necessary to maintain our competitive position, our performance, including our competitive position, could suffer, and, in turn, adversely affect our business, financial condition and results of operations.
We may be adversely impacted by weakness in the local economies we serve.
Our business activities are geographically concentrated in Northeast Ohio and, in particular, Mahoning, Trumbull and Columbiana County, Ohio, where commercial activity has deteriorated at a greater rate than in other parts of Ohio and in the national economy. This has led to and may lead to further unexpected deterioration in loan quality, and slower asset and deposit growth, which may adversely affect our business, financial condition and results of operations.
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The soundness of other financial institutions could adversely affect us.
Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships. We have exposure to many different industries and counterparties, and we routinely execute transactions with counterparties in the financial industry. As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, have led to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions. Many of these transactions expose us to credit risk in the event of default of our counterparty or client. In addition, our credit risk may be exacerbated when the collateral that we hold cannot be realized upon or is liquidated at prices insufficient to recover the full amount of the loan. We cannot assure you that any such losses would not materially and adversely affect 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 our 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.
A substantial decline in the value of our Federal Home Loan Bank of Cincinnati common stock may adversely affect our financial condition.
We own common stock of the Federal Home Loan Bank of Cincinnati (the “FHLB”), in order to qualify for membership in the Federal Home Loan Bank system, which enables us to borrow funds under the Federal Home Loan Bank advance program. The carrying value of our FHLB common stock was approximately $3.1 million as of December 31, 2009.September 30, 2010.
Published reports indicate that certain member banks of the Federal Home Loan Bank system may be subject to asset quality risks that could result in materially lower regulatory capital levels. In December 2008, certain member banks of the Federal Home Loan Bank system (other than the FHLB) suspended dividend payments and the repurchase of capital stock until further notice. In an extreme situation, it is possible that the capitalization of a Federal Home Loan Bank, including the FHLB, could be substantially diminished or reduced to zero. Consequently, given that there is no market for our FHLB common stock, we believe that there is a risk that our investment could be deemedother-than-temporarily impaired at some time in the future.
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If this occurs, it may adversely affect our results of operations and financial condition. If the FHLB were to cease operations, or if we were required to write-off our investment in the FHLB, our business, financial condition, liquidity, capital and results of operations may be materially adversely affected.
Our business strategy includes significant growth plans. Our financial condition and 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 you that we will be
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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.
Risks Related to the Rights Offering
The future price of our common shares may be less than the $ purchase price per share in the rights offering.
If you exercise your subscription rights to purchase common shares in the rights offering, you may not be able to sell them later at or above the $ purchase price in the rights offering. The actual market price of our common shares could be subject to wide fluctuations in response to numerous factors, some of which are beyond our control. These factors include, among other things, actual or anticipated variations in our costs of doing business, operating results and cash flow, the nature and content of our earnings releases and our competitors’ earnings releases, changes in financial estimates by securities analysts, business conditions in our markets and the general state of the securities markets and the market for other financial stocks, changes in capital markets that affect the perceived availability of capital to companies in our industry, governmental legislation or regulation, currency and exchange rate fluctuations, as well as general economic and market conditions, such as downturns in our economy and recessions.
Once you exercise your subscription rights, you may not revoke them. If you exercise your subscription rights and, afterwards, the public trading market price of our common shares decreases below the subscription price, you will have committed to buying common shares at a price above the prevailing market price and could have an Investmentimmediate unrealized loss. Our common shares are quoted on the OTCBB under the symbol “FMNB.OB,” and the last reported sales price of our common shares on the OTCBB on was $ per share. We cannot assure you that the market price of our common shares will not decline after you exercise your subscription rights. Moreover, we cannot assure you that following the exercise of your subscription rights you will be able to sell your common shares at a price equal to or greater than the subscription price.
The subscription price determined for the rights offering is not an indication of the fair value of our common shares.
The price of the shares offered in Our Common Sharesthe rights offering was determined by us based on a variety of factors, including:
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| • | The results of negotiations with prospective standby investors; |
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| • | the earnings per share and the per share book value of our common shares; |
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| • | the trading history of our common shares; |
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| • | our operating history and prospects for future earnings; |
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| • | our current performance; |
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| • | the prospects of the banking industry in which we compete; |
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| • | the general condition of the securities markets at the time of the offering; and |
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| • | the prices of equity securities and equity equivalent securities of comparable companies. |
In conjunction with its review of these factors, the board of directors also reviewed our history and prospects, including our past and present earnings, our prospects for future earnings, our current financial condition and regulatory status. The per share subscription price is not necessarily related to our book value, net worth or any other established criteria of fair value and may or may not be considered the fair value of our common shares to be offered in the rights offering. After the date of this prospectus, our common shares may trade at prices below the subscription price.
The share offering may reduce your percentage ownership in Farmers.
Even if our current shareholders fully exercise their basic subscription rights, they will experience dilution to their percentage ownership of our outstanding common shares as a result of the share offering. In addition, current shareholders who do not exercise a certain level of their oversubscription privilege will experience dilution as a result of the sale of shares to standby investors and in a public reoffering, if any. Standby investors will be able to purchase additional common shares beyond those shares issuable upon exercise of the subscription rights. We are obligated to sell additional shares to standby investors because the standby investors have a right to purchase shares, which may include treasury shares, even if we issue all of the shares issuable upon exercise of basic subscription rights and oversubscription privileges.
You may not revoke your exercise of rights; we may terminate the rights offering.
Once you have exercised your subscription rights, you may not revoke your exercise even if you learn information about us that you consider to be unfavorable. We may terminate the rights offering at our discretion. If we terminate the rights offering, neither we nor the subscription agent will have any obligation to you with respect to the rights except to return any payment received by the subscription agent, without interest or penalty.
You will not be able to sell the shares you buy in the rights offering until you receive your share certificates or your account is credited with the common shares.
If you purchase our common shares in the rights offering by submitting a rights certificate and payment, we will mail you a share certificate as soon as practicable after , 2010, or such later date as to which the rights offering may be extended. If your shares are held by a custodian bank, broker, dealer or other nominee and you purchase our common shares, your account with your nominee will be credited with the common shares you purchased in the rights offering as soon as practicable after the expiration of the rights offering, or such later date as to which the rights offering may be extended. Until your share certificates have been delivered or your account is credited, you may not be able to sell your shares even though the common shares issued in the rights offering will be quoted for trading on the OTCBB. The share price may decline between the time you decide to sell your shares and the time you are actually able to sell your shares.
Our common shares represent equity interests in Farmers and rank junior to all of our existing and future indebtedness. Regulatory, statutory and contractual restrictions may limit or prevent us from paying dividends on our common shares and there is no limitation on the amount of indebtedness we may incur in the future.
Our common shares are equity interests in Farmers. As such, our common shares rank junior to all of our indebtedness and to other non-equity claims with respect to assets available to satisfy claims on Farmers, including in a liquidation. Additionally, unlike indebtedness, for which principal and interest customarily are payable on specified due dates, in the case of our common shares: (1)(i) dividends are payable only when, as and if authorized and declared by our board and depend on, among other things, our results of operations, financial condition, debt service requirements, other cash needs and any other factors our board deems relevant; and (2)
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(ii) as an Ohio corporation, under Ohio law, we are subject to restrictions on payments of dividends out of lawfully available funds. We and our subsidiaries may incur substantial amounts of additional debt and other obligations that will rank senior to our common shares.
We could change or eliminate our historic practice of paying dividends in the future.
Holders of our common shares are entitled to receive dividends only when, as and if declared by our board.board of directors. Although we have historically paid dividends on our common shares, we are not required to do so, and our board of directors could reduce or eliminate dividends paid on our common shares in the future. Consequently, prospective investors should not expect that future dividends will be paid at current levels or at all. Future modifications, reductions or the elimination of dividends paid on our common shares could adversely affect the market price of our common shares.
The low trading volume in our common shares may adversely affect your ability to resell shares at prices that you find attractive, or at all.
Our common shares are traded on the OTCBB. The average daily trading volume for our common shares is less than larger financial institutions. During the past 12 months, the average daily trading volume for our common shares on the OTCBB was approximately [ • ]2,417 shares. Due to its relatively small trading volume, sales of our common shares may place significant downward pressure on the market price of our common shares. Furthermore, it may be difficult for holders to resell their shares at prices they find attractive, or at all.
The price of our common shares may fluctuate significantly and this may make it difficult for you to resell our common shares when you want or at prices you find attractive.
The market value of our common shares will likely continue to fluctuate in response to a number of factors, most of which are beyond our control. The market value of our common shares may also be affected by conditions affecting the financial markets generally, including the recent volatility of the trading markets. These conditions may result in: (1)(i) fluctuations in the market prices of stocks generally and, in turn, our common shares; and (2)(ii) sales of substantial amounts of our common shares in the market, in each case that could be unrelated or disproportionate to changes in our operating performance. These broad market fluctuations may adversely affect the market value of our common shares. A significant decline in our stockshare price could result in substantial losses for shareholders and could lead to costly and disruptive securities litigation.
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There may be future sales of additional common shares or preferred shares or other dilution of our equity, which may adversely affect the market price of our common shares.
Assuming the approval by our shareholders of the proposed amendments to our Articles of Incorporation, as amended (the “Articles”) described in our proxy statement dated May 12, 2010, which is incorporated herein by reference, we are not restricted from issuing additional common shares or preferred shares, including any securities that are convertible into or exchangeable for, or that represent the right to receive, common shares or preferred shares or any substantially similar securities. The per share value of our common shares could decline as a result of sales by us of a large number of our common shares or preferred shares or similar securities in the market or the perception that such sales could occur.
Anti-takeover provisions could negatively impact our shareholders.
Provisions of Ohio law, our Articles, and our Amended Code of Regulations, (the “Regulations”which we refer to as the Regulations and, collectively with the Articles, as our “CorporateCorporate Governance Documents”),Documents, 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.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in, or incorporated by reference into, this prospectus are “forward-looking statements” within the meaning of the federal securities laws, including, without limitation, statements regarding our outlook on earnings, asset quality, projected growth, capital position, business opportunities in our markets and economic conditions, and are based upon management’s beliefs as well as assumptions made based on data currently available to management. When we use words like “believe,” “intend,” “plan,” “may,” “continue,” “project,” “would,” “expect,” “estimate,” “could,” “should,” “will” and similar expressions, you should consider them as identifying forward-looking statements. These forward-looking statements are not guarantees of future performance, and a variety of factors could cause our actual results to differ materially from the anticipated or expected results expressed in these forward-looking statements. Many of these factors are beyond our 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 us, summarizes several factors that could cause our actual results to differ materially from those anticipated or expected in these forward-looking statements:
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| • | general economic conditions in market areas where we conduct business, which could materially impact credit quality trends; |
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| • | business conditions in the banking industry; |
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| • | the regulatory environment; |
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| • | fluctuations in interest rates; |
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| • | demand for loans in the market areas where we conduct business; |
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| • | rapidly changing technology and evolving banking industry standards; |
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| • | competitive factors, including increased competition with regional and national financial institutions; |
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| • | new service and product offerings by competitors and price pressures; and |
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| • | other like items. |
We undertake no obligation to update publicly forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. You are advised, however, to consult any further disclosures we make on related subjects in our Annual Reports onForm 10-K, Quarterly Reports onForm 10-Q and Current Reports onForm 8-K filed with the SEC. Also note that we provide cautionary discussion of risks, uncertainties and assumptions relevant to our business in our Annual Report onForm 10-K, our Quarterly ReportReports onForm 10-Q and in our Current Reports onForm 8-K incorporated by
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reference herein. These are factors that, individually or in the aggregate, management believes could cause our actual results to differ materially from expected and historical results. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider such disclosures to be a complete discussion of all potential risks or uncertainties.
