and industrial loans. Commercial

and industrial loans generally carry larger loan balances and can involve a greater degree of financial and credit risk than other loans.
Any significant failure to pay on time by our customers would hurt our earnings and cause a significant increase in non-performing
loans. The increased financial and credit risk associated with these types of loans are a result of several factors, including the
concentration of principal in a limited number of loans and borrowers, the size of loan balances, the effects of general economic
conditions on income-producing properties and the increased difficulty of evaluating and monitoring these types of loans. In addition,
when underwriting a commercial or industrial loan, we may take a security interest in commercial real estate, and, in some instances
upon a default by the borrower, we may foreclose on and take title to the property, which may lead to potential financial risks. An
increase in non-performing loans could result in a net loss of earnings from these loans, an increase in the provision for loan losses and
an increase in loan charge-offs, all of which could have a material adverse effect on our business, financial condition or results of
operations.

Our allowance for loan loss may not be adequate to cover actual future losses.

We maintain an allowance for loan losses to cover current, probable incurred loan losses. Every loan we make carries a certain
risk of non-repayment, and we make various assumptions and judgments about the collectability of our loan portfolio, including the
creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of loans.
Through a periodic review and consideration of the loan portfolio, management determines the amount of the allowance for loan
losses by considering general market conditions, credit quality of the loan portfolio, the collateral supporting the loans and
performance of customers relative to their financial obligations with us. The amount of future losses is susceptible to changes in
economic, operating and other conditions, including changes in interest rates, which may be beyond our control, and these losses may
exceed current estimates. We cannot fully predict the amount or timing of losses or whether the loss allowance will be adequate in the
future. If our assumptions prove to be incorrect, our allowance for loan losses may not be sufficient to cover losses inherent in our
loan portfolio, which will require additions to the allowance. Excessive loan losses and significant additions to our allowance for loan
losses could have a material adverse impact on our business, financial condition or results of operations.

We are subject to certain risks with respect to liquidity.

“Liquidity” refers to our ability to generate sufficient cash flows to support our operations and to fulfill our obligations,
including commitments to originate loans, to repay our wholesale borrowings and other liabilities and to satisfy the withdrawal of
deposits by our customers. Our primary source of liquidity is our core deposit base, which is raised through our retail branch system.
Core deposits – savings and money market accounts, time deposits less than $250 thousand and demand deposits—comprised
approximately 96.8% of total deposits at December 31, 2015. Additional available unused wholesale sources of liquidity include
advances from the FHLB, issuances through dealers in the capital markets and access to certificates of deposit issued through brokers.
Liquidity is further provided by unencumbered, or unpledged, investment securities that totaled $176 million at December 31, 2015.
An inability to raise funds through deposits, borrowings, the sale or pledging as collateral of loans and other assets could have a
substantial negative effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities could be
impaired by factors that affect us specifically or the financial services industry in general. Factors that could negatively affect our
access to liquidity sources include a decrease in the level of our business activity due to a market downturn or negative regulatory
action against us. Our ability to borrow could also be impaired by factors that are not specific to us, such as severe disruption of the
financial markets or negative news and expectations about the prospects for the financial services industry as a whole, as evidenced by
recent turmoil in the domestic and worldwide credit markets.

Our business strategy includes continuing our growth plans. Our business, financial condition or results of operations could

be negatively affected if we fail to grow or fail to manage our growth effectively.

We intend to continue pursuing a profitable growth strategy both within our existing markets and in new markets. Our prospects
must be considered in light of the risks, expenses and difficulties frequently encountered by companies in significant growth stages of
development. We cannot assure that we will be able to expand our market presence in our existing markets or successfully enter new
markets or that any such expansion will not adversely affect our results of operations. Failure to manage our growth effectively could
have a material adverse effect on our business, future prospects, financial condition or results of operations and could adversely affect
our ability to successfully implement our business strategy. Also, if we grow more slowly than anticipated, our operating results could
be materially adversely affected.

We may experience difficulties in integrating acquired businesses, or acquisitions may not perform as expected.

In 2015, we completed the acquisitions of NBOH and Tri-State. The successful integration of these acquisitions depends on our

ability to manage the operations and personnel of the acquired businesses. Integrating operations is complex and requires significant
efforts and expenses. Potential difficulties we may encounter as part of the integration process include the following:

•

employees may voluntarily or involuntarily exit the Company because of the acquisitions;

our management team may have its attention diverted while trying to integrate the acquired companies;

we may encounter obstacles when incorporating the acquired operations into our operations;

differences in business backgrounds, corporate cultures and management philosophies;

potential unknown liabilities and unforeseen increased expenses;

previously undetected operational or other issues; and

the acquired operations may not otherwise perform as expected or provide expected results

Any of these factors could adversely affect each company’s ability to maintain relationships with customers, suppliers,

employees and other constituencies or our ability to achieve the anticipated benefits of the acquisition or could reduce each company’s
earnings or otherwise adversely affect our business and financial results after the acquisition.

We may fail to realize all of the anticipated benefits of acquisitions, which could reduce our anticipated profitability.

We expect that our acquisitions will result in certain synergies, business opportunities and growth prospects, although we may

not fully realize these expectations. Our assumptions underlying estimates of expected cost savings may be inaccurate or general
industry and business conditions may deteriorate. In addition, our growth and operating strategies for acquired businesses may be
different from the strategies that the acquired companies pursued. If these factors limit our ability to integrate or operate the acquired
companies successfully or on a timely basis, our expectations of future results of operations, including certain cost savings and
synergies expected to result from acquisitions, may not be met.

We may not be able to attract and retain skilled people.

Our success depends, in large part, on our ability to attract and retain key people. Competition for the best people in most
activities in which we engage can be intense, and we may not be able to retain or hire the people we want or need. In order to attract
and retain qualified employees, we must compensate them at market levels. If we are unable to continue to attract and retain qualified
employees, or do so at rates necessary to maintain our competitive position, our performance, including our competitive position,
could suffer, and, in turn, adversely affect our business, financial condition or results of operations.

Strong competition within the markets in which we operate could reduce our ability to attract and retain business.

In our markets, we encounter significant competition from banks, savings and loan associations, credit unions, mortgage banks

and other financial service companies. As a result of their size and ability to achieve economies of scale, some of our competitors offer
a broader range of products and services than we can offer. In particular, the competition includes major financial companies whose
greater resources may afford them a marketplace advantage by enabling them to maintain numerous banking locations and mount
extensive promotional and advertising campaigns. Our ability to maintain our history of strong financial performance and return on
investment to shareholders will depend in part on our continued ability to compete successfully in our market. Financial performance
and return on investment to shareholders will also depend on our ability to expand our scope of available financial services to our
customers. In addition to other banks, competitors include securities dealers, brokers, investment advisors, and finance and insurance
companies. The increasingly competitive environment is, in part, a result of changes in regulation, changes in technology and product
delivery systems, and the accelerating pace of consolidation among financial service providers.

Consumers may decide not to use banks to complete their financial transactions.

Technology and other changes are allowing parties to utilize alternative methods to complete financial transactions that
historically have involved banks. For example, consumers can now maintain funds in brokerage accounts or mutual funds that would
have historically been held as bank deposits. Consumers can also complete transactions such as paying bills and/or transferring funds
directly without the assistance of banks. The process of eliminating banks as intermediaries could result in the loss of fee income, as
well as the loss of customer deposits and the related income generated from those deposits. The loss of these revenue streams and the
lower cost deposits as a source of funds could have a material adverse effect on our business, financial condition or results of
operations.

We are exposed to operational risk.

Similar to any large organization, we are exposed to many types of operational risk, including reputational risk, legal and

compliance risk, the risk of fraud or theft by employees or outsiders, unauthorized transactions by employees or operational errors,
including clerical or record-keeping errors or those resulting from faulty or disabled computer or telecommunications systems.

Negative public opinion can result from our actual or alleged conduct in any number of activities, including lending practices,
corporate governance and acquisitions and from actions taken by government regulators and community organizations in response to
those activities. Negative public opinion can adversely affect our ability to attract and keep customers and can expose us to litigation
and regulatory action.

Given the volume of transactions we process, certain errors may be repeated or compounded before they are discovered and

successfully rectified. Our necessary dependence upon automated systems to record and process our transaction volume may further
increase the risk that technical system flaws or employee tampering or manipulation of those systems will result in losses that are
difficult to detect. We may also be subject to disruptions of our operating systems arising from events that are wholly or partially
beyond our control (for example, computer viruses or electrical or telecommunications outages), which may give rise to disruption of
service to customers and to financial loss of liability. We are further exposed to the risk that our external vendors may be unable to
fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their respective employees as
we are) and to the risk that our (or our vendors’) business continuity and data security systems prove to be inadequate.

Unauthorized disclosure of sensitive or confidential client or customer information, whether through a breach of our

computer systems or otherwise, could severely harm our business.

As part of our financial institution business, we collect, process and retain sensitive and confidential client and customer

information on behalf of our subsidiaries and other third parties. Despite the security measures we have in place, our facilities and
systems, and those of our third-party service providers, may be vulnerable to security breaches, acts of vandalism, computer viruses,
misplaced or lost data, programming and/or human errors or other similar events. If information security is breached, information
could be lost or misappropriated, resulting in financial loss or costs to us or damages to others. Any security breach involving the
misappropriation, loss or other unauthorized disclosure of confidential customer information, whether by us or by our vendors, could
severely damage our reputation, expose us to the risks of litigation and liability or disrupt our operations and have a material adverse
effect on our business, financial condition or results of operations.

We depend on our subsidiaries for dividends, distributions and other payments.

As a bank holding company, we are a legal entity separate and distinct from our subsidiaries. Our principal source of funds to

pay dividends on our common shares is dividends from these subsidiaries. Federal and state statutory provisions and regulations limit
the amount of dividends that our banking and other subsidiaries may pay to us without regulatory approval. In the event our
subsidiaries become unable to pay dividends to us, we may not be able to pay dividends on our outstanding common shares.
Accordingly, our inability to receive dividends from our subsidiaries could also have a material adverse effect on our business,
financial condition and results of operations. Further discussion of our ability to pay dividends can be found under the caption
“Dividends and Transactions with Affiliates” in Item 1 of this Annual Report on Form 10-K.

We may elect or be compelled to seek additional capital in the future, but that capital may not be available when it is needed.

We are required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations.
Federal banking agencies have proposed extensive changes to their capital requirements, including raising required amounts and
eliminating the inclusion of certain instruments from the calculation of capital. The final form of such regulations and their impact on
the Company is unknown at this time but may require us to raise additional capital. In addition, we may elect to raise capital to support
our business or to finance acquisitions, if any, or for other anticipated reasons. Our ability to raise additional capital, if needed, will
depend on financial performance, conditions in the capital markets, economic conditions and a number of other factors, including the
satisfaction or release of preemptive rights in the event of a common share offering, many of which are outside our control. Therefore,
there can be no assurance additional capital can be raised when needed or that capital can be raised on acceptable terms. The inability
to raise capital may have a material adverse effect on our business, financial condition or results of operations.

Impairment of investment securities, goodwill, other intangible assets, or deferred tax assets could require charges to

earnings, which could result in a negative impact on our results of operations.

In assessing the impairment of investment securities, we consider the length of time and extent to which the fair value has been

less than cost, the financial condition and near-term prospects of the issuers, whether the market decline was affected by
macroeconomic conditions and whether we have the intent to sell the debt security or will be required to sell the debt security before
its anticipated recovery. Under current accounting standards, goodwill and certain other intangible assets with indeterminate lives are
no longer amortized but, instead, are assessed for impairment periodically or when impairment indicators are present. Assessment of
goodwill and such other intangible assets could result in circumstances where the applicable intangible asset is deemed to be impaired
for accounting purposes. Under such circumstances, the intangible asset’s impairment would be reflected as a charge to earnings in the
period. Deferred tax assets are only recognized to the extent it is more likely than not they will be realized. Should management
determine it is not more likely than not that the deferred tax assets will be realized, a valuation allowance with a change to earnings
would be reflected in the period.

Risks Related to the Legal and Regulatory Environment

Increases in FDIC insurance premiums may have a material adverse effect on our earnings.

The FDIC maintains the Deposit Insurance Fund to resolve the cost of bank failures. Since 2007, the number of bank failures

has increased significantly, which dramatically increased resolution costs of the FDIC and depleted the Deposit Insurance Fund. Also
during this period, the FDIC and the U.S. Congress have instituted a program to further insure customer deposits at FDIC-member
banks: (i) deposit accounts are now insured up to $250,000 per customer.

Since late 2008, the FDIC has taken various actions intended to maintain a strong funding position and restore reserve ratios of

the Deposit Insurance Fund. These actions have included increasing assessment rates for all insured institutions, requiring riskier
institutions to pay a larger share of premiums by factoring in rate adjustments based on secured liabilities and unsecured debt levels,
imposing special assessments and requiring insured depository institutions to prepay their quarterly risk-based assessments for the
fourth quarter of 2009 and full years 2010 through 2012. In addition, on February 7, 2011, the FDIC approved a final rule that
changed the deposit insurance assessment base and assessment rate schedule, adopted a new large-bank pricing assessment scheme,
and set a target size for the Deposit Insurance Fund. The rule, as mandated by the Dodd-Frank Act, finalized a target size for the
Deposit Insurance Fund at 2 percent of insured deposits. The final rule went into effect beginning with the second quarter of 2011.

We have a limited ability to control the amount of premiums we are required to pay for FDIC insurance. If there are additional

financial institution failures or other significant legislative or regulatory changes, the FDIC may be required to increase assessment
rates or take actions similar to those taken during 2009. Increases in FDIC insurance assessment rates may materially adversely affect
our results of operations and our ability to continue to pay dividends on our common shares at the current rate or at all.

Legislative or regulatory changes or actions, or significant litigation, could adversely impact us or the businesses in which

we are engaged.

The financial services industry is extensively regulated. We are subject to extensive state and federal regulation, supervision and

legislation that govern almost all aspects of our operations. Laws and regulations may change from time to time and are primarily
intended for the protection of consumers, depositors and the Deposit Insurance Fund, and not to benefit our shareholders. The impact
of any changes to laws and regulations or other actions by regulatory agencies may negatively impact us or our ability to increase the
value of our business. Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities,
including the imposition of restrictions on the operation of an institution, the classification of assets by an institution and the adequacy
of an institution’s allowance for loan losses. Additionally, actions by regulatory agencies or significant litigation against us could
cause us to devote significant time and resources to defending our business and may lead to penalties that materially affect us and our
shareholders.

In addition to laws, regulations and actions directed at the operations of banks, proposals to reform the housing finance market

consider winding down Fannie Mae and Freddie Mac, which could negatively affect our sales of loans.

Continued regulatory changes implemented under the Dodd-Frank Act may adversely impact our business, financial

condition or results of operations.

On July 21, 2010, the Dodd-Frank Act was signed into law as an intended comprehensive overhaul of the financial services

industry within the U.S. There are a number of reform provisions that are likely to significantly impact the ways in which banks and
bank holding companies do business. A detailed discussion regarding the Dodd-Frank Act can be found under the caption “Dodd-
Frank Act” in Item 1 of this Annual Report on Form 10-K.

While the ultimate effect of the changes effected and to be implemented under the Dodd-Frank Act cannot currently be
determined, the law and its implementing rules and regulations are expected to result in increased compliance costs and fees paid to
regulators, along with possible restrictions on our banking operations, all of which may have a material adverse effect on our business,
financial condition or results of operations.

Our results of operations, financial condition or liquidity may be adversely impacted by issues arising in foreclosure
practices, including delays in the foreclosure process, related to certain industry deficiencies, as well as potential losses in
connection with actual or projected repurchases and indemnification payments related to mortgages sold into the secondary
market.

Recent announcements of deficiencies in foreclosure documentation by several large seller/servicer financial institutions have

raised various concerns relating to mortgage foreclosure practices. The integrity of the foreclosure process is important to our
business, as an originator and servicer of residential mortgages. As a result of our continued focus of concentrating our lending efforts
in our primary markets in Ohio, as well as servicing loans for the Federal National Mortgage Association (Fannie Mae) and the
Federal Home Loan Mortgage Corporation (Freddie Mac), we do not anticipate suspending any of our foreclosure activities. During
2010, we reviewed our foreclosure procedures and concluded they are generally conservative in nature and do not present the
significant documentation deficiencies underlying other industry foreclosure problems. Nevertheless, we could face delays and
challenges in the foreclosure process arising from claims relating to industry practices generally, which could adversely affect
recoveries and our financial results, whether through increased expenses of litigation and property maintenance, deteriorating values
of underlying mortgaged properties or unsuccessful litigation results generally.

In addition, in connection with the origination and sale of residential mortgages into the secondary market, we make certain

representations and warranties, which, if breached, may require us to repurchase such loans, substitute other loans or indemnify the
purchasers of such loans for actual losses incurred in respect of such loans. Although we believe that our mortgage documentation and
procedures have been appropriate and are generally conservative in nature, it is possible that we will receive repurchase requests in the
future and we may not be able to reach favorable settlements with respect to such requests. It is therefore possible that we may
increase our reserves or may sustain losses associated with such loan repurchases and indemnification payments.

Environmental liability associated with commercial lending could have a material adverse effect on our business, financial

condition or results of operations.

A significant portion of our loan portfolio is secured by real property. During the ordinary course of business, we may foreclose

on and take title to properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances could be found on
these properties. If hazardous or toxic substances are found, we may be liable for remediation costs, as well as for personal injury and
property damage. In addition, we own and operate certain properties that may be subject to similar environmental liability risks.

Environmental laws may require us to incur substantial expenses and may materially reduce the affected property’s value or

limit our ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies
with respect to existing laws may increase our exposure to environmental liability. Although we have policies and procedures
requiring the performance of an environmental site assessment before initiating any foreclosure action on real property, these
assessments may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial
liabilities associated with an environmental hazard could have a material adverse effect on our business, financial condition or results
of operations.

Changes in tax laws could adversely affect our performance.

We are subject to extensive federal, state and local taxes, including income, excise, sales/use, payroll, franchise, withholding

and ad valorem taxes. Changes to our taxes could have a material adverse effect on our results of operations. On January 1, 2014 the
State of Ohio replaced the current franchise tax for financial institutions with the new Ohio Financial Institutions Tax. The Company
has determined that this new tax will have a non-material positive effect on the Company. In addition, our customers are subject to a
wide variety of federal, state and local taxes. Changes in taxes paid by our customers may adversely affect their ability to purchase
homes or consumer products, which could adversely affect their demand for our loans and deposit products. In addition, such negative
effects on our customers could result in defaults on the loans we have made and decrease the value of mortgage-backed securities in
which we have invested.

Changes to the healthcare laws in the United States may increase the number of employees who choose to participate in our

healthcare plans, which may significantly increase our healthcare costs and negatively impact our financial results.

We offer healthcare coverage to our eligible employees with part of the cost subsidized by the Company. With recent changes to

the healthcare laws in the United States becoming effective in 2014, more of our employees may choose to participate in our health
insurance plans, which could increase our costs for such coverage and material adversely impact our costs of operations.

Anti-takeover provisions could delay or prevent an acquisition or change in control by a third party.

Provisions of the Ohio General Corporation Law, our Articles of Incorporation, and our Amended Code of Regulations,
including a staggered board and supermajority voting requirements, could make it more difficult for a third party to acquire control of
us or could have the effect of discouraging a third party from attempting to acquire control of us.

We may be a defendant from time to time in the future in a variety of litigation and other actions, which could have a

material adverse effect on our business, financial condition or results of operations.

We and our subsidiaries may be involved from time to time in the future in a variety of litigation arising out of our business. Our

insurance may not cover all claims that may be asserted against us, and any claims asserted against us, regardless of merit or eventual
outcome, may harm our reputation. Should the ultimate judgments or settlements in any litigation exceed our insurance coverage, they
could have a material adverse effect on our business, financial condition or results of operations. In addition, we may not be able to
obtain appropriate types or levels of insurance in the future, nor may we be able to obtain adequate replacement policies with
acceptable terms, if at all.

Item 1B. Unresolved Staff Comments.
There are no matters of unresolved staff comments from the Commission staff.

Item 2. Properties.
Farmers National Banc Corp.’s Properties

The Company does not own any property. The Company’s operations are conducted at Farmers Bank’s main office, which is located
at 20 and 30 South Broad Street, Canfield, Ohio.

Farmers National Bank Property
The Bank’s main office is located at 20 and 30 S. Broad Street, Canfield, Ohio. The other locations of Farmers Bank are:

Office Building .......................... 40 & 46 S. Broad St., Canfield, Ohio
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 ................. 401 E. Main St. Canfield, Ohio
Western Reserve Office ............. 102 W. Western Reserve Rd., Youngstown, Ohio
Salem Office .............................. 100 Continental Dr., Salem, Ohio
Columbiana Office ..................... 340 State Rt. 14, Columbiana, Ohio
Damascus Office ........................ 29053 State Rt. 62 Damascus, Ohio
Poland Office ............................. 106 McKinley Way West, Poland, Ohio
Niles Office ................................ 1 South Main Street, Niles, Ohio
Niles Drive Up ........................... 170 East State Street, Niles, Ohio
Girard Office .............................. 121 North State Street, Girard, Ohio
Eastwood Office ........................ 5845 Youngstown-Warren Rd, Niles, Ohio
Mineral Ridge Office ................. 3826 South Main Street, Mineral Ridge, Ohio
Niles Operation Center .............. 51 South Main Street, Niles, Ohio
Canton Office............................. 4518 Fulton Dr., Canton, Ohio
McClurg Road Office ................ 42 McClurg Rd., Boardman, Ohio
Howland Office ......................... 1625 Niles-Cortland Rd., Warren, Ohio
Fairlawn Office .......................... 2820 W. Market St., Suite 120, Akron, Ohio
Wealth Management Building ... 2 S. Broad Street, Canfield, Ohio
Alliance Office........................... 310 West State St., Alliance, Ohio
Midway Office ........................... 7227 East Lincoln Way, Apple Creek, Ohio
Dalton Office ............................. 12 West Main St., Dalton, Ohio
Calcutta Office ........................... 15703 State Rt., 170, East Liverpool, Ohio
East Liverpool Office ................ 619 Bradshaw Ave., East Liverpool, Ohio
Kidron Office ............................. 4950 Kidron Rd., Kidron, Ohio
Lisbon Office ............................. 131 East Lincoln Way, Lisbon, Ohio
Lodi Office ................................ 106 Ainsworth, Lodi, Ohio
Massillon Office ........................ 211 Lincoln Way East, Massillon, Ohio
Mayflower Office ...................... 2312 Lincoln Way NW, Massillon, Ohio
Mount Eaton Office ................... 15974 East Main St., Mount Eaton, Ohio
Orrville Main Office .................. 112 W. Market St., Orrville, Ohio
West High Street Office ............. 1320 W. High St., Orrville, Ohio
Seville Office ............................. 4885 Atlantic Dr., Seville, Ohio
Smithville Office ....................... 153 East Main St., Smithville, Ohio
Burbank Road Office ................. 4192 Burbank Rd., Wooster, Ohio
Cleveland Road Office............... 1725 Cleveland Rd., Wooster, Ohio
Midland Office........................... 629 Midland Ave., Midland, Pennsylvania

The Bank owns all locations except the Colonial Plaza, Canton, Alliance, East Liverpool and Fairlawn offices, which are leased.

Farmers Trust Company Property
Farmers Trust Company operates from two locations owned by the Bank:

Boardman Office ......................... 42 McClurg Rd., Boardman, Ohio

Howland Office ........................... 1625 Niles-Cortland Rd., Warren, Ohio

Farmers National Insurance, LLC Property
Farmers National Insurance operates from one location which is owned by the Bank:

Wealth Management Building ..... 2 S. Broad Street, Canfield, Ohio

National Associates, Inc. Property
National Associates, Inc. operates from one location which is leased:

Rocky River Office ...................... 20325 Center Ridge Rd., Cleveland, Ohio

Item 3. Legal Proceedings.

In the normal course of business, the Company and its subsidiaries are at all times subject to pending and threatened legal

actions, some for which the relief or damages sought are substantial. Although Farmers is not able to predict the outcome of such
actions, after reviewing pending and threatened actions with counsel, management believes that based on the information currently
available the outcome of such actions, individually or in the aggregate, will not have a material adverse effect on the results of
operations or stockholders’ equity of the Company. However, it is possible that the ultimate resolution of these matters, if unfavorable,
may be material to the results of operations in a particular future period as the time and amount of any resolution of such actions and
its relationship to the future results of operations are not known.

Item 4. Mine Safety Disclosures
Not applicable.

Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuers Purchases of Equity Securities
Market Information regarding the Company’s Common Shares.

Farmers’ common shares currently trade under the symbol “FMNB” on the Nasdaq Capital Market. Farmers had 26,935,484

common shares outstanding and approximately 3,629 holders of record of common shares at March 7, 2016. The following table sets
forth price ranges and dividend information for Farmers’ common shares for the calendar quarters indicated. Quotations reflect inter-
dealer prices without retail mark-up, mark-down or commission, and may not represent actual transactions. Certain limitations and
restrictions on the ability of Farmers to continue to pay quarterly dividends are described under the caption “Capital Resources” in
Item 7 of this Part II, and under the caption “Dividends and Transactions with Affiliates” in Item 1 of Part I.

Quarter Ended
High .................................................................................... $
Low ..................................................................................... $
Cash dividends paid per share ............................................. $

March 31,
2015

June 30,
2015

September 30,
2015

December 31,
2015

8.45 $
7.09 $
0.03 $

8.44 $
7.95 $
0.03 $

8.75 $
7.86 $
0.03 $

8.70
7.60
0.03

March 31,
2014

June 30,
2014

September 30,
2014

December 31,
2014

7.75 $
6.53 $
0.03 $

7.89 $
7.35 $
0.03 $

8.71 $
7.10 $
0.03 $

8.68
7.40
0.03

Purchases of Common Shares by Farmers.

In September 2012, the Company announced that its Board of Directors approved a share repurchase program under which the

Company was authorized to repurchase up to 920,000 shares of its common stock in the open market or in privately negotiated
transactions, subject to market and other conditions (the “Program”). The Program may be modified, suspended or terminated by the
Company at any time. During the course of 2015, 2014 and 2013 the Company repurchased 26,800 shares, 372,368 shares and
247,845 shares of its common stock.

The following table summarizes the treasury stock activity under the program during the year ended December 31, 2015.

2015
Beginning balance ...............................................................
December 1-31 ..............................................................
Ending balance ....................................................................

Total Number
of Shares
Purchased

Average Price
Paid per Share

Total Number
of Shares
Purchased as
Part of Publicly
Announced
Program

Maximum
Number of
Shares that
May Yet be
Purchased
Under the
Program

26,800 $
26,800 $

7.92
7.92

627,434
26,800
654,234

292,566
265,766
265,766

Item 6. Selected Financial Data.

SELECTED FINANCIAL DATA
(Table Dollar Amounts in Thousands except Per Share Data)

For the Years Ending December 31,
Summary of Earnings

Total Interest and Dividend Income
(including fees on loans) ............................................... $
Total Interest Expense .....................................................
Net Interest Income .........................................................
Provision for Loan Losses ...............................................
Noninterest Income (1) ....................................................
Noninterest Expense ........................................................
Income Before Income Taxes ..........................................
Income Taxes ...................................................................
NET INCOME ................................................................. $

Per Share Data

2015

2014

2013

2012

2011

53,827 $
4,090
49,737
3,510
18,306
53,979
10,554
2,499
8,055

40,915 $
4,579
36,336
1,880
15,303
38,162
11,597
2,632
8,965

40,959 $
5,063
35,896
1,290
13,914
39,057
9,463
1,683
7,780 $

43,110 $
6,212
36,898
725
12,578
35,764
12,987
3,055
9,932

44,434
7,837
36,597
3,650
12,539
33,728
11,758
2,540
9,218

Basic earnings per share .................................................. $
Diluted earnings per share ...............................................
Cash Dividends Paid ........................................................
Book Value at Year-End ..................................................
Tangible Book Value (2) .................................................

0.36
0.36
0.12
7.35
5.76

0.48
0.48
0.12
6.71
6.23

0.41 $
0.41
0.12
6.02
5.47

0.53
0.53
0.18
6.43
6.11

0.50
0.50
0.12
6.10
5.76

Balances at Year-End

Total Assets ..................................................................... $ 1,869,902
1,735,843
Earning Assets .................................................................
1,409,047
Total Deposits ..................................................................
Short-Term Borrowings ...................................................
225,832
22,153
Long-Term Borrowings ...................................................
1,769
Loans Held for Sale .........................................................
Net Loans.........................................................................
1,287,887
198,047
Total Stockholders' Equity ...............................................

$ 1,136,967
1,074,434
915,703
59,136
28,381
511
656,220
123,560

$ 1,137,326 $ 1,139,695
1,076,073 1,082,078
915,216 919,009
79,886
10,423
3,624
623,116 578,963
113,007 120,792

81,617
19,822
158

$ 1,067,871
1,014,997
840,125
98,088
11,263
677
561,986
114,445

Average Balances

Total Assets ..................................................................... $ 1,482,527
162,086
Total Stockholders' Equity ...............................................