USE OF PROCEEDS
The net proceeds, after underwriting discounts and commissions and estimated expenses, to us from the sale of the common shares offered will be approximately $ on (or approximately $ million if the underwriter exercises its over-allotment option in full). We intend to use the net proceeds of this offering for general corporate purposes, including a capital contribution to Farmers Bank, which will use such amount for its general corporate purposes, including, but not limited to, improving its regulatory capital position, funding organic loan growth and pursuing long-term strategic opportunities.
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CAPITALIZATION
The following table sets forth our capitalization as of March 31 2010. Our capitalization is presented on a historical basis and on a pro forma basis as if the offering had been completed as of March 31, 2010 and assuming the sale of common shares at a price of $ per share and that the underwriter’s over-allotment option is not exercised.
The following information should be read in conjunction with our consolidated financial statements for the year ended December 31, 2009, and the notes thereto, included in our Annual Report onForm 10-K for the year ended December 31, 2009, and the unaudited consolidated financial statements for the three months ended March 31, 2010, and the notes thereto, included in our Quarterly Report onForm 10-Q for the period ended March 31, 2010, each of which is incorporated by reference herein.
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| | As of March 31,
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| | 2010 | |
| | Actual | | | As Adjusted | |
| | (Unaudited)
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| | (Dollars in thousands) | |
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Stockholders’ Equity: | | | | | | | | |
Common Stock — Authorized 25,000,000 shares; issued 13,546,248 and , respectively | | $ | 95,770 | | | $ | | |
Retained earnings | | | 7,579 | | | | | |
Accumulated other comprehensive income (loss), net of tax | | | 4,411 | | | | | |
Treasury stock, at cost; 2,053,111 shares | | | (25,503 | ) | | | | |
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Total Stockholders’ Equity | | $ | 82,257 | | | $ | | |
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Capital Ratios for Farmers National Banc Corp.(1) | | | | | | | | |
Tier 1 Capital to average assets ratio | | | 7.04 | % | | | | % |
Tier 1 to risk-weighted assets ratio | | | 10.89 | % | | | | % |
Total capital to risk-weighted assets | | | 12.15 | % | | | | % |
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(1) | | The as adjusted capital ratios assume the initial deployment of the net proceeds of the offering in short term investments carrying a 20% risk-weighting under applicable regulations. |
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MARKET FOR COMMON SHARES AND OUR DIVIDEND POLICY
Our common shares are traded on the OTCBB. The average daily trading volume for our common shares is less than larger financial institutions. On [ • ], 2010, we applied to have our common shares listed on the Nasdaq. During the past 12 months, the average daily trading volume for our common shares on the OTCBB was approximately [ • ]2,417 shares. No assurance can be given that a very active trading market will develop in the foreseeable future or can be maintained. As of [ • ],, 2010, we had [ • ] common shares outstanding, held by approximately [ • ] holders of record.
The following table sets forth the high and low closing sales prices per common share reported for the periods presented, and the cash dividends paid per common share, for the periods shown.
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Quarter Ended | | High | | Low | | Cash Dividend |
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June 30, 2010 (through [ • ], 2010) | | $ | [ • ] | | | $ | [ • ] | | | $ | [ • ] | |
March 31, 2010 | | $ | 4.80 | | | $ | 4.10 | | | $ | 0.03 | |
December 31, 2009 | | $ | 5.35 | | | $ | 4.01 | | | $ | 0.06 | |
September 30, 2009 | | $ | 6.00 | | | $ | 4.71 | | | $ | 0.06 | |
June 30, 2009 | | $ | 6.80 | | | $ | 4.75 | | | $ | 0.12 | |
March 31, 2009 | | $ | 6.05 | | | $ | 3.65 | | | $ | 0.12 | |
December 31, 2008 | | $ | 7.24 | | | $ | 3.55 | | | $ | 0.12 | |
September 30, 2008 | | $ | 7.55 | | | $ | 5.50 | | | $ | 0.12 | |
June 30, 2008 | | $ | 8.45 | | | $ | 7.05 | | | $ | 0.12 | |
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Quarter Ended | | High | | Low | | Cash Dividend |
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December 30, 2010 (through November 12, 2010) | | $ | 3.70 | | | $ | 3.51 | | | $ | — | |
September 30, 2010 | | $ | 4.10 | | | $ | 3.47 | | | $ | 0.03 | |
June 30, 2010 | | $ | 4.65 | | | $ | 3.50 | | | $ | 0.03 | |
March 31, 2010 | | $ | 4.80 | | | $ | 4.10 | | | $ | 0.03 | |
December 31, 2009 | | $ | 5.35 | | | $ | 4.01 | | | $ | 0.06 | |
September 30, 2009 | | $ | 6.00 | | | $ | 4.71 | | | $ | 0.06 | |
June 30, 2009 | | $ | 6.80 | | | $ | 4.75 | | | $ | 0.12 | |
March 31, 2009 | | $ | 6.05 | | | $ | 3.65 | | | $ | 0.12 | |
December 31, 2008 | | $ | 7.24 | | | $ | 3.55 | | | $ | 0.12 | |
The amount and type (cash or stock)shares), if any, of future dividends will be determined by our board and will depend on our earnings, financial conditions and other factors considered by our board to be relevant. There can be no assurance as to when, or if, our board will increase dividends above this level.
Additionally, the payment of cash dividends on our common shares will depend largely upon the ability of Farmers Bank to declare and pay dividends to us. Farmers Bank’s ability to pay dividends will depend primarily upon its earnings, financial condition, and need for funds, as well as applicable governmental policies. Even if we have earnings in an amount sufficient to pay dividends, Farmers Bank’s board of directors may determine to retain earnings for the purpose of funding growth. Farmers Bank generally pays a dividend to us to provide funds for: (1)(i) dividends the we pay our shareholders; (ii) treasury share repurchases; and (iii) other expenses.
There are various legal limitations with respect to Farmers Bank’s ability to pay dividends to us and our ability to pay dividends to shareholders. Under the Ohio General Corporation Law, we may pay dividends out of surplus, however created, but must notify our shareholders if a dividend is paid out of capital surplus. Our ability to pay dividends to our shareholders is largely dependent on the amount of dividends which may be declared and paid to us by our subsidiaries. Under Federalfederal banking law, the prior approval of the Federal Reserve Board and the OCC may be required in certain circumstances prior to the payment of dividends by us or Farmers Bank. The OCC has the authority to prohibit a national bank from paying dividends if such payment is deemed to be an unsafe or unsound practice, and the Federal Reserve Board has the same authority over bank holding companies.
The Federal Reserve Board has established guidelines with respect to the maintenance of appropriate levels of capital by registered bank holding companies. Compliance with such standards, as presently in effect, or as they may be amended from time to time, could possibly limit the amount of dividends that we may pay in the future. The Federal Reserve Board’s guidelines generally require us to review the effects of the cash payment of dividends on common stockshares and other Tier 1 capital instruments (i.e., perpetual preferred stock and trust preferred debt) on our financial condition. The guidelines also require that we review our net income.
Any future determination to pay dividends will be at the discretion of our board, subject to applicable limitations under Ohio law, and will be dependent upon our results of operations, financial condition, contractual restrictions and other factors deemed relevant by our board.
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CAPITALIZATION
The following table presents our historical consolidated capitalization at September 30, 2010 and our pro forma consolidated capitalization after giving effect to the receipt of net proceeds from the offering, assuming net proceeds of approximately $ . The table also sets forth the historical regulatory capital ratios of Farmers and Farmers Bank at September 30, 2010, and the pro forma regulatory capital ratios of Farmers Bank and Farmers, assuming the receipt by Farmers Bank of $ million of net proceeds from the offering, and further assuming that $ million of the proceeds received by Farmers Bank were invested in assets with a risk weighting of 20%, and $ million were invested in assets with a risk weighting of 50%.
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| | Historical at
| | | Pro Forma at
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| | September 30, 2010 | | | September 30, 2010 | |
| | (Dollars in thousands) | |
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Stockholders’ Equity: | | | | | | | | |
Common Shares — Authorized 25,000,000 shares; issued 15,662,843 at September 30, 2010; shares to be issued as adjusted(1) | | $ | 96,014 | | | $ | | |
Retained earnings | | | 11,654 | | | | | |
Accumulated other comprehensive income (loss), net of tax | | | 8,936 | | | | | |
Treasury stock, at cost; 2,053,136 shares | | | (25,503 | ) | | | | |
| | | | | | | | |
Total Stockholders’ Equity | | $ | 91,101 | | | $ | | |
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Capital Ratios for Farmers National Banc Corp. | | | | | | | | |
Tier 1 Capital to average assets ratio | | | 7.19 | % | | | | |
Tier 1 to risk-weighted assets ratio | | | 11.66 | % | | | | |
Total capital to risk-weighted assets | | | 12.87 | % | | | | |
Capital Ratios for Farmers National Bank of Canfield | | | | | | | | |
Tier 1 Capital to average assets ratio | | | 6.90 | % | | | | |
Tier 1 to risk-weighted assets ratio | | | 11.02 | % | | | | |
Total capital to risk-weighted assets | | | 12.23 | % | | | | |
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(1) | | The number of common shares to be outstanding after the offering is based on the number of shares outstanding as of September 30, 2010 and excludes shares reserved for issuance upon exercise of outstanding stock options with a weighted-average exercise price of . |
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THE RIGHTS OFFERING
General
We are distributing to the holders of our common shares, at no cost to the holders, non-transferable rights to purchase our common shares. We will distribute to each shareholder who owned shares at the end of the day on , 2010, the record date, one right for each common share held of record. Each subscription right entitles the holder to a basic subscription right and an oversubscription privilege. We will not issue fractional rights; the number of subscription rights we offer to each shareholder will be rounded down to the nearest whole number.
There will be no public market for the rights. You may not sell, assign or otherwise transfer your rights, except by operation of law in the event of your death or dissolution.