$ 1,141,047
120,352

$ 1,141,770 $ 1,118,322
116,735 118,011

$ 1,035,392
105,276

Significant Ratios

Return on Average Assets (ROA) ...................................
Return on Average Equity (ROE)....................................
Average Earning Assets/Average Assets .........................
Average Equity/Average Assets ......................................
Loans/Deposits ................................................................
Allowance for Loan Losses/Total Loans .........................
Allowance for Loan Losses/Non-Acquired Loans ..........
Allowance for Loan Losses/Nonperforming Loans.........
Efficiency Ratio (On tax equivalent basis) ......................
Net Interest Margin ..........................................................
Dividend Payout Rate ......................................................
Tangible Common Equity Ratio (3) ................................

0.54%
4.97
91.91
10.93
92.04
0.69
1.08
85.96
75.26
3.81
33.32
8.50

0.79%
7.45
93.02
10.55
72.50
1.15
1.15
89.99
70.24
3.59
24.95
10.17

0.68 %
6.66
92.90
10.22
68.91
1.20
1.20
83.25
74.82
3.58
28.89
9.11

0.89%
8.42
92.13
10.55
63.83
1.30
1.30
93.01
69.94
3.76
34.05
10.12

0.89%
8.76
92.64
10.17
68.06
1.72
1.72
89.19
67.14
4.01
24.31
10.18

(1) Noninterest income includes a securities impairment charge of $3 thousand and $11 thousand for the years ended December 31,

2013 and 2011

(2) Tangible book value per share is Total Stockholders’ Equity minus goodwill and other intangible assets divided by the number

of shares outstanding.

(3) The tangible common equity ratio is calculated by dividing total common stockholders’ equity by total assets, after reducing

both amounts by intangible assets. The tangible common equity ratio is not required by U.S.GAAP or by applicable bank
regulatory requirements, but is a metric used by management to evaluate the adequacy of our capital levels. Since there is no
authoritative requirement to calculate the tangible common equity ratio, our tangible common equity ratio is not necessarily
comparable to similar capital measures disclosed or used by other companies in the financial services industry. Tangible
common equity and tangible assets are non U.S.GAAP financial measures and should be considered in addition to, not as a
substitute for or superior to, financial measures determined in accordance with U.S.GAAP. With respect to the calculation of the
actual unaudited tangible common equity ratio as of December 31, 2015, reconciliations of tangible common equity to
U.S.GAAP total common stockholders’ equity and tangible assets to U.S.GAAP total assets are set forth below:

Reconciliation of Common Stockholders’ Equity to Tangible Common Equity

December 31,
Stockholders' Equity ............................................................. $
Less Goodwill and other intangibles .....................................
Tangible Common Equity ..................................................... $

2015
198,047 $
42,911
155,136 $

2014
123,560 $
8,813
114,747 $

2013

2012

113,007 $ 120,792 $
6,032
102,664 $ 114,760 $

10,343

2011
114,445
6,441
108,004

Reconciliation of Total Assets to Tangible Assets

December 31,
2011
Total Assets ........................................................................... $ 1,869,902 $ 1,136,967 $ 1,137,326 $ 1,139,695 $ 1,067,871
Less Goodwill and other intangibles .....................................
6,441
Tangible Assets ..................................................................... $ 1,826,991 $ 1,128,154 $ 1,126,983 $ 1,133,663 $ 1,061,430

10,343

42,911

6,032

8,813

2013

2015

2012

2014

3
1
0
2

4
1
0
2

5
1
0
2

E
T
A
R

T
S
E
R
E
T
N

E
G
A
R
E
V
A

E
C
N
A
L
A
B

E
T
A
R

T
S
E
R
E
T
N

E
G
A
R
E
V
A

E
C
N
A
L
A
B

E
T
A
R

T
S
E
R
E
T
N

E
G
A
R
E
V
A

E
C
N
A
L
A
B

s
e
t
a
R
d
n
a

s
d

l
e
i
Y
d
e
t
a
l
e
R
d
n
a

s
t
e
e
h
S
e
c
n
a
l
a
B
e
g
a
r
e
v
A

)
a
t
a
D
e
r
a
h
S
r
e
P

t
p
e
c
x
e

s
d
n
a
s
u
o
h
T
n
i

s
t
n
u
o
m
A

r
a
l
l
o
D
e
l
b
a
T
(

,
1
3

r
e
b
m
e
c
e
D
d
e
d
n
e

s
r
a
e
Y

S
T
E
S
S
A
G
N
N
R
A
E

1
0
.
2

6
1
.
5

3
5
.
4

6
1
.
0

5
0
.
4

2
6
0
,
7

7
8
4
,
4

5
3

6
9
1

1
9
9
,
2
4

%
4
2
.
5

1
1
2
,
1
3

0
6
5
,
5
9
5

8
9
8
,
1
5
3

3
2
3
,
4

1
0
0
,
7
8

4
6
9
,
1
2

6
4
7
,
0
6
0
,
1

%
7
9
.
4

0
9
3
,
1
3

9
1
.
2

1
7
.
4

4
4
.
4

5
1
.
0

2
0
.
4

2
8
2
,
7

9
3
8
,
3

9
1

0
9
1

0
2
7
,
2
4

1
1
0
1
3
6

3
7
2
2
3
3

2
8
2

9
2
5
1
8

1
3
3
2
1

6
2
4
1
6
0

%
4
7

2
4
2
5
4

1
1

4
3

7
3

7
1

1
1

3
0
9

0
1
5

9
2

7
8
2

1
7
9
5
5

5
1
4
5
5
9

8
0
8
9
7
2

7
4
9
3
0
1

1
6
5

5
5
8
6
1

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.

)
5
(

)
3
(

)
1
(

s
n
a
o
L

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
)
2
(

s
e
i
t
i
r
u
c
e
s

e
l
b
a
x
a
T

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
)
5
(

)
2
(

s
e
i
t
i
r
u
c
e
s

t
p
m
e
x
e
-
x
a
T

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.

)
5
(

)
4
(

s
e
i
t
i
r
u
c
e
s
y
t
i
u
q
E

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
h
s
a
c

r
e
h
t
o
d
n
a

d
l
o
s

s
d
n
u
f

l
a
r
e
d
e
F

6
8
5
2
6
3

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
t
e
s
s
a
g
n
i
n
r
a
e

l
a
t
o
T

5
8
0
,
0
2

2
1
9
,
7
1

)
1
5
4
,
7
(

3
2
6
,
2

5
5
8
,
7
4

0
7
7
,
1
4
1
,
1

5
5
3
0
2

2
9
3
7
1

)
8
3
3

7
(

)
3
0
0

2
(

5
1
2
1
5

7
4
0
1
4
1

2
6
8
4
2

7
0
0
1
2

)
6
7
9

7
(

8
8
7

0
6
2
0
8

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
k
n
a
b
m
o
r
f

e
u
d
d
n
a

h
s
a
C

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.

t
n
e
m
p
i
u
q
e

d
n
a

s
e
s
i

m
e
r
P

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.

s
e
s
s
o
L
n
a
o
L
r
o
f

e
c
n
a
w
o
l
l

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.

s
e
i
t
i
r
u
c
e
s

n
o

s
n
i
a
g

d
e
z
i
l
a
e
r
n
U

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
)
1
(

s
t
e
s
s
a

r
e
h
t
O

7
2
5
2
8
4

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.

s
t
e
s
s
A

l
a
t
o
T

S
T
E
S
S
A
G
N
N
R
A
E
N
O
N

%
8
6
.
1

6
1
.
0

3
0
.
0

6
0
.
0

2
7
.
2

8
5
.
0

8
3

1
5

4
6
6

8
5
8
,
3

2
5
4

3
6
0
,
5

2
3
2
,
0
3
2

9
7
1
,
5
1
4

0
9
9
,
4
2
1

3
5
6
,
1
9

7
9
5
,
6
1

1
5
6
,
8
7
8

%
1
6
.
1

1
1
.
0

3
0
.
0

6
0
.
0

7
4
.
2

4
5
.
0

6
3

6
4

6
6
4

6
0
5
,
3

5
2
5

9
7
5
,
4

6
2
1
7
1
2

6
5
9
8
0
4

6
6
0
7
2
1

0
7
8
2
7

0
4
2
1
2

8
5
2
7
4
8

%
5
1

0
1
6

1
1

6
1

2
2

9
3

4
3
5

5
4
3

7
7
1

4
2
4

0
9
0

2
1
4
7
2
2

3
2
1
8
6
4

7
5
2
9
1
2

0
5
8
7
0
1

9
9
7
4
3

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
t
i
s
o
p
e
d
e
m
T

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.

s
t
i
s
o
p
e
d

s
g
n
i
v
a
S

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
t
i
s
o
p
e
d

d
n
a
m
e
D

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
g
n
i
w
o
r
r
o
b
m
r
e
t

t
r
o
h
S

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.

s
g
n
i
w
o
r
r
o
b
m
r
e
t
g
n
o
L

1
4
4
7
5
0

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
e
i
t
i
l
i
b
a
i
L
g
n
i
r
a
e
B

-
t
s
e
r
e
t
n
I

l
a
t
o
T

S
E
I
T
I
L
I

B
A
I
L
G
N
R
A
E
B
-
T
S
E
R
E
T
N

%
7
4
.
3

8
2
9
,
7
3

%
8
4
.
3

1
4
1
,
8
3

%
2
7

1
8
8
1
5

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
d
a
e
r
p
s

e
t
a
r

%
8
5
.
3

%
9
5
.
3

%
1
8

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
n
i
g
r
a
m

t
s
e
r
e
t
n
i

t
e
N

.
t
s
o
c
d
e
z
i
t
r
o
m
a

l
a
c
i
r
o
t
s
i
h

e
g
a
r
e
v
a

e
h
t
g
n
i
s
u

d
e
t
u
p
m
o
c

e
r
a

d
l
e
i
y

d
n
a

e
c
n
a
l
a
b

e
g
a
r
e
v
A

.
s
m
u
i
m
e
r
p

d
n
a

s
t
n
u
o
c
s
i
d

d
e
z
i
t
r
o
m
a
n
u

s
e
d
u
l
c
n
I

.
s
t
e
s
s
a

r
e
h
t
o
n
i

d
e
d
u
l
c
n
i

e
r
a

s
t
i
s
o
p
e
d

t
f
a
r
d
r
e
v
o

d
n
a

s
n
a
o
l

l
a
u
r
c
c
a
-
n
o
N

)
1
(

)
2
(

1
1
1
,
0
4
1

3
7
2
,
6

5
3
7
,
6
1
1

0
7
7
,
1
4
1
,
1

4
4
6
3
6
1

3
9
7

2
5
3
0
2
1

7
4
0
1
4
1

8
2
6
0
5
2

2
7
3
2
1

6
8
0
2
6
1

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
t
i
s
o
p
e
d

d
n
a
m
e
D

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
e
i
t
i
l
i
b
a
i
L
r
e
h
t
O

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
y
t
i
u
q
e

s
r
e
d
l
o
h
k
c
o
t
S

7
2
5
2
8
4

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.

y
t
i
u
q
E

s
r
e
d
l
o
h
k
c
o
t
S

d
n
a

s
e
i
t
i
l
i
b
a
i
L

l
a
t
o
T

Y
T
I
U
Q
E

S
R
E
D
L
O
H
K
C
O
T
S

t
s
e
r
e
t
n
i

d
n
a

e
m
o
c
n
i

t
s
e
r
e
t
n
i

t
e
N

D
N
A
S
E
I
T
I
L
I
B
A
I
L
G
N
R
A
E
B
-
T
S
E
R
E
T
N
N
O
N

1
.
2
$

,
n
o
i
l
l
i

m
3
.
2
$
f
o
n
o
i
t
a
z
i
t
r
o
m
a
y
b

d
e
c
u
d
e
r

s
i

d
n
a
y
l
e
v
i
t
c
e
p
s
e
r
3
1
0
2

d
n
a

4
1
0
2

,
5
1
0
2

r
o
f

n
o
i
l
l
i

m
4
.
2
$

d
n
a
n
o
i
l
l
i

m
5
.
2
$

,
n
o
i
l
l
i

m
0
.
3
$
f
o

e
m
o
c
n
i

e
e
f

s
e
d
u
l
c
n
i

s
n
a
o
l
n
o

t
s
e
r
e
t
n
I

)
3
(

e
r
e
w
n
o
i
l
l
i

m
5
.
1
$

d
n
a

d
n
a
s
u
o
h
t

4
9
4
$
f
o
s
t
n
e
m

t
s
u
j
d
a

,
3
1
0
2

r
o
F

.
s
e
i
t
i
r
u
c
e
s

t
p
m
e
x
e
x
a
t

d
n
a

s
n
a
o
l

t
p
m
e
x
e
x
a
t
n
o

e
m
o
c
n
i

e
t
a
u
q
e
x
a
t

o
t

e
d
a
m
e
r
e
w
n
o
i
l
l
i

m
3
.
1
$

d
n
a

d
n
a
s
u
o
h
t

.
s
e
c
n
a
w
o
l
l
a
s
i
d

s
s
e
l

%
5
3
f
o

e
t
a
r
x
a
t

e
m
o
c
n
i

l
a
r
e
d
e
f

l
a
n
i
g
r
a
m
a
n
o

d
e
s
a
b

e
r
a

s
t
n
e
m
t
s
u
j
d
a

e
s
e
h
T

.
s
e
i
t
i
r
u
c
e
s

t
p
m
e
x
e
x
a
t

d
n
a

s
n
a
o
l

t
p
m
e
x
e
x
a
t

n
o

e
m
o
c
n
i

e
t
a
u
q
e
x
a
t

o
t

e
d
a
m

9
8
4
$
f
o
s
t
n
e
m

t
s
u
j
d
a

,
4
1
0
2

r
o
F

.
s
e
i
t
i
r
u
c
e
s

t
p
m
e
x
e
x
a
t

d
n
a

s
n
a
o
l

t
p
m
e
x
e
x
a
t
n
o

e
m
o
c
n
i

e
t
a
u
q
e
x
a
t

o
t

e
d
a
m
e
r
e
w
n
o
i
l
l
i

m
6
.
1
$

d
n
a

d
n
a
s
u
o
h
t

5
8
5
$
f
o
s
t
n
e
m

t
s
u
j
d
a

,
5
1
0
2

r
o
F

.
s
t
e
e
h
s

e
c
n
a
l
a
b

d
e
t
a
d
i
l
o
s
n
o
c

e
h
t
n
o

s
t
e
s
s
a

r
e
h
t
o
n
i

d
e
d
u
l
c
n
i

s
i
h
c
i
h
w

,
k
c
o
t
s

d
e
t
c
i
r
t
s
e
r

e
d
u
l
c
n
i

s
e
i
t
i
r
u
c
e
s
y
t
i
u
q
E

.
y
l
e
v
i
t
c
e
p
s
e
r

3
1
0
2

d
n
a

4
1
0
2
,
5
1
0
2

r
o
f

n
o
i
l
l
i

m
1
.
2
$

d
n
a
n
o
i
l
l
i

)
4
(

)
5
(

RATE AND VOLUME ANALYSIS
(Table Dollar Amounts in Thousands except Per Share Data)

The following table analyzes by rate and volume the dollar amount of changes in the components of the interest differential:

2015 change from 2014

2014 change from 2013

Net
Change To Volume To Rate

Change Due Change Due Net

Change Due Change Due

Change To Volume To Rate

Tax Equivalent Interest Income

Loans ..................................................................... $ 13,852 $
(1,379)
Taxable securities ..................................................
671
Tax-exempt securities ............................................
97
Equity securities ....................................................
10
Funds sold and other cash ......................................
Total interest income ................................................... $ 13,251 $

16,138 $
(1,150)
1,056
101
7
16,152 $

Interest Expense

Time deposits ......................................................... $
Savings deposits ....................................................
Demand deposits....................................................
Short term borrowings ...........................................
Long term borrowings ...........................................
Total interest expense .................................................. $

(896) $
68
309
131
(101)
(489) $

166 $
67
26
22
335
616 $

(2,286) $
(229)
(385)
(4)
3
(2,901) $

(1,062) $
1
283
109
(436)
(1,105) $

179 $
220
(648 )
(6 )
(16 )
(271 ) $

(352 ) $
(198 )
(2 )
(5 )
73
(484 ) $

1,858 $
(394)
(282)
(2)
(15)
1,165 $

(220) $
(10)
1
(10)
126
(113) $

(1,679)
614
(366)
(4)
(1)
(1,436)

(132)
(188)
(3)
5
(53)
(371)

Increase (decrease) in tax equivalent
net interest income .................................................... $ 13,740 $

15,536 $

(1,796) $

213 $

1,278 $

(1,065)

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.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following presents a discussion and analysis of Farmers’ financial condition and results of operations by its management.
The review highlights the principal factors affecting earnings and the significant changes in balance sheet items for the years 2015,
2014 and 2013. Financial information for prior years is presented when appropriate. The objective of this financial review is to
enhance the reader’s understanding of the accompanying tables and charts, the consolidated financial statements, notes to financial
statements, and financial statistics appearing elsewhere in this Annual Report on Form 10-K. Where applicable, this discussion also
reflects management’s insights of known events and trends that have or may reasonably be expected to have a material effect on
Farmers’ business, financial condition or results of operations.

Cautionary Note Regarding Forward Looking Statements

Discussions in this Annual Report on Form 10-K that are not statements of historical fact (including statements that include

terms such as “will,” “may,” “should,” “believe,” “expect,” “anticipate,” “estimate,” “project,” intend,” and “plan”) are forward-
looking statements that involve risks and uncertainties. Any forward-looking statement is not a guarantee of future performance, and
actual future results could differ materially from those contained in forward-looking information. Factors that could cause or
contribute to such differences include, without limitation, risks and uncertainties detailed from time to time in Farmers’ filings with
the Securities and Exchange Commission, including without limitation the risk factors disclosed in Item 1A, “Risk Factors” of this
Annual Report on Form 10-K.

Many of these factors are beyond the Company’s ability to control or predict, and readers are cautioned not to put undue

reliance on those forward-looking statements. The following list, which is not intended to be an all-encompassing list of risks and
uncertainties affecting the Company, summarizes several factors that could cause the Company’s actual results to differ materially
from those anticipated or expected in these forward-looking statements:

•

general economic conditions in market areas where Farmers conducts business, which could materially impact
credit quality trends;

•

business conditions in the banking industry;

the regulatory environment;

fluctuations in interest rates;

demand for loans in the market areas where Farmers conducts business;

rapidly changing technology and evolving banking industry standards;

competitive factors, including increased competition with regional and national financial institutions;

new service and product offerings by competitors and price pressures; and

other similar items.

Other factors not currently anticipated may also materially and adversely affect Farmers’ business, financial condition, results of

operations or cash flows. There can be no assurance that future results will meet expectations. While the Company believes that the
forward-looking statements in this Annual Report on Form 10-K are reasonable, the reader should not place undue reliance on any
forward-looking statement. In addition, these statements speak only as of the date made. Farmers does not undertake, and expressly
disclaims, any obligation to update or alter any statements whether as a result of new information, future events or otherwise, except
as may be required by applicable law.

Results of Operations
Comparison of Operating Results for the Years Ended December 31, 2015 and 2014.

The Company’s net income totaled $8.1 million during 2015, compared to $9.0 million for 2014. On a per share basis, diluted

earnings per share were $0.36 as compared to $0.48 diluted earnings per share for 2014. Excluding expenses related to acquisition
activities, net income for 2015 would have been $12.9 million, or $0.57 per share. Common comparative ratios for results of
operations include the return on average assets and return on average stockholders’ equity. For 2015, the return on average equity was
4.97%, compared to 7.45% for 2014. The return on average assets was 0.54% for 2015 and 0.79% for 2014. Excluding expenses
related to acquisition activities, the return on average assets and return on average stockholders’ equity were 0.87% and 7.95%,
respectively.

The results for 2015 included $94 thousand in gains on sales of securities, compared to $457 thousand in 2015.

On June 19, 2015, the Company completed the acquisition of all outstanding stock of National Bancshares Corporation
(“NBOH”), the parent company of First National Bank of Orrville (“First National Bank”). The transaction involved both cash and
7,262,955 shares of stock totaling $74.8 million. First National Bank of Orrville branches became branches of Farmers National Bank
of Canfield. Pursuant to the Agreement, each shareholder of NBOH received either $32.15 per share in cash or 4.034 shares of
Farmers’ common stock, subject to an overall limitation of 80% of the shares of NBOH being exchanged for stock and 20% for cash.

On October 1, 2015, the Company completed the acquisition of Tri-State 1st Banc, Inc. (“Tri-State”), the parent company of 1st

National Community Bank (“FNCB”). Pursuant to the terms of the Merger Agreement, common shareholders of Tri-State were
entitled to receive 1.747 common shares, without par value, of the Company (the “Company Common Shares”), or $14.20 in cash, for
each common share, without par value, of Tri-State (the “Tri-State Common Shares”), subject to proration provisions specified in the
Merger Agreement that provide for a targeted aggregate split of total consideration consisting of 75% Company Common Shares and
25% cash. Preferred shareholders of Tri-State received $13.60 in cash for each share of Series A Preferred Stock, without par value, of
Tri-State. Total consideration actually paid was in the form of $3.6 million in cash and $10.7 million worth of the Company’s stock on
October 1, 2015.

Net Interest Income

Net interest income, the principal source of the Company’s earnings, represents the difference between interest income on
interest-earning assets and interest expense on interest-bearing liabilities. For 2015, taxable equivalent net interest income increased
$13.7 million, or 36.0%, from 2014. Interest-earning assets averaged $1.363 billion during 2015, increasing $301.2 million compared
to 2014. The Company’s interest-bearing liabilities increased 24.8% from $847.3 million in 2014 to $1.057 billion in 2015. The two
previously mentioned acquisitions increased interest-earning assets by $647.5 million and interest-bearing liabilities by $605.5 million
at their respective completion dates.

The Company 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 Company 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 spread in 2015 was 3.72%,
increasing from 3.48% in 2014. 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 2015, the net interest margin, measured on a fully taxable equivalent basis, increased to 3.81%,
compared to 3.59% in 2014. The net interest margin, excluding the impact of amortization and accretion from the current year
acquisitions, improved 17 basis points to 3.76% for the year ended December 31, 2015. The accretion added $64 thousand per month
during the final months of 2015 and will continue over the next several years.

The increase in net interest margin is largely a result of interest bearing liabilities repricing at lower rates and the shifting of
assets from investment securities to higher interest income rates of loans. As long term time deposits mature they are being renewed at
lesser rates or moving to more liquid accounts at lower interest rates. Total taxable equivalent interest income was $51.9 million for
2015, which is $13.7 million more than the $38.1 million reported in 2014. In comparing the years ending December 31, 2015 and
2014, yields on earning assets increased 6 basis points while the cost of interest bearing liabilities decreased similarly at 19 basis
points. Average loans increased $324.4 million, or 51.41%, in 2015, however the yields decreased from 4.97% in 2014 to 4.74% in
2015. Tax equated income from securities, federal funds and other decreased $601 thousand, or 5.30%, in 2015. Even though tax
equated income decreased, Farmers saw its yields on these assets increase slightly from 2.63% in 2014 to 2.64% in 2015. The average
balance of investment securities and federal funds sold decreased from $430.4 million in 2014 to $407.2 million in 2015.

Total interest expense amounted to $4.1 million for 2015, a 10.7% decrease from $4.6 million reported in 2014. The decrease in

2015 is the result of lower rates of interest paid on interest-bearing deposits and repurchase agreements. The cost of interest-bearing
liabilities decreased from 0.54% in 2014 to 0.39% in 2015.

Management will continue to evaluate future changes in interest rates and the shape of the treasury yield curve so that assets and

liabilities may be priced accordingly to minimize the impact on the net interest margin.

Noninterest Income

Total noninterest income increased by $3 million in 2015. The increase in noninterest income is due to several factors. Gains on
the sale of mortgage loans increased from $358 thousand to $1.1 million, representing an increase of $743 thousand. Retirement plan
consulting fees also increased to $2.1 million compared to $1.8 million in 2014and service charges on deposit accounts increased from
$2.6 million in 2014 to $3.3 million in 2015, reflecting the size of the company of after the two acquisitions. Investment commissions
increased $146 thousand or 14%, as management continues to focus on diversifying revenue sources to decrease the reliance on net
interest income as the main driver of revenue. Other operating income also increased $1 million, primarily as a result of the positive
impact from account level transaction volumes from the merger related growth. Included in the increase in other operating income
was debit card interchange income, which increased $618 thousand, and ATM fee income, which increased $74 thousand. The Bank
and Company expect these amounts to increase during 2016 as the level of activity will be for a full twelve months.

Noninterest Expenses

Noninterest expense for 2015 was $54.0 million, compared to $38.2 million in 2014, representing a increase of $15.8 million, or
41.5%. Most of the increase was from merger related costs, which were $6.4 million in 2015, compared to none in 2014. Salaries and
employee benefits also increased $5.8 million, mainly due to an increase in the number of employees resulting from the mergers. The
Company’s full time equivalent employees (“FTE”) increased by 105 from December 31, 2014 to December 31, 2015. Occupancy
and equipment costs also increased $947 thousand due to the additional eighteen banking locations resulting from the mergers.
Excluding expenses related to acquisition activities, noninterest expenses measured as a percentage of average assets decreased from
3.34% in 2014 to 3.21% in 2015.

The Company’s tax equivalent efficiency ratio for the twelve month period ended December 31, 2015 was 75.26%, compared to

70.24% for the same period in 2014. Excluding expenses related to acquisition activities, the efficiency ratio for the year ended
December 31, 2015 improved to 66.2%. The main factors leading to the improvement in the efficiency ratio was the increase in net
interest income and noninterest income, along with the stabilized level of noninterest expenses relative to average assets as explained
in the preceding paragraph. The efficiency ratio is calculated as follows: non-interest expense divided by the sum of tax equivalent net
interest income plus non-interest income, excluding security gains and losses and intangible amortization. This ratio is a measure of
the expense incurred to generate a dollar of revenue. Management will continue to closely monitor and keep the increases in other
expenses to a minimum.

Income Taxes

Income tax expense totaled $2.5 million for 2015 and $2.6 million in 2014. Income taxes are computed using the appropriate

effective tax rates for each period. The small decrease in the current year tax expense can be mainly attributed to the $1.0 million
decrease in income before taxes. The effective tax rates are less than the statutory tax rate primarily due to nontaxable interest and
dividend income. The effective income tax rate was 23.7% for 2015 and 22.7% for 2014. Refer to Note 16 to the consolidated
financial statements for additional information regarding the effective tax rate.

Comparison of Operating Results for the Years Ended December 31, 2014 and 2013.

The Company’s net income totaled $9.0 million during 2014, compared to $7.8 million for 2013. On a per share basis, diluted
earnings per share were $0.48 as compared to $0.41 diluted earnings per share for 2013. For 2014, the return on average equity was
7.45%, compared to 6.66% for 2013. The return on average assets was 0.79% for 2014 and 0.68% for 2013.

The results for 2014 included $457 thousand in gains on sales of securities, compared to $863 thousand in 2013.

During 2013, the Company completed the acquisition of all outstanding stock of the retirement planning consultancy National
Associates, Inc. of Cleveland, Ohio. The company is a leading independent consultant to retirement plans and offers actuarial, plan
design, compliance and administrative services. As a third party administrator, NAI provides services to 401(k), defined benefit, profit
sharing, flexible spending, 403(b), ESOP and other plans. In acquiring NAI, the Company assumes a professional staff that is highly
qualified and credentialed. Synergies and the cost savings resulting from the combining of the operations of the companies will help
drive an increase of non-interest income.

NAI contributed $1.8 million of gross revenues to the Company resulting in a net loss of $671 thousand for the year ended
December 31, 2014. The net loss was mainly due to the $764 thousand goodwill impairment charge. The goodwill was partially
impaired as described in Note 6, by an amount equal to the reduction in the contingent consideration payable. The two adjustments
offset resulting in a zero impact to the Company’s consolidated statements of income for year ended December 31, 2014.

Net Interest Income

For 2014, taxable equivalent net interest income increased $213 thousand, or 0.56%, from 2013. Interest-earning assets
averaged $1.061 billion during 2014, increasing $680 thousand, compared to 2013. The Company’s interest-bearing liabilities
decreased 3.57% from $878.7 million in 2013 to $847.3 million in 2014.

Total taxable equivalent interest income was $42.7 million for 2014, which is $271 thousand less than the $43.0 million reported

in 2013. In comparing the years ending December 31, 2014 and 2013, yields on earning assets decreased 3 basis points while the cost
of interest bearing liabilities decreased 4 basis points. Average loans increased $35.5 million, or 5.95%, in 2014, however the yields
decreased from 5.24% in 2013 to 4.97% in 2014. Tax equated income from securities, federal funds and other decreased $450
thousand, or 3.82%, in 2014. Farmers saw its yields on these assets increased from 2.53% in 2013 to 2.63% in 2014. The average
balance of investment securities and federal funds sold decreased from $465.2 million in 2013 to $430.4 million in 2014.

Total interest expense amounted to $4.6 million for 2014, a 9.6% decrease from $5.1 million reported in 2013. The decrease in
2014 is the result of lower rates of interest paid on interest-bearing deposits and repurchase agreements. The cost of interest-bearing
liabilities decreased from 0.58% in 2013 to 0.54% in 2014.

Noninterest Income

Total noninterest income increased by $1.4 million in 2014. The increase in noninterest income is due to several factors.
Retirement plan consulting fees increased to $1.8 million compared to $628 thousand in 2013 reflecting a full twelve months this year
compared to six months of income earned from the newly acquired entity, NAI in 2013. Service charges on deposit accounts increased
from $2.4 million in 2013 to $2.6 million in 2014 as the Company made adjustments to the service charge structure of its deposit
accounts. Bank owned life insurance income decreased $237 thousand as the Trust fees increased $509 thousand, insurance agency
commissions increased $111 thousand and investment commissions increased $37 thousand, as management continues to focus on
diversifying revenue sources to decrease the reliance on net interest income as the main driver of revenue.

Noninterest Expenses

Noninterest expense for 2014 was $38.2 million, compared to $39.1 million in 2013, representing a decrease of $895 thousand,

or 2.3%. Most of the decrease was a result of a 5.3% decrease in salary and employee benefits, mainly due to severance costs recorded
in 2013 and not in 2014. State and local taxes decreased $435 thousand to $878 thousand in 2014 compared to $1.3 million in 2013.
The decrease is the result of the new and reduced financial institution’s tax rate by the state of Ohio in 2014. Merger related costs also
decreased $330 thousand in 2014.

Professional fees increased 10.8% as a result of corporate legal and consulting fees related to compensation practices and other

business advisory fees. Intangible amortization increased $143 thousand as a result of a full twelve months of amortization of
intangible assets related to the acquisition of NAI. Advertising increased $201 thousand.

The Company’s tax equivalent efficiency ratio for the twelve month period ended December 31, 2014 was 70.24%, compared to

74.82% for the same period in 2013. The main factor leading to the improvement in the efficiency ratio was the decrease in
noninterest expenses and increase in noninterest income as explained earlier in this section. The efficiency ratio is calculated as
follows: non-interest expense divided by the sum of tax equivalent net interest income plus non-interest income, excluding security
gains and losses and intangible amortization. This ratio is a measure of the expense incurred to generate a dollar of revenue.
Management will continue to closely monitor and keep the increases in other expenses to a minimum.

Income Taxes

Income tax expense totaled $2.6 million for 2014 and $1.7 million in 2013. The effective income tax rate was 22.7% for 2014

and 17.8% for 2013.

Liquidity

Farmers maintains, in the opinion of management, liquidity sufficient to satisfy depositors’ requirements and meet the credit

needs of customers. The Company depends on its ability to maintain its market share of deposits as well as acquiring new funds. The
Company’s ability to attract deposits and borrow funds depends in large measure on its profitability, capitalization and overall
financial condition.

Principal sources of liquidity 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, Farmers 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 two major domestic
banks. At December 31, 2015, Farmers 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 Company also has additional borrowing
capacity with the FHLB, as well as access to the Federal Reserve Discount Window, which provides an additional source of funds.
The Company views its membership in the FHLB as a solid source of liquidity. As of December 31, 2015, the Bank is eligible to
borrow an additional $63.4 million from the FHLB under various fixed rate and variable rate credit facilities. Advances outstanding
from the FHLB at December 31, 2015 amounted to $170.1 million.

Farmers’ primary investing activities are originating loans and purchasing securities. During 2015, net cash used by investing
activities amounted to $22.5 million, compared to $6.2 million provided in 2014. Net increases in loans were $140 million in 2015,
compared to $35.4 million in 2014. The cash used by lending activities during 2015 can be attributed to the activity in the commercial
real estate, residential real estate and commercial loan portfolios. Purchases of securities available for sale were $72.7 million in 2015,
compared to $64.4 million in 2014 and proceeds from maturities and sales of securities available for sale were $165.6 million in 2015,
compared to $106.6 million in 2014. Net cash of $30.7 million was received as a result of the acquisitions of NBOH and Tri-State.

Farmers’ primary financing activities are obtaining deposits, repurchase agreements and other borrowings. Net cash provided by

financing activities amounted to $50.7 million for 2015, compared to $18.5 million used in 2014. The majority of this change can be
attributed to the change in short-term borrowings. Short-term borrowings increased $101.2 million in 2015 compared to a $22.5
million decrease in 2014. Deposits decreased $39.3 million during 2015 compared to a $487 thousand increase during 2014.

Loan Portfolio
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. Balances
include unamortized loan origination fees and costs.

2015

Years Ended December 31,
2014
Commercial Real Estate .................... $ 485,973 37.5% $222,573 33.5% $217,362 34.4% $ 200,651 34.2 % $198,041 34.6%
74,875 13.1
120,150 18.1
Commercial ....................................... 230,748 17.8
167,031 29.2
183,853 27.7
Residential Real Estate ...................... 395,067 30.4
Consumer .......................................... 185,077 14.3
131,859 23.1
137,276 20.7
Total Loans ....................................... $ 1,296,865 100.0% $663,852 100.0% $630,684 100.0% $ 586,592 100.0 % $571,806 100.0%

97,112 16.6
156,182 26.6
132,647 22.6

105,023 16.7
170,151 27.0
138,148 21.9

2011

2013

2012

The following schedule sets forth maturities based on remaining scheduled repayments of principal for commercial and commercial
real estate loans listed above as of December 31, 2015:

Types of Loans

Commercial ................................................................................................ $
Commercial Real Estate ............................................................................. $

1 Year or less 1 to 5 Years Over 5 Years
101,367
389,256

112,447 $
81,744 $

16,934 $
14,973 $

The amounts of commercial and commercial real estate loans as of December 31, 2015, based on remaining scheduled repayments of
principal, are shown in the following table:

Loan Sensitivities

1 Year or less Over 1 Year

Total

Floating or Adjustable Rates of Interest ..................................................... $
Fixed Rates of Interest ................................................................................
Total Loans ................................................................................................. $

17,627 $
14,281
31,908 $

488,985 $
195,828
684,813 $

506,612
210,109
716,721

Total loans were $1.3 billion at year-end 2015, compared to $663.9 million at year-end 2014. Loans grew 20% organically

during the past twelve months, which is in addition to the $432 million and $66 million increase in loans resulting from the NBOH
and Tri-State acquisitions, respectively. The organic 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 70.1% of the Bank’s
average earning assets in 2015, compared to 59.5% in 2014. The product mix in the loan portfolio includes commercial loans
comprising 17.8%, residential real estate loans 30.4%, commercial real estate loans 37.5% and consumer loans 14.3% at
December 31, 2015 compared with 18.1%, 27.7%, 33.5% and 20.7%, respectively, at December 31, 2014.

Loans contributed 80.8% of total taxable equivalent interest income in 2015 and 73.5% in 2014. Loan yields were 4.74% in
2015, 63 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 that 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. Commercial loans at December 31, 2015 increased 92% from year-end 2014
with outstanding balances of $230.7 million. 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, business types and local municipalities. 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 and leasehold improvements, the purchase of inventory, general working capital and small business lines of credit.

Residential real estate mortgage loans increased to $395.1 million at December 31, 2015, compared to $183.9 million in 2014.

Farmers originated both fixed rate and adjustable rate mortgages during 2014. Fixed rate terms are generally limited to fifteen year
terms while adjustable rate products are offered with maturities up to thirty years.

Commercial real estate loans increased from $222.6 million at December 31, 2014 to $485.97 million at December 31, 2015, an

increase of $263.4 million. The Company’s commercial real estate loan portfolio includes loans for owner occupied and non-owner
occupied real estate. These loans are made to finance properties such as office and industrial buildings, hotels and retail shopping
centers.

The growth in the commercial and commercial real estate loan portfolios was consistent with the improvements in the local

economy. Several new projects announced in the Mahoning Valley and Stark County, along with decreased levels of unemployment
have led small business owners to expand or make additional investments in their operations.

Summary of Loan Loss Experience
The following is an analysis of the allowance for loan losses for the periods indicated:

Years Ended December 31,
Balance at Beginning of Year ............................................... $
Charge-Offs:

Recoveries on Previous Charge-Offs:

Commercial Real Estate ..................................................
Commercial .....................................................................
Residential Real Estate ....................................................
Consumer .........................................................................
Total Recoveries ..............................................................
Net Charge-Offs ....................................................................
Provision For Loan Losses ....................................................
Balance at End of Year ......................................................... $
Ratio of Net Charge-offs to Average Loans Outstanding .....

2015

2014

2013

2012

2011

7,632 $

7,568 $

7,629 $

9,820 $

9,307

(151)
(185)
(585)
(2,213)
(3,134)

125
29
77
1,087
1,318
(1,816)
1,880
7,632 $
0.28%

(505 )
(99 )
(326 )
(1,723 )
(2,653 )

171
262
47
822
1,302
(1,351 )
1,290
7,568 $
0.23 %

(1,225)
(918)
(806)
(1,002)
(3,951)

253
50
104
628
1,035
(2,916)
725
7,629 $
0.52%

(1,246)
(414)
(1,736)
(1,125)
(4,521)

44
39
452
849
1,384
(3,137)
3,650
9,820
0.56%

(536)
(290)
(320)
(2,058)
(3,204)

130
9
122
779
1,040
(2,164)
3,510
8,978 $
0.22%

Provisions charged to operations amounted to $3.5 million in 2015, compared to $1.9 million in 2014, an increase of $1.6
million. This increase is primarily due to an increase in the level of net charge-offs and the overall 20% organic increase in total loans,
which are factors considered in management’s estimate of loan loss provisions and the adequacy of the allowance for loan losses. Net
charge-offs for the year ended December 31, 2014 were $2.2 million, $337 thousand higher than net charge-offs for the year ended
December 31, 2014. The allowance for loan losses to total loans decreased from 1.15% at December 31, 2014 to 0.69% at December
31, 2015. The decrease is the result of the additional loan portfolio acquired at fair market value without an allowance for loan losses
as displayed in the allowance for loan losses as a percentage of non-acquired loans. When the acquired loans are excluded the ratio is
1.08% and compares similarly with the periods presented in the above table. Additionally, when loans collectively evaluated for
impairment, which excludes acquired loans, are compared to the allowance for loan losses for loans collectively evaluated for
impairment the ratio is 1.03% for the year ended December 31, 2015 compared to 1.04% for the year ended December 31, 2014.
Nonperforming loans to total loans decreased from 1.28% at December 31, 2014 to 0.81% at December 31, 2015. Although non-
performing loans increased $2 million in comparing 2015 to 2014, the size of the total loan portfolio almost doubled in the past twelve
months. In determining the estimate of the allowance for loan losses, management computes the historical loss percentage based upon
the loss history of the past 12 quarters. The Company believes that using a loss history of the previous 12 quarters helps mitigate
volatility in the timing of charge-offs and better reflects probable incurred losses.

The provision for loan 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 charge-off 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.

The allowance for loan losses increased $1.3 million during the year. Aside from the various credit quality metrics discussed

above, another reason for the increase in the current year allowance for loan losses was an increase in probable incurred losses
associated with the commercial real estate loan portfolio. At December 31, 2015, loans collectively evaluated for impairment totaled
$296.9 million with an allowance allocation of $2.7 million compared to commercial real estate loans individually evaluated for
impairment of $215.4 million with an allowance for loan losses of $2.1 million at December 31, 2014. The commercial real estate loan
portfolio experienced a provision of $857 thousand, compared to a negative $50 thousand provision in 2014. Impaired loans are
carried at the fair value of the underlying collateral, less estimated disposition costs, if repayment of the loan is expected to be solely
dependent on the sale of the collateral. Otherwise, impaired loans are carried at the present value of expected cash flows.

Typically, commercial and commercial real estate loans are identified as impaired when they become ninety days past due, or

earlier if management believes it is probable that the Company will not collect all amounts due under the terms of the loan agreement.
When Farmers identifies a loan as impaired and also concludes that the loan is collateral dependent, Farmers performs an internal
collateral valuation as an interim measure. Farmers typically obtains an external appraisal to validate its internal collateral valuation as
soon as is practical and adjusts the associated specific loss reserve, if necessary.

The ratio of the allowance for loan losses to non-performing loans at December 31, 2015 was 85.96%, compared to 89.99% at

December 31, 2014. Non-performing loan totals actually increased over prior year, but with the additional loan balances acquired with
the two mergers this year the ratio of allowance for loan losses to non-performing loans improved. Non-performing commercial loans
were the only category that decreased during 2015. The balance in the allowance for loan losses increased in 2015, with the increased
loan portfolio size, to $9.0 million compared to $7.6 million in 2014.

Nonperforming Assets
December 31,
Nonaccrual loans:

2015

2014

2013

2012

2011

Commercial Real Estate .................................................. $
Commercial .....................................................................
Residential Real Estate ....................................................
Consumer .........................................................................
Total Nonaccrual Loans ................................................... $
Loans Past Due 90 Days or More .........................................
Total Nonperforming Loans .................................................. $

3,876 $
1,609
3,116
457
9,058 $
1,387
10,445 $

3,356 $
1,645
2,881
126
8,008 $
473
8,481 $

3,211 $
1,993
2,864
363
8,431 $
646
9,077 $

3,915 $
1,081
2,636
—
7,632 $
596
8,228 $

6,025
527
4,196
12
10,760
250
11,010

Other Real Estate Owned ......................................................
Total Nonperforming Assets ................................................. $

942
11,387 $

148
8,629 $

171
9,248 $

334
8,562 $

585
11,595

Loans modified in troubled debt restructuring ...................... $
TDRs included in Nonaccrual Loans .................................... $
Percentage of Nonperforming Loans to Loans......................
Percentage of Nonperforming Assets to Total Assets ...........
Loans Delinquent 30-89 days................................................
Percentage of Loans Delinquent 30-89 days to

9,325 $
4,733 $
0.81%
0.61%
9,129

8,110 $
1,436 $
1.28%
0.76%
5,426

8,280 $
1,957 $
1.44 %
0.81 %
3,658

7,642 $
818 $
1.40%
0.75%
3,702

4,277
471
1.93%
1.09%
3,471

Total Loans ......................................................................

0.70%

0.82%

0.58 %

0.63%

0.61%

The Company has forgone interest income of approximately $439 thousand from nonaccrual loans as of December 31, 2015 that

would have been earned, over the life of the loans, if all loans had performed in accordance with their original terms.

Net charge-offs as a percentage of average loans outstanding decreased from 0.28% for 2014 to 0.22% for 2015 as a result of the

larger loan portfolio and improved loan quality. Net charge-offs did increase from $1.8 million in 2014 to $2.2 million in 2015. The
primary reason for the increase was gross charge-offs in the commercial real estate portfolio which increased by $385 thousand or
255.0% from 2014 to 2015. The majority of the charge-offs in the commercial loan portfolio were related to a small number of loans.

A significant allocation in the allowance for loan losses is for performing commercial and commercial real estate loans
classified by the internal loan review as substandard. The loss experience on the average balance of this category of loans for the past
three years has been approximately 1.93% of the principal balance of these loans, which is management’s allocation for these loans.
This equates to an allocation of approximately $109 thousand at the end of 2015 compared to an allocation of $250 thousand at the
end of 2014. The allocation decreased due to a decrease in the historical loss experience for the substandard loans. The actual loss
experience may be more or less than the amount allocated. At December 31, 2015, the amount of substandard loans that continue to
accrue interest is $5.7 million. As always, management is working to address weaknesses in each of these specific loans that may
result in loss.

December 31,

2015
Loans to

2014

Loans to

2013

Loans to

2012
Loans to

2011

Loans to

Commercial Real Estate .................................... $ 3,127
Commercial ....................................................... 1,373
Residential Real Estate ...................................... 1,845
Consumer .......................................................... 2,160
473
Unallocated .......................................................
$ 8,978

Amount Total Loans Amount Total Loans Amount Total Loans Amount Total Loans Amount Total Loans
34.6%
13.1
29.2
23.1
0
100.0%

34.2 % $ 4,880
16.6 1,529
26.6 1,802
972
22.6
637
0
100.0 % $ 9,820

34.4% $ 3,392
1,453
16.7
1,569
27.0
951
21.9
264
0
100.0% $ 7,629

37.5% $ 2,676
1,420
17.8
1,689
30.4
1,663
14.3
184
0
100.0% $ 7,632

33.5% $ 2,752
1,219
18.1
1,964
27.7
1,419
20.7
214
0
100.0% $ 7,568

The allowance allocated to each of the four loan categories should not be interpreted as an indication that charge-offs in 2016

will occur in the same proportions or that the allocation indicates future charge-off trends. The allowance allocated to the one-to-four
family real estate loan category and the consumer loan category is based upon the Company’s allowance methodology for
homogeneous loans, and increases and decreases in the balances of those portfolios. In previous years, the indirect installment loan
category has represented the largest percentage of loan losses. The consumer loan category represents approximately 14.3% of total
loans and in 2015, the net loan losses accounted for 59.1% of the losses of the entire loan portfolio. For the commercial loan category,
which represents 17.8% of the total loan portfolio, management relies on the Bank’s internal loan review procedures and allocates
accordingly based on loan classifications. The net charge-offs in the commercial real estate portfolio which represents 37.5% of the
total portfolio, was $406 thousand for 2015.

There were no loans other than those identified above, that management has known information about possible credit problems

of borrowers and their ability to comply with the loan repayment terms. Management is actively monitoring certain borrowers’
financial condition and loans which management wants to more closely monitor due to special circumstances. These loans and their
potential loss exposure have been considered in management’s analysis of the adequacy of the allowance for loan losses.

Loan Commitments and Lines of Credit

In the normal course of business, the Bank 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. Normally, an annual fee of two percent is charged for the issuance of a letter of credit.

As of December 31, 2015, there were no concentrations of loans exceeding 10% of total loans that 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, restructured or
non-performing.

Investment Securities

The investment securities portfolio increased $4.5 million in 2015. Maturing security funds were not reinvested and were used

to fund loan portfolio growth and deposit runoff. The Company’s investment strategy is to maintain a diverse investment security
portfolio with a higher concentration in mortgage-backed securities that are issued by U.S. Government sponsored enterprises and tax-
free municipal securities. Farmers sold $107.5 million in securities in 2015, resulting in net security gains of $94 thousand. Farmers
recognized market appreciation on faster paying mortgage-backed securities and lower rated municipal securities, and reinvested in
new mortgage-backed securities and higher rated municipal securities to further diversify the securities portfolio. During 2014 the
Company created the Investments subsidiary to hold municipal securities and take advantage of more favorable tax treatment. At
December 31, 2015, the Investments entity had a balance of $50.8 million in municipal securities.

Farmers’ objective in managing the investment portfolio is to preserve and enhance corporate liquidity through investment in

primarily 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 Volcker Rule places limits on the trading activity of insured depository institutions and entities affiliated with a depository

institution, subject to certain exceptions. The Bank does not engage in any of the trading activities or own any of the types of funds
regulated by the Volcker Rule.

Mortgage-backed securities are created by the pooling of mortgages and issuance of a security. Mortgage-backed securities

typically represent a participation interest in a pool of single-family or multi-family mortgages. Prepayment estimates for mortgage-
backed securities are performed at purchase to ensure that prepayment assumptions are reasonable considering the underlying
collateral for the mortgage-backed securities at issue and current mortgage interest rates and to determine the yield and estimated
maturity of the mortgage-backed security portfolio. Prepayments that are faster than anticipated may shorten the life of the security
and may result in faster amortization of any premiums paid and thereby reduce the net yield on such securities. During periods of
declining mortgage interest rates, refinancing generally increases and accelerates the prepayment of the underlying mortgages and the
related security. All holdings of mortgage-backed securities were issued by U.S. Government sponsored enterprises.

The following table shows the carrying value of investment securities by type of obligation at the dates indicated:

Type

December 31,
U.S. Treasury securities ................................................................................... $
U.S. government sponsored enterprise debt securities .....................................
Mortgage-backed securities - residential and collateralized mortgage

obligations ...................................................................................................
Small Business Administration ........................................................................
Obligations of states and political subdivisions ...............................................
Equity securities ...............................................................................................
Corporate bonds ...............................................................................................
$

2015

2014

2013

1,192 $
9,914

844 $
23,977

223,752
19,299
138,723
298
1,134
394,312 $

249,537
22,419
91,881
240
931
389,829 $

100
51,210

251,656
23,573
94,734
187
1,525
422,985

A summary of debt securities held at December 31, 2015 classified according to maturity and including weighted average yield for
each range of maturities is set forth below:

Type and Maturity Grouping

December 31, 2015

Fair Value

Weighted Average
Yield (1)

U.S. Treasury securities

Maturing within one year ........................................................................................... $
Maturing after one year but within five years ............................................................
Maturing after five years but within ten years ............................................................
Total U.S. Treasury securities ................................................................................. $

U.S. government sponsored enterprise debt securities

Maturing within one year ........................................................................................... $
Maturing after one year but within five years ............................................................
Maturing after five years but within ten years ............................................................
Total U.S. government sponsored enterprise debt securities ................................... $

Mortgage-backed securities - residential and collateralized mortgage obligations (2)
Maturing within one year ........................................................................................... $
Maturing after one year but within five years ............................................................
Maturing after five years but within ten years ............................................................
Maturing after ten years .............................................................................................
Total mortgage-backed securities ............................................................................ $

Small Business Administration

Maturing within one year ........................................................................................... $
Maturing after one year but within five years ............................................................
Maturing after five years but within ten years ............................................................
Total small business administration ......................................................................... $

Obligations of states and political subdivisions

Maturing within one year ........................................................................................... $
Maturing after one year but within five years ............................................................
Maturing after five years but within ten years ............................................................
Maturing after ten years .............................................................................................
Total obligations of states and political subdivisions .............................................. $

Corporate bonds

Maturing after one year but within five years ............................................................ $
Maturing after five years but within ten years ............................................................
Total other securities ............................................................................................... $

100
449
643
1,192

4,563
3,512
1,839
9,914

29,925
85,189
60,804
47,834
223,752

15
47
19,237
19,299

12,034
64,123
50,092
12,474
138,723

933
201
1,134

0.44%
1.63%
2.05%
1.76%

2.54%
1.26%
2.07%
2.00%

2.12%
2.17%
2.23%
2.37%
2.22%

2.60%
2.57%
1.99%
1.99%

4.25%
2.98%
4.26%
4.43%
3.69%

1.57%
2.64%
1.76%

(1) The weighted average yield has been computed by dividing the total contractual 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 35% were $131 thousand, $432
thousand, $507 thousand and $142 thousand for the four ranges of maturities.

(2) Payments based on contractual maturity.

Premises and Equipment

Premises and equipment had a net increase of $7.1 million in 2015 as a result of the $8.0 million acquired in the mergers. The

increase was the result of eighteen additional branch locations as well as furniture and fixtures in those new locations.

Deposits

Deposits represent the Company’s principal source of funds. The deposit base consists of demand deposits, savings and money

market accounts and other time deposits. During the year, the Company’s average total deposits increased from $916.8 million in 2014
to $1.165 billion in 2015. Average interest bearing demand deposits increased $92.2 million and savings deposits increased $59.2
million since December 31, 2014. Additionally, noninterest bearing demand deposits increased $87.0 million during 2015. With
interest rates continuing to be low, customers have little incentive to commit funds to term deposit accounts. Time deposits had a
modest increase of $10.3 million considering the additional time deposits acquired during the mergers. The Company’s focus is on
core deposit growth and Farmers will continue to price deposit rates to remain competitive within the market and to retain customers.
At December 31, 2015, core deposits – savings and money market accounts, time deposits less than $250 thousand, demand deposits
and interest bearing demand deposits represented approximately 96.8% of total deposits.

Bank Owned Life Insurance

Farmers’ owns bank owned life insurance policies on the lives of certain members of management. The purpose of this
transaction is to help fund the costs of employee benefit plans. The cash surrender value of these policies was $29.2 million at
December 31, 2015 compared to $16.4 million at December 31, 2014.

Borrowings

Short-term borrowings increased $166.7 million or 281.9% since December 31, 2014 as a result of the acquisitions and the
continued strong loan growth. Most of the increase is for short-term Federal Home Loan Advances. Long-term borrowings decreased
$6.2 million or 21.9%, as maturing Federal Home Loan Bank advances were refinanced with short-term advances to capitalize on the
favorable interest rates. See Note 10 and 11 within Item 8 of this Annual report on Form 10-K for additional detail.

Contractual Obligations, Commitments, Contingent Liabilities and Off-Balance Sheet Arrangements

The following table presents, as of December 31, 2015, the Company’s significant fixed and determinable contractual

obligations by payment date. The payment amounts represent those amounts contractually due to the recipient and do not include any
unamortized premiums or discounts or other similar carrying value adjustments. Further discussion of the nature of each obligation is
included in the referenced note to the consolidated financial statements.

Commitments
12/31/2015

Note
Ref.

Deposits without maturity ...................................
Certificates of deposit .........................................
Repurchase agreements .......................................
Short-term borrowed funds .................................
Short-term FHLB advances.................................
Long-term FHLB advances .................................
Operating leases ..................................................

9
10
10
10
11
7

2016
$1,169,965

2017

2018

2019

2020

Thereafter

108,493 39,007 18,528 27,827 37,494

7,733

75,482
350
150,000
7,247
307

8,089
319

1,008
306

931
303

860
267

1,919
1,380

Note 12 to the consolidated financial statements discusses in greater detail other commitments and contingencies and the various

obligations that exists under those agreements. Examples of these commitments and contingencies include commitments to extend
credit and standby letters of credit.

At December 31, 2015, the Company had no unconsolidated, related special purpose entities, nor did the Company engage in
derivatives and hedging contracts that may expose the Company to liabilities greater than the amounts recorded on the consolidated
balance sheet. Management’s policy is to not engage in derivatives contracts for speculative trading purposes. The Company does
utilize interest-rate swaps as a way of helping manage interest rate risk and not as derivatives for trading purposes. See Note 20 within
Item 8 of this Annual report on Form 10-K for additional detail.

Capital Resources

Total Stockholders’ Equity increased 60.3% from $123.6 million at December 31, 2014 to $198.0 million in 2015. The increase

in equity was mainly the result of a $70.3 million increase in common stock that was issued during the acquisitions in 2015. Net
income during the past twelve months was partially offset by dividends paid. During the year, shareholders received a total of $0.12
per share cash dividends paid in the past four quarters. Book value increased 9.5% from $6.71 per share at December 31, 2014 to
$7.35 per share at December 31, 2015. The Company’s tangible book value decreased from $6.23 per share at December 31, 2014 to
$5.77 per share at December 31, 2015. Additionally, the Company repurchased $213 thousand in treasury shares in 2015.

The Bank, as a national chartered bank, is subject to the dividend restrictions set forth by the OCC. The OCC 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). Farmers and Farmers Bank are required to maintain minimum amounts of capital to total “risk weighted” assets, as defined
by the banking regulators. At December 31, 2015, under the new minimum capital requirements associated with the Basel Committee
on capital and liquidity regulation (Basel III), Farmers Bank and Farmers are required to have minimum capital ratios. Actual and
minimum ratios are detailed in Note 14 of the Consolidated Financial Statements. Farmers Bank and Farmers had capital ratios above
the minimum levels at December 31, 2015 and 2014. At year-end 2015 and 2014, the most recent regulatory notifications categorized
Farmers Bank as well capitalized under the regulatory framework for prompt corrective action.

During 2013, the Federal banking regulators approved a final rule to implement revised capital adequacy standards of the Basel
Committee on Banking Supervision, commonly called Basel III, and to address relevant provisions of the Dodd-Frank Act. The final
rule strengthens the definition of regulatory capital, increases risk-based capital requirements, makes selected changes to the
calculation of risk-weighted assets, and adjusts the prompt corrective action thresholds. Community banking organizations, such as
the Company and the Bank, became subject to the new rule on January 1, 2015 and certain provisions of the new rule will be phased
in over the period of 2015 through 2019. The Bank has retained, through a one-time election, the prior treatment for most
accumulated other comprehensive income, such that unrealized gains and losses on securities available for sale that did not affect
regulatory capital amounts and ratios. As mentioned in the prior paragraph, the Bank falls within the new regulatory capital ratio
guidelines.

Critical Accounting Policies

The Company follows financial accounting and reporting policies that are in accordance with generally accepted accounting
principles in the United States of America and conform to general practices within the banking industry. Some of these accounting
policies are considered to be critical accounting policies. Critical accounting policies are those policies that require management’s
most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are
inherently uncertain. The Company has identified three accounting policies that are critical accounting policies and an understanding
of these policies is necessary to understand the financial statements. These policies relate to determining the adequacy of the
allowance for loan losses, if there is any impairment of goodwill and other intangibles, and estimating the fair value of assets acquired
and liabilities assumed in connection with any merger activity. Additional information regarding these policies is included in the notes
to the consolidated financial statements, including Note 1 (Summary of Significant Accounting Policies), Note 4 (Loans) and Note 2
(Business Combinations), and the section above captioned “Loan Portfolio.” Management believes that the judgments, estimates and
assumptions used in the preparation of the consolidated financial statements are appropriate given the factual circumstances at the
time.