Basic Subscription Right
With your basic subscription right, you may purchase common shares per subscription right, subject to delivery of the required documents and payment of the subscription price of $ per share, prior to the expiration of the rights offering. Fractional common shares resulting from the exercise of the basic subscription right will be eliminated by rounding down to the nearest whole share. You may exercise all or a portion of your basic subscription right. However, if you exercise less than your full basic subscription right, you will not be entitled to purchase shares under your oversubscription privilege.
Oversubscription Privilege
In the event that you purchase all of the common shares available to you pursuant to your basic subscription right, you may also choose to purchase a portion of any common shares that are not purchased by other shareholders through the exercise of their basic subscription rights. If sufficient common shares are available, we will seek to honor the oversubscription requests in full. If oversubscription requests exceed the number of common shares available to be purchased pursuant to the oversubscription privilege, we will allocate the available common shares among shareholders who oversubscribed by multiplying the number of shares requested by each shareholder through the exercise of their oversubscription privileges by a fraction which equals (x) the number of shares available to be issued through oversubscription privileges divided by (y) the total number of shares requested by all subscribers through the exercise of their oversubscription privileges. As described above for the basic subscription right, we will not issue fractional shares through the exercise of oversubscription privileges.
Expiration Time
The subscription period, during which you may exercise your subscription rights, expires at 5:00 p.m., Eastern Time, on , 2010, which is the expiration of the rights offering. If you do not exercise your subscription rights prior to that time, your subscription rights will expire and will no longer be exercisable. We will not be required to issue common shares to you if the subscription agent receives your rights certificate or your subscription payment after that time. We have the option to extend the rights offering without notice to you. In no event will the expiration date be later than , 2010. We may extend the expiration of the rights offering by giving oral or written notice to the subscription agent prior to the expiration of the rights offering. If we elect to extend the expiration of the rights offering, we will issue a press release announcing such extension no later than the next business day after the board of directors determines to extend the rights offering.
If you hold your common shares in the name of a custodian bank, broker, dealer or other nominee, your nominee will exercise the subscription rights on your behalf in accordance with your instructions. Your nominee may establish a deadline that may be before the 5:00 p.m., Eastern Time, , 2010, expiration date that we have established for the rights offering.
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Standby Purchase Agreements
We anticipate that we will enter into standby purchase agreements pursuant to which an aggregate of investors, as standby investors, will severally agree to acquire from us at $ per share up to common shares (maximum), subject in each case to possible reduction under certain circumstances. See“— Regulatory Limitation” beginning on page 40 of this prospectus. We expect that the standby purchase agreements will require that we sell and guarantee the availability of up to 2,053,136 common shares to such standby investors if sufficient shares are not available after completion of the rights offering. The additional shares would be offered only to the standby investors and would be issued by us out of treasury shares, which are not subject to preemptive rights. See“STANDBY PURCHASE AGREEMENTS” beginning on page 45 of this prospectus.
Reasons for the Rights Offering
The issuance of our common shares generally is subject to preemptive rights, which provide shareholders the right to subscribe for additional common shares when we issue and sell additional common shares, including an issuance of common shares in a public offering. Initially, our board of directors determined to conduct a public offering of our common shares to raise equity capital. In order to conduct a public offering, we needed the approval of our shareholders to amend our Articles to eliminate preemptive rights. We held a special meeting of shareholders on August 19, 2010, but were not successful in obtaining sufficient votes to amend the Articles. Our board of directors subsequently concluded that a rights offering was the appropriate option under the current circumstances to raise equity capital. We believe that the rights offering will strengthen our financial condition by generating additional cash and increasing our capital position; however, our board of directors is making no recommendation regarding your exercise of the subscription rights. We cannot assure you that we will not need to seek additional financing or engage in additional capital offerings in the future.
No Board or Financial Advisor Recommendation
You must make your decision whether to exercise your rights based on your own evaluation of your financial situation and our offer. Neither our board of directors nor Sandler O’Neill makes any recommendation to any holder of rights or other prospective purchasers regarding the exercise of their rights or the subscription for shares of our common shares.
Exercise of Subscription Rights
Important! Please carefully read the instructions accompanying the subscription rights certificate and follow those instructions in detail. Do not send subscription rights certificates to us.
You are responsible for choosing the payment and delivery method for your subscription rights certificate, and you bear the risks associated with your choices. If you choose to deliver your subscription rights certificate and payment by mail, we recommend that you use registered mail, properly insured, with return receipt requested. We also recommend that you allow a sufficient number of days to ensure delivery to the subscription agent and clearance of payment prior to , 2010. Because uncertified personal checks may take at least five business days to clear, we strongly urge you to pay, or arrange for payment, by means of certified or cashier’s check, money order or wire transfer of funds.
Method of Exercise
The exercise of subscription rights is irrevocable and may not be cancelled or modified. You may exercise your subscription rights as follows:
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| • | Subscription by Registered Holders. To exercise your subscription rights, you must properly complete and execute the subscription rights certificate, together with any required signature guarantees, and forward it, together with payment in full of the subscription price for each common share you are subscribing for, to the subscription agent at the address set forth under the caption“— Subscription Agent”beginning on page 39, prior to the expiration date or, if you cannot deliver your subscription |
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| | rights certificate to the subscription agent prior to the expiration date, you may follow the guaranteed delivery procedures described under the caption“— Guaranteed Delivery Procedures”beginning on page 36. Your payment, in any case, must be received and cleared prior to 5:00 p.m., Eastern Time, on , 2010. |
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| • | Subscription by Beneficial Owners. If you are a beneficial owner of common shares, meaning that you hold your shares in “street name” through a broker, dealer, custodian bank or other nominee, we will ask your broker, dealer, custodian bank or other nominee to notify you of the rights offering. If you wish to exercise your subscription rights, you will need to have your broker, dealer, custodian bank or other nominee act for you and exercise your subscription rights and deliver all documents and payment on your behalf, including a “Nominee Holder Certification,” prior to 5:00 p.m., Eastern Time, on , 2010. If you hold a Farmers share certificate directly and would prefer to have your broker, dealer, custodian bank or other nominee act for you, you should contact your nominee and request it to effect the transactions for you. |
To indicate your decision with respect to your subscription rights, you should complete and return to your broker, dealer, custodian bank or other nominee, the form entitled “Beneficial Owners Election Form.” You should receive this form from your broker, dealer, custodian bank or other nominee with the other subscription rights offering materials. If you wish to obtain a separate subscription rights certificate, you should contact the nominee as soon as possible and request that a separate subscription rights certificate form be issued to you. You should contact your broker, dealer, custodian bank or other nominee if you do not receive this form, but you believe you are entitled to participate in the rights offering. We are not responsible if you do not receive the form from your broker, dealer, custodian bank or other nominee or if you receive it without sufficient time to respond.
Your subscription rights will not be considered exercised unless the subscription agent actually receives from you, your broker, dealer, custodian bank or other nominee, as the case may be, all of the required documents (including those referenced under the caption“— Guaranteed Delivery Procedures”beginning on page 36 if you are following the guaranteed delivery procedures) and your full subscription price payment (and your payment has cleared) prior to 5:00 p.m., Eastern Time, on , 2010, the scheduled expiration date of the rights offering.
Method of Payment
You must pay for the common shares you subscribe for in full in United States currency by: (i) check or bank draft payable to “BNY Mellon Shareowner Services”, drawn upon a United States bank; or (ii) wire transfer of immediately available funds to an account maintained by subscription agent. You will have paid the subscription price only upon:
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| • | clearance of any uncertified check deposited by the subscription agent; |
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| • | receipt by the subscription agent of any certified check or bank draft, drawn upon a United States bank; or |
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| • | receipt of collected funds in the subscription agent’s account. |
Guaranteed Delivery Procedures
If you want to exercise your rights, but time will not permit your subscription rights certificate to reach the subscription agent on or prior to 5:00 p.m., Eastern Time, on , 2010, you may exercise your rights using the following guaranteed delivery procedures:
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| 1. | on or before , 2010, you must have sent, and the subscription agent must have received, payment in full for each common share you are purchasing through your basic subscription right and your oversubscription privilege; |
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| 2. | on or before , 2010, you must have sent, and the subscription agent must have received, a Notice of Guaranteed Delivery, substantially in the form provided with the attached instructions, |
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| | from a member firm of a registered national securities exchange or a member of the Financial Industry Regulatory Authority, which we refer to as FINRA, or a commercial bank or trust company having an office or correspondent in the United States. The Notice of Guaranteed Delivery must state: |
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| • | your name, |
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| • | the number of rights that you hold, |
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| • | the number of common shares that you wish to purchase pursuant to your basic subscription rights, and |
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| • | the number of common shares, if any, you wish to purchase pursuant to your oversubscription privilege. |
The Notice of Guaranteed Delivery must guarantee the delivery of your subscription rights certificate to the subscription agent within three OTCBB trading days following the date of the Notice of Guaranteed Delivery; and
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| 3. | you must send, and the subscription agent must receive, your properly completed and duly executed subscription rights certificate, including any required signature guarantees, within three OTCBB trading days following the date of your Notice of Guaranteed Delivery. You may physically deliver the Notice of Guaranteed Delivery via the enclosed envelope to the subscription agent. You can obtain additional copies of the Notice of Guaranteed Delivery from the subscription agent at the address set forth below under the caption“— Subscription Agent” beginning on page 39 of this prospectus. |
Signature Guarantee
Signatures on the subscription rights certificate must be guaranteed by an Eligible Guarantor Institution, as defined inRule 17Ad-15 of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, subject to the standards and procedures adopted by the subscription agent. Eligible Guarantor Institutions that provide signature guarantee services include banks, brokers, dealers, credit unions, national securities exchanges and savings associations. Signatures on the subscription rights certificate do not need to be guaranteed if the subscription rights certificate:
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| • | provides that the common shares you are purchasing are to be delivered directly to the record owner of the subscription rights; or |
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| • | is submitted for the account of a member firm of a registered national securities exchange or a member of the FINRA, or a commercial bank or trust company having an office or correspondent in the United States. |
Shares Held by or for Others
If you hold common shares for the account of others, such as a broker, a trustee or a depository for securities, you should notify the respective beneficial owners of the shares as soon as possible to obtain instructions with respect to the subscription rights they beneficially own.
If you are a beneficial owner of common shares held by a holder of record, such as a broker, trustee or a depository for securities, you should contact the holder and ask the holder to effect transactions in accordance with your instructions.
Ambiguities in Exercise of the Subscription Rights
If you do not specify the number of rights being exercised on your subscription rights certificate, or if your payment is not sufficient to pay the total purchase price for all of the shares that you indicated you wish to purchase, you will be deemed to have exercised the maximum number of rights that could be exercised for the amount of the payment that the subscription agent receives from you.