Farmers maintains an allowance for loan losses. The allowance for loan losses is presented as a reserve against loans on the

balance sheets. Loan losses are charged off against the allowance for loan losses, while recoveries of amounts previously charged off
are credited to the allowance for loan losses. A provision for loan losses is charged to operations based on management’s periodic
evaluation of adequacy of the allowance. The provision for credit losses provides for probable losses on loans.

Estimating the amount of the allowance for loan losses requires significant judgment and the use of estimates related to the

amount and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on
historical loss experience, and consideration of current economic trends and conditions, all of which may be susceptible to significant
change. The loan portfolio represents the largest asset category on the consolidated balance sheets. Management’s assessment of the
adequacy of the allowance for loan losses considers individually impaired loans, pools of homogeneous loans with similar risk
characteristics and other environmental risk factors.

Pools of homogeneous loans with similar risk characteristics are assessed for probable losses. Probable losses are estimated
through application of historical loss experience. Historical loss experience data used to establish loss estimates may not precisely
correspond to the current portfolio. As a result, the historical loss experience used in the allowance analysis may not be representative
of actual unrealized losses inherent in the portfolio.

Management also evaluates the impact of environmental factors which pose additional risks that may not adequately be

addressed in the analyses described above. Such environmental factors could include: levels of, and trends in, delinquencies and
impaired loans, charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in lending policies and
procedures including those for underwriting, collection, charge-off, and recovery; experience, ability, and depth of lending
management and staff; national and local economic trends and conditions; industry and geographic conditions; concentrations of credit
such as, but not limited to, local industries, their employees, suppliers; or any other common risk factor that might affect loss
experience across one or more components of the portfolio. The determination of this component of the allowances requires
considerable management judgment. To the extent actual outcomes differ from management estimates, additional provision for credit
losses could be required that could adversely affect earnings or financial position in future periods. The “Loan Portfolio” section of
this financial review includes a discussion of the factors driving changes in the allowance for loan losses during the current period.

Management believes that the accounting for goodwill and other intangible assets also involves a higher degree of judgment

than most other significant accounting policies. GAAP establishes standards for the amortization of acquired intangible assets and the
impairment assessment of goodwill. Goodwill arising from business combinations represents the value attributable to unidentifiable
intangible assets in the business acquired. The Company’s goodwill relates to the value inherent in the banking industry and that value
is dependent upon the ability of the Company’s Trust to provide quality, cost-effective trust services in a competitive marketplace.
The goodwill value is supported by revenue that is in part driven by the volume of business transacted. A decrease in earnings
resulting from a decline in the customer base or the inability to deliver cost-effective services over sustained periods can lead to
impairment of goodwill that could adversely impact earnings in future periods. GAAP requires an annual evaluation of goodwill for
impairment, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The fair value of
goodwill, which resides on the books of Farmers Trust and NAI, is estimated by reviewing the past and projected operating results for
the subsidiaries and industry comparable information. At December 31, 2015, on a consolidated basis, Farmers had intangibles of
$7.8 million subject to amortization and $35.1 million of goodwill, which was not subject to periodic amortization.

Estimating the fair value of assets acquired and liabilities assumed, in connection with the NBOH and Tri-State acquisitions in
2015, requires significant judgment. In addition to the associated goodwill that was mentioned in the prior paragraph, estimates about
the fair values of loans, core deposit intangible assets, premises and equipment, and time deposits were susceptible to estimation.
Management’s judgment about real estate and equipment values, as well as the amount and timing of future cash flows associated with
loans and deposits are a few of the factors considered.

Recent Accounting Pronouncements and Developments

Note 1 to the consolidated financial statements discusses new accounting policies adopted by Farmers during 2015 and the

expected impact of accounting policies recently issued or proposed but not yet required to be adopted. To the extent the adoption of
new accounting standards materially affects financial condition, results of operations, or liquidity, the impacts are discussed in the
applicable sections of this financial review and notes to the consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

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 Company, 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. The Company monitors interest rate sensitive assets and liabilities to determine the overall interest rate position over various
time frames.

The Company considers the primary market exposure to be interest rate risk. Simulation analysis is used to monitor the
Company’s exposure to changes in interest rates, and the effect of the change to net interest income. The following table shows the
effect on net interest income and the net present value of equity in the event of a sudden and sustained 300 basis point increase and
100 basis point decrease in market interest rates:

Changes In Interest Rate (basis points)
Net Interest Income Change

+300 .............................................................................................................
+200 .............................................................................................................
+100 .............................................................................................................
-100 ..............................................................................................................

Net Present Value Of Equity Change

2015
Result

2014
Result

ALCO

Guidelines

-1.3%
-0.6%
-0.2%
-2.8%

-8.4%
-4.5%
-1.3%
-3.5%

2.2 %
1.9 %
1.2 %
-4.0 %

-4.6 %
-1.9 %
0.8 %
-6.7 %

15%
10%
5%
5%

20%
15%
10%
10%

All interest rate change results fall within policy limits for the year ended December 31, 2015 and 2014. A report on interest rate

risk is presented to the Board of Directors and the Asset/Liability Committee on a quarterly basis. The Company has no market risk
sensitive instruments held for trading purposes.

With the largest amount of interest sensitive assets and liabilities maturing within twelve months, the Company monitors this

area most closely. Early withdrawal of deposits, prepayments of loans and loan delinquencies are some of the factors that can impact
actual results in comparison to our simulation analysis. In addition, changes in rates on interest sensitive assets and liabilities may not
be equal, which could result in a change in net interest margin.

Interest rate sensitivity management provides some degree of protection against net interest income volatility. It is not possible

nor 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.

Item 8. Financial Statements and Supplementary Financial Data.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Farmers National Banc Corp. (the “Company”) is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(1) promulgated under the Securities
Exchange Act of 1934 as a process designed by, or under the supervision of; our principal executive and principal financial officers
and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted
accounting principles and includes those policies and procedures that:

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of
our assets;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in
accordance with authorizations of our management and directors; and

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2015. In making this
assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”) in the 2013 Internal Control-Integrated Framework. Based on that assessment, we believe that, as of December 31, 2015,
our internal control over financial reporting is effective based on those criteria.

Management’s assessment of the effectiveness of the Company’s internal control over financial reporting excluded NBOH and Tri-
State, of which the Company acquired all outstanding shares during year-end 2015. These acquired entities represented, in the
aggregate, 36% and 23% of consolidated total assets and consolidated net interest income, respectively, of the Company as of and for
the year ended December 31, 2015 and are more fully discussed in Note 2 to our consolidated financial statements. Under guidelines
established by the SEC, companies are allowed to exclude acquisitions from their first assessment of internal control over financial
reporting following the date of the acquisition.

Crowe Horwath LLP has audited the effectiveness of the Company’s internal control over financial reporting as of December 31,
2015, as stated in their report dated March 10, 2016.

Kevin J. Helmick
President and Chief Executive Officer

Carl D. Culp
Executive Vice President and Treasurer

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Crowe Horwath LLP
Independent Member Crowe Horwath International

To the Board of Directors and Shareholders
Farmers National Banc Corp.
Canfield, Ohio

We have audited the accompanying consolidated balance sheets of Farmers National Banc Corp. (the “Company”) as of December 31,
2015 and 2014, and the related consolidated statements of income, comprehensive income (loss), stockholders’ equity, and cash flows
for each of the years in the three-year period ended December 31, 2015. We also have audited the Company’s internal control over
financial reporting as of December 31, 2015, based on criteria established in the 2013 Internal Control – Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible
for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control
Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s
internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of
material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our
audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As permitted, the Corporation excluded the operations of financial institutions acquired during 2015, which is described in Note 2 of
the consolidated financial statements, from the scope of management’s report on internal control over financial reporting. As such, it
has also been excluded from the scope of our audit of internal control over financial reporting.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Farmers
National Banc Corp. as of December 31, 2015 and 2014, and the results of its operations and its cash flows for each of the years in the
three-year period ended December 31, 2015 in conformity with accounting principles generally accepted in the United States of
America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as
of December 31, 2015, based on criteria established in the 2013 Internal Control – Integrated Framework issued by COSO.

Cleveland, Ohio
March 10, 2016

Crowe Horwath LLP

CONSOLIDATED BALANCE SHEETS
(Table Dollar Amounts in Thousands except Per Share Data)

December 31,
ASSETS
Cash and due from banks ...................................................................................................... $
Federal funds sold and other .................................................................................................
TOTAL CASH AND CASH EQUIVALENTS

2015

22,500 $
33,514
56,014

Securities available for sale ...................................................................................................
Loans held for sale ................................................................................................................

394,312
1,769

Loans .....................................................................................................................................
Less allowance for loan losses ..............................................................................................
NET LOANS

Premises and equipment, net .................................................................................................
Goodwill ...............................................................................................................................
Other intangibles ...................................................................................................................
Bank owned life insurance ....................................................................................................
Other assets ...........................................................................................................................
TOTAL ASSETS $

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:

Noninterest-bearing ......................................................................................................... $
Interest-bearing ................................................................................................................
TOTAL DEPOSITS

Short-term borrowings ..........................................................................................................
Long-term borrowings ..........................................................................................................
Other liabilities ......................................................................................................................
TOTAL LIABILITIES

1,296,865
8,978
1,287,887

24,190
35,090
7,821
29,234
33,585
1,869,902 $

314,650 $
1,094,397
1,409,047

225,832
22,153
14,823
1,671,855

2014

11,410
16,018
27,428

389,829
511

663,852
7,632
656,220

17,049
5,591
3,222
16,367
20,750
1,136,967

184,697
731,006
915,703

69,136
18,381
10,187
1,013,407

Commitments and contingent liabilities (Note 12)

Stockholders' equity

Common Stock - Authorized 35,000,000 shares; issued 27,590,531 in 2015 and
19,031,059 in 2014 .......................................................................................................
Retained earnings ............................................................................................................
Accumulated other comprehensive income .....................................................................
Treasury stock, at cost; 646,247 shares in 2015 and 622,447 shares in 2014 ..................
TOTAL STOCKHOLDERS' EQUITY
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $

176,287
26,316
133
(4,689 )
198,047
1,869,902 $

106,021
20,944
1,093
(4,498)
123,560
1,136,967

See accompanying notes.

CONSOLIDATED STATEMENTS OF INCOME
(Table Dollar Amounts in Thousands except Per Share Data)

Years ended December 31,
INTEREST AND DIVIDEND INCOME

Loans, including fees .................................................................................. $
Taxable securities .......................................................................................
Tax exempt securities .................................................................................
Dividends ....................................................................................................
Federal funds sold and other interest income .............................................
TOTAL INTEREST AND DIVIDEND INCOME

INTEREST EXPENSE

Deposits ......................................................................................................
Short-term borrowings ................................................................................
Long-term borrowings ................................................................................
TOTAL INTEREST EXPENSE
NET INTEREST INCOME
Provision for loan losses .............................................................................

NET INTEREST INCOME AFTER PROVISION

2015

2014

2013

44,657 $
5,903
2,951
287
29
53,827

3,489
177
424
4,090
49,737
3,510

30,901 $
7,282
2,523
190
19
40,915

4,008
46
525
4,579
36,336
1,880

30,717
7,062
2,949
196
35
40,959

4,560
51
452
5,063
35,896
1,290

FOR LOAN LOSSES

46,227

34,456

34,606

NONINTEREST INCOME

Service charges on deposit accounts ...........................................................
Bank owned life insurance income, including death benefits .....................
Trust fees ....................................................................................................
Insurance agency commissions ...................................................................
Security gains .............................................................................................
Impairment of equity securities ..................................................................
Retirement plan consulting fees ..................................................................
Investment commissions .............................................................................
Net gains on sale of loans ...........................................................................
Other operating income ..............................................................................
TOTAL NONINTEREST INCOME

NONINTEREST EXPENSE

Salaries and employee benefits ...................................................................
Occupancy and equipment ..........................................................................
State and local taxes ...................................................................................
Professional fees .........................................................................................
Merger related costs ....................................................................................
Advertising .................................................................................................
FDIC insurance ...........................................................................................
Intangible amortization ...............................................................................
Core processing charges .............................................................................
Other operating expenses ............................................................................
TOTAL NONINTEREST EXPENSE
INCOME BEFORE INCOME TAXES

3,253
702
6,156
569
94
0
2,130
1,172
1,101
3,129
18,306

26,638
5,452
1,171
3,180
6,392
1,325
937
983
2,176
5,725
53,979
10,554

2,627
459
6,092
354
457
0
1,809
1,026
358
2,121
15,303

20,878
4,505
878
2,451
0
1,112
733
767
1,571
5,267
38,162
11,597

INCOME TAXES ..........................................................................................
NET INCOME $

2,499
8,055 $

2,632
8,965 $

2,370
696
5,583
243
863
(3)
628
989
505
2,040
13,914

22,054
4,189
1,313
2,212
330
911
719
624
1,354
5,351
39,057
9,463

1,683
7,780

EARNINGS PER SHARE:

Basic and Diluted........................................................................................ $

0.36 $

0.48 $

0.41

See accompanying notes.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Table Dollar Amounts in Thousands except Per Share Data)

Years ended December 31,
NET INCOME ................................................................................................. $

2015
8,055 $

2014
8,965 $

2013
7,780

Other comprehensive income (loss):

Net unrealized holding gains (losses) on available for sale securities ...
Reclassification adjustment for gains realized in income .....................
Net unrealized holding gains (losses) .........................................................
Income tax effect ...................................................................................
Unrealized holding gains (losses), net of reclassification and tax ..............

Change in funded status of post-retirement health plan ..............................
Income tax effect ...................................................................................
Change in funded status of post-retirement health plan, net of tax .............

(1,403)
(94)
(1,497)
524
(973)

20
(7)
13

10,486
(457)
10,029
(3,510)
6,519

60
(21)
39

(19,310)
(860)
(20,170)
7,060
(13,110)

(3)
1
(2)

Other comprehensive income (loss), net of tax ..........................................

(960)

6,558

(13,112)

TOTAL COMPREHENSIVE INCOME (LOSS) $

7,095 $

15,523 $

(5,332)

See accompanying notes.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Table Dollar Amounts in Thousands except Per Share Data)

Years ended December 31,
COMMON STOCK

2015

2014

2013

Balance at beginning of year ...................................................................... $
Issued 8,559,472 shares in 2015 and 228,777 in 2013 as part of
business combinations .............................................................................
Stock compensation expense for 320,980 unvested shares in 2015
and 46,957 in 2014 ..................................................................................
Balance at end of year ................................................................................

106,021 $

105,905 $

104,504

69,780

1,400

486
176,287

116
106,021

1
105,905

RETAINED EARNINGS

Balance at beginning of year ......................................................................
Net income ..................................................................................................
Dividends declared:

$.12 cash dividends per share in 2015, 2014 and 2013 ........................
Balance at end of year ................................................................................

20,944
8,055

(2,683)
26,316

14,215
8,965

(2,236)
20,944

8,683
7,780

(2,248)
14,215

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Balance at beginning of year ......................................................................
Other comprehensive income (loss) ...........................................................
Balance at end of year ................................................................................

1,093
(960)
133

(5,465)
6,558
1,093

7,647
(13,112)
(5,465)

TREASURY STOCK, AT COST

Balance at beginning of year ......................................................................
Reissued 5,000 treasury shares to satisfy exercised stock options ..............
Reissued 3,000 treasury shares under the Equity Incentive Plan ................
Purchased 26,800 shares in 2015, 372,368 shares in 2014 and
247,845 shares in 2013 ............................................................................
Balance at end of year ................................................................................
TOTAL STOCKHOLDERS' EQUITY AT END OF YEAR $

(4,498)
0
22

(1,648)
32
0

(42)
0
0

(213)
(4,689)
198,047 $

(2,882)
(4,498)
123,560 $

(1,606)
(1,648)
113,007

See accompanying notes.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Table Dollar Amounts in Thousands except Per Share Data)

Years ended December 31,
CASH FLOWS FROM OPERATING ACTIVITIES

Net income ............................................................................................................... $
Adjustments to reconcile net income to net cash from operating activities:

Provision for loan losses ....................................................................................
Depreciation and amortization ...........................................................................
Net amortization of securities ............................................................................
Security gains ....................................................................................................
Stock compensation expense .............................................................................
Impairment of equity securities .........................................................................
Loss on sale of other real estate owned ..............................................................
Earnings on bank owned life insurance .............................................................
Income recognized from death benefit on bank owned life insurance ...............
Origination of loans held for sale .......................................................................
Proceeds from loans held for sale ......................................................................
Net gains on sale of loans ..................................................................................
Net change in other assets and liabilities ...........................................................
NET CASH FROM OPERATING ACTIVITIES

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from maturities and repayments of securities available for sale .........
Proceeds from sales of securities available for sale ...........................................
Purchases of securities available for sale ...........................................................
Loan originations and payments, net .................................................................
Proceeds from sale of other real estate owned ...................................................
Purchase of bank owned life insurance ..............................................................
Proceeds from BOLI death benefit ....................................................................
Proceeds from sale of land and building ............................................................
Additions to premises and equipment ................................................................
Net cash received (paid) in business combinations ............................................
NET CASH FROM INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES

Net change in deposits .......................................................................................
Net change in short-term borrowings .................................................................
Repayments of long-term borrowings ................................................................
New advances for long term borrowing .............................................................
Cash dividends paid ...........................................................................................
Proceeds from reissuance of treasury shares ......................................................
Repurchase of common shares...........................................................................
NET CASH FROM FINANCING ACTIVITIES
NET CHANGE IN CASH AND CASH EQUIVALENTS

2015

2014

8,055 $

8,965 $

3,510
2,751
2,275
(94)
486
0
286
(702)
0
(46,201)
46,455
(1,101)
(9,397)
6,323

63,243
102,257
(72,683)
(139,656)
553
(6,000)
0
723
(1,299)
29,749
(23,113)

(44,659)
91,159
(3,228)
5,000
(2,683)
0
(213)
45,376
28,586

1,880
1,981
1,472
(457)
116
0
53
(459)
0
(15,911)
15,916
(358)
(946)
12,252

49,401
57,170
(64,400)
(35,352)
337
0
0
0
(972)
0
6,184

487
(22,481)
(1,441)
10,000
(2,236)
32
(2,882)
(18,521)
(85)

Beginning cash and cash equivalents .................................................................
Ending cash and cash equivalents ...................................................................... $

27,428
56,014 $

27,513
27,428 $

Supplemental cash flow information:

Interest paid ....................................................................................................... $
Income taxes paid .............................................................................................. $

4,047 $
2,620 $

4,623 $
1,925 $

Supplemental noncash disclosures:

Transfer of loans and property to other real estate owned ................................. $
Issuance of stock for business combinations...................................................... $
Contingent consideration for NAI acquisition ................................................... $
Security purchases not settled ............................................................................ $

888 $
69,780 $
0 $
1,338 $

368 $
0 $
0 $
0 $

2013

7,780

1,290
1,945
2,646
(863)
0
3
75
(478)
(218)
(25,085)
29,056
(505)
(1,394)
14,252

75,015
94,016
(149,886)
(45,529)
282
0
329
118
(215)
(2,111)
(27,981)

(3,793)
1,731
(601)
10,000
(2,248)
0
(1,606)
3,483
(10,246)

37,759
27,513

5,095
1,130

193
1,400
920
0

See accompanying notes.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts In Thousands except Per Share Data)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation: The consolidated financial statements include the accounts of Farmers National Banc Corp. and its
wholly-owned subsidiaries, The Farmers National Bank (“Bank”) of Canfield, Farmers Trust Company (“Trust”) and National
Associates, Inc. (“NAI”). The Company acquired First National Bank of Orrville (“First National Bank”) a subsidiary of National
Bancshares Corporation (“NBOH”) and 1st National Community Bank (“FNCB”) a subsidiary of Tri-State 1st Banc, Inc. (“Tri-State”)
during 2015 and consolidated all activity of both acquisitions within the Bank, see Note 2. The consolidated financial statements also
include the accounts of the Farmers National Bank of Canfield’s subsidiaries; Farmers National Insurance (“Insurance”) and Farmers
of Canfield Investment Co. (“Investments”). Together the entities are referred to as “the Company.” All significant intercompany
balances and transactions have been eliminated in consolidation.

Nature of Operations: The Company provides full banking services, including wealth management services and mortgage banking
activity, through the Bank. 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 primary area served by the Bank is the northeastern region of Ohio through thirty
eight (38) locations. With the acquisition of FNCB the Bank has added one branch location in southwestern Pennsylvania. The
Company provides trust services through its Trust subsidiary, retirement consulting services through its NAI subsidiary and insurance
services through the Bank’s Insurance subsidiary. The primary purpose of Investments, the new subsidiary of the Bank in 2014, is to
invest in municipal securities. Farmers Trust Company has a state-chartered bank license to conduct trust business from the Ohio
Department of Commerce – Division of Financial Institutions.

Estimates: The preparation of financial statements in conformity with U.S. 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 Flows: Cash and cash equivalents include cash on hand, deposits with other financial institutions and federal funds sold.
Generally, federal funds are purchased and sold for one-day periods. Net cash flows are reported for loan and deposit transactions,
short term borrowings, and other assets and liabilities.

Securities Available for Sale: Debt securities are classified as available for sale when they might be sold before maturity. Equity
securities with readily determinable fair values are classified as available for sale. Securities available for sale are carried at fair value,
with unrealized holding gains and losses reported in other comprehensive income, net of tax.

Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized on the
level-yield method without anticipating prepayments, except for mortgage backed securities where prepayments are anticipated. Gains
and losses on sales are recorded on the trade date and determined using the specific identification method. Purchases are recorded on
the trade date.

Management evaluates securities for other-than-temporary impairment (OTTI) on at least a quarterly basis, and more frequently when
economic or market conditions warrant. For securities in an unrealized loss position, management considers the extent and duration of
the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to
sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized
cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair
value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of
impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement
and 2) other-than-temporary impairment (OTTI) related to other factors, which is recognized in other comprehensive income. The
credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost
basis. For equity securities, the entire amount of impairment is recognized through earnings.

Loans Held for Sale: Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate
cost or fair value, as determined by outstanding commitments from investors. Net unrealized losses, if any, are charged to earnings.

Mortgage loans held for sale are sold with or without servicing rights released. Gains and losses on sales of mortgage loans are based
on the difference between the selling price and the carrying value of the related loan sold.

Loans: Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at
the principal balance outstanding, net of deferred loan fees and costs, and an allowance for loan losses. Substantially all loans are
secured by specific items of collateral including business assets, consumer assets, and commercial and residential real estate.

Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred
and recognized in interest income using the level yield method without anticipating prepayments. Interest income on mortgage and
commercial loans is discontinued at the time the loan is 90 days delinquent unless the loan is well-secured and in process of collection.
Consumer loans are typically charged off no later than 120 days past due. Past due status is based on the contractual terms of the loan.
In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.
Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively
evaluated for impairment and individually classified impaired loans.

For all classes of loans, when interest accruals are discontinued, interest accrued but not received for loans placed on non-accrual is
reversed against interest income. Interest on such loans is thereafter recorded on a cash-basis or cost-recovery method, until qualifying
for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought
current and future payments are reasonably assured.

Purchased Credit Impaired Loans: The Company purchased loans that have shown evidence of credit deterioration since origination
through the acquisition of First National Bank. These loans are recorded at the amount paid, such that there is no carryover of the
seller’s allowance for loan losses. The Company estimates the amount and timing of expected cash flows for each loan, and the
expected cash flows in excess of amount paid is recorded as interest income over the remaining life of the loan. The excess of the
loan’s contractual principal and interest over expected cash flows is not recorded.

Over the life of the loan, expected cash flows continue to be estimated. If the present value of expected cash flows is less than the
carrying amount, a loss is recorded as a provision for loan losses. If the present value of expected cash flows is greater than the
carrying amount, it is recognized as part of future interest income.

Derivatives: Derivative financial instruments are recognized as assets or liabilities at fair value. The Company’s derivatives are
interest-rate swap agreements, which are used as part of its asset and liability management strategy to help manage its interest rate risk
position. The Company does not use derivatives for trading or balance sheet hedging purposes. The derivative transactions are
considered instruments with no hedging designation, otherwise known as stand-alone derivatives. Changes in the fair value of the
derivatives are reported currently in earnings, as other noninterest income.

Concentration of Credit Risk: There are no significant concentrations of loans to any one industry or customer. However, most of the
Company’s business activity is with customers located within Northeastern Ohio. Therefore, the Company’s exposure to credit risk is
significantly affected by changes in the economy of a 9 county area. Loans secured by real estate represent 68% of the total portfolio
and changes related to the real estate markets are monitor by management.

Allowance for Loan Losses: The allowance for loan losses is a valuation allowance for probable incurred loan losses, increased by the
provision for loan losses and decreased by charge-offs less recoveries. The allowance is based on management’s judgment taking into
consideration past loss experience, reviews of individual loans, 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 allowance. If additions to the original estimate of the allowance for loan losses are deemed
necessary, they will be reported in earnings in the period in which they become reasonably estimable and probable. Allocations of the
allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should
be charged-off.

Acquired loans are individually evaluated and for those purchased loans without evidence of credit deterioration, management
evaluates each reviewed loan using an internal grading system with a grade assigned to each loan at the date of acquisition. To the
extent that any purchased loan is not specifically reviewed, such loan is assumed to have characteristics similar to the characteristics
of the acquired portfolio of purchased loans. The grade for each purchased loan without evidence of credit deterioration is reviewed
subsequent to the date of acquisition any time a loan is renewed or extended or at any time information becomes available to the
Company that provides material insight regarding the loan’s performance, the status of the borrower or the quality or value of the
underlying collateral. To the extent that current information indicates it is probable that the Company will collect all amounts
according to the contractual terms thereof, such loan is not considered impaired and is not individually considered in the determination
of the required allowance for loan losses. To the extent that current information indicates it is probable that the Company will not be
able to collect all amounts according to the contractual terms thereof, such loan is considered impaired and is considered in the
determination of the required level of allowance.

In determining the day 1 fair values of purchased loans without evidence of credit deterioration at the date of acquisition, management
includes (i) no carry over of any previously recorded allowance for loan losses and (ii) an adjustment of the unpaid principal balance
to reflect an appropriate market rate of interest, given the risk profile and grade assigned to each loan. This adjustment is accreted into
earnings as a yield adjustment, using the effective yield method, over the remaining life of each loan.

The allowance consists of specific and general components. The specific component relates to loans that are individually classified as
impaired. A loan is considered impaired when, based on the current information and events, it is probable that the Company will be
unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.
Loans, for which the terms have been modified, and for which the borrower is experiencing financial difficulties, are considered
troubled debt restructurings and classified as impaired.

Factors considered by management in determining impairment include payment status, collateral value, and the probability of
collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment
shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls
on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length
of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal
and interest owed.

Impairment is measured on a loan by loan basis for commercial and commercial real estate loans over $750 thousand, individually or
in the aggregate, by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s
obtainable market price, or the fair value of the collateral if the loan is collateral dependent. Large groups of smaller balance
homogeneous loans, such as consumer and residential real estate loans are collectively evaluated for impairment and accordingly, they
are not separately identified for impairment disclosures. Non-real estate secured consumer loans in bankruptcy where debt has not
been reaffirmed are considered troubled debt restructurings and are evaluated individually to ensure that accurate accounting treatment
is in place.

The Company considers the guidance on troubled debt restructuring for individual consumer and residential loans when evaluating for
impairment disclosure. Troubled debt restructurings are measured at the present value of estimated future cash flow using the loan’s
effective rate at inception. If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, at
the fair value of the collateral. For troubled debt restructurings that subsequently default, the Company determines the amount of
reserve in accordance with the accounting policy for the allowance for loan losses.

The general component covers non-impaired loans and is based on historical loss experience adjusted for current factors. The
historical loss experience is determined by portfolio segment and is based on the actual loss history experienced for the most recent
twelve quarters. The formula for calculating the allowance for loan losses requires that the historical loss percentage be applied to
homogeneous and all risk rated loans. This actual loss experience is supplemented with other economic factors based on the risks
present for each portfolio segment. These economic factors include consideration of the following: levels of and trends in
delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in volume and terms of loans; effects of
any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience,
ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry
conditions; and effects of changes in credit concentrations. The following portfolio segments have been identified:

Commercial Loans. Commercial credit is extended to commercial customers for use in normal business operations to finance working
capital needs, equipment purchases, or other projects. The majority of these borrowers are customers doing business within our
geographic regions. These loans are generally underwritten individually and secured with the assets of the company and the personal
guarantee of the business owners. Commercial loans are made based primarily on the historical and projected cash flow of the
borrower and the underlying collateral provided by the borrower.

Commercial Real Estate Loans. Commercial real estate loans are subject to underwriting standards and processes similar to
commercial loans. These loans are viewed primarily as cash flow loans and the repayment of these loans is largely dependent on the
successful operation of the property. Loan performance may be adversely affected by factors impacting the general economy or
conditions specific to the real estate market such as geographic location and property type.

Consumer Loans. Consumer loans are primarily comprised of loans made directly to consumers and indirectly through automobile
dealerships. These loans have a specific matrix which consists of several factors including debt to income, type of collateral and loan
to collateral value, credit history and relationship with the borrower. Consumer lending uses risk-based pricing in the underwriting
process.