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If your payment exceeds the total purchase price for the number of shares of common shares that you have indicated you wish to exercise on your subscription rights certificate, your payment will be applied until depleted as follows:
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| 1. | to subscribe for the number of common shares that you indicated on the subscription rights certificate that you wish to purchase through your basic subscription rights; |
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| 2. | to subscribe for additional common shares until your basic subscription right has been fully exercised; and |
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| 3. | To subscribe for additional common shares pursuant to your oversubscription privilege (subject to any applicable limitation or proration). |
Validity of Subscriptions
We will determine all questions concerning the timeliness, validity, form and eligibility of any exercise of subscription rights. We may, at our sole discretion:
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| • | waive any defect or irregularity; |
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| • | permit a defect or irregularity to be corrected within any period of time that we set; or |
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| • | reject the purported exercise of any right by reason of any defect or irregularity. |
Any determination we make with respect to these matters will be final and binding. Subscriptions will not be deemed to have been received or accepted until the person submitting the subscription has cured all irregularities or we have waived them. This must occur within any period of time that we, in our sole discretion, set. Neither we nor the subscription agent will:
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| • | be under any duty to notify anyone of any defect or irregularity in connection with the submission of any subscription rights certificate; or |
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| • | incur any liability for any failure to give notice of this sort. |
Subscribers’ Fees and Expenses
You are responsible for paying all commissions, fees, taxes and other expenses that you incur in exercising your subscription rights.
No Revocation
Once you submit the rights certificate or have instructed your nominee of your subscription request, you are not allowed to revoke or change the exercise or request a refund of monies paid. All exercises of subscription rights are irrevocable, even if you learn information about us that you consider to be unfavorable. You should not exercise your subscription rights unless you are certain that you wish to purchase additional common shares at the subscription price.
Right To Terminate Offering
We expressly reserve the right, at our sole discretion, at any time prior to delivery of the common shares offered by this prospectus, to terminate the rights offering if the offering is prohibited by law or regulation or our board of directors concludes, in its judgment, that it is not in our best interest, and that of our shareholders, to complete the offering under the circumstances.
Escrow Arrangements; Return of Funds
BNY Mellon Shareowner Services, the subscription agent, will hold funds received in payment for our common shares until the rights offering is completed or is withdrawn or canceled. If the rights offering is canceled for any reason, all subscription payments received by the subscription agent will be returned promptly, with interest.
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Rights as a Shareholder
You will have no rights as a holder of common shares you purchase in the rights offering until certificates representing the common shares are issued to you, or your account at your nominee is credited with the common shares purchased in the rights offering.
Listing
The subscription rights granted to you are non-transferable and, therefore, you may not sell, transfer or assign your subscription rights to anyone. The subscription rights will not be quoted for trading on the OTCBB or any other stock exchange or market. The our common shares issuable upon exercise of the subscription rights will be listed on the OTCBB under the ticker symbol “FMNB.OB.”
Subscription Agent
BNY Mellon Shareowner Services is acting as the subscription agent for the rights offering under an agreement with us. All subscription rights certificates, payments of the subscription price, and nominee holder certifications, to the extent applicable to your exercise of rights, must be delivered to BNY Mellon Shareowner Services as follows:
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By mail:
BNY Mellon Shareowner Services Attn: Corporate Action Department, 27th Floor P.O. Box 3301 South Hackensack, New Jersey 07606 | | By overnight courier or by hand:
BNY Mellon Shareowner Services Attn: Corporate Action Department, 27th Floor 480 Washington Boulevard Jersey City, New Jersey 07310 |
Delivery to any address or by a method other than those set forth above does not constitute valid delivery.
You should direct any questions or requests for assistance concerning the method of subscribing for common shares or for additional copies of this prospectus to BNY Mellon Shareowner Services, the information agent, by calling, if you are located within the United States, Canada or Puerto Rico,(866) 365-9071 (toll free) or, if you are located outside the U.S., (201)680-6575 (collect).
We will pay the fees and expenses of the subscription agent and have agreed to indemnify it against any liability that it may incur in connection with the offering, including liabilities under the Securities Act of 1933, as amended, which we refer to as the Securities Act.
Determination of Subscription Price
The price of the shares offered in the rights offering was determined by us based on a variety of factors, including:
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| • | The results of negotiations with prospective standby investors; |
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| • | the earnings per share and the per share book value of our common shares; |
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| • | the trading history of our common shares; |
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| • | our operating history and prospects for future earnings; |
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| • | our current performance; |
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| • | the prospects of the banking industry in which we compete; |
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| • | the general condition of the securities markets at the time of the offering; and |
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| • | the prices of equity securities and equity equivalent securities of comparable companies. |
Sandler O’Neill has not prepared any report or opinion constituting a recommendation or advice to us or our shareholders, nor has Sandler O’Neill prepared an opinion as to the fairness of the subscription price or
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the terms of the offering to us or our current shareholders. Sandler O’Neill expresses no opinion and makes no recommendation to holders of the rights as to the purchase by any person of our common shares. Sandler O’Neill also expresses no opinion as to the prices at which shares to be distributed in connection with the rights offering may trade if and when they are issued or at any future time.
We cannot assure you that the market price of our common shares will not decline during or after the rights offering. We also cannot assure you that you will be able to sell the common shares purchased during the rights offering at a price equal to or greater than the subscription price. We urge you to obtain a current quote for our common shares before exercising your subscription rights.
Information Agent
If you have any questions regarding completing a rights certificate or submitting payment in the rights offering, or if you have any questions about us, Farmers Bank or the rights offering, please contact our information agent, BNY Mellon Shareowner Services, by calling, if you are located within the United States, Canada or Puerto Rico, (866) 365-9071 (toll free) or, if you are located outside the U.S., (201) 680-6575 (collect). We will pay the fees and expenses of the information agent and have also agreed to indemnify the information agent from certain liabilities that it may incur in connection with the rights offering.
Dilution
Rights holders may experience substantial dilution of their percentage of equity ownership interest and voting power in us if they do not exercise their rights. If we are required to sell additional shares to the standby investors in excess of those offered pursuant to the basic subscription rights and oversubscription privileges due to minimum guarantees in the standby purchase agreements, subscription rights holders will suffer dilution in their equity ownership interest and voting power whether or not they exercise their basic subscription rights.
Purchase Intentions of Directors and Officers
We expect all of our directors and executive officers to participate in the rights offering. Our directors and executive officers, together with their affiliates, intend to purchase approximately $ million in available common shares, assuming sufficient common shares are available to satisfy their purchase intentions. The purchase price paid by our directors and executive officers, together with their affiliates, will be $ per share, the same paid by all other persons who purchase our common shares in the rights offering. Following the completion of the share offering our directors and executive officers, together with their affiliates are expected to own approximately common shares, or between % and % of our total outstanding common shares, assuming the sale at the minimum and maximum of the offering range, respectively, and excluding stock options currently exercisable or exercisable within 60 days of , 2010.
Foreign and Certain Other Shareholders
Subscription rights certificates will not be mailed to record date holders whose addresses are outside the United States and Canada or who have an APO or FPO address, but will be held by the subscription agent for each record date holders’ accounts. To exercise their subscription rights, such persons must notify the subscription agent at or prior to 5:00 p.m., Eastern Time, on , 2010, at which time (if no contrary instructions have been received) the rights represented thereby will expire if not exercised.
Regulatory Limitation
We will not issue common shares pursuant to the exercise of basic subscription rights or over-subscription rights to any shareholder who, in our sole opinion, could be required to obtain prior clearance or approval from or submit a notice to any state or federal bank regulatory authority to acquire, own or control such shares if, as of , 2010, such clearance or approval has not been obtainedand/or any required waiting period has not expired. If we elect not to issue shares in such case, such shares will become available to satisfy
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oversubscription by other shareholders pursuant to subscription rights and will be available to standby investors.
The acquisition of more than 10% of our outstanding common shares may, in certain circumstances, be subject to the provisions of the Change in Bank Control Act of 1978, which we refer to as the Bank Control Act. The Board of Governors of the Federal Reserve System, which we refer to as the Federal Reserve Board, has also adopted a regulation pursuant to the Change in Bank Control Act which generally requires persons who at any time intend to acquire control of a member bank, either directly or indirectly through an acquisition of control of its holding company, to provide 60 days prior written notice and certain financial and other information to the Federal Reserve Board. Control for the purpose of this Act exists in situations in which the acquiring party has voting control of at least 25% of any class of voting stock or the power to direct the management or policies of the bank or the holding company. However, under Federal Reserve Board regulations, control is presumed to exist where the acquiring party has voting control of at least 10% of any class of voting securities if: (i) the bank or holding company has a class of voting securities which is registered under Section 12 of the Exchange Act; or (ii) the acquiring party would be the largest holder of a class of voting shares of the bank or the holding company. The statute and underlying regulations authorize the Federal Reserve Board to disapprove a proposed acquisition on certain specified grounds. As part of such acquisition, the acquiring company (unless already so registered) would be required to register as a bank holding company under the BHC Act.
Common Shares Outstanding After the Rights Offering
Assuming no options are exercised prior to the expiration of the rights offering and assuming that the offering is fully subscribed and that 2,053,136 common shares are issued to standby investors, we expect approximately common shares will be outstanding immediately after the completion of the offering.
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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of the material U.S. federal income tax consequences of the receipt and exercise (or expiration) of the subscription rights acquired through the rights offering and the common shares received upon exercise of the subscription rights or, if applicable, upon exercise of the over-subscription privilege. This discussion is a summary for general information purposes only and does not consider all aspects of U.S. federal income taxation that may be relevant to particular U.S. holders in light of their particular circumstances. This summary applies to you only if you are a U.S. holder (defined below), acquire your subscription rights in the rights offering and you hold your subscription rights or common shares issued to you upon exercise of the subscription rights or, if applicable, the oversubscription privilege, as capital assets for tax purposes. This summary does not apply to you if you are not a U.S. holder or if you are a member of a special class of holders subject to special rules, including, but not limited to:
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| • | A financial institution; |
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| • | A regulated investment company; |
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| • | A real estate investment trust; |
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| • | A dealer in securities; |
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| • | A trader in securities that elects to use amark-to-market method of accounting for securities holdings, |
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| • | A tax-exempt organization; |
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| • | An employee stock purchase plan; |
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| • | An insurance company; |
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| • | A person subject to the alternative minimum tax provisions of the Internal Revenue Code of 1986, as amended, which we refer to as the Code; |
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| • | A person who acquired common shares pursuant to the exercise of compensatory stock options or otherwise as compensation; |
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| • | A person that holds common shares as part of a “straddle,” “constructive sale” or a “hedging” or “conversion” transaction; |
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| • | A person whose functional currency is not the U.S. dollar. |
This section is based on Code, its legislative history, existing and proposed Treasury regulations promulgated thereunder, published rulings of the Internal Revenue Service, which we refer to as the IRS, and court decisions, all as currently in effect, all of which are subject to change or differing interpretations at any time, possibly on a retroactive basis. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described herein.
You are a U.S. holder if you are a beneficial owner of subscription rights or common shares and you are:
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| • | An individual who is a citizen or resident of the U.S. for federal income tax purposes; |
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| • | A corporation (or other entity classified as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the U.S., any state thereof or the District of Columbia; |
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| • | An estate whose income is subject to U.S. federal income tax regardless of its source; or |
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| • | A trust if (i) a U.S. court can exercise primary supervision over the trust’s administration and one or more U.S. persons are authorized to control all substantial decisions of the trust, or (ii) the trust has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person. |
If a partnership (including any entity classified as a partnership for U.S. federal income tax purposes) receives the subscription rights or holds common shares received upon exercise of the subscription rights or the over-subscription privilege, the tax treatment of a partner in such partnership generally will depend upon the status of the partner and the activities of the partnership. Such a partner or partnership should consult its tax advisor as to the U.S. federal income tax consequences of receiving and exercising the subscription rights and acquiring, holding or disposing of the common shares.
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THIS DISCUSSION ADDRESSES ONLY CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR REGARDING THE U.S. FEDERAL, STATE, LOCAL,NON-U.S. AND OTHER TAX CONSEQUENCES OF RECEIVING, OWNING AND EXERCISING THE SUBSCRIPTION RIGHTS AND ACQUIRING, HOLDING AND DISPOSING OF THE COMMON SHARES IN YOUR PARTICULAR CIRCUMSTANCES.
Taxation of Subscription Rights
Receipt of Subscription Rights. Your receipt of subscription rights pursuant to the rights offering should be treated as a nontaxable distribution with respect to your existing common shares for U.S. federal income tax purposes. Under Section 305 of the Code, a shareholder who receives a right to acquire shares will in certain circumstances, be treated as having received a taxable dividend in an amount equal to the fair market value of such right. The application of this rule is very complex and subject to uncertainty. However, we believe that pursuant to Section 305 of the Code and the Treasury regulations promulgated thereunder, the receipt of subscription rights should generally not be taxable to a shareholder. Consequently, the discussion below assumes that the receipt of subscription rights will be treated as a nontaxable distribution.
Tax Basis in Subscription Rights. If the fair market value of the subscription rights you receive is less than 15% of the fair market value of your existing common shares on the date you receive the subscription rights, the subscription rights will be allocated a zero basis for U.S. federal income tax purposes, unless you elect to allocate basis between your existing common shares and the subscription rights in proportion to the relative fair market values of the existing common shares and the subscription rights determined on the date of receipt of the subscription rights. If you choose to allocate basis between your existing common shares and the subscription rights, you must make this election on a statement included with your timely filed tax return (including extensions) for the taxable year in which you receive the subscription rights. Such an election is irrevocable.
On the other hand, if the fair market value of the subscription rights you receive is 15% or more of the fair market value of your existing common shares on the date you receive the subscription rights, then you must allocate your basis in your existing common shares between the existing common shares and the subscription rights you receive in proportion to their fair market values determined on the date you receive the subscription rights.
The fair market value of the subscription rights on the date the subscription rights are distributed is uncertain, and we have not obtained, and do not intend to obtain, an appraisal of the fair market value of the subscription rights on that date. In determining the fair market value of the subscription rights, you should consider all relevant facts and circumstances, including any difference between the subscription price of the subscription rights and the trading price of our common shares on the date that the subscription rights are distributed, the length of the period during which the subscription rights may be exercised and the fact that the subscription rights are non-transferable.
Holding Period in Subscription Rights. Your holding period in a subscription right will include your holding period in the common shares with respect to which the subscription right was distributed.
Exercise of Subscription Rights. Generally, you will not recognize gain or loss on the exercise of subscription rights. Your tax basis in a new common share acquired when you exercise a subscription right will generally be equal to the sum of: (1) your adjusted tax basis, if any, in the subscription right; and (2) the subscription price you paid for such shares. The holding period for common shares acquired when you exercise your subscription right will begin on the date of exercise.
Acquisition of Common Shares through Exercise of Over-Subscription Privilege. Generally, you will not recognize gain or loss on the exercise of the oversubscription privilege. If you acquire common shares through exercise of the over-subscription privilege, your basis in such shares will generally be equal to the subscription price you paid for such shares plus any servicing fee charged to you by your broker, bank or trust. The holding period with respect to such shares of common shares will commence on the day after the acquisition of the common shares.
Not Exercising Subscription Rights. If you do not exercise your subscription rights, you should not recognize any gain or loss for U.S. federal income tax purposes and any portion of the tax basis in your
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existing common shares previously allocated to the subscription rights not exercised should be re-allocated to the existing common shares.
Taxation of Common Shares
Distributions. Distributions with respect to common shares acquired upon exercise of subscription rights or the over-subscription privilege will be taxable as dividend income when actually or constructively received to the extent of our current or accumulated earnings and profits as determined for U.S. federal income tax purposes. To the extent that the amount of a distribution exceeds our current and accumulated earnings and profits, such distribution will be treated first as a tax-free return of capital to the extent of your adjusted tax basis in such common shares and thereafter as capital gain.
Dispositions. If you sell or otherwise dispose of common shares acquired upon exercise of basic subscription rights or the oversubscription privilege, you will generally recognize capital gain or loss equal to the difference between the amount realized and your adjusted tax basis in the common shares. Such capital gain or loss will be long-term capital gain or loss if your holding period for the common shares is more than one year. Long-term capital gain of an individual that is recognized in taxable years beginning before January 1, 2011 is generally taxed at a maximum rate of 15%. The deductibility of net capital losses is subject to limitations.
New Legislation Relating to Foreign Accounts
Newly enacted legislation may impose withholding taxes on certain types of payments made to “foreign financial institutions” and certain othernon-U.S. entities after December 31, 2012. Among other requirements, the new legislation imposes a 30% withholding tax on dividends on, or gross proceeds from the sale or other disposition of, our common shares paid to a foreign financial institution unless the foreign financial institution enters into an agreement with the U.S. Treasury to undertake to identify accounts held by certain U.S. persons orU.S.-owned foreign entities, report annually certain information about such accounts and withhold 30% on payments to account holders whose actions prevent it from complying with these requirements. In addition, the legislation imposes a 30% withholding tax on the same types of payments to a foreign non-financial entity unless the entity certifies that it does not have any substantial U.S. owners or furnishes identifying information regarding each substantial U.S. owner. You should consult your own tax advisor regarding this legislation.
Health Care and Reconciliation Act of 2010
On March 30, 2010, President Obama signed into law the Health Care and Reconciliation Act of 2010, which requires certain U.S. stockholders who are individuals, estates or trusts to pay a 3.8% tax on, among other sources, dividends on stock and capital gains from the sale or other disposition of stock for taxable years beginning after December 31, 2012. You should consult your own tax advisor regarding the effect, if any, of this legislation on your ownership and disposition of the common shares.
Information Reporting and Backup Withholding
You may be subject to information reportingand/or backup withholding with respect to dividend payments on or the gross proceeds from the disposition of the common shares acquired through the exercise of the subscription rights or the over-subscription privilege. Backup withholding may apply under certain circumstances if you: (1) fail to furnish your social security or other taxpayer identification number, which we refer to as a TIN; (2) furnish an incorrect TIN; (3) fail to report interest or dividends properly; or (4) fail to provide a certified statement, signed under penalty of perjury, that the TIN provided is correct, that you are not subject to backup withholding and that you are a U.S. person. Any amount withheld from a payment under the backup withholding rules is allowable as a credit against (and may entitle you to a refund with respect to) your U.S. federal income tax liability, provided that the required information is furnished to the IRS. Certain persons are exempt from backup withholding, including corporations and financial institutions. You should consult your own tax advisor as to your qualification for exemption from backup withholding and the procedure for obtaining such exemption.
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STANDBY PURCHASE AGREEMENTS
We expect to enter into standby purchase agreements with certain standby investors. We expect the standby investors to severally agree, subject in each case to a maximum standby purchase commitment and certain conditions, to acquire from us at the subscription price of $ per share up to common shares (maximum), if any, remaining after the exercise of the rights, including those purchased pursuant to the oversubscription privilege. In addition, the standby purchase agreements will provide that we must sell up to 2,053,136 common shares, which consists of our available treasury shares, which are not subject to preemptive rights, to the standby investors if such amount of underlying shares are not available for sale after the exercise of rights. The obligations of the standby investors will not be subject to the purchase of any minimum number of shares pursuant to the exercise of the rights by the rights holders, but are subject to the following conditions:
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| • | that no order suspending the effectiveness of the registration statement or any amendment or supplement thereto shall have been issued and no proceedings for such purpose shall be pending before or, to our knowledge or the standby investor, threatened by the Commission and any requests for additional information by the Commission (to be included in the registration statement, in this prospectus or otherwise) shall have been complied with in all material respects; |
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| • | that our representations and warranties and those of the standby investor contained in the standby purchase agreement shall be true and correct in all material respects as of the closing date, and that we, as well as the standby investor, shall have performed all covenants and agreements required to be performed at or prior to the closing date; and |
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| • | we shall have conducted the rights offering substantially in the manner described in this prospectus. |
The following table sets forth the minimum and maximum share commitments of the standby investors.
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Name | | Minimum Share Commitment | | Maximum Share Commitment |
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Total | | | | |
Each standby purchase agreement is expected to provide that it may be terminated by the standby investor only upon the occurrence of the following events:
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| • | prior to the closing of the share offering, if we experience a material adverse effect on our financial condition, or on our financial position, operations, assets, results of operation or business (excluding changes in general economic, industry, market or competitive conditions that generally affect the financial institutions industry, unless such changes have a disproportionate effect on us); |
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| • | the suspension of trading in our common shares; |
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| • | if we materially breach the standby purchase agreement and such breach is not cured within the time period specified in the standby purchase agreement; |
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| • | if the share offering is not completed by , 2010; |
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| • | in the event that we are unable to obtain any required federal or state approvals for the share offerings on conditions reasonably satisfactory to us despite our reasonable efforts to obtain such approvals; and |
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| • | any circumstances occur that would result in the standby investor, individually or otherwise with any other person or entity, being required to register as a depository institution holding company under federal or state laws or regulations, or to submit an application, or notice, to a federal regulatory authority. |
Each standby investor has represented to us that they are not “affiliates” of the other within the meaning of Rule 405 of the Securities Act, and are not acting in concert with each other and are not members of a “group” (within the meaning of Section 13(d)(3) of the Exchange Act) and have no current intention to act in the future in a manner that would make them members of such a group.