Residential Real Estate Loans. Residential mortgage loans represent loans to consumers for the purchase or refinance of a residence.
These loans are generally financed up to 15 years, and in most cases, are extended to borrowers to finance their primary residence.
Real estate market values at the time of origination directly affect the amount of credit extended and, in the event of default,
subsequent changes in these values may impact the severity of losses.

Servicing Rights: When mortgage loans are sold and servicing rights are retained the servicing rights are initially recorded at fair
value with the income statement effect recorded in gains on sales of loans. Fair value is based on market prices for comparable
mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of
estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating
future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income,
prepayment speeds and default rates and losses. The Company compares the valuation model inputs and results to published industry
data in order to validate the model results and assumptions. All classes of servicing assets are subsequently measured using the
amortization method which requires servicing rights to be amortized into non-interest income in proportion to, and over the period of,
the estimated future net servicing income of the underlying loans.

All classes of servicing assets are subsequently measured using the amortization method which requires servicing rights to be
amortized into non-interest income in proportion to, and over the period of, the estimated future net servicing income of the
underlying loans. Servicing assets are evaluated for impairment based upon the fair value of the assets compared to carrying amount.
Any impairment is reported as a valuation allowance, to the extent that fair value is less than the capitalized amount for a grouping.
There was no valuation allowance impairment against servicing assets as of December 31, 2015.

Servicing fee income is recorded when earned for servicing loans based on a contractual percentage of the outstanding principal or a
fixed amount per loan. The amortization of mortgage servicing rights is netted against loan servicing fee income. Servicing fees, late
fees and ancillary fees related to loan servicing are not considered significant for financial reporting.

Foreclosed Assets: Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when
acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs
to sell. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after
acquisition are expensed.

Premises and Equipment: Land is carried at cost. Premises and equipment are stated at cost, less accumulated depreciation. Buildings
and related components are depreciated using the straight-line method with useful lives ranging from 5 to 40 years. Furniture, fixtures
and equipment are depreciated using the straight-line method with useful lives ranging from 3 to 10 years.

Restricted Stock: The Bank is a member of the Federal Home Loan Bank (FHLB) system. Members are required to own a certain
amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. The Bank is also a member
of and owns stock in the Federal Reserve Bank. These stocks are carried at cost, classified as restricted securities included in other
assets, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported
as income.

Bank Owned Life Insurance: The Company has purchased life insurance policies on certain key officers. Bank owned life insurance
is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value
adjusted for other charges or other amounts due that are probable at settlement.

Long-term Assets: Premises and equipment and other long-term assets are reviewed for impairment when events indicate their
carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.

Goodwill and Other Intangible Assets: Goodwill resulting from a business combination is generally determined as the excess of the
fair value of the consideration transferred over the fair value of the net assets acquired as of the acquisition date. Goodwill acquired in
a purchase business combination and determined to have an indefinite useful life is not amortized, but tested for impairment at least
annually. The Company has selected September 30 as the date to perform the annual goodwill impairment tests associated with the
acquisition of the Trust, NAI, First National Bank and FNCB. Intangible assets with definite useful lives are amortized over their
estimated useful lives. Goodwill is the only intangible asset with an indefinite life on the balance sheet. Core deposit intangible assets
arising from bank acquisitions are amortized over their estimated useful lives of 7 to 8 years. Non-compete contracts are amortized on
a straight line basis, over the term of the agreements. Customer relationship and trade name intangibles are amortized over an average
of 13 years on an accelerated method.

Loan Commitments and Related Financial Instruments: Financial instruments include off-balance sheet credit instruments, such as
commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these
items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are
recorded when they are funded.

Stock-Based Compensation: Compensation cost is recognized for stock options and restricted stock awards issued to employees,
based on the fair value of these awards at the date of grant. The market price of the Company’s common stock at the grant date is used
for restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period.
For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire
award.

Income Taxes: Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets
and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying
amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred
tax assets to the amount expected to be realized.

A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax
examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is
greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit
is recorded.

The Company recognizes interest and/or penalties related to income tax matters in income tax expense.

Retirement Plans: Employee 401(k) and profit sharing plan expense is the amount of matching and discretionary contributions.
Deferred compensation and supplemental retirement plan expense allocates the benefits over years of service.

Earnings per Common Share: Basic earnings per common share is net income divided by the weighted average number of common
shares outstanding during the period. Diluted earnings per common share include the dilutive effect of additional potential common
shares issuable under stock equity awards. Earnings and dividends per share are restated for all stock splits and stock dividends
through the date of issuance of the financial statements.

Comprehensive Income (Loss): Comprehensive income (loss) consists of net income and other comprehensive income (loss). Other
comprehensive income (loss) consists of unrealized gains and losses on securities available for sale and changes in the funded status of
the post-retirement health plan, which are recognized as separate components of equity, net of tax effects.

Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as
liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not
believe there are such matters that will have a material effect on the financial statements.

Restrictions on Cash: Cash on hand or on deposit with the Federal Reserve Bank (“FRB”) was required to meet regulatory reserve
and clearing requirements. The Company had deposits with the FRB of $29.4 million at December 31, 2015 and $14.0 million at
December 31, 2014.

Equity: Treasury stock is carried at cost.

Dividend Restriction: Banking regulations require maintaining certain capital levels and may limit the dividends paid by the Bank and
Trust to the holding company or by the holding company to shareholders.

Fair Value of Financial Instruments: Fair values of financial instruments are estimated using relevant market information and other
assumptions as more fully disclosed in Note 6. Fair value estimates involve uncertainties and matters of significant judgment
regarding interest rates, credit risk, prepayments and other factors, especially in the absence of broad markets for particular items.
Changes in assumptions or in market conditions could significantly affect these estimates.

Operating Segments: While the chief decision-makers monitor the revenue streams of the various products and services, operations
are managed and financial performance is primarily aggregated and reported in three lines of business, the Bank, Trust and Retirement
Consulting segments. The Company discloses segment information in Note 21.

Reclassification: Some items in the prior year financial statements were reclassified to conform to the current presentation.
Reclassifications had no effect on prior year net income or stockholders’ equity.

Adoption of New Accounting Standards: In September 2015, the FASB amended existing guidance under Accounting Standards
Update (ASU) 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. The
amendments require that an acquirer recognize adjustments to estimated amounts that are identified during the measurement period in
the reporting period in which the adjustment amounts are determined. The amendments require that the acquirer record, in the same
period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a
result of the change to the estimated amounts, calculated as if the accounting had been completed at the acquisition date. These
amendments are effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after
December 15, 2015. The amendments should be applied prospectively to adjustments to provisional amounts that occur after the
effective date with earlier application permitted for financial statements that have not been issued. The adoption of this standard did
not have a material effect on the Company’s consolidated financial statements.

In June 2014, the FASB issued ASU No. 2014-11, "Repurchase-to-Maturity Transactions, Repurchase Financings, and
Disclosures." The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as
repurchase financings with the accounting for other typical repurchase agreements. Going forward, these transactions would all be
accounted for as secured borrowings. The guidance eliminates sale accounting for repurchase-to-maturity transactions and supersedes
the guidance under which a transfer of a financial asset and a contemporaneous repurchase financing could be accounted for on a
combined basis as a forward agreement, which has resulted in outcomes referred to as off-balance-sheet accounting. The amendments
in the ASU require a new disclosure for transactions economically similar to repurchase agreements in which the transferor retains
substantially all of the exposure to the economic return on the transferred financial assets throughout the term of the transaction. The
amendments in the ASU also require expanded disclosures about the nature of collateral pledged in repurchase agreements and similar
transactions accounted for as secured borrowings. The Company adopted the amendments in this ASU effective January 1, 2015. In
addition, the expanded disclosures about the nature of collateral pledged in repurchase agreements and similar transactions accounted
for as secured borrowings were effective for the Company’s reporting period ending June 30, 2015. All of the Company's repurchase
agreements are typical in nature (i.e., not repurchase-to-maturity transactions or repurchase agreements executed as a repurchase
financing) and are accounted for as secured borrowings. As such, the adoption of ASU No. 2014-11 did not have a material impact on
the Company's consolidated financial statements.

Newly Issued, Not Yet Effective Accounting Standards: In January, 2016, the FASB issued ASU 2016-01, Financial Instruments—
Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, affecting public and private
companies, not-for-profit organizations, and employee benefit plans that hold financial assets or owe financial liabilities. Requiring
most equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the
investee) to be measured at fair value with changes in fair value recognized in net income. The ASU will take effect for fiscal years
beginning after December 15, 2017. The adoption of this standard is not expected to have a material effect on the Company’s
consolidated financial statements.

NOTE 2 - BUSINESS COMBINATIONS

On October 1, 2015, the Company completed the acquisition of Tri-State, the parent company of FNCB. The transaction involved
both cash and 1,296,517 shares of stock totaling $14.3 million. Pursuant to the terms of the merger agreement, common shareholders
of Tri-State received 1.747 common shares, without par value, of the Company or $14.20 in cash, for each common share of Tri-State,
subject to proration provisions specified in the merger agreement that provide for a targeted aggregate split of total consideration
consisting of 75% shares of Farmers’ common stock and 25% cash. Preferred shareholders of Tri-State received $13.60 in cash for
each share of Series A Preferred Stock, without par value, of Tri-State.

Goodwill of $2.8 million, which is recorded on the balance sheet, arising from the acquisition consisted largely of synergies and the
cost savings resulting from the combining of the companies. The goodwill is not expected to be deductible for income tax purposes.
The fair value of other intangible assets of $1.2 million is related to core deposits. The following table summarizes the consideration
paid for Tri-State and the amounts of the assets acquired and liabilities assumed on the closing date of the acquisition.

Consideration

Cash ........................................................................................................................................................ $
Stock ........................................................................................................................................................

Fair value of total consideration transferred........................................................................................................ $

Assets acquired and liabilities assumed

Cash and due from financial institutions ................................................................................................ $
Securities available for sale ....................................................................................................................
Loans, net ...............................................................................................................................................
Premises and equipment .........................................................................................................................
Bank owned life insurance .....................................................................................................................
Core deposit intangible ..........................................................................................................................
Other assets ............................................................................................................................................
Total assets .......................................................................................................................................

Fair value of liabilities assumed

Deposits ..................................................................................................................................................
Long-term borrowings ...........................................................................................................................
Accrued interest payable and other liabilities ........................................................................................
Total liabilities ..................................................................................................................................

Net assets acquired ...................................................................................................................... $

Goodwill created ....................................................................................................................................

Total net assets acquired ................................................................................................................... $

3,607
10,733
14,340

13,553
48,300
66,374
1,935
3,274
1,173
1,329
135,938

114,342
2,002
8,072
124,416
11,522
2,818
14,340

Valuation of some assets acquired or created including but not limited to net loans and goodwill are preliminary and could be subject
to change.

On June 19, 2015, the Company completed the acquisition of all outstanding stock of NBOH, the parent company of First National
Bank. The transaction involved both cash and 7,262,955 shares of stock totaling $74.8 million. First National Bank branches became
branches of Farmers Bank. Pursuant to the Agreement, each shareholder of NBOH received either $32.15 per share in cash or 4.034
shares of Farmers’ common stock, subject to an overall limitation of 80% of the shares of NBOH being exchanged for stock and 20%
for cash.

Goodwill of $26.7 million, which is recorded on the balance sheet, arising from the acquisition consisted largely of synergies and the
cost savings resulting from the combining of the companies. The goodwill is not expected to be deductible for income tax purposes.
The fair value of other intangible assets of $4.4 million is related to core deposits. The following table summarizes the consideration
paid for NBOH and the amounts of the assets acquired and liabilities assumed on the closing date of the acquisition.
The acquisition provides an attractive mix of additional loans and deposits and helps the Company achieve additional operating scale
and drives earnings per share growth. In addition to the financial benefits, the merger is a significant step in Company’s strategy to
expand its footprint. The combined company creates a top-performing midwest community bank that has the scale, product depth and
efficiency to compete effectively.

Consideration

Fair value of total consideration transferred........................................................................................................ $

Assets acquired and liabilities assumed

Fair value of liabilities assumed

Deposits ..................................................................................................................................................
Short-term borrowings ...........................................................................................................................
Accrued interest payable and other liabilities ........................................................................................
Total liabilities ..................................................................................................................................

Net assets acquired ...................................................................................................................... $

Goodwill created ....................................................................................................................................

Total net assets acquired ................................................................................................................... $

15,732
59,048
74,780

37,035
51,340
430,035
6,105
2,891
4,409
7,996
539,811

423,661
65,537
2,514
491,712
48,099
26,681
74,780

The fair value of net assets acquired includes fair value adjustments to certain receivables that were not considered impaired as of the
acquisition date. The fair value adjustments were determined using discounted contractual cash flows. However, the Company
believes that all contractual cash flows related to these financial instruments will be collected. As such, these receivables were not
considered impaired at the acquisition date and were not subject to the guidance relating to purchased credit impaired loans, which
have shown evidence of credit deterioration since origination. Receivables acquired that were not subject to these requirements
include non-impaired loans and customer receivables with a fair value and gross contractual amounts receivable of $429.7 million on
the date of acquisition.

The following table presents pro forma information as if both acquisitions that occurred in 2015 actually took place at the beginning of
2014. The pro forma information includes adjustments for merger related costs, amortization of intangibles arising from the
transaction and the related income tax effects. The pro forma financial information is not necessarily indicative of the results of
operations that would have occurred had the transactions been effective on the assumed dates.

Net interest income .......................................................................................................... $

62,524 $

58,098

2015

2014

Net income ....................................................................................................................... $

12,750 $

15,316

Basic and diluted earnings per share................................................................................ $

0.47 $

0.57

On July 1, 2013, the Company completed the acquisition of all outstanding stock of the retirement planning consultancy NAI of
Rocky River, Ohio. The transaction involved both cash and stock totaling $4.4 million, including up to $1.5 million of future cash
payments contingent upon NAI meeting income performance targets based on growth in EBITDA with an initial fair value of $920
thousand. The measurement period is defined, in essence, as “the twelve month period ending on the second anniversary of the closing
date.” Based on actual EBITDA growth the Company recognized $1.3 million of expense during the year ended December 31, 2015
after writing the fair value of the contingent consideration down to $156 thousand in 2014. The final payment of $1.5 million was
made to satisfy the contingent consideration clause of the agreement during September 2015.

Goodwill of $2.6 million, which is recorded on the balance sheet, arising from the acquisition consisted largely of synergies and the
cost savings resulting from the combining of the operations of the companies. The goodwill is not expected to be deductible for
income tax purposes. The goodwill was partially impaired as described in Note 8, by an amount equal to the reduction in the
contingent consideration payable. The two adjustments offset resulting in a zero impact to the Company’s consolidated statements of
income for year ended December 31, 2014. After the impairment in 2014 the NAI goodwill was $1.9 million at year ended 2015 and
2014. The fair value of other intangible assets of $2.3 million is related to client relationships, company name and noncompetition
agreements. The intangible assets had a carrying value of $1.3 million at December 31, 2015.

NOTE 3 - SECURITIES AVAILABLE FOR SALE

The following table summarizes the amortized cost and fair value of the available-for-sale securities portfolio at December 31, 2015
and 2014 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income
(loss) were as follows:

2015

2014

Gross
Amortized Unrealized Unrealized
Gains

Losses

Gross

Cost

U.S. Treasury and U.S. government sponsored entities............. $
State and political subdivisions .................................................
Corporate bonds .........................................................................
Mortgage-backed securities - residential ...................................
Collateralized mortgage obligations ..........................................
Small Business Administration ..................................................
Equity securities ........................................................................
Totals $

11,120 $
136,781
1,134
197,289
28,035
19,755
203
394,317 $

38 $
2,354
5
1,433
0
1
127
3,958 $

Gross
Amortized Unrealized Unrealized
Gains

Losses

Gross

Cost

24,515 $
90,369
936
223,216
25,988
23,193
120
388,337 $

418 $
2,183
3
2,395
98
1
121
5,219 $

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

Fair Value
11,106
138,723
1,134
196,587
27,165
19,299
298
394,312

(52) $
(412)
(5)
(2,135)
(870)
(457)
(32)
(3,963) $

Fair Value
24,821
91,881
931
224,362
25,175
22,419
240
389,829

(112) $
(671)
(8)
(1,249)
(911)
(775)
(1)
(3,727) $

Proceeds ......................................................................................
Gross gains .................................................................................
Gross losses ................................................................................

2015
102,257 $
908
(814 )

2014
57,170 $
758
(301)

2013
94,016
1,924
(1,061)

The tax provision related to these net realized gains was $33 thousand, $160 thousand and $301 thousand respectively.

The amortized cost and fair value of the debt securities portfolio are shown by expected maturity. Expected maturities may differ from
contractual maturities if issuers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not
due at a single maturity date are shown separately.

Available for sale

Maturity

Within one year ............................................................................
One to five years ...........................................................................
Five to ten years ............................................................................
Beyond ten years ..........................................................................
Mortgage-backed securities, collateralized mortgage obligations and Small Business
Administration .................................................................................................................................
Totals $

December 31, 2015

Amortized
Cost

Fair Value
16,697
69,023
52,775
12,468

16,564 $
68,354
51,655
12,462

245,079
394,114 $

243,051
394,014

Securities with a carrying amount of $219 million at December 31, 2015, $149 million at December 31, 2014 and $164 million at
December 31, 2013 were pledged to secure public deposits and repurchase agreements. The Trust company had securities, with a
carrying amount of $100 thousand, at year-end 2015, 2014 and 2013, pledged to qualify as a fiduciary in the State of Ohio.

In each year, there were no holdings of any other issuer that exceeded 10% of stockholders’ equity, other than the U.S. Government,
its agencies and its sponsored entities.

The following table summarizes the investment securities with unrealized losses at December 31, 2015 and 2014 aggregated by major
security type and length of time in a continuous unrealized loss position.

2015

Description of Securities

Less than 12 Months

Fair
Value

Unrealized
Loss

12 Months or More
Fair
Value

Unrealized
Loss

Fair
Value

Total
Unrealized
Loss

U.S. Treasury and U.S. government
sponsored entities .................................................. $
State and political subdivisions .............................
Corporate bonds .....................................................
Mortgage-backed securities - residential ...............
Collateralized mortgage obligations ......................
Small Business Administration ..............................
Equity securities ....................................................

6,044 $
22,016
102
79,301
14,342
0
88
Total temporarily impaired $ 121,893 $

(51) $
(167)
(1)
(1,044)
(169)
0
(32)

199 $
12,635
478
40,794
12,695
19,237
0
(1,464) $ 86,038 $

(4 )

(1 ) $

6,243 $
(245 ) 34,651
580
(1,091 ) 120,095
(701 ) 27,037
(457 ) 19,237
88
(2,499 ) $ 207,931 $

(52)
(412)
(5)
(2,135)
(870)
(457)
(32)
(3,963)

2014

Description of Securities

Less than 12 Months

Fair
Value

Unrealized
Loss

12 Months or More
Fair
Value

Unrealized
Loss

Fair
Value

Total
Unrealized
Loss

498 $
987
0
25,770
0
0
26
Total temporarily impaired $ 27,281 $

(11)
0
(202)
0
0
(1)

(2) $ 10,159 $
24,063
476
55,576
19,541
22,319
0
(216) $ 132,134 $

(8 )

(110 ) $ 10,657 $
(660 ) 25,050
476
(1,047 ) 81,346
(911 ) 19,541
(775 ) 22,319
26
(3,511 ) $ 159,415 $

(112)
(671)
(8)
(1,249)
(911)
(775)
(1)
(3,727)

The Company’s equity securities include local and regional bank holdings. During the year ended December 31, 2013 a $3 thousand
pre-tax charge was recognized for the other-than-temporary decline in fair value on these equity holdings. No other-than-temporary
impairments were recognized during 2015 or 2014. If an other-than-temporary impairment were to occur, the amount of the
impairment recognized in earnings depends on whether an entity intends to sell the security or it is more likely than not it would be
required to sell the security before recovery of its amortized cost basis. The previous amortized cost basis less the impairment
recognized in earnings becomes the new amortized cost basis of the investment.

As of December 31, 2015, the Company’s security portfolio consisted of 486 securities, 178 of which were in an unrealized loss
position. The majority of unrealized losses are related to the Company’s holdings in securities issued by state and political
subdivisions, mortgage-backed securities - residential, collateralized mortgage obligations and Small Business Administration, as
discussed below:

Securities issued by State and Political subdivisions

Unrealized losses on debt securities issued by state and political subdivisions have not been recognized into income. Generally these
securities have maintained their investment grade ratings and management does not have the intent and does not expect to be required
to sell these securities before their anticipated recovery. The fair value is expected to recover as the securities approach their maturity
date.

Mortgage-backed securities - residential

All of the Company’s holdings of mortgage-backed securities—residential at year end 2015 and 2014 were issued by U.S.
Government sponsored enterprises. Unrealized losses on mortgage-backed securities—residential have not been recognized into
income. Because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because
the Company does not have the intent to sell these mortgage-backed securities—residential and it is likely that it will not be required
to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily
impaired at December 31, 2015 and 2014.

Collateralized mortgage obligations

The Company’s portfolio includes collateralized mortgage obligations issued by U.S. Government sponsored enterprises. The decline
in fair value is attributable to changes in interest rates and illiquidity, and not credit quality. The Company does not have the intent to
sell these collateralized mortgage obligations and it is likely that it will not be required to sell the securities before their anticipated
recovery. The Company monitors all securities to ensure adequate credit support and as of December 31, 2015 and 2014, the
Company believes there is no other-than-temporary impairment.

Small Business Administration

The Company’s holdings of Small Business Administration securities are issued and backed by the full faith and credit of the U.S.
Government. Unrealized losses on these Small Business Administration securities have not been recognized into income. Because the
decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because the Company does
not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated
recovery, the Company does not consider these securities to be other-than-temporarily impaired at December 31, 2015 and 2014.

NOTE 4 - LOANS

Loans at year end were as follows:

Originated loans:
Commercial real estate

Owner occupied .................................................................................................................... $
Non-owner occupied .............................................................................................................
Other .....................................................................................................................................
Commercial ................................................................................................................................
Residential real estate

1-4 family residential ............................................................................................................
Home equity lines of credit...................................................................................................

Consumer

Indirect ..................................................................................................................................
Direct ....................................................................................................................................
Other .....................................................................................................................................
Subtotal ...........................................................................................................................
Net deferred loan costs ...............................................................................................................
Allowance for loan losses ..........................................................................................................
Total originated loans ................................................................................................

Acquired loans:
Commercial real estate

Owner occupied ....................................................................................................................
Non-owner occupied .............................................................................................................
Other .....................................................................................................................................
Commercial ................................................................................................................................
Residential real estate

Consumer

2015

2014

113,160 $
139,502
50,855
157,447

179,657
41,171

127,335
17,325
4,508
830,960
2,731
(8,978 )
824,713

131,673
28,045
23,536
73,621

133,701
40,929

74,829
122,228
26,137
120,493

153,055
31,255

120,931
9,071
3,626
661,625
2,227
(7,632)
656,220

0
0
0
0

0
0

Direct ....................................................................................................................................
Other .....................................................................................................................................
Total acquired loans ...................................................................................................
Net loans ............................................................................................................... $

31,465
204
463,174
1,287,887 $

0
0
0
656,220

Purchased credit impaired loans

As part of the NBOH acquisition during 2015 the Company acquired various loans that displayed evidence of deterioration of credit
quality since origination and which was probable that all contractually required payments would not be collected. The carrying
amounts and contractually required payments of these loans which are included in the loan balances above are summarized in the
following tables:

Commercial real estate

Owner occupied ...................................................................................................................................... $
Non-owner occupied ...............................................................................................................................
Commercial ..................................................................................................................................................

Total outstanding balance ............................................................................................................ $
Carrying amount, net of allowance of $31 ............................................................................. $

2015

986
501
1,576
3,063
2,215

Accretable yield, or income expected to be collected, is shown in the table below:

Beginning balance ........................................................................................................................................ $
New loans purchased ..............................................................................................................................
Accretion of income ...............................................................................................................................
Ending balance ............................................................................................................................................. $

Contractually required payments receivable on loans purchased credit impaired acquired during the year:

Commercial real estate

Total .................................................................................................................................................. $

Cash flows expected to be collected at acquisition ....................................................................................... $
Fair value of acquired loans at acquisition .................................................................................................... $

2015

0
361
(38)
323

1,063
586
1,476
3,125

2,764
2,538

The key assumptions considered in evaluating expected cash flows include probability of default and the amount of actual
prepayments after the acquisition date. Prepayments affect the estimated life of the loans and could change the amount of interest
income and principal expected to be collected. In reforecasting future estimated cash flows, credit loss expectations are adjusted as
necessary. There were no adjustments to forecasted cash flows that impacted the allowance for loan losses for the year ended
December 31, 2015.

The following tables present the activity in the allowance for loan losses by portfolio segment for years ended December 31, 2015,
2014 and 2013:

December 31, 2015
Allowance for loan losses

Commercial
Real Estate Commercial

Residential
Real Estate Consumer Unallocated Total

Beginning balance .......................................... $
Provision for loan losses .................................
Loans charged off ...........................................
Recoveries ......................................................
Total ending allowance balance ........................... $

2,676 $
857
(536)
130
3,127 $

1,420 $
234
(290)
9
1,373 $

1,689 $
354
(320)
122
1,845 $

1,663 $
1,776
(2,058 )
779
2,160 $

184 $
289
0
0
473 $

7,632
3,510
(3,204)
1,040
8,978

December 31, 2014
Allowance for loan losses

Commercial
Real Estate Commercial

Residential
Real Estate Consumer Unallocated Total

2,752 $
(50)
(151)
125
2,676 $

1,219 $
357
(185)
29
1,420 $

1,964 $
233
(585)
77
1,689 $

1,419 $
1,370
(2,213 )
1,087
1,663 $

214 $
(30)
0
0
184 $

7,568
1,880
(3,134)
1,318
7,632

December 31, 2013

Allowance for loan losses

Commercial
Real Estate Commercial

Residential
Real Estate Consumer Unallocated Total

3,392 $
(306)
(505)
171
2,752 $

1,453 $
(397)
(99)
262
1,219 $

1,569 $
674
(326)
47
1,964 $

951 $
1,369
(1,723 )
822
1,419 $

264 $
(50)
0
0
214 $

7,629
1,290
(2,653)
1,302
7,568

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment
and based on impairment method as of December 31, 2015 and 2014. The recorded investment in loans includes the unpaid principal
balance and unamortized loan origination fees and costs, but excludes accrued interest receivable which is not considered to be
material.

December 31, 2015
Allowance for loan losses:
Ending allowance balance attributable to loans:

Commercial
Real Estate Commercial

Residential
Real Estate Consumer Unallocated

Total

Individually evaluated for impairment ........... $
Collectively evaluated for impairment ...........
Acquired loans ................................................
Acquired with deteriorated credit quality .......
Total ending allowance balance ........................... $

429 $

2,698
0
0
3,127 $

5 $

1,337
0
31
1,373 $

63 $

1,782
0
0
1,845 $

0 $
2,160
0
0
2,160 $

0 $

473
0
0
473 $

497
8,450
0
31
8,978

Loans:

Loans individually evaluated for
impairment ...................................................
Loans collectively evaluated for
impairment ...................................................
Acquired loans ................................................
Acquired with deteriorated credit quality .......

Total ending loans balance ................................... $ 485,973 $

5,853

712

3,414

103

10,082

296,866
181,987
1,267

153,305

156,415
72,673
948

217,023
174,630
0

31,669
0
230,748 $ 395,067 $ 185,077 $

823,609
0
460,959
0
0
2,215
0 $1,296,865

December 31, 2014
Allowance for loan losses:
Ending allowance balance attributable to loans:

Commercial
Real Estate Commercial

Residential
Real Estate Consumer Unallocated Total

Individually evaluated for impairment ........... $
Collectively evaluated for impairment ...........
Total ending allowance balance ........................... $

514 $

2,162
2,676 $

272 $

1,148
1,420 $

88 $

1,601
1,689 $

0 $
1,663
1,663 $

0 $

184
184 $

874
6,758
7,632

7,139

1,940

3,425

12,597

215,434

118,210
120,150 $ 183,853 $ 137,276 $

137,183

180,428

0
651,255
0 $ 663,852

Loans:

Loans individually evaluated for
impairment ...................................................
Loans collectively evaluated for
impairment ...................................................

Total ending loans balance ................................... $ 222,573 $

The following tables present information related to impaired loans by class of loans as of and for year ended December 31, 2015, 2014
and 2013. The recorded investment in loans excludes accrued interest receivable due to immateriality.

December 31, 2015
With no related allowance recorded:

Commercial real estate

Unpaid Principal
Balance

Recorded
Investment

Allowance for
Loan Losses
Allocated

Average Recorded
Investment

Interest Income
Recognized

Owner occupied ................................................ $
Non-owner occupied .........................................
Commercial ............................................................
Residential real estate

1-4 family residential ........................................
Home equity lines of credit ...............................
Consumer ................................................................
Subtotal ...................................................................

With an allowance recorded:
Commercial real estate

Owner occupied ................................................
Non-owner occupied .........................................
Commercial ............................................................
Residential real estate

2,956 $
343
834

2,575
283
214
7,205

2,436 $
342
631

2,310
268
103
6,090

1,597
1,480
81

1,595
1,480
81

769
87
0
4,014
11,219 $

749
87
0
3,992
10,082 $

0 $
0
0

0
0
0
0

379
50
5

61
2
0
497
497 $

2,080 $
372
433

2,174
260
81
5,400

2,008
1,511
540

919
96
0
5,074
10,474 $

106
30
23

147
15
14
335

70
79
4

39
4
0
196
531

December 31, 2014
With no related allowance recorded:

Commercial real estate

Unpaid Principal
Balance

Recorded
Investment

Allowance for
Loan Losses
Allocated

Average Recorded
Investment

Interest Income
Recognized

With an allowance recorded:
Commercial real estate

2,448 $
391
531

2,421
476
185
6,452

2,318 $
391
511

2,156
251
93
5,720

2,882
1,548
1,444

2,882
1,548
1,429

944
90
0
6,908
13,360 $

928
90
0
6,877
12,597 $

0 $
0
0

0
0
0
0

446
68
272

85
3
0
874
874 $

1,860 $
653
1,273

1,804
263
166
6,019

2,104
1,570
818

1,207
113
2
5,814
11,833 $

46
20
22

79
13
4
184

94
81
2

41
5
0
223
407

December 31, 2013
With no related allowance recorded:

Commercial real estate

Unpaid Principal
Balance

Recorded
Investment

Allowance for
Loan Losses
Allocated

Average Recorded
Investment

Interest Income
Recognized

With an allowance recorded:
Commercial real estate

4,302 $
491
1,007

1,026
107
111
7,044

3,762 $
389
971

961
99
112
6,294

886
1,593
1,462

884
1,588
1,459

1,458
148
247
5,794
12,838 $

1,347
147
251
5,676
11,970 $

0 $
0
0

0
0
0
0

91
75
110

190
12
82
560
560 $

2,643 $
438
1,363

1,462
194
9
6,109

2,536
1,975
594

112
12
21
5,250
11,359 $

Cash basis interest income recognized and interest income recognized was materially equal for 2015, 2014 and 2013.

137
0
25

51
0
0
213

39
87
5

48
0
0
179
392

Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively
evaluated for impairment and individually classified impaired loans. The following table presents the recorded investment in
nonaccrual and loans past due over 90 days still on accrual by class of loans as of December 31, 2015 and 2014:

December 31, 2015

December 31, 2014

Loans Past Due
90 Days or More
Still Accruing

Nonaccrual

Originated loans:
Commercial real estate

Owner occupied ................................................................... $
Non-owner occupied ............................................................
Commercial ...............................................................................
Residential real estate

3,313 $
345
541

1-4 family residential ...........................................................
Home equity lines of credit..................................................

2,406
127

Consumer

Indirect .................................................................................
Direct ...................................................................................
Other ....................................................................................
Total originated loans ..................................................... $

Acquired loans:
Commercial real estate

Owner occupied ................................................................... $
Other ....................................................................................
Commercial ...............................................................................
Residential real estate

266
30
0
7,028 $

126 $
92
1,068

1-4 family residential ...........................................................
Home equity lines of credit..................................................

458
125

Consumer

0 $
0
73

336
112

297
3
24
845 $

18 $
0
0

467
7

3,315 $
41
1,645

2,742
139

90
36
0
8,008 $

0 $
0
0

0
0

Direct ...................................................................................
Total acquired loans ....................................................... $
Total loans ................................................................ $

161
2,030 $
9,058 $

50
542 $
1,387 $

0
0 $
8,008 $

44
0
0

195
40

193
0
1
473

0
0
0

0
0

0
0
473

The following tables present the aging of the recorded investment in past due loans as of December 31, 2015 and 2014 by class of
loans:

December 31, 2015
Originated loans:
Commercial real estate

30-59
Days Past
Due

60-89
Days Past
Due

90 Days or More
Past Due
and Nonaccrual

Total Past
Due

Loans Not
Past Due

Total

Owner occupied .............................................. $
Non-owner occupied .......................................
Other ...............................................................
Commercial ..........................................................
Residential real estate

34 $
0
112
0

1-4 family residential ......................................
Home equity lines of credit.............................

1,694
62

Consumer

Indirect ............................................................
Direct ..............................................................
Other ...............................................................
Total originated loans: ............................... $

2,059
311
13
4,285 $

Acquired loans:
Commercial real estate

669 $
0
0
276

0 $
0
0
0

402
5

525
5
10
947 $

0 $
0
0
2

3,313 $
345
0
614

3,347 $ 109,532 $ 112,879
139,169
50,671
157,127

345 138,824
112
50,559
614 156,513

2,742
239

4,838 174,376
40,917

306

179,214
41,223

563
33
24
7,873 $

131,427
3,147 128,280
17,473
17,124
4,508
4,461
13,105 $ 820,586 $ 833,691

349
47

144 $
0
92
1,068

813 $ 130,860 $ 131,673
28,045
23,536
73,621

28,045
23,444
72,275

0
92
1,346

1-4 family residential ......................................
Home equity lines of credit.............................

1,994
78

244
11

925
132

3,163 130,538
40,708

221

133,701
40,929

Consumer

Direct ..............................................................
Other ...............................................................
Total acquired loans .................................. $
Total loans ........................................... $

567
0
3,584 $
7,869 $

56
0
313 $
1,260 $

211
0
2,572 $
10,445 $

834
0

31,465
30,631
204
204
6,469 $ 456,705 $ 463,174
19,574 $ 1,277,291 $1,296,865

December 31, 2014
Originated loans:
Commercial real estate

30-59
Days Past
Due

60-89
Days Past
Due

90 Days or More
Past Due
and Nonaccrual

Total Past
Due

Loans Not
Past Due

Total

0 $
0
0
0

3,359 $
41
0
1,645

3,359 $ 71,272 $
41 121,872
26,029
0
1,645 118,505

74,631
121,913
26,029
120,150

1-4 family residential ......................................
Home equity lines of credit.............................

1,892
205

546
92

2,937
179

5,375 147,223
30,779

476

152,598
31,255

Consumer

Indirect ............................................................
Direct ..............................................................
Other ...............................................................
Total loans ........................................... $

2,136
108
17
4,358 $

406
18
6
1,068 $

283
36
1
8,481 $

124,579
2,825 121,754
9,071
8,909
3,626
3,602
13,907 $ 649,945 $ 663,852

162
24

Troubled Debt Restructurings:

Total troubled debt restructurings were $9.3 million and $8.1 million at December 31, 2015 and 2014 respectively. The Company has
allocated $528 thousand and $242 thousand of specific reserves to customers whose loan terms have been modified in troubled debt
restructurings as of December 31, 2015 and 2014. There were no commitments to lend additional amounts to borrowers with loans
that were classified as troubled debt restructurings at December 31, 2015 and $25 thousand in commitments at December 31, 2014.

During the years ending December 31, 2015, 2014 and 2013, the terms of certain loans were modified as troubled debt restructurings.
The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of
the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk;
a permanent reduction of the recorded investment in the loan; a permanent increase of the recorded investment in the loan due to a
protective advance to pay delinquent real estate taxes or advance new monies; a deferral of principal payments; or a legal concession.

Troubled debt restructuring modifications involved a reduction of the notes stated interest rate in the range of 0.38% to 11.51%. There
were also extensions of the maturity dates on these and other troubled debt restructurings in the range of fifteen months to 126 months.

The following tables present loans by class modified as troubled debt restructurings that occurred during the years ending
December 31, 2015, 2014 and 2013:

December 31, 2015

Troubled Debt Restructurings:
Originated loans:

Commercial real estate

Pre-
Modification
Outstanding
Recorded
Investment

Post-
Modification
Outstanding
Recorded
Investment

Number of

Loans

Owner occupied .....................................................................................
Commercial .................................................................................................
Residential real estate

1-4 family residential .............................................................................
Home equity lines of credit ....................................................................
Indirect .........................................................................................................
Consumer .....................................................................................................
Total originated loans .......................................................................

Acquired loans:

Commercial .................................................................................................
Total loans ...................................................................................

2
1

13
2
12
1
31

2
33

$
$

801
8

760
60
104
8
1,741

957
2,698

$
$

801
8

760
60
104
8
1,741

957
2,698

The troubled debt restructurings described above increased the allowance for loan losses by $101 thousand and resulted in charge offs
of $129 thousand during the year ended December 31, 2015.

December 31, 2014

Troubled Debt Restructurings:
Commercial real estate

Pre-
Modification
Outstanding
Recorded
Investment

Post-
Modification
Outstanding
Recorded
Investment

Number of

Loans

Owner occupied .....................................................................................
Non-owner occupied ..............................................................................

Residential real estate

1-4 family residential .............................................................................
Home equity lines of credit ....................................................................
Indirect .........................................................................................................
Consumer .....................................................................................................
Total loans ...................................................................................

1
2

21
5
2
1
32

303
408

1,042
128
37
11
1,929

316
408

1,059
128
37
11
1,959

The troubled debt restructurings described above increased the allowance for loan losses by $11 thousand and resulted in charge offs
of $42 thousand during the year ended December 31, 2014.

December 31, 2013

Troubled Debt Restructurings:
Commercial real estate

Pre-
Modification
Outstanding
Recorded
Investment

Post-
Modification
Outstanding
Recorded
Investment

Number of

Loans

1-4 family residential .............................................................................
Home equity lines of credit ....................................................................
Indirect .........................................................................................................
Consumer .....................................................................................................
Total loans ...................................................................................

2
5

4
5
24
1
41

226
649

131
214
188
1
1,409

239
682

98
214
188
1
1,422

The troubled debt restructurings described above increased the allowance for loan losses by $66 thousand and resulted in charge offs
of $50 thousand during the year ended December 31, 2013.

There was one commercial real estate loan for $40 thousand, one residential real estate loan for $1 thousand and one home equity line
of credit for $11 thousand modified as troubled debt restructurings for which there were payment defaults within twelve months
following the modification during the year December 31, 2015. All three loans were past due at December 31, 2015. There was no
effect on the provision for loan losses as a result of this default during 2015.

There were four residential real estate loans for which there were payment defaults within twelve months following the modification
of the troubled debt restructuring during the year ending December 31, 2014. Only one of the four loans was past due at December
31, 2014. There was no effect on the provision for loan losses as a result of this default during 2014.

There were two commercial loans for $204 thousand, one commercial real estate loan for $205 thousand and one residential real estate
loan for $35 thousand modified as troubled debt restructuring for which there were payment defaults within twelve months following
the modification during the year ending December 31, 2013. All four loans were past due at December 31, 2013. There was one
indirect loan modified as troubled debt restructuring for which there were payment defaults within twelve months following the
modification during the year ending December 31, 2013. The loan was not past due at December 31, 2013. There was no additional
provision or any impact to the allowance for losses associated with these loans.

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt
such as: current financial information, historical payment experience, credit documentation, public information, and current economic
trends, among other factors. The Company establishes a risk rating at origination for all commercial loan and commercial real estate
relationships. For relationships over $750 thousand management monitors the loans on an ongoing basis for any changes in the
borrower’s ability to service their debt. Management also affirms the risk ratings for the loans and leases in their respective portfolios
on an annual basis. The Company uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If
left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the
institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose an
institution to sufficient risk to warrant adverse classification.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the
obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the
liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the
deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added
characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and
values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass
rated loans.

Based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

December 31, 2015
Originated loans:
Commercial real estate

Pass

Special
Mention

Sub
standard

Doubtful Not Rated

Total

Owner occupied ............................................... $ 107,222 $
Non-owner occupied ........................................ 135,847
50,376
Other ................................................................
Commercial ........................................................... 154,215

Total originated loans ................................. $ 447,660 $

1,069 $
461
0
939
2,469 $

4,588 $
2,861
295
1,973
9,717 $

Acquired loans:
Commercial real estate

Owner occupied ............................................... $ 130,028 $
Non-owner occupied ........................................
Other ................................................................
Commercial ...........................................................

26,141
22,843
69,674

Total acquired loans ................................... $ 248,686 $
Total loans ............................................ $ 696,346 $

0 $

1,340
476
635
2,451 $
4,920 $

1,645 $
564
217
3,312
5,738 $
15,455 $

0 $
0
0
0
0 $

0 $
0
0
0
0 $
0 $

0 $ 112,879
139,169
0
50,671
0
0
157,127
0 $ 459,846

0 $ 131,673
28,045
0
23,536
0
0
73,621
0 $ 256,875
0 $ 716,721

December 31, 2014
Commercial real estate

Pass

Special
Mention

Sub
standard

Doubtful Not Rated

Total

Owner occupied ............................................... $
Non-owner occupied ........................................ 115,159
25,710
Other ................................................................
Commercial ........................................................... 114,409

66,036 $

Total loans ............................................ $ 321,314 $

2,534 $
3,760
0
1,566
7,860 $

6,061 $
2,994
319
4,175
13,549 $

0 $
0
0
0
0 $

74,631
0 $
121,913
0
26,029
0
0
120,150
0 $ 342,723

The Company considers the performance of the loan portfolio and its impact on the allowance for loan losses. For residential,
consumer and indirect loan classes, the Company also evaluates credit quality based on the aging status of the loan, which was
previously presented, and by payment activity.

The following table presents the recorded investment in residential, consumer and indirect auto loans based on payment activity.
Nonperforming loans are loans past due 90 days and still accruing interest and nonaccrual loans.

December 31, 2015
Originated loans:

Residential Real Estate

1-4 Family
Residential

Home Equity Lines
of Credit

Consumer

Indirect

Direct

Other

Performing ............................................................... $
Nonperforming ........................................................
Total originated loans ......................................... $

176,472 $
2,742
179,214 $

40,984 $
239
41,223 $

130,864 $
563
131,427 $

17,440 $
33
17,473 $

Acquired loans:

Performing ...............................................................
Nonperforming ........................................................
Total acquired loans ........................................... $
Total loans .................................................... $

132,776
925
133,701 $
312,915 $

40,797
132
40,929 $
82,152 $

0
0
0 $
131,427 $

31,254
211
31,465 $
48,938 $

4,484
24
4,508

204
0
204
4,712

December 31, 2014

Residential Real Estate

Consumer

1-4 Family
Residential

Home Equit
y Lines of
Credit

Indirect

Direct

Other

Performing ............................................................... $
Nonperforming ........................................................
Total ................................................................... $

149,661 $
2,937
152,598 $

31,076 $
179
31,255 $

124,296
283
124,579

9,035 $
36
9,071 $

3,625
1
3,626

NOTE 5 – LOAN SERVICING

The Company began servicing loans upon the acquisition of First National Bank’s servicing portfolio in June 2015. Mortgage loans
serviced for others are not reported as assets. The principal balances of these loans at year-end are as follows:

Mortgage loan portfolio serviced for:

FHLMC .................................................................................................................................................. $

68,605

2015

Custodial escrow balances maintained in connection with serviced loans were $584 thousand at December 31, 2015.

Activity for mortgage servicing rights since the acquisition date of June 18, 2015 is as follows:

Servicing rights:

Beginning balance ....................................................................................................................................... $
Additions .....................................................................................................................................................
Amortization to expense ..............................................................................................................................
Ending balance ............................................................................................................................................ $

2015

347
166
(60)
453

There was no valuation allowance required for mortgage servicing rights at December 31, 2015.

NOTE 6 - FAIR VALUE

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There
are three levels of inputs that may be used to measure fair values:

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as
of the measurement date.

Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities;
quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market
data.

Level 3 – Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market
participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:

Investment Securities

The Company used a third party service to estimate fair value on available for sale securities on a monthly basis. This service provider
is considered a leading evaluation pricing service for U.S. domestic fixed income securities. They subscribe to multiple third-party
pricing vendors, and supplement that information with matrix pricing methods. The fair values for investment securities are
determined by quoted market prices in active markets, if available (Level 1). For securities where quoted prices are not available, fair
values are calculated based on quoted prices for similar assets in active markets, quoted prices for similar assets in markets that are not
active or inputs other than quoted prices, which provide a reasonable basis for fair value determination. Such inputs may include
interest rates and yield curves, volatilities, prepayment speeds, credit risks and default rates. Inputs used are derived principally from
observable market data (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values
are calculated using discounted cash flows or other market indicators (Level 3). The fair values of Level 3 investment securities are
determined by using unobservable inputs to measure fair value of assets for which there is little, if any market activity at the
measurement date, using reasonable inputs and assumptions based on the best information at the time, to the extent that inputs are
available without undue cost and effort. For the years ended December 31, 2015 and 2014 the fair value of Level 3 investment
securities was immaterial.

Derivative Instruments

The fair values of derivative instruments are based on valuation models using observable market data as of the measurement date
(Level 2).

Impaired Loans

At the time loans are considered impaired, collateral dependent impaired loans are valued at the lower of cost or fair value and non-
collateral dependent loans are valued based on discounted cash flows. Impaired loans carried at fair value generally receive specific
allocations of the allowance for loan losses. For collateral dependent loans fair value is commonly based on recent real estate
appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and
the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the
comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of
the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s
financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market
conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a
Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Other Real Estate Owned

Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a
new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair values are
commonly based on recent real estate appraisals. These appraisals may use a single valuation approach or a combination of
approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the
independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually
significant and typically result in a Level 3 classification of the inputs for determining fair value.

Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers (for
commercial and commercial real estate properties) or certified residential appraisers (for residential properties) whose qualifications
and licenses have been reviewed and verified by the Company. Once received, a member of the Appraisal Department reviews the
assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with via independent data
sources such as recent market data or industry-wide statistics. On an annual basis, the Company compares the actual selling price of
collateral that has been sold to the most recent appraised value to determine what adjustments should be made to appraisals to arrive at
fair value.

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

Fair Value Measurements at December 31, 2015 Using:

Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)

Carrying
Value

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Financial Assets

Investment securities available-for sale

U.S Treasury and U.S. government sponsored entities .......... $
State and political subdivisions ..............................................
Corporate bonds .....................................................................
Mortgage-backed securities-residential ..................................
Collateralized mortgage obligations .......................................
Small Business Administration ..............................................
Equity securities .....................................................................
Total investment securities ............................................... $
Loan yield maintenance provisions ............................................. $

11,106 $

138,723
1,134
196,587
27,165
19,299
298
394,312 $
789 $

0 $
0
0
0
0
0
298
298
0

$
$

11,106 $

138,723
1,134
196,572
27,165
19,299
0

393,999 $
789 $

Financial Liabilities

Interest rate swaps ....................................................................... $

789 $

0
0
0
15
0
0
0
15
0

Fair Value Measurements at December 31, 2014 Using:

Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)

Carrying
Value

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Financial Assets

Investment securities available-for sale

24,821 $
91,881
931
224,362
25,175
22,419
240
389,829 $
638 $

0 $
0
0
0
0
0
240
240
0

$
$

24,821 $
91,881
931
224,352
25,175
22,419
0

389,579 $
638 $

Financial Liabilities

Interest rate swaps ....................................................................... $

638 $

0
0
0
10
0
0
0
10
0

There were no significant transfers between Level 1 and Level 2 during 2015 or 2014.

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs
(Level 3) for the year ended December 31:

Investment Securities Available-for-sale (Level 3)
2014

2013

2015

Beginning Balance ............................................................................................ $

Total unrealized gains or losses:

Included in other comprehensive income ...............................................
Repayments .................................................................................................
Acquired and/or purchased ..........................................................................
Ending Balance ................................................................................................. $

0
(1)
6
15

0
0
0
10

0
(1)
0
10

There is no impact to earnings as a result of fair value measurements on items valued on a recurring basis, using level 3 inputs.

Assets Measured on a Non-Recurring Basis
Assets measured at fair value on a non-recurring basis are summarized below:

Fair Value Measurements
at December 31, 2015 Using:

Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)

Carrying
Value

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Financial Assets

Impaired loans

Commercial real estate

Owner occupied ................................................................ $
Commercial ............................................................................
1–4 family residential .............................................................
Consumer ...............................................................................

1,448 $
1,514
42
13

0
0
0
0

0 $
0
0
0

1,448
1,514
42
13

Fair Value Measurements
at December 31, 2014 Using:

Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)

Carrying
Value

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Financial Assets

Impaired loans

Commercial ............................................................................ $
1–4 family residential .............................................................

807 $
63

Other real estate owned

Commercial real estate ...........................................................

0
0

0 $
0

807
63

Impaired loans carried at fair value that are measured for impairment using the fair value of the collateral had a carrying amount of
$3.4 million, with a valuation allowance of $383 thousand at December 31, 2015, resulting in an additional provision for loan losses
of $270 thousand for the year ending December 31, 2015. At December 31, 2014, impaired loans had a carrying amount of $988
thousand, with a valuation allowance of $117 thousand. Loans measured at fair value throughout the year resulted in an additional
provision for loan losses of $992 thousand for the year ending December 31, 2014. Excluded from the fair value of impaired loans, at
December 31, 2015 and 2014, discussed above are $2.9 million and $4.2 million of loans with specific allowance amounts allocated
and classified as troubled debt restructurings and measured using the present value of discounted cash flows, which are not carried at
fair value.

Impaired commercial real estate loans, both owner occupied and non-owner occupied are valued by independent external appraisals.
These external appraisals are prepared using the sales comparison approach and income approach valuation techniques. Management
makes subsequent unobservable adjustments to the impaired loan appraisals. Impaired loans other than commercial real estate and
other real estate owned are not considered material.

The Company had no related write downs during the year ended December 31, 2015. At December 31, 2014, other real estate owned
measured at fair value less costs to sell, had a net carrying amount of $45 thousand. During the year ended December 31, 2014 the
Company charged down one property reflecting an updated appraisal which resulted in a write-down of $5 thousand.

The following table presents quantitative information about level 3 fair value measurements for financial instruments measured at fair
value on a non-recurring basis at year ended 2014 and 2013:

December 31, 2015
Impaired loans

Fair
value

Valuation
Technique(s)

Unobservable
Input(s)

Range
Weighted Average

Adjustment for
differences between
earning multiplier

Offer price

Offer price
Adjustment for
differences between
earning multiplier
Adjustment for
differences between
comparable sales
Adjustment for
differences between
comparable sales

(49.42%) - 40.89%
35.33%
1.01%
1.01%
(3.01%)
(3.01%)

(29.77%)
(29.77%)

(18.32%) - 24.16%
(14.02%)

(12.86%) - 11.97%
(5.79%)

Commercial real estate ......................................................

701

Commercial .......................................................................

252

747

Income approach
Quoted price for
loan relationship
Quoted price for
loan relationship

1,262

Income approach

Residential .........................................................................

Consumer ..........................................................................

Sales
comparison

December 31, 2014
Impaired loans

Fair value

Valuation
Technique(s)

Unobservable
Input(s)

Range
Weighted Average

Commercial real estate .....................................................

1,237

Sales
comparison

116

Income
approach

Commercial ......................................................................

807

Residential ........................................................................

Other real estate owned ....................................................

Sales
comparison

Adjustment for
differences
between
comparable sales
Adjustment for
differences in net
operating income
Adjustment for
differences
between
comparable sales
Adjustment for
differences
between
comparable sales
Adjustment for
differences
between
comparable sales

-41.59% - 77.25%
(-7.82%)

-13.64% - 12.93%
(-5.96%)

(27.43%) - 32.86%
9.96%

(18.32%) - 24.16%
(14.02%)

(12.86%) - 11.97%
(5.79%)

Fair Value of Financial Instruments

The carrying amounts and estimated fair values of financial instruments measured on a recurring basis and not previously presented, at
December 31, 2015 and December 31, 2014 are as follows:

Fair Value Measurements at December 31, 2015 Using:

Carrying
Amount

Level 1

Level 2

Level 3

Total

Financial assets

Cash and cash equivalents ............................................... $
56,014 $
Restricted stock ...............................................................
9,384
1,769
Loans held for sale ...........................................................
Loans, net ........................................................................ 1,287,887
Mortgage servicing rights ................................................
453
5,158
Accrued interest receivable..............................................

22,500 $
n/a
0
0
0
0

Financial liabilities

Deposits ........................................................................... 1,409,047
225,832
Short-term borrowings .....................................................
22,153
Long-term borrowings .....................................................
445
Accrued interest payable..................................................

1,164,506
0
0
26

33,514
n/a
1,813
0
453
2,011

241,909
225,832
22,306
419

0 $

n/a
0
1,296,075
0
3,147

56,014
n/a
1,813
1,296,075
453
5,158

0
0
0
0

1,406,415
225,832
22,306
445

Fair Value Measurements at December 31, 2014 Using:

Carrying
Amount

Level 1

Level 2

Level 3

Total

Financial assets

Cash and cash equivalents ............................................... $
Restricted stock ...............................................................
Loans held for sale ...........................................................
Loans, net ........................................................................
Accrued interest receivable..............................................

27,428 $
4,224
511
656,220
3,237

11,410 $
n/a
0
0
0

Financial liabilities

Deposits ...........................................................................
Short-term borrowings .....................................................
Long-term borrowings .....................................................
Accrued interest payable..................................................

915,703
69,136
18,381
402

708,752
0
0
2

16,018
n/a
523
0
1,645

206,708
69,136
18,837
400

0 $

n/a
0
658,993
1,592

0
0
0
0

27,428
n/a
523
658,993
3,237

915,460
69,136
18,837
402

The methods and assumptions used to estimate fair value, not previously described, are described as follows:

Cash and Cash Equivalents: The carrying amounts of cash and short-term instruments approximate fair values and are classified as
either Level 1 or Level 2. The Company has determined that cash on hand and non-interest bearing due from bank accounts are Level
1 whereas interest bearing federal funds sold and other are Level 2.

Restricted Stock: It is not practical to determine the fair value of restricted stock due to restrictions placed on its transferability.

Loans: Fair values of loans, excluding loans held for sale, are estimated as follows: For variable rate loans that reprice frequently and
with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification. Fair values for
other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms
to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value
as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.

Loans held for sale: The fair value of loans held for sale is estimated based upon the average of binding contracts and quotes from
third party investors resulting in a Level 2 classification.

Loan servicing rights: Fair value is based on a valuation model that calculates the present value of estimated future net servicing
income. The valuation model utilizes interest rate, prepayment speed and default rate assumptions that market participants would use
in estimating future net servicing income (Level 2).

Accrued Interest Receivable/Payable: The carrying amounts of accrued interest receivable and payable approximate fair value
resulting in a Level l, Level 2, or Level 3 classification. The classification is the result of the association with securities, loans and
deposits.

Deposits: The fair values disclosed for demand deposits – interest and non-interest checking, passbook savings, and money market
accounts—are, by definition, equal to the amount payable on demand at the reporting date resulting in a Level 1 classification. The
carrying amounts of variable rate certificates of deposit approximate their fair values at the reporting date resulting Level 2
classification. Fair value for fixed rate certificates of deposit are estimated using a discounted cash flows calculation that applies
interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting
in a Level 2 classification.

Short-term Borrowings: The carrying amounts of federal funds purchased, borrowings under repurchase agreements, and other short-
term borrowings, generally maturing within ninety days, approximate their fair values resulting in a Level 2 classification.

Long-term Borrowings: The fair values of the Company’s long-term borrowings are estimated using discounted cash flow analyses
based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

Off-balance Sheet Instruments: The fair value of commitments is not considered material.

Year-end premises and equipment were as follows:

NOTE 7—PREMISES AND EQUIPMENT

Land ...................................................................................................................................... $
Buildings ...............................................................................................................................
Furniture, fixtures and equipment .........................................................................................
Leasehold Improvements ......................................................................................................

Less accumulated depreciation .............................................................................................
NET BOOK VALUE $

2015
5,833 $
24,724
13,485
450
44,492
(20,302 )
24,190 $

2014
3,143
20,842
11,651
247
35,883
(18,834)
17,049

Depreciation expense was $1.5 million for year ended December 31, 2015, $1.1 million for year ended December 31, 2014 and $1.2
million for year ended December 31, 2013.

During June 2015 the Company added 14 branches, mostly in Wayne and Medina Counties, as part of the NBOH acquisition and in
September 2015, 4 branches, mostly in Columbiana County, as part of the Tri-State acquisition. All fixed assets were recorded at their
fair market value.

During 2014, the Company purchased property located adjacent to its Canfield branch on South Broad Street in Canfield, for $395
thousand to house some investment, insurance and mortgage lending activities. The building was put into service in June 2014.

The Company leases certain branch properties under operating leases. Rent expense was $332, $323, and $302 thousand for 2015,
2014 and 2013. In addition to rent expense, under the leases, common area maintenance and property taxes are paid and the amount
can fluctuate according to the costs incurred. Rent commitments, before considering renewal options that generally are present, were
as follows:

2016 .................................................................................................................................................................. $
2017 ..................................................................................................................................................................
2018 ..................................................................................................................................................................
2019 ..................................................................................................................................................................
2020 ..................................................................................................................................................................
Thereafter ..........................................................................................................................................................