USE OF PROCEEDS
Assuming the offering is fully subscribed and that 2,053,136 common shares are issued to the standby investors, we estimate that the net proceeds from the offering, after advisory fees, selling agent commissions and
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estimated expenses, will be approximately $ . We intend to contribute $8 to $10 million of the net proceeds of the offering to Farmers Bank for general operating purposes, which may include among other things funding of loans, investment in securities, and payment of expenses. The proceeds of the offering which are not contributed to Farmers Bank will be used by the Company for general corporate purposes which may include, among others, payment of expenses, payment of dividends, and pursuing strategic opportunities which may be presented to the Company from time to time. In the event that we are unable to sell the maximum number of shares provided for in this offering, we will apply the net proceeds that we receive first to a capital contribution to Farmers Bank, and then, to the extent that proceeds remain available, to our general corporate purposes as described above.
PLAN OF DISTRIBUTION
We are offering common shares to our shareholders of record as of 2010, through the distribution to those shareholders of nontransferable rights to purchase common shares for every common shares each shareholder beneficially owned on such date. The subscription price in the rights offering is $ per share. To the extent any of the shares offered in the rights offering are available, shareholders shall be permitted to oversubscribe, subject to the limitations described in this prospectus under the caption“THE RIGHTS OFFERING — The Subscription Rights — Oversubscription Privilege” beginning on page 34 of this prospectus.
Directors, executive officers and employees
Our directors and executive officers may participate in the solicitation of the exercise of subscription rights for the purchase of common shares. These persons will not receive any commissions or compensation in connection with these activities, other than their normal compensation, but they will be reimbursed for their reasonableout-of-pocket expenses incurred in connection with any solicitation. Other trained employees of Farmers Bank may assist in the rights offering in ministerial capacities, providing clerical work in effecting an exercise of subscription rights or answering questions of a ministerial nature. Our other employees have been instructed not to solicit the exercise of subscription rights for the purchase of common shares or to provide advice regarding the exercise of subscription rights. We will rely onRule 3a4-1 under the Exchange Act, and the solicitation of subscription rights and the sales of the common shares underlying such subscription rights will be conducted within the requirements ofRule 3a4-1, so as to permit officers, directors and employees to participate in the sale of our common shares. None of our officers, directors or employees will be compensated in connection with their participation in the offering by the payment of commissions or other remuneration based either directly or indirectly on the transactions in the common shares.
Financial Advisor
We have engaged Sandler O’Neill as our financial advisor in connection with the offering pursuant to an agency agreement between Sandler O’Neill and us. Sandler O’Neill is a nationally recognized investment banking firm whose principal business specialty is financial institutions. In the ordinary course of its investment banking business, Sandler O’Neill is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.
In its capacity as financial advisor, Sandler O’Neill provided advice to us regarding the structure and the financial and market impact of the offering as well as with respect to marketing the common shares to be issued in the offering. Sandler O’Neill will not participate in the solicitation of the exercise of subscription rights for the purchase of common shares. Sandler O’Neill will identify potential standby investors and will assist us in negotiating standby purchase agreements with the standby investors.
Sandler O’Neill has also agreed, subject to the terms and conditions contained in the agency agreement with us, to sell in a public offering, on a best efforts basis, any shares not subscribed in the rights offering. Because the public offering is on a best efforts basis, Sandler O’Neill is not obligated to purchase any shares if they are not sold to the public, and the selling agent is not required to sell any specific number or dollar amount of shares.
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The public reoffer, if any, will be conducted in accordance with certain Commission rules applicable to best efforts offerings. Under these rules, if Sandler O’Neill collects funds from investors in the public reoffer, such funds will be deposited in the escrow account at on the same terms applicable to purchasers in the rights offering. Normal customer ticketing will be used for orders placed through Sandler O’Neill or other broker-dealers participating in the public reoffer. Accordingly, Sandler O’Neill and any other broker-dealer participating in the public reoffer generally will accept payment for common shares to be purchased in the public reoffer on the settlement date through the services of DTC on a delivery versus payment basis. The closing of the public reoffer is subject to conditions set forth in the agency agreement. If and when all the conditions for the closing are met, funds for common shares sold in the public reoffer, less fees and commissions payable, will be delivered promptly to us.
Determination of Offering Price
The price of the shares offered in the rights offering was determined by us based on a variety of factors, including:
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| • | The results of negotiations with prospective standby investors; |
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| • | the earnings per share and the per share book value of our common shares; |
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| • | the trading history of our common shares; |
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| • | our operating history and prospects for future earnings; |
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| • | our current performance; |
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| • | the prospects of the banking industry in which we compete; |
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| • | the general condition of the securities markets at the time of the offering; and |
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| • | the prices of equity securities and equity equivalent securities of comparable companies. |
Sandler O’Neill has not prepared any report or opinion constituting a recommendation or advice to us or our shareholders, nor has Sandler O’Neill prepared an opinion as to the fairness of the subscription price or the terms of the offering to us or our current shareholders. Sandler O’Neill expresses no opinion and makes no recommendation to holders of the rights as to the purchase by any person of our common shares. Sandler O’Neill also expresses no opinion as to the prices at which shares to be distributed in connection with the rights offering may trade if and when they are issued or at any future time.
Commissions and Expenses
As compensation for its services, we have agreed to pay Sandler O’Neill fees consisting of:
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| • | an advisory fee of $35,000 payable upon completion of the offering for its advisory services in connection with the transaction, |
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| • | a placement fee of 6.0% of the aggregate value of funds committed by standby investors and |
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| • | a placement fee of 7.0% of the aggregate purchase price of any shares sold on a best efforts basis in the public offering. |
Our arrangements with Sandler O’Neill provide for that firm to receive minimum fees of at least $200,000 for its services.
Indemnity
We have agreed to indemnify Sandler O’Neill, and persons who control Sandler O’Neill, against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the underwriter may be required to make in respect of these liabilities.
Lock-Up Agreement
We, and each of our directors and executive officers, and standby investors, have agreed for a period of days after the date of this prospectus, subject to certain exceptions, to not sell, offer, agree to sell,
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contract to sell, hypothecate, pledge, grant any option to purchase, make any short sale or otherwise dispose of or hedge, directly or indirectly, any common shares or securities convertible into, exchangeable or exercisable for any of our common shares or warrants or other rights to purchase common shares or any other of our securities that are substantially similar to our common shares without, in each case, the prior written consent of Sandler O’Neill. These restrictions are expressly agreed to preclude us, and our executive officers and directors, from engaging in any hedging or other transactions or arrangement that is designed to, or which reasonably could be expected to, lead to or result in a sale, disposition or transfer, in whole or in part, of any of the economic consequences of ownership of our common shares, whether such transaction would be settled by delivery of common shares or other securities, in cash or otherwise. The -day restricted period described above will be automatically extended if: (i) during the period that begins on the date that is 15 calendar days plus 3 business days before the last day of the -day restricted period and ends on the last day of the -day restricted period, we issue an earnings release or material news or a material event relating to us occurs; or (ii) prior to the expiration of the -day restricted period, we announce that we will release earnings results or become aware that material news or a material event would occur during the16-day period beginning on the last day of the -day restricted period, then the restricted period will continue to apply until the expiration of the date that is 15 calendar days plus 3 business days after the date on which the earnings release is issued or the material news or material event relating to us occurs.
Relationship with Sandler O’Neill
Sandler O’Neill, including some of its affiliates, have performed and expect to continue to perform financial advisory and investment banking services for us in the ordinary course of its businesses, and may have received, and may continue to receive, compensation for those services.
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DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock assumes approval by our shareholders ofPursuant to the proposed amendments to our Articles, described in the proxy statement dated May 12, 2010, which is incorporated herein by reference.
Upon completion of this offering, our authorized capital stock will consist of 24,000,00025,000,000 common shares and 1,000,000 preferred shares. Immediately prior to this offering, there were [ • ] of our common shares outstanding and no preferred shares outstanding. At that time, there were approximately [ • ] holders of record of our common shares. In addition, immediately prior to this offering, there were options to purchase [ • ] common shares. Assuming the sale of common shares in this offering, we will have a total of common shares and no preferred shares outstanding immediately following this offering.
Common Shares
Each outstanding common share is entitled to one vote on all matters submitted to a vote of shareholders. Shareholders do not have the right to vote cumulatively in the election of directors. Subject to any superior rights of any holders of preferred shares, eachEach outstanding common share will be entitled to such dividends as may be declared from time to time by our board of directors out of legally available funds. In the event of our liquidation, dissolution or winding up, holders of our common shares will be entitled to their proportionate share of any assets remaining after payment of liabilities and any amounts due to the holders of preferred stock. Holders of our common shares have no preemptive rights and no right to convert or exchange their common shares into any other securities. No preemptive rights, redemption or sinking fund provisions apply to our common shares.
Holders of our common shares have pre-emptive rights, unless the common shares offered or sold are: (1) treasury shares; (2) issued as a share dividend; (3) issued or agreed to be issued for consideration other than money; (4) issued by our board of directors; (5) issued or agreed to be issued upon the conversion of convertible shares authorized in our Articles, or upon exercise of the conversion conferred and authorized by our board of directors; (6) offered to shareholders in satisfaction of their pre-emptive rights and not purchased by such shareholders, and thereupon issued and agreed to be issued for a consideration not less than that at which the common shares were so offered to shareholders, less reasonable expenses, compensation, or discount paid or allowed for sale, underwriting, or purchase of the common shares, unless by the affirmative vote or written order of the holders of two-thirds of the common shares otherwise entitled to such pre-emptive rights, if pre-emptive rights are restored as to any of such shares not theretofore issued or agreed to be issued; (7) released from pre-emptive rights by the affirmative vote or written consent of the holders of two-thirds of the shares entitled to such pre-emptive rights; and (8) released from pre-emptive rights by the affirmative vote or written consent of the holders of a majority of the common shares entitled to pre-emptive rights, for offering and sale, or the grant of options with respect thereto, to any or all employees of Farmers or its subsidiary corporations or to a trustee on their behalf, under a plan adopted or to be adopted by the board of directors for that purpose.
All outstanding common shares are, and all common shares to be outstanding upon completion of this offering will be, fully paid and non-assessable.nonassessable. In addition to the common shares that will be outstanding upon the closing of this offering, as of [ • ],, 2010, employee stock options to purchase up to [ • ] common shares were exercisable.
Preferred Shares
Our board is authorized, without shareholder approval, to issue up to 1,000,000 preferred shares in one or more series and to fix the rights, preferences, privileges and restrictions granted to or imposed upon the preferred shares, including voting rights, dividend rights, conversion rights, terms of redemption, liquidation preference, sinking fund terms and the number of shares constituting any series or the designation of a series. Our board can, without shareholder approval, issue preferred shares with voting and conversion rights that could adversely affect the voting power of the holders of common shares. Any preferred shares issued would also rank senior to our common shares as to rights upon liquidation,winding-up or dissolution. The issuance of convertible preferred shares could have the effect of delaying, deferring or preventing a change in control of our company. We have no present plan to issue any preferred shares.