TOTAL $

307
319
306
303
267
1,380
2,882

NOTE 8—GOODWILL AND INTANGIBLE ASSETS

Goodwill associated with the Company’s purchase of NBOH in June 2015, Tri-State in October 2015, NAI in July of 2013 and Trust
in 2009 totaled $35.1 million at December 31, 2015 and $5.6 million at December 31, 2014. The NBOH, Tri-State and NAI
acquisitions are more fully described in Note 2. Impairment exists when a reporting unit’s carrying value of goodwill exceeds its fair
value, which is determined through a two-step impairment test. Step 1 includes the determination of the carrying value of the reporting
units, including the existing goodwill and intangible assets, and estimating the fair value of the reporting units. After our annual
impairment analysis as of September 30, 2015, the Company determined the fair value of all goodwill exceeded its carrying amount.
After the annual impairment testing as of September 30, 2014 the fair value of NAI was less than its carrying value. When the
carrying amount of a reporting unit exceeds its fair value, a second step to the impairment test is required. The analysis indicated that
the Step 2 analysis was necessary for the NAI reporting unit. Step 2 of the goodwill impairment test is performed to measure the
impairment loss. Step 2 requires that the implied fair value of the reporting unit’s goodwill be compared to the carrying amount of
that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment
loss shall be recognized in an amount equal to that excess. After performing Step 2 it was determined that the implied value of
goodwill was less than the carrying costs, resulting in an impairment charge of $763 thousand for the year ended December 31, 2014.
During the initial valuation of NAI the future income projections were not fully attained. The fair value of the reporting unit was
determined based on a discounted cash flow model. Additionally, the $763 thousand impairment was offset with an equal reduction of
the future payment liability associated with the purchase. The two adjustments offset resulting in a zero impact to the Company’s
consolidated statements of income for year ended December 31, 2014.

Other Intangibles
Core deposit intangible assets associated with the Company’s purchases of NBOH and Tri-State totaled $5.6 million.

Other intangible assets were as follows at year end:

2015

2014

Gross
Carrying
Amount

Accumulated

Amortization

Gross
Carrying
Amount

Accumulated
Amortization

Other intangible:

Customer relationship intangibles ............................................... $
Non-compete contracts ................................................................
Trade Name .................................................................................
Core deposit intangible ................................................................
Total .................................................................................................. $

5,970 $
370
190
5,582
12,112 $

(3,585 ) $
(325 )
(65 )
(316 )
(4,291 ) $

5,970 $
370
190
0
6,530 $

(2,972)
(295)
(41)
0
(3,308)

Aggregate amortization expense was $983 thousand, $767 thousand, and $624 thousand for 2015, 2014, and 2013.

Estimated amortization expense for each of the next five years:

TOTAL ........................................................................................................................................................ $

1,293
1,207
1,123
1,048
973
2,177
7,821

Time deposits of $250 thousand or more were $39.6 million and $26.3 million at year-end 2015 and 2014.

NOTE 9 - INTEREST BEARING DEPOSITS

Following is a summary of scheduled maturities of certificates of deposit during the years following December 31, 2015:

2016 ...........................................................................................................................
2017 ...........................................................................................................................
2018 ...........................................................................................................................
2019 ...........................................................................................................................
2020 ...........................................................................................................................
Thereafter ...................................................................................................................

Following is a summary of year-end interest bearing deposits:

Demand ...................................................................................................................... $
Money Market ............................................................................................................
Savings .......................................................................................................................
Certificates of Deposit ...............................................................................................

TOTAL $

2015
327,434 $
293,209
234,672
239,082
1,094,397 $

108,493
39,007
18,528
27,827
37,494
7,733
239,082

2014
126,456
266,040
131,559
206,951
731,006

NOTE 10 - SHORT-TERM BORROWINGS

The Bank has short-term advances from the Federal Home Loan Bank that had maturity dates of less than one year at the time of the
advance. All balances are due within one year and can be renewed at the time of maturity. Federal Home Loan Bank advances are
secured by pledgings described in the following Long-Term Borrowings footnote. Balances at year end were as follows:

2015
Weighted
Average

2014
Weighted
Average

Amount

Rate

Amount

Rate

Repurchase advance with a rate of .39% at December 31, 2015 ....... $
Cash management advance with rates from .26% to .45% at
December 31, 2015 and 2014 .........................................................
Total advances .................................................................................. $

100,000

0.39 %

50,000
150,000

0.39 % $
0.39 % $

10,000
10,000

0.26%
0.26%

Securities sold under repurchase agreements are secured by the Bank’s holdings of debt securities issued by U.S. government
sponsored entities and agencies with a carrying amount of $79.3 million and $61.7 million at year ended 2015 and 2014.

Repurchase agreements are financing arrangements that mature within 89 days and usually overnight. Under the agreements,
customers agree to maintain funds on deposit with the Bank and in return acquire an interest in a pool of securities pledged as
collateral against the funds. The securities are held in segregated safekeeping accounts at the Federal Reserve Bank and Farmers Trust
Company. Information concerning securities sold under agreements to repurchase is summarized as follows:

Average balance during the year ...................................................................... $
Average interest rate during the year ...............................................................
Maximum month-end balance during the year ................................................. $
Weighted average year-end interest rate ..........................................................
Balance at year-end .......................................................................................... $

2015
71,779 $
0.07%
89,574 $
0.06%
75,482 $

2014
71,573 $
0.04 %
78,972 $
0.06 %
58,786 $

2013
90,951
0.04%
100,462
0.06%

75,267

The following table provides a disaggregation of the obligation by class of collateral pledged for short-term financing obtained
through the sales of repurchase agreements:

Overnight and continuous repurchase agreements

U.S. Treasury and U.S. government sponsored entities............................................................................... $
State and political subdivisions ...................................................................................................................
Mortgage-backed securities - residential .....................................................................................................
Collateralized mortgage obligations ............................................................................................................
Total borrowings ............................................................................................................................................... $

2015

5,276
2,640
60,391
7,175
75,482

Management believes the risks associated with the agreements are minimal and in the case of collateral decline the company has
additional investment securities available to adequately pledge as guarantees for the repurchase agreements.

The Bank has access to lines of credit amounting to $25 million at two major domestic banks that are below prime rate. The lines and
terms are periodically reviewed by the banks and are generally subject to withdrawal at their discretion. There were no borrowings
under these lines at December 31, 2015 and 2014.

Farmers National Banc Corp has two unsecured revolving lines of credit for $6.5 million. The lines can be renewed annually. The
lines have interest rates of prime with floors of 3.5% and 4.5%. The outstanding balance on the two lines was $350 thousand at
December 31, 2015 and 2014. The interest rate on the outstanding balance at December 31, 2015 and 2014 was 4.5%.

At year end, long-term advances from the Federal Home Loan Bank were as follows:

NOTE 11 - LONG-TERM BORROWINGS

2015

Weighted
Average

2014

Weighted
Average

Amount

Rate

Amount

Rate

Fixed-rate constant payment advances, at rates from .61%
to 4.88% at December 31, 2015 and 2014 ..................................... $
Convertible and putable fixed-rate advances, at rates from 2.82%
to 4.45% at December 31, 2015 and 2014 .....................................
Total advances .................................................................................. $

15,054

5,000
20,054

1.24 % $

4.45 %
2.04 % $

8,381

1.72%

10,000
18,381

3.64%
2.76%

The Bank added $8 million in long-term advances as part of the two acquisitions during the year ended December 31, 2015. The Bank
also has a total of $5 million in putable FHLB fixed-rate advances. Should the FHLB elect the put, the Bank is required to repay the
advance on that date without penalty.

Short-term and long-term Federal Home Loan Bank advances are secured by a blanket pledge of residential mortgage loans totaling
$237.8 million and $110.3 million at year end 2015 and 2014. Based on this collateral the Bank is eligible to borrow an additional
$63.4 million at year end 2015. Each advance is subject to a prepayment penalty if paid prior to its maturity date.

Scheduled payments of long-term FHLB advances are as follows:

Maturing in:
2016 .................................................................................................................................................................. $
2017 ..................................................................................................................................................................
2018 ..................................................................................................................................................................
2019 ..................................................................................................................................................................
2020 ..................................................................................................................................................................
Thereafter ..........................................................................................................................................................

TOTAL $

7,247
8,089
1,008
931
860
1,919
20,054

The Company added a special purpose entity to hold $2.1 million in Trust Preferred Debenture as part of the Tri-State acquisition. The
debt has a floating rate that is determined quarterly based on the three-month LIBOR. At December 31, 2015 the interest rate was
2.2%. These securities can be redeemed at any quarter-end. Final maturity of the Trust Preferred Debenture is December 15, 2036.
The Company has the $2.1 million note payable recorded in the long-term borrowings section of the Consolidated Balance Sheets.

NOTE 12 - COMMITMENTS AND CONTINGENT LIABILITIES

Some financial instruments, such as loan commitments, credit lines, letters of credit and overdraft protection, are issued to meet
customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in
the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance-sheet risk to credit
loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to
make such commitments as are used for loans, including obtaining collateral at exercise of the commitment.

The contractual amounts of financial instruments with off-balance-sheet risk at year end were as follows:

Commitments to make loans ................................... $
Unused lines of credit .............................................. $

100 $
64,338 $

4,836 $
204,889 $

Fixed Rate

2015
Variable Rate

Fixed Rate

2014
Variable Rate
1,881
39,205

471 $
108,382 $

Commitments to make loans are generally made for periods of 30 days or less. There is one fixed rate loan commitment for 2015 that
has an interest rate of 3.89% and matures within fifteen years. Variable rate loan commitments have interest rates that at December 31,
2015 ranged from 4.25% to 5.00%. The fixed rate loan commitments for 2014 have interest rates that range from 4.00% to 4.63% and
mature within thirty years. Fixed rate unused lines of credit have interest rates ranging from 0.20% to 21.90% at December 31, 2015
and 2.11% to 13.50% at December 31, 2014.

Standby letters of credit are considered financial guarantees. The standby letters of credit have a contractual value of $5.6 million at
December 31, 2015 and $5.2 million at December 31, 2014. The carrying amount of these items on the balance sheet is not material.

NOTE 13 - STOCK BASED COMPENSATION

During 2012, the Company, with the approval of shareholders, created the 2012 Equity Incentive Plan (the “Plan”). The Plan permits
the award of up to 500 thousand shares to the Company’s directors and employees to promote the Company’s long-term financial
success by motivating performance through long-term incentive compensation and to better align the interests of its employees with
those of its shareholders. There were restricted stock awards, under the Plan, totaling 279,023 shares during 2015 and 46,957 shares
during 2014. The restricted stock awards were granted with a fair value price equal to the market price of the Company’s common
stock at the date of grant. Expense recognized for the Plan was $486 thousand for the year ended 2015 and $116 thousand for 2014.
As of December 31, 2015, there was $1.9 million of total unrecognized compensation expense related to the nonvested shares granted
under the Plan. The remaining cost is expected to be recognized over the next 2.7 years. There were no shares awarded or expense
recognized during the year ended December 31, 2013 under the Plan.

The following is the activity under the Plan during the years ended December 31, 2015 and 2014:

2015

2014

Weighted
Average
Grant Date
Fair Value

7.39
7.98
0
7.88
7.90

Weighted
Average
Grant Date
Fair Value
0
7.39
0
0.00
7.39

Units

0 $
46,957
0
0
46,957 $

Units

46,957 $
279,023
0
(5,000)
320,980 $

Beginning balance .............................................................................
Granted ..............................................................................................
Vested ...............................................................................................
Forfeited ............................................................................................
Ending balance ..................................................................................

The Company’s Stock Option Plan, which was shareholder-approved and has since expired, permitted the grant of share options to its
directors, officers and employees for up to 375 thousand shares of common stock. Option awards were granted with an exercise price
equal to the market price of the Company’s common stock at the date of grant; those option awards have vesting periods of 5 years
and have 10-year contractual terms. During the first quarter of 2014 the last remaining 5,000 outstanding options were exercised and
the Company satisfied these options with the reissuance of treasury shares.

There were no options granted under the Stock Option Plan during 2015, 2014 or 2013.

NOTE 14 - REGULATORY MATTERS

Banks and bank holding companies are subject to various regulatory capital requirements administered by the federal banking
agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures
of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. The new minimum capital
requirements associated with the Basel Committee on capital and liquidity regulation (Basel III) are being phased in and began on
January 1, 2015 and will continue through January 1, 2019. Capital amounts and classifications are also subject to qualitative
judgments by regulators. Failure to meet capital requirements can initiate regulatory action by regulators that, if undertaken, could
have a direct material effect on the financial statements. Management believes as of December 31, 2015, the Company and Bank meet
all capital adequacy requirements to which they are subject.

The FDIC and other federal banking regulators revised the risk-based capital requirements applicable to bank holding companies and
insured depository institutions, including the Company and the Bank, to make them consistent with agreements that were reached by
the Basel Committee on Banking Supervision (“Basel III”).

The common equity tier 1 capital, tier 1 capital and total capital ratios are calculated by dividing the respective capital amounts by
risk-weighted assets. The leverage ratio is calculated by dividing tier 1 capital by adjusted average total assets.

Basel III limits capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital
conservation buffer” consisting of 2.5% of common equity tier 1 capital, tier 1 capital and total capital to risk-weighted assets in
addition to the amount necessary to meet minimum risk-based capital requirements. The capital conservation buffer will be phased in
beginning January 1, 2016 and increasing each year until fully implemented at 2.5% on January 1, 2019. Currently Basel III requires
the Company and Bank to maintain (i) a minimum ratio of common equity tier 1 capital to risk-weighted assets of at least 4.5%, (ii) a
minimum ratio of tier 1 capital to risk-weighted assets of at least 6.0%, (iii) a minimum ratio of total capital to risk-weighted assets of
at least 8.0% and (iv) a minimum leverage ratio of at least 4.0%.

Prior to January 1, 2015, federal and state regulatory agencies required the Company and the Bank to maintain minimum Tier 1 and
total capital to risk-weighted assets of 4.0% and 8.0%, respectively, and Tier 1 leverage ratio of at least 4.0%.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial
condition. If only adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital
distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At year-end 2015 and 2014, the
most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective
action. There are no conditions or events since that notification that management believes have changed the institution’s category.

Dividend Restrictions: The Company’s principal source of funds for dividend payments is dividends received from the Bank, Trust
and NAI. The Bank and Trust are subject to the dividend restrictions set forth by the Comptroller of the Currency and Ohio
Department of Commerce – Division of Financial Institutions, respectively. The respective regulatory agency 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.
During 2016, the Bank could declare dividends on any 2016 net profits retained above $3.9 million at the date of the dividend
declaration. In order to practice trust powers, Trust must maintain a minimum capital of $3 million. The Trust would also be able to,
without prior approval, declare dividends on any 2016 net profits retained to the date of the dividend declaration.

Actual and required capital amounts and ratios are presented below at year-end:

2015
Common equity tier 1 capital ratio

Actual

Amount Ratio

Requirement For Capital
Adequacy Purposes:
Ratio

Amount

To be Well Capitalized
Under Prompt Corrective
Action Provisions:
Ratio

Amount

Consolidated .......................................................... $ 165,451
Bank ....................................................................... 157,396

11.59% $
11.08%

64,245
63,938

4.5 % N/A
4.5 % $ 92,354

N/A

6.5%

Total risk based capital ratio

Consolidated .......................................................... 176,571
Bank ....................................................................... 166,374

12.37% 114,214
11.71% 113,667

8.0 % N/A
8.0 % 142,084

N/A

10.0%

Tier I risk based capital ratio

Consolidated .......................................................... 167,550
Bank ....................................................................... 157,396

11.74%
11.08%

85,660
85,250

6.0 % N/A
6.0 % 113,667

N/A

8.0%

Tier I leverage ratio

Consolidated .......................................................... 167,550
Bank ....................................................................... 157,396

9.21%
8.65%

72,803
72,770

4.0 % N/A
4.0 %

90,963

N/A

5.0%

2014
Total risk based capital ratio

Consolidated .......................................................... $ 121,340
Bank ....................................................................... 114,321

16.48% $
15.56%

58,523
58,773

8.0 % N/A
8.0 % $ 73,466

N/A

10.0%

Tier I risk based capital ratio

Consolidated .......................................................... 113,654
Bank ....................................................................... 106,689

15.43%
14.52%

29,262
29,386

4.0 % N/A
4.0 %

44,079

N/A

6.0%

Tier I leverage ratio

Consolidated .......................................................... 113,654
Bank ....................................................................... 106,689

10.03%
9.37%

45,313
45,565

4.0 % N/A
4.0 %

56,956

N/A

5.0%

NOTE 15 - EMPLOYEE BENEFIT PLANS

The Company has a qualified 401(k) deferred compensation Retirement Savings Plan. All employees of the Company who have
completed at least 90 days of service and meet certain other eligibility requirements are eligible to participate in the Plan. Under the
terms of the Plan, employees may voluntarily defer a portion of their annual compensation pursuant to section 401(k) of the Internal
Revenue Code. The Company matches a percentage of the participants’ voluntary contributions up to 6% of gross wages. In addition,
at the discretion of the Board of Directors, the Company may make an additional profit sharing contribution to the Plan. Total expense
was $431 thousand, $336 thousand and $336 thousand for the years ended December 31, 2015, 2014 and 2013, respectively.

During 2014 the Company adopted a profit sharing plan to provide associates not participating in a current incentive plan a vehicle for
sharing in the success of the Company outside of existing wages and non-monetary benefits. The board of directors approved a profit
sharing amount equal to 1% of annual compensation for associates in 2015 and 2014. The expense was $82 thousand and $73
thousand for the years ended December 31, 2015 and 2014.

The Company maintains a deferred compensation plan for certain retirees. Expense under the Plan was $10 thousand for each of the
three years ended December 31, 2015, 2014 and 2013. The liability under the Plan at December 31, 2015 was $149 thousand and
$156 thousand at December 31, 2014.

During 2015, the Company established a nonqualified deferred compensation plan for a select group of management or highly
compensated eligible individuals. Under the terms of the plan, eligible individuals may elect to defer receipt of their compensation to a
later taxable year. The Company has recorded both an asset and liability of equal amount that represents the amount of contributions
and the payable due to the participants in the plan. The recorded asset and liability was $67 thousand At December 31, 2015

As part of the NBOH acquisition the Company has a director retirement and death benefit Plan for the benefit of prior members of the
Board of Directors of NBOH. The plan is designed to provide an annual retirement benefit to be paid to each director upon retirement
from the Board or attaining age 70. There are no additional benefits or participants being added to the Plan and the liability recorded
at December 31, 2015 was $929 thousand. The benefit payment upon satisfying the Plan’s requirements is a benefit to the qualifying
director until death or a maximum of 15 years. No expense was recognized under this Plan in 2015.

The Company assumed as ESOP as part of the Tri-State acquisition that covered substantially all of their employees and officers. The
trustee had discretionary authority to purchase shares of common stock of Tri-State on the open market. There were no contributions
to the plan in 2015. During acquisition the Tri-State shares were converted to the Company’s shares and the trustee held 39,690
shares at December 31, 2015. The process to terminate this ESOP had begun at December 31, 2015.

The Company also has a postretirement health care benefit Plan covering individuals retired from the Company that have met certain
service and age requirements and certain other active employees that have met similar service requirements. The postretirement health
care Plan includes a limit on the Company’s share of costs for recent and future retirees. A benefit was recognized under this Plan for
2015 of $12 thousand and expense of $4 thousand in 2014 and $13 thousand in 2013. The accrued postretirement benefit liability
under this Plan was $280 thousand and $314 thousand at December 31, 2014 and 2013. Due to the immateriality of the Plan, the
disclosures required under U.S. generally accepted accounting principles have been omitted.

The provision for income taxes (credit) consists of the following:

NOTE 16 - INCOME TAXES

Current expense ............................................................................................... $
Deferred expense (benefit) ...............................................................................
TOTALS $

2015
3,046 $
(547)
2,499 $

2014
2,369 $
263
2,632 $

Effective tax rates differ from federal statutory rate of 35% applied to income before income taxes due to the following:

Statutory tax ..................................................................................................... $
Effect of nontaxable interest .......................................................................
Bank owned life insurance, net ...................................................................
Effect of nontaxable life insurance death proceeds ....................................
Nondeductible acquisition costs .................................................................
Other ...........................................................................................................
ACTUAL TAX $

2015
3,694 $
(1,403)
(242)
0
401
49
2,499 $

2014
4,059 $
(1,179)
(159)
0
0
(89)
2,632 $

2013
874
809
1,683

2013
3,312
(1,325)
(123)
(115)
0
(66)
1,683

Deferred tax assets (liabilities) are comprised of the following:

Deferred tax assets:

Allowance for credit losses .............................................................................................. $
Net unrealized loss on securities available for sale..........................................................
Deferred and accrued compensation ................................................................................
Deferred loan fees and costs ............................................................................................
Post-retirement benefits ...................................................................................................
Nonaccrual loan interest income .....................................................................................
Other-than-temporary impairment ...................................................................................
Other ................................................................................................................................
Gross deferred tax assets ............................................................................................ $

Deferred tax liabilities:

Depreciation and amortization ......................................................................................... $
Net unrealized gain on securities available for sale .........................................................
Federal Home Loan Bank dividends ...............................................................................
Purchase accounting adjustments ....................................................................................
Mortgage servicing rights ................................................................................................
Other ................................................................................................................................
Gross deferred tax liabilities ......................................................................................
NET DEFERRED TAX ASSET $

No valuation allowance for deferred tax assets was recorded at December 31, 2015 and 2014.

2015

2,968 $
326
1,562
605
172
324
196
93
6,246 $

(649 ) $
0
(1,093 )
(984 )
(158 )
(11 )
(2,895 )
3,351 $

2014

2,671
0
848
515
110
56
41
117
4,358

(1,081)
(523)
(482)
(550)
0
(38)
(2,674)
1,684

At December 31, 2015 and December 31, 2014, the Company had no unrecognized tax benefits recorded. The Company does not
expect the amount of unrecognized tax benefits to significantly change within the next twelve months.

The Company paid no penalties for the year ended December 31, 2015 or 2014. There were no amounts accrued for penalties or
interest as of December 31, 2015 or 2014.

The Company is subject to U.S. federal income tax. The Company is no longer subject to examination by the federal taxing authority
for years prior to 2012. The tax years 2012—2014 remain open to examination by the U.S. taxing authority.

NOTE 17 – OTHER COMPREHENSIVE INCOME (LOSS)

The following table represents the detail of other comprehensive income (loss) for the years ended December 31, 2015, 2014 and
2013.

Pre-tax

2015
Tax

Unrealized holding losses on available-for-sale securities during the year ....... $
Reclassification adjustment for (gains) losses included in net income (1) ........
Net unrealized losses on available-for-sale securities .......................................
Change in funded status of post-retirement health plan ....................................
Net other comprehensive income (loss) ............................................................ $

(1,403)
(94)
(1,497)
20
(1,477)

Unrealized holding gains on available-for-sale securities during the year ........ $
Reclassification adjustment for (gains) losses included in net income (1) ........
Net unrealized gains on available-for-sale securities ........................................
Change in funded status of post-retirement health plan ....................................
Net other comprehensive income (loss) ............................................................ $

Pre-tax

10,486
(457)
10,029
60
10,089

Pre-tax

(19,310)
(860)
(20,170)
(3)
(20,173)

After-Tax
$

491
33
524
(7)
517

(912)
(61)
(973)
13
(960)

2014
Tax

After-Tax

(3,670) $
160
(3,510)
(21)
(3,531) $

6,816
(297)
6,519
39
6,558

2013
Tax

6,759
301
7,060
1
7,061

After-Tax
$

(12,551)
(559)
(13,110)
(2)
(13,112)

(1) Pre-tax reclassification adjustments relating to available-for-sale securities are reported in security gains and the tax impact is

included in income tax expense on the consolidated statements of income.

Loans to principal officers, directors, and their affiliates during 2015 were as follows:

NOTE 18 - RELATED PARTY TRANSACTIONS

Beginning balance ............................................................................................................................................. $
New loans..........................................................................................................................................................
Effect of changes in composition of related parties ..........................................................................................
Repayments .......................................................................................................................................................
Ending balance .................................................................................................................................................. $

760
4
0
(335)
429

Deposits from principal officers, directors, and their affiliates at year-end 2015 and 2014 were $7.9 million and $1.7 million.

The factors used in the earnings per share computation follow:

NOTE 19 – EARNINGS PER SHARE

Basic EPS

Net income ........................................................................................... $
Weighted average shares outstanding ..................................................
Basic earnings per share .............................................................. $

$
8,055
22,678,338
$

0.36

8,965 $
18,674,526
0.48 $

7,780
18,773,491
0.41

2015

2014

2013

Diluted EPS

Net income ........................................................................................... $
Weighted average shares out-standing for basic earnings per share ....
Restricted stock awards .......................................................................
Weighted average shares for diluted earnings per share ......................
Diluted earnings per share .......................................................... $

$
8,055
22,678,338
5,232
22,683,570
$

0.36

8,965 $
18,674,526

890

18,675,416
0.48 $

7,780
18,773,491
0
18,773,491
0.41

193,105 award shares of common stock, issued during 2015, were not considered in computing diluted earnings per share because
they were anti-dilutive. Stock options for 5,000 shares of common stock for 2013 were not considered in computing diluted earnings
per share because they were antidilutive.

NOTE 20 – INTEREST RATE SWAPS

The Company uses a program that utilizes interest-rate swaps as part of its asset/liability management strategy. The interest-rate swaps
are used to help manage the Company’s interest rate risk position and not as derivatives for trading purposes. The notional amount of
the interest-rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the
notional amount and the other terms of the individual interest-rate swap agreements.

The objective of the interest-rate swaps is to protect the related fixed rate commercial real estate loans from changes in fair value due
to changes in interest rates. The Company has a program whereby it lends to its borrowers at a fixed rate with the loan agreement
containing a two-way yield maintenance provision, which will be invoked in the event of prepayment of the loan, and is expected to
exactly offset the fair value of unwinding the swap. The yield maintenance provision represents an embedded derivative which is
bifurcated from the host loan contract and, as such, the swaps and embedded derivatives are not designated as hedges. Accordingly,
both instruments are carried at fair value and changes in fair value are reported in current period earnings.

Summary information about these interest-rate swaps as of year ended December 31, 2015, 2014 and 2013 is as follows:

2015

2014

2013

Notional amounts .............................................................................. $
Weighted average pay rate on interest-rate swaps ............................
Weighted average receive rate on interest-rate swaps ......................
Weighted average matuirity (years) ..................................................
Fair value of combined interest-rate swaps ...................................... $

30,763

$
4.25%
2.70%
4.1
789

31,459

$
4.26 %
2.67 %
5.9
638

25,195
4.28%
2.82%
6.3
275

The fair value of the yield maintenance provisions and interest-rate swaps is recorded in other assets and other liabilities, respectively,
in the consolidated balance sheet. Changes in the fair value of the yield maintenance provisions and interest-rate swaps are reported in
earnings, as other noninterest income in the consolidated income statements. There were no net gains or losses recognized in earnings
related to yield maintenance provisions for years ended December 31, 2015, 2014 and 2013.

NOTE 21 – SEGMENT INFORMATION

The reportable segments are determined by the products and services offered, primarily distinguished between banking, trust and
retirement consulting operations. They are also distinguished by the level of information provided to the chief operating decision
makers in the Company, who use such information to review performance of various components of the business, which are then
aggregated. Loans, investments, and deposits provide the revenues in the banking operation, trust service fees provide the revenue in
trust operations and consulting fees provide the revenues in the retirement consulting operations. All operations are domestic.

Accounting policies for segments are the same as those described in Note 1. Segment performance is evaluated using operating
income. Income taxes are calculated on operating income. Transactions among segments are made at fair value.