Authorized but Unissued Capital Stock
The authorized but unissued common shares and preferred shares may be issued without further shareholder approval. These shares may be used for a variety of corporate purposes, including future private or public offerings, to raise additional capital or facilitate acquisitions. The existence of authorized but unissued common shares and preferred shares could render more difficult or discourage an attempt to obtain control of us by means of a merger, tender offer, proxy context or otherwise.
Anti-takeover Effects of our Charter Documents and Ohio Law
There are provisions in our Corporate Governance Documents, and in the Ohio General Corporation Law, (the “OGCL”)which we refer to as the OGCL, that could discourage potential takeover attempts and make attempts by shareholders to change
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shareholders to change management more difficult. These provisions could adversely affect the market price of our shares. In addition to our preferred shares described above:
Classified Board of Directors. Our Articles provide for our board to be divided into three classes of directors, as nearly equal in number as possible, serving staggered terms. Approximately one-third of our board will be elected by the shareholders each year. This classification system makes it more difficult to replace a majority of the directors and may tend to discourage a third-party from making a tender offer or otherwise attempting to gain control of us. It also may maintain the incumbency of our board.
Business Combinations. Subject to certain exceptions, our Articles prohibit us from consummating a “Business Combination” except with the approval by the affirmative vote of the holders of shares entitling them to exercise at least 80% of the voting power. In the case of any Business Combination that has been approved by a vote of at least two-thirds of our disinterested directors, and which those directors have determined to be fair and equitable to all shareholders, may be consummated with the approval by the affirmative vote of the holders of shares entitling them to exercise at least two-thirds of the voting power. Our Articles define a “Business Combination” to mean any:
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| • | merger or consolidation of Farmers; |
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| • | sale, lease exchange, transfer or other disposition of all or substantially all of our assets; |
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| • | adoption of any plan of liquidation and dissolution of Farmers; or |
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| • | reclassification of securities, recapitalization or reorganization which would increase, directly or indirectly, the proportionate equity interest or control by an acquiring entity (excluding any such transaction with an entity controlled by us). |
Acquisitions of More Than 10% of Our Voting Power. Subject to certain exceptions, our Articles provide that in no event may any person seek to acquire directly or indirectly, common shares which would entitle such acquiring entity, immediately after such acquisition, either directly or indirectly, alone or with others, to exercise or direct the exercise of 10% or more of the voting power of Farmers (a “control share acquisition”) unless the board must call a special meeting of shareholders for voting on the proposed control share acquisition to be held within 50 days after the receipt by us of a statement from the acquiring entity providing certain information as set forth in the Articles, including that the acquiring entity has received all necessary regulatory approvals and consents to make such control share acquisition and that the proposed control share acquisition, unless
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| • | prior approval at a special meeting of shareholders is given by an affirmative vote of the holders of shares entitling them to exercise at least 80% of the voting power and by the affirmative vote of the holders of shares entitling them to exercise at least 80% of that portion of such voting power excluding: |
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| • | shares which are already owned by the acquiring entity; |
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| • | shares which the acquiring entity has the right to vote, acquire, or control; and |
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| • | shares owned by our employees who are also our directors or |
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| • | the board, by a vote of at least two-thirds of the entire board, determines that the proposed control share acquisition will be made to all of our shareholders at the same time on a uniform and fair basis, for all of the outstanding shares other than those shares which are already owned by the acquiring entity), and prior approval a special meeting of shareholders to is given by an affirmative vote of the holders of shares entitling them to exercise at least a two-thirds majority of the voting power and by the affirmative vote of the holders of shares entitling them to exercise at least a two-thirds majority of such voting power excluding: |
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| • | shares which are already owned by the acquiring entity; |
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| • | shares which the acquiring entity has the right to vote, acquire, or control; and |
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| • | shares owned by our employees who are also our directors. |
The board must call a special meeting of shareholders for voting on the proposed control share acquisition to be held within 50 days after the receipt by us of a statement from the acquiring entity providing certain information as set forth in the Articles, including that the acquiring entity has received all necessary regulatory approvals and consents to make such control share acquisition and that the proposed control share acquisition,
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if consummated, will not be contrary to law. The board has no obligation to call such a meeting if it determines in good faith by a vote of at least two-thirds of the entire board that the proposed control share acquisition is contrary to law or cannot be consummated for financial reasons. Any control share acquisition which is authorized as set out above must be consummated in accordance with the terms set forth in the acquiring entity’s statement to us within 180 days following such shareholder approval.
Any shares acquired in a control share acquisition not authorized as provided above will be excluded from voting in any subsequent meeting of the shareholders. Additionally, the Secretary will direct the transfer agent to refuse to transfer shares on our books which represent shares acquired in a control share acquisition not authorized as provided above.
Ohio Merger Moratorium Statute. We are an “issuing public corporation” as defined under Ohio law. Chapter 1704 of the OGCL governs transactions between an issuing public corporation andand:
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| • | an “interested shareholder,” which, generally, means someone who becomes a beneficial owner of 10% or more of the shares of the corporation without the prior approval of the board of directors of the corporation; and |
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| • | persons affiliated or associated with an interested shareholder. |
For at least three years after an interested shareholder becomes such, the following transactions are prohibited if they involve both the issuing public corporation and either an interested shareholder or anyone affiliated or associated with an interested shareholder:
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| • | the disposition or acquisition of any interest in assets; |
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| • | mergers, consolidations, combinations and majority share acquisitions; |
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| • | voluntary dissolutions or liquidations; and the issuance or transfer of shares or any rights to acquire shares in excess of 5% of the outstanding shares. |
Subsequent to the three-year period, these transactions may take place provided that either of the following conditions are satisfied:
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| • | the transaction is approved by the holders of shares with at least two-thirds of the voting power of the corporation, or a different proportion set forth in the articles of incorporation, including at least a majority of the outstanding shares after excluding shares controlled by the interested shareholder; or |
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| • | the business combination results in shareholders, other than the interested shareholder, receiving a fair price, as determined by Section 1704.03(A)(4), for their shares. |
If, prior to the acquisition of shares by which a person becomes an interested shareholder, the board of directors of the corporation approves the transaction by which the person would become an interested shareholder, then Chapter 1704’s prohibition does not apply. The prohibition imposed by Chapter 1704 continues indefinitely after the initial three-year period unless the subject transaction is approved by the requisite vote of the shareholders or satisfies statutory conditions relating to the fairness of consideration received by shareholders, other than the interested shareholder.
Chapter 1704 does not apply to a corporation if its articles of incorporation or code of regulations state that it does not apply. We have not opted out of the application of this statute.
Ohio Control Share Statute. We are subject to Section 1701.831 of the Ohio Revised Code, which requires the prior authorization of the shareholders of an issuing public corporation in order for any person to acquire, either directly or indirectly, shares of that corporation that would entitle the acquiring person to
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exercise or direct the exercise of one-fifth or more of the voting power of that corporation in the election of directors or to exceed specified other percentages of voting power.
A person proposing to make an acquisition of our shares subject to the statute must deliver to the corporation a statement disclosing, among other things:
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| • | the number of shares owned, directly or indirectly, by the person; |
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| • | the range of voting power that may result from the proposed acquisition; |
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| • | and the identity of the acquiring person. |
Within 10 days after receiving this statement, the corporation must call a special meeting of shareholders to vote on the proposed acquisition. The acquiring person may complete the proposed acquisition only if the acquisition is approved by the affirmative vote of the holders of at least a majority of the voting power of all shares entitle to vote in the election of directors represented at the meeting excluding the voting power of all “interested shares.” Interested shares include any shares held by the acquiring person and those held by officers and directors of the corporation as well as by certain others, including many holders commonly characterized as arbitrageurs.
Section 1701.831 does not apply to a corporation if its articles of incorporation or code of regulations state that it does not apply. We have not opted out of the application of this statute.
Listing
Our common shares are quoted the OTCBB under the symbol “FMNB.OB.” On [ • ], 2010, we applied to list our shares on the Nasdaq under the symbol “[ • ].”
Transfer Agent and Registrar
We act as the transfer agent and registrar for our common shares.
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UNDERWRITING
We are offering our common shares described in this prospectus in an underwritten offering in which Sandler O’Neill & Partners, L.P. is acting as sole underwriter. We will enter into an underwriting agreement with Sandler O’Neill & Partners, L.P. with respect to the common shares being offered. Subject to the terms and conditions contained in the underwriting agreement, Sandler O’Neill & Partners, L.P. has agreed to purchase all of the common shares being offered by this prospectus:
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| | Amount of
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Underwriter
| | Common Shares | |
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Sandler O’Neill & Partners, L.P. | | | | |
Total | | | | |
The underwriting agreement provides that the underwriter’s obligation to purchase our common shares depends on the satisfaction of the conditions contained in the underwriting agreement, including:
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| • | the representations and warranties made by us are true and agreements have been performed; |
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| • | there is no material adverse change in the financial markets or in our business; and |
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| • | we deliver customary closing documents. |
Subject to these conditions, the underwriter is committed to purchase and pay for all of our common shares offered by this prospectus, if any such shares are purchased. However, the underwriter is not obligated to take or pay for the common shares covered by the underwriter’s over-allotment option described below, unless and until that option is exercised.
Over-Allotment Option.
We have granted the underwriter an option, exercisable no later than 30 days after the date of the underwriting agreement, to purchase up to an aggregate of additional common shares at the public offering price, less the underwriting discount set forth on the cover page of this prospectus. We will be obligated to sell these common shares to the underwriter to the extent the over-allotment option is exercised. The underwriter may exercise this option only to cover over-allotments, if any, made in connection with the sale of our common shares offered by this prospectus.
Commissions and Expenses.
The underwriter proposes to offer our common shares directly to the public at the offering price set forth on the cover page of this prospectus and to dealers at the public offering price less a concession not in excess of $ per share. The underwriter may allow, and the dealers may re-allow, a concession not in excess of $ per share on sales to other brokers and dealers. After the public offering of our common shares, the underwriter may change the offering price, concessions and other selling terms.
The following table shows the per share and total underwriting discounts and commissions that we will pay to the underwriter and the proceeds we will receive before expenses. These amounts are shown assuming both no exercise and full exercise of the underwriter’s option to purchase additional common shares.
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| | | | Total Without
| | Total With
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| | Per Share | | Over-Allotment | | Over-Allotment |
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Price to public | | $ | | | | $ | | | | $ | | |
Underwriting discounts and commissions | | $ | | | | $ | | | | $ | | |
Proceeds, before expenses to Farmers National Banc Corp. | | $ | | | | $ | | | | $ | | |
In addition to the underwriting discount, we will reimburse the underwriter for its reasonableout-of-pocket expenses, incurred in connection with its engagement as underwriter, regardless of whether this offering is consummated, including, without limitation, legal fees and expenses, marketing, syndication and
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travel expenses. We estimate that the total expenses of this offering, exclusive of the underwriting discounts and commissions, will be approximately $ , and are payable by us.