Significant segment totals are reconciled to the financial statements as follows:

December 31, 2015
Goodwill and other intangibles ......................... $
Total assets ........................................................ $

Trust
Segment

Bank
Segment

Retirement
Consulting
Segment

Eliminations
and
Others

Consolidated
Totals

4,967 $
11,078 $

35,412 $
1,854,306 $

3,178 $
4,127 $

(646) $
391 $

42,911
1,869,902

December 31, 2014
Goodwill and other intangibles ......................... $
Total assets ........................................................ $

Trust
Segment

Bank
Segment

Retirement
Consulting
Segment

Eliminations
and
Others

Consolidated
Totals

5,285 $
10,643 $

0 $
1,121,505 $

3,528 $
4,356 $

0 $
463 $

8,813
1,136,967

For year ended 2015
Net interest income ........................................... $
Provision for loan losses ...................................
Service fees, security gains and other
noninterest income .........................................
Noninterest expense ..........................................
Amortization and depreciation expense ............
Income before taxes .....................................
Income tax .........................................................
Net Income .................................................. $

Trust
Segment

Bank
Segment

Retirement
Consulting
Segment

Eliminations
and
Others

Consolidated
Totals

65 $
0

49,705 $
3,510

0 $
0

(33) $
0 $

6,239
4,719
339
1,246
425
821 $

10,192
40,753
1,759
13,875
2,968
10,907 $

2,130
1,487
360
283
97
186 $

(255) $
4,562 $
0 $
(4,850)
(991) $
(3,859) $

49,737
3,510

18,306
51,521
2,458
10,554
2,499
8,055

For year ended 2014
Net interest income ........................................... $
Provision for loan losses ...................................
Service fees, security gains and other
noninterest income .........................................
Noninterest expense ..........................................
Amortization and depreciation expense ............
Income before taxes .....................................
Income tax .........................................................
Net Income (Loss) ....................................... $

Trust
Segment

Bank
Segment

53 $
0

36,297 $
1,880

6,170
4,528
378
1,317
451
866 $

7,577
29,268
1,081
11,645
2,645
9,000 $

Retirement
Consulting
Segment

Eliminations
and
Others

Consolidated
Totals

0 $
0

1,810
2,010
423
(623 )
48
(671 ) $

(14) $
0 $

(254) $
474 $
0 $
(742) $
(512) $
(230) $

36,336
1,880

15,303
36,280
1,882
11,597
2,632
8,965

For year ended 2013
Net interest income ........................................... $
Provision for loan losses ...................................
Service fees, security gains and other
noninterest income .........................................
Noninterest expense ..........................................
Amortization and depreciation expense ............
Income before taxes .....................................
Income tax .........................................................
Net Income (Loss) ....................................... $

Trust
Segment

Bank
Segment

Retirement
Consulting
Segment

Eliminations
and
Others

Consolidated
Totals

45 $
0

35,865 $
1,290

0 $
0

(14) $
0

7,838
30,682
1,193
10,538
2,043
8,495 $

627
627
236
(236 )
(80 )
(156 ) $

(218)
1,420
0
(1,652)
(562)
(1,090) $

5,667
4,483
416
813
282
531 $

35,896
1,290

13,914
37,212
1,845
9,463
1,683
7,780

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

NOTE 22 - QUARTERLY FINANCIAL DATA (UNAUDITED)

March 31

Quarter Ended 2015
Total interest income ......................................................................... $
Total interest expense ........................................................................
Net interest income ...........................................................................
Provision for loan losses ...................................................................
Noninterest income ...........................................................................
Merger related costs ..........................................................................
Noninterest expense ..........................................................................
Income before income taxes..............................................................
Income taxes .....................................................................................
Net income ........................................................................................ $

9,999 $
1,007
8,992
450
4,037
245
9,506
2,828
617
2,211 $

June 30

September 30 December 31
17,481
1,023
16,458
990
5,175
1,736
14,884
4,023
848
3,175

15,594 $
1,056
14,538
1,220
4,685
2,499
13,022
2,482
625
1,857 $

10,753 $
1,004
9,749
850
4,409
1,912
10,175
1,221
409
812 $

Earnings per share - basic and diluted ............................................... $

0.12 $

0.04 $

0.07 $

0.12

March 31

Quarter Ended 2014
Total interest income ......................................................................... $
Total interest expense ........................................................................
Net interest income ...........................................................................
Provision for loan losses ...................................................................
Noninterest income ...........................................................................
Noninterest expense ..........................................................................
Income before income taxes..............................................................
Income taxes .....................................................................................
Net income ........................................................................................ $

10,063 $
1,207
8,856
330
3,433
9,141
2,818
627
2,191 $

June 30

September 30 December 31
10,321
1,078
9,243
825
4,193
9,867
2,744
597
2,147

10,413 $
1,128
9,285
425
3,880
9,776
2,964
688
2,276 $

10,118 $
1,166
8,952
300
3,797
9,378
3,071
720
2,351 $

Earnings per share - basic and diluted ............................................... $

0.12 $

0.13 $

0.12 $

0.12

The Company sold certain investment securities and recognized security gains of $372 thousand during the fourth quarter of 2014.

NOTE 23—PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

Below is condensed financial information of Farmers National Banc Corp. (parent company only). This information should be read in
conjunction with the consolidated financial statements and related notes.

December 31,
BALANCE SHEETS

Assets:
Cash ................................................................................................................................. $
Investment in subsidiaries

Bank ........................................................................................................................
Trust .........................................................................................................................
NAI ...........................................................................................................................
Securities available for sale ..............................................................................................
Other .................................................................................................................................
TOTAL ASSETS $

Liabilities:

Other liabilities ........................................................................................................... $
Note payable ..............................................................................................................
Subordinate debt.........................................................................................................
Other accounts payable ..............................................................................................
TOTAL LIABILITIES
TOTAL STOCKHOLDERS' EQUITY
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $

2015

2014

1,357 $

1,564

184,253
10,188
3,391
231
1,319
200,739 $

241 $
350
2,099
2
2,692
198,047
200,739 $

107,704
10,115
3,604
172
916
124,075

163
350
0
2
515
123,560
124,075

STATEMENTS OF INCOME
Years ended December 31,

Income:

Dividends from subsidiaries

2015

2014

2013

Bank ...................................................................................................... $
Trust ......................................................................................................
NAI ........................................................................................................
Interest and dividends on securities..........................................................
Security gains/(losses) ..............................................................................
Other income ............................................................................................
TOTAL INCOME
Interest on borrowings ..............................................................................
Other expenses .........................................................................................
Income before income tax benefit and undistributed subsidiary income ....
Income tax benefit ....................................................................................

Equity in undistributed net income of subsidiaries (dividends in excess
of net income)

Bank .........................................................................................................
Trust .........................................................................................................
NAI ..........................................................................................................
NET INCOME $

23,744 $
750
400
2
0
0
24,896
(35)
(4,817)
20,044
991

(12,837)
71
(214)
8,055 $

4,013 $
2,000
0
1
0
764
6,778
(15)
(1,492)
5,271
512

4,987
(1,134)
(671)
8,965 $

4,333
980
0
2
21
0
5,336
(16)
(1,659)
3,661
562

4,162
(449)
(156)
7,780

STATEMENTS OF CASH FLOWS
Years ended December 31,
Cash flows from operating activities:
Net income ........................................................................................................... $

Adjustments to reconcile net income to net cash
from operating activities:

2015

2014

2013

8,055 $

8,965 $

7,780

Security (gains)/losses ...............................................................................
Impairment of securities ............................................................................
Dividends in excess of net income (Equity in undistributed net
income of subsidiary) .............................................................................
Other .........................................................................................................
NET CASH FROM OPERATING ACTIVITIES

0
0

12,980
(269)
20,766

Cash flows from investing activities:

Proceeds from maturities of available for sale securities ...........................
Purchase of National Associates, Inc. ........................................................
Net cash paid in business combinations ....................................................
NET CASH FROM INVESTING ACTIVITIES

0
0
(18,077)
(18,077)

0
0

(3,182)
(982)
4,801

0
0
0
0

Cash flows from financing activities:

Proceeds from reissuance of treasury shares ............................................
Purchase of treasury shares .......................................................................
Cash dividends paid ..................................................................................
NET CASH FROM FINANCING ACTIVITIES
NET CHANGE IN CASH AND CASH EQUIVALENTS

0
(213)
(2,683)
(2,896)
(207)

32
(2,882)
(2,236)
(5,086)
(285)

Beginning cash and cash equivalents ..................................................................
Ending cash and cash equivalents ....................................................................... $

1,564
1,357 $

1,849
1,564 $

(24)
3

(3,557)
(270)
3,932

56
(2,111)
0
(2,055)

0
(1,606)
(2,248)
(3,854)
(1,977)

3,826
1,849

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.

Item 9A. Controls and Procedures.

As of the end of the period covered by this Annual Report on Form 10-K, the Company carried out an evaluation, under the
supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that
evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and
procedures were effective to ensure that the financial and nonfinancial information required to be disclosed by the Company in the
reports that it files or submits under the Securities Exchange Act of 1934, as amended, including this Annual Report on Form 10-K for
the period ended December 31, 2015, is recorded, processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission’s rules and forms.

Management’s responsibilities related to establishing and maintaining effective disclosure controls and procedures include
maintaining effective internal controls over financial reporting that are designed to produce reliable financial statements in accordance
with GAAP. As disclosed in the Report on Management’s Assessment of Internal Control Over Financial Reporting in the Company’s
2015 Annual Report to Shareholders, management assessed the Company’s system of internal control over financial reporting as of
December 31, 2015, in relation to criteria for effective internal control over financial reporting as described in the 2013 “Internal
Control - Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission and found it to
be effective.

Crowe Horwath LLP, the Company’s registered public accounting firm, has audited the Company’s internal control over financial
reporting as of December 31, 2015. The audit report by Crowe Horwath is located in Item 8 of this report.

There were no changes in the Company’s internal controls over financial reporting (as defined in Rule 13a - 15(f) under the Exchange
Act) that occurred during the year ended December 31, 2015, that have materially affected, or are reasonably likely to materially
affect, the Company’s internal control over financial reporting. There have been no significant changes in the Company’s internal
controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation or material
weaknesses in such internal controls requiring corrective actions.

Item 9B. Other Information.
None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by Item 401 of Regulation S-K concerning the directors of the Company and the nominees for election as
directors of the Company at the Annual Meeting of Shareholders to be held on April 20, 2016 (the “2016 Annual Meeting”) is
incorporated herein by reference from the information to be included under the caption “Proposal 1 – Election of Directors” in
Farmers’ definitive proxy statement relating to the 2016 Annual Meeting to be filed with the Commission (“2016 Proxy Statement”).

Executive Officers of the Registrant
The names, ages and positions of Farmers’ executive officers as of March 10, 2016:

Name
Carl D. Culp ..............................

Age
52

Joseph Gerzina ..........................

Mark L. Graham ........................
Kevin J. Helmick ......................
Brian E. Jackson ........................
Mark A. Nicastro ......................
Joseph W. Sabat ........................
Timothy Shaffer ........................
Amber Wallace Soukenik .........
James VanSickle .......................
Mark R. Witmer ........................

61
44
46
45
55
54
50
45
51

Title

Executive Vice President, Secretary and Treasurer of Farmers and Executive Vice-
President and Chief Financial Officer of Farmers Bank.
Senior Vice President, Chief Lending Officer and Regional President of Farmers
Bank

Executive Vice President and Chief Credit Officer of Farmers Bank
President and Chief Executive Officer of Farmers and Farmers Bank
Senior Vice President and Chief Information Officer of Farmers Bank
Senior Vice President and Director of Human Resources of Farmers Bank
Vice President and Controller of Farmers Bank
Senior Vice President and Regional President of Farmers Bank
Senior Vice President and Chief Retail/Marketing Officer of Farmers Bank
Senior Vice President and Chief Risk Officer of Farmers Bank
Senior Executive Vice President, Chief Banking Officer of Farmers Bank

Officers are generally elected annually by the Board of Directors. 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. Culp has served as Executive Vice President and Treasurer of Farmers and Executive Vice President and Chief Financial Officer
of Farmers Bank since March 1996. Prior to that time, Mr. Culp was Controller of Farmers and Farmers Bank from November 1995.
Mr. Culp has 30 years of experience in finance and accounting in the banking industry, and is a certified public accountant.

Mr. Gerzina currently serves as Regional President and Chief Lending Officer, and brings 33 years of experience in commercial and
private banking. Prior to joining Farmers Bank, Mr. Gerzina was a Managing Partner at Weather Vane Capital, and previously held
the role of Senior Vice President and Regional Commercial Manager (2002-2009) with Huntington Bank. He was appointed as an
executive officer of Farmers in 2012.

Mr. Graham has over 38 years of experience with Farmers Bank. During his tenure, Mr. Graham has held a variety of positions in
Farmers Bank’s commercial loan department. Mr. Graham has served as Executive Vice President and Chief Credit Officer of
Farmers Bank since January 2012; for the four years prior to that appointment, Mr. Graham served as Senior Vice President and
Senior Lending Officer of Farmers Bank.

Mr. Helmick is the President and Chief Executive Officer of Farmers and Farmers Bank, a position he has held since November 2013.
Prior to becoming President Mr. Helmick was Secretary of Farmers and Executive Vice President – Wealth Management and Retail
Services of Farmers Bank since January 2012. Mr. Helmick has been with the Company for 21 years and has a retail and investment
background, including an MBA and CFP designation. From 1997 through 2008, Mr. Helmick served as the Vice President and
Program Manager for Farmers National Investments. In 2008 Mr. Helmick was promoted to Senior Vice President of Wealth
Management and Retail Services where he was responsible for the management and oversight of Farmers National Investments, the
retail investment area of Farmers Bank, Farmers Insurance, and all branch sales and operational functions.

Mr. Jackson is the Senior Vice President and Chief Information Officer of Farmers Bank, a position he has held since May 2009. Prior
to coming to the Company, Mr. Jackson was Assistant Vice President and Information Technology Manager with Home Savings Bank
since 1993. He has over 23 years of experience in the IT field. Mr. Jackson was appointed as an executive officer in 2012.

Mr. Nicastro is the Senior Vice President and Director of Human Resources of Farmers Bank, a position he has held since joining
Farmers in July 2009. Prior to that appointment, Mr. Nicastro served as Staffing and Compliance Manager for Huntington National
Bank (2007-2008) and Regional Human Resources Manager for Sky Bank from 2004 until 2007. Mr. Nicastro has an MBA, and has
more than 18 years of experience in Human Resource Management from both large multi-national banks and regional community
banks. He was appointed as an executive officer in 2012.

Mr. Sabat has served as Vice President and Controller of Farmers Bank since April 2006. Prior to coming to the Company, Mr. Sabat
was with a regional public accounting firm. Mr. Sabat has 20 years of experience in the accounting, finance and auditing fields. He is
a certified public accountant and was appointed as an executive officer in 2012.

Mr. Shaffer serves as Regional President and has held that title since July of 2015. Previously, Mr. Shaffer served as the Director of
Commercial Banking & Private Client Services. In October of 2011 Mr. Shaffer joined Farmers Bank as the Commercial Lending
Manager, overseeing commercial lending, small business lending and treasury management. Mr. Shaffer has over 26 years of Banking
and Lending experience in the Mahoning Valley market. Mr. Shaffer was appointed as an executive officer in 2014.

Ms. Wallace Soukenik has served as Senior Vice President and Chief Retail/Marketing Officer for Farmers Bank since November
2013. In August 2008 Ms. Wallace Soukenik joined Farmers Bank as Senior Vice President and Director of Marketing. She has 26
years of experience in the Marketing field. Prior to joining the Company, Ms. Wallace Soukenik served as the Assistant Vice
President of Marketing and Physician Relations at Trumbull Memorial Hospital, where she managed a $14 million endowment, a $1.5
million marketing budget and all physician contracts. She was appointed as an executive officer in 2012.

Mr. VanSickle is a Senior Vice President and Chief Risk Officer of Farmers National Bank. Mr. VanSickle joined Farmers National
Bank as part of the merger with First National Bank of Orrville in June of 2015. Prior to the merger Mr. VanSickle served as the
Chief Financial Officer of First National Bank of Orrville and brings more than 20 years of experience as a financial executive.

Mr. Witmer is the Senior Executive Vice President and Chief Banking Officer of Farmers National Bank. Mr. Witmer joined Farmers
National Bank as part of the merger with First National Bank of Orrville in June of 2015. Prior to the merger Mr. Witmer served as
the Chief Executive Officer of First National Bank of Orrville. Mr. Witmer has more than 25 years of leadership, community banking
and lending experience.

Compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended.

The information required by Item 405 of Regulation S-K is incorporated herein by reference from the disclosure to be included under
the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in the 2016 Proxy Statement.

Code of Business Conduct and Ethics.

The Company has adopted a Code of Business Conduct and Ethics (the “Code of Ethics”) that covers all employees, including its
principal executive, financial and accounting officers, and is posted on the Company’s website www.farmersbankgroup.com. In the
event of any amendment to, or waiver from, a provision of the Code of Ethics that applies to its principal executive, financial or
accounting officers, the Company intends to disclose such amendment or waiver on its website.

Procedures for Recommending Directors Nominees.

Information concerning the procedures by which shareholders may recommend nominees to Farmers’ Board of Directors is
incorporated herein by reference from the information to be included under the caption “Director Nominations” in 2016 Proxy
Statement. These procedures have not materially changed from those described in Farmers’ definitive proxy materials for the 2015
Annual Meeting of Shareholders.

Audit Committee.

The information required by Items 407(d)(4) and (d)(5) of Regulation S-K is incorporated herein by reference from the disclosure to
be included under the caption “Committees of the Board of Directors – Audit Committee” in the 2016 Proxy Statement.

Item 11. Executive Compensation.

The information required by Item 402 of Regulation S-K is incorporated herein by reference from the disclosure to be included under
the captions “Compensation Discussion and Analysis” and “Executive Compensation and Other Information” in the 2016 Proxy
Statement.

The information required by Item 407(e)(4) of Regulation S-K is incorporated herein by reference from the disclosure to be included
under the caption “Compensation Committee Interlocks and Insider Participation” in the 2016 Proxy Statement.

The information required by Item 407(e)(5) of Regulation S-K is incorporated herein by reference from the disclosure to be included
under the caption “The Compensation Committee Report” in the 2016 Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by Item 201(d) of Regulation S-K is incorporated herein by reference from the disclosure included under the
caption “Equity Compensation Plan Information” in the 2016 Proxy Statement of the Company.

The information required by Item 403 of Regulation S-K is incorporated herein by reference from the disclosure included under the
caption “Beneficial Ownership of Management and Certain Beneficial Owners” in the 2016 Proxy Statement of the Company.

Item 13. Certain Relationships and Related Transactions and Director Independence.

The information required by Item 404 of Regulation S-K is incorporated herein by reference from the disclosure to be included under
the caption “Certain Relationships and Related Transactions” in the 2016 Proxy Statement.

The information required by Item 407(a) of Regulation S-K is incorporated herein by reference from the disclosure to be included
under the caption “The Board of Directors — Independence” in the 2016 Proxy Statement.

Item 14. Principal Accountant Fees and Services.

The information required by this Item 14 is incorporated herein by reference from the disclosure to be included under the captions
“Independent Registered Public Accounting Firm Fees” and “Pre-Approval of Fees” in the 2016 Proxy Statement.

Item 15. Exhibits, Financial Statement Schedules.

(a) (1) Financial Statements

PART IV

Item 8 Reference is made to the Consolidated Financial Statements included in Item 8 of Part II herein.

(2) Financial Statement Schedules

No financial statement schedules are presented because they are not applicable.

(3) Exhibits

The exhibits filed or incorporated by reference as a part of this Annual Report on Form 10-K are listed in the
Exhibit Index, which follows the signature page and is incorporated herein by reference.

(b) Exhibits

The exhibits filed or incorporated by reference as a part of this Annual Report on Form 10-K are listed in the
Exhibit Index, which follows the signature page and is incorporated herein by reference.

See subparagraph (a)(2) above.

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Company has duly caused this
report to be signed on its behalf by the under signed, thereunto duly authorized.

SIGNATURES

FARMERS NATIONAL BANC CORP.

By /s/ Kevin J. Helmick

Kevin J. Helmick, President and Chief Executive
Officer

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ Kevin J. Helmick
Kevin J. Helmick

/s/ Carl D. Culp
Carl D. Culp

/s/ Joseph W. Sabat
Joseph W. Sabat

/s/ Gregory C. Bestic*
Gregory C. Bestic

/s/ Anne Frederick Crawford*
Anne Frederick Crawford

/s/ Lance J. Ciroli*
Lance J. Ciroli

/s/ Ralph D. Macali*
Ralph D. Macali

/s/ Terry A. Moore*
Terry A. Moore

/s/ David Z. Paull*
David Z. Paull

/s/ Earl R. Scott*
Earl R. Scott

/s/ James R. Smail*
James R. Smail

/s/ Gregg Strollo*
Gregg Strollo

/s/ Howard J. Wenger*
Howard J. Wenger

President, Chief Executive Officer and Director

March 10, 2016

(Principal Executive Officer)

Executive Vice President, Secretary and Treasurer March 10, 2016

(Principal Financial Officer)

Controller

(Principal Accounting Officer)

Director

March 10, 2016

Chairman of the Board

March 10, 2016

Director

March 10, 2016

* The above-named directors and officers of the Registrant sign this Annual Report on Form 10-K by Kevin J. Helmick and Carl D.
Culp, their attorney-in-fact, pursuant to Powers of Attorney signed by the above-named directors and officers, which Powers of
Attorney are filed with this Annual Report on Form 10-K as exhibits, in the capacities indicated.

/s/ Kevin J. Helmick
Kevin J. Helmick
President, Chief Executive Officer and Director
(Principal Executive Officer)

/s/ Carl D. Culp
Carl D. Culp
Executive Vice President, Secretary and Treasurer
(Principal Financial Officer)

The following exhibits are filed or incorporated by reference as part of this Annual Report on Form 10-K:

INDEX TO EXHIBITS

Exhibit
Number

3.1

3.2

10.1

10.2

10.3*

10.4*

10.5*

10.6*

10.7*

10.8*

10.9*

10.10*

10.11*

Description

Articles of Incorporation of Farmers National Banc Corp., as amended (incorporated by reference from Exhibit 4.1 to
Farmers’ Registration Statement on Form S-3 filed with the Commission on October 3, 2001 (File No. 333-70806), and
by reference from Exhibit 3.1 to Farmers’ Current Report on Form 8-K filed with the commission on May 1, 2013).

Amended Code of Regulations of Farmers National Banc Corp. (incorporated by reference from Exhibit 3.2 to Farmers’
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2011 filed with the Commission on August 9,
2011).

Agreement and Plan of Merger by and between National Bancshares Corporation and Farmers National Banc Corp.,
dated as of January 27, 2015 (incorporated by reference from Exhibit 2.1 to Farmers’ Current Report on Form 8-K filed
with the Commission on January 27, 2015).

Agreement and Plan of Merger by and among Tri-State 1st Banc, Inc., Farmers National Banc Corp. and FMNB Merger
Subsidiary, LLC, dated as of June 23, 2015 (incorporated by reference from Exhibit 2.1 to the Company’s Current
Report on Form 8-K filed with the Commission on June 29, 2015).

Farmers National Banc Corp. 2012 Equity Incentive Plan (incorporated by reference from Exhibit 10.1 to Farmers’
Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 filed with the Commission on August 8, 2012).

Farmers National Banc Corp. Cash Incentive Plan (incorporated by reference from Exhibit 10.1 to Farmers’ Current
Report on Form 8-K filed with the Commission on June 24, 2011).

Farmers National Banc Corp. Long-Term Incentive Plan (incorporated by reference from Exhibit 10.1 to Farmers’
Current Report on Form 8-K filed with the Commission on June 29, 2011).

Farmers National Banc Corp. Nonqualified Deferred Compensation Plan (incorporated by reference from Exhibit 10.1 to
Farmers’ Current Report on Form 8-K filed with the Commission on February 3, 2015).

Farmers National Banc Corp. Form of 2012 Award Agreement under Long-Term Incentive Plan (incorporated by
reference from Exhibit 10.6 to Farmers’ Annual Report on Form 10-K for the year ended December 31, 2012 filed with
the Commission on March 13, 2013).

Farmers National Banc Corp. Form of 2013 Award Agreement under Long-Term Incentive Plan (incorporated by
reference from Exhibit 10.5 to Farmers’ Annual Report on Form 10-K for the year ended December 31, 2013 filed with
the Commission on March 13, 2014).

Farmers National Banc Corp. Form of Cash Long-Term Incentive Award Agreement under Long-Term Incentive Plan
(filed herewith).

Farmers National Banc Corp. Form of Equity Long-Term Incentive Award Agreement under 2012 Equity Incentive Plan
(filed herewith).

Farmers National Banc Corp. Form of Notice of Grant and Restricted Stock Award Agreement under 2012 Equity
Incentive Plan (incorporated by reference from Exhibit 10.1 to Farmers’ Quarterly Report on Form 10-Q filed with the
Commission on November 9, 2015).

10.12*

Nonemployee Director Compensation (filed herewith).

10.13*

10.14*

10.15*

10.16*

Farmers National Banc Corp. Form of Indemnification Agreement (incorporated by reference from Exhibit 10.1 to
Farmers’ Current Report on Form 8-K filed with the Commission on April 29, 2011).

Farmers National Banc Corp. Executive Separation Policy (incorporated by reference from Exhibit 10.2 to Farmers’
Quarterly Report on Form 10-Q filed with the Commission on November 9, 2015).

Change in Control Agreement with Kevin J. Helmick (incorporated by reference from Exhibit 10.2 to Farmers’ Current
Report on Form 8-K filed with the Commission on November 14, 2013).

Form of Change in Control Agreements for Executive Officers (incorporated by reference from Exhibit 10.3 to Farmers’
Current Report on Form 8-K filed with the Commission on November 14, 2013).

Exhibit
Number

31.1

31.2

32.1

32.2

Subsidiaries of Farmers (filed herewith).

Consent of Independent Registered Public Accounting Firm (filed herewith).

Powers of Attorney of Directors and Executive Officers (filed herewith).

Description

Rule 13a-14(a)/15d-14(a) Certification of Kevin J. Helmick, President and Chief Executive Officer of Farmers (principal
executive officer)(filed herewith).

Rule 13a-14(a)/15d-14(a) Certification of Carl D. Culp, Executive Vice President and Treasurer of Farmers (principal
financial officer) (filed herewith).

Certification pursuant to 18 U.S.C. Section 1350 of Kevin J. Helmick, President and Chief Executive Officer of Farmers
(principal executive officer) (filed herewith).

Certification pursuant to 18 U.S.C. Section 1350 of Carl D. Culp, Executive Vice President and Treasurer of Farmers
(principal financial officer) (filed herewith).

101.INS

XBRL Instance Document (filed herewith).

101.SCH

XBRL Taxonomy Extension Schema Document (filed herewith).

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith).

101.LAB

XBRL Taxonomy Extension Label Linkbase Document (filed herewith).

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith).

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document (filed herewith).

* Constitutes a management contract or compensatory plan or arrangement.

Copies of any exhibits will be furnished to shareholders upon written request. Request should be directed to Carl D. Culp, Executive
Vice President and Treasurer, Farmers National Banc Corp., 20 S. Broad Street, Canfield, Ohio 44406.

100

Investor Information

Corporate Headquarters:
Farmers National Banc Corp.
20 South Broad Street, P.O. Box 555
Canﬁ eld, OH 44406.
Phone 330-533-3341
Toll Free 1-888-988-3276
Website: www.farmersbankgroup.com

Dividend Payments: Subject to the approval of the
Board of Directors, quarterly cash dividends are
customarily payable on or about the 30th day of
March, June, September and December.

Transfer Agent: Computershare Investor Services
P.O. Box 30170 College Station, TX 77842

Dividend Reinvestment Plan (DRIP): Registered
shareholders can purchase additional common
shares through Farmers’ Dividend Reinvestment Plan.
Participation is voluntary and allows for automatic
reinvestment of cash dividends and the safekeeping
of share certiﬁ cates. To obtain a prospectus, contact
the Computershare Investor Services at 877-581-5548

Direct Deposit of Cash Dividends: The direct
deposit program, which is offered at no charge,
provides for automatic deposit of quarterly dividends
directly to a checking or savings account. For
information regarding this program, please contact
the Computershare Investor Services at 877-581-5548

Annual Report on Form 10-K: A copy of the Annual
Report on Form 10-K ﬁ led with the Securities and
Exchange Commission will be provided to any
shareholder on request to the attention: Mr. Carl D.
Culp, Farmers National Banc Corp., 20 South Broad
Street, P.O. Box 555 Canﬁ eld, OH 44406

Common Stock Listing and Information as to
Stock Prices and Dividends:
The Company’s common shares trade on the
NASDAQ Capital Market under the symbol FMNB.
Set forth in the accompanying table are per share
prices at which common shares have actually been
purchased and sold in transactions during the
periods indicated, to the knowledge of the Company.
Also included in the table are dividends per share
paid on the outstanding Company’s common shares
and any shares dividends paid. As of December 31,
2015, there were 26,944,285 shares outstanding and
3,632 shareholders of record of common shares.

The following graph compares the cumulative ﬁ ve year total return
to shareholders on Farmers National Banc Corp.’s common shares
relative to the cumulative total returns of the NASDAQ Composite
index, the NASDAQ Bank index and the SNL Micro Cap Bank
index. The graph assumes that the value of the investment in the
Company’ common shares and in each of the indexes (including
reinvestment of dividends) was $100 on 12/31/2010 and tracks
it through 12/31/2015.

Total Return Performance

Farmers National Banc Corp.

NASDAQ Composite

NASDAQ Bank

SNL Microcap Bank Index

280

250

220

190

160

130

100

e
u
l
a
V
x
e
d
n

70
12/31/10

12/31/11

12/31/12

12/31/13

12/31/14

12/31/15

Period Ending

Index

12/31/10 12/31/11 12/31/12 12/31/13 12/31/14 12/31/15

Farmers National Banc Corp.
NASDAQ Composite
NASDAQ Bank
SNL Microcap Bank Index

100.00
100.00
100.00
100.00

140.36
99.21
89.50
95.11

181.05 194.96 252.41 263.81
116.82 163.75 188.03 201.40
106.23 150.55 157.95 171.92
120.19 155.07 175.86 195.56

The stock price performance included in this graph is not necessarily indicative
of future stock price performance.

Farmers National Banc Corp.
20 South Broad Street
P.O. Box 555
Canﬁ eld, Ohio 44406