Indemnity.
We have agreed to indemnify the underwriter, and persons who control the underwriter, against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the underwriter may be required to make in respect of these liabilities.
Lock-Up Agreement.
We, and each of our directors and executive officers, have agreed for a period of [ • ] days after the date of this prospectus, subject to certain exceptions, to not sell, offer, agree to sell, contract to sell, hypothecate, pledge, grant any option to purchase, make any short sale or otherwise dispose of or hedge, directly or indirectly, any common shares or securities convertible into, exchangeable or exercisable for any of our common shares or warrants or other rights to purchase common shares or any other of our securities that are substantially similar to our common shares without, in each case, the prior written consent of Sandler O’Neill & Partners, L.P. These restrictions are expressly agreed to preclude us, and our executive officers and directors, from engaging in any hedging or other transactions or arrangement that is designed to, or which reasonably could be expected to, lead to or result in a sale, disposition or transfer, in whole or in part, of any of the economic consequences of ownership of our common shares, whether such transaction would be settled by delivery of common shares or other securities, in cash or otherwise. The[ • ]-day restricted period described above will be automatically extended if (1) during the period that begins on the date that is 15 calendar days plus 3 business days before the last day of the[ • ]-day restricted period and ends on the last day of the[ • ]-day restricted period, we issue an earnings release or material news or a material event relating to us occurs, or (2) prior to the expiration of the[ • ]-day restricted period, we announce that we will release earnings results or become aware that material news or a material event would occur during the16-day period beginning on the last day of the[ • ]-day restricted period, then the restricted period will continue to apply until the expiration of the date that is 15 calendar days plus 3 business days after the date on which the earnings release is issued or the material news or material event relating to us occurs.
Stabilization.
In connection with this offering, the underwriter may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids:
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| • | Stabilizing transactions permit bids to purchase common shares so long as the stabilizing bids do not exceed a specified maximum, and are engaged in for the purpose of preventing or retarding a decline in the market price of the common shares while the offering is in progress. |
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| • | Over-allotment transactions involve sales of common shares in excess of the number of shares the underwriter is obligated to purchase. This creates a syndicate short position which may be either a covered short position or a naked short position. In a covered short position, the number of shares of common shares over allotted by the underwriter is not greater than the number of shares that it may purchase in the option to purchase additional shares. In a naked short position, the number of shares involved is greater than the number of shares in the option to purchase additional shares. The underwriter may close out any short position by exercising its option to purchase additional sharesand/or purchasing shares in the open market. |
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| • | Syndicate covering transactions involve purchases of our common shares in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriter will consider, among other things, the price of shares available for purchase in the open market as compared with the price at which it may purchase shares through exercise of the option to purchase additional shares. If the underwriter sells more shares than could be covered by exercise of the option to purchase additional shares and, therefore, has a naked short position, the position can be closed out only by buying shares in the open market. A naked |
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| | short position is more likely to be created if the underwriter is concerned that after pricing there could be downward pressure on the price of the shares in the open market that could adversely affect investors who purchase in the offering. |
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| • | Penalty bids permit the underwriter to reclaim a selling concession from a syndicate member when the common shares originally sold by that syndicate member are purchased in stabilizing or syndicate covering transactions to cover syndicate short positions. |
These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common shares or preventing or retarding a decline in the market price of our common shares. As a result, the price of our common shares in the open market may be higher than it would otherwise be in the absence of these transactions. Neither we nor the underwriter makes any representation or prediction as to the effect that the transactions described above may have on the price of our common shares. These transactions may be effected on the Nasdaq, in theover-the-counter market or otherwise and if commenced, may be discontinued by the underwriter at any time.
Relationship with the Underwriter.
Sandler O’Neill & Partners, L.P., including some of their affiliates, have performed and expect to continue to perform financial advisory and investment banking services for us in the ordinary course of its businesses, and may have received, and may continue to receive, compensation for those services.
Our common shares are being offered by the underwriter, subject to prior sale, when, as and if issued to and accepted by it, subject to approval of certain legal matters by counsel for the underwriter and other conditions.
EXPERTS
Our consolidated balance sheets as of December 31, 2009 and December 31, 2008 and the related consolidated statements of income and comprehensive income, changes in stockholders’ equity and cash flows for each of the years in the three year period ended December 31, 2009 appearing in our Annual Report onForm 10-K for the year ended December 31, 2009 have been incorporated by reference herein in reliance upon the report of Crowe Horwath LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the issuance of the securities to be offered by this prospectus will be passed upon for us by Vorys, Sater, Seymour and Pease LLP, Akron, Ohio. Certain legal matters relating to the sale of the securities to be offered by this prospectus will be passed upon for the underwriter by Calfee, Halter & Griswold LLP, Cleveland, Ohio.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the information requirements of the Securities Exchange Act, of 1934, as amended (the “Exchange Act”), which means that we are required to file annual, quarterly and current reports, proxy statements and other information with the SEC, all of which are available at the Public Reference Room of the SEC at 100 F Street, NE, Washington, D.C. 20549. You may also obtain copies of the reports, proxy statements and other information from the Public Reference Room of the SEC, at prescribed rates, by calling1-800-SEC-0330. The SEC maintains an Internet website athttp://www.sec.gov where you can access reports, proxy, information and registration statements, and other information regarding us that we file electronically with the SEC. In addition, we make available, without charge, through our website,www.farmersbankgroup.com, electronic copies of our filings with the SEC, including copies of Annual Reports onForm 10-K, Quarterly Reports onForm 10-Q, Current Reports onForm 8-K, and amendments to these
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filings, if any. Information on our website should not be considered a part of this prospectus, and we do not intend to incorporate into this prospectus any information contained in our website.
The SEC allows us to “incorporate by reference” the information we file with it, which means that we can disclose important information to you by referring you to those documents filed separately with the SEC.
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The information we incorporate by reference is an important part of this prospectus. We incorporate by reference the documents listed below, except to the extent that any information contained in those documents is deemed “furnished” in accordance with SEC rules. The documents we incorporate by reference, all of which we have previously filed with the SEC, include:
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| • | Our Annual Report onForm 10-K for the year ended December 31, 2009; |
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| • | Our Quarterly ReportReports onForm 10-Q for the quarter ended March 31, 2010, June 30, 2010 and September 30, 2010; |
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| • | Our Current Reports onForm 8-K filed on April 16, 2010, April 28, 2010, and May 27, 2010, May 28, 2010, June 2, 2010, June 14, 2010, August 20, 2010, August 24, 2010, September 20, 2010 and September 24, 2010; |
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| • | The definitive proxy statement for our 2010 Annual Meeting of Shareholders; |
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| • | The definitive proxy statement for our Special Meeting of Shareholders to be held on June 17,August 19, 2010; |
|
| • | The description of our common shares contained in our Registration Statement on Form 8, or contained in any subsequent amendment or report filed for the purpose of updating such description; and |
|
| • | All other reports filed with the SEC under Section 13(a) or 15(d) of the Exchange Act or proxy or information statements filed under Section 14 of the Exchange Act since December 31, 2009 and before the date of this Registration Statement. |
Any statement contained in a document that is incorporated by reference will be modified or superseded for all purposes to the extent that a statement contained in this prospectus modifies or is contrary to that previous statement. Any statement so modified or superseded will not be deemed a part of this prospectus except as so modified or superseded.
You may request a copy of any of these filings at no cost, by writing or telephoning us at the following address or telephone number:
Farmers National Banc Corp.
20 South Broad Street
Canfield, Ohio 44406
(330) 533-3341
2753
Common Shares
PROSPECTUS
, 2010
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
| |
Item 13. | Other Expenses of Issuance and Distribution. |
The following table sets forth all expenses to be paid by the registrant, other than estimated underwriting discounts and commissions, in connection with this offering. All amounts shown are estimates except for the SEC registration fee.
| | | | |
| | Amount to be Paid | |
|
SEC Registration Fee | | $ | 1,070 | |
FINRA Filing Fee | | $ | [ • ] | |
Printing and engraving expenses | | $ | [ • ] | |
Legal fees and expenses | | $ | [ • ] | |
Accounting fees and expenses | | $ | [ • ] | |
Miscellaneous | | $ | [ • ] | |
| | | | |
TOTAL | | $ | [ • ] | |
| | | | |
| | | | |
| | Amount to be Paid | |
|
SEC Registration Fee | | $ | 1,070 | |
FINRA Filing Fee | | $ | | |
Blue sky fees and expenses | | $ | | |
Printing and engraving expenses | | $ | | |
Legal fees and expenses | | $ | | |
Accounting fees and expenses | | $ | | |
Subscription agent and registrar fees and expenses | | $ | | |
Miscellaneous | | $ | | |
| | | | |
TOTAL | | $ | | |
| | | | |
| |
Item 14. | Indemnification of Directors and Officers. |
| |
(a) | Ohio General Corporation Law |
Section 1701.13(E) of the Ohio Revised Code grants corporations broad powers to indemnify directors, officers, employees and agents. Section 1701.13(E) provides:
(E)(1) A corporation may indemnify or agree to indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, other than an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, trustee, officer, employee, member, manager, or agent of another corporation, domestic or foreign, nonprofit or for profit, a limited liability company, or a partnership, joint venture, trust, or other enterprise, against expenses, including attorney’s fees, judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit, or proceeding, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, if he had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful.
(2) A corporation may indemnify or agree to indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending, or completed action or suit by or in the right of the corporation to procure a judgment in its favor, by reason of the fact that he is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, trustee, officer, employee, member, manager, or agent of another corporation, domestic or foreign, nonprofit or for profit, a limited liability company, or a partnership, joint venture, trust, or other enterprise, against expenses, including attorney’s fees, actually and reasonably incurred by him in connection with the defense or settlement of such action or suit, if he acted in good faith and in a manner
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he reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made in respect of any of the following:
(a) Any claim, issue, or matter as to which such person is adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless, and only to the extent that, the court of common pleas or the court in which such action or suit was brought determines, upon application, that, despite the adjudication of liability, but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the court of common pleas or such other court shall deem proper;
(b) Any action or suit in which the only liability asserted against a director is pursuant to section 1701.95 of the Revised Code.
(3) To the extent that a director, trustee, officer, employee, member, manager, or agent has been successful on the merits or otherwise in defense of any action, suit, or proceeding referred to in division (E)(1) or (2) of this section, or in defense of any claim, issue, or matter therein, he shall be indemnified against expenses, including attorney’s fees, actually and reasonably incurred by him in connection with the action, suit, or proceeding.
(4) Any indemnification under division (E)(1) or (2) of this section, unless ordered by a court, shall be made by the corporation only as authorized in the specific case, upon a determination that indemnification of the director, trustee, officer, employee, member, manager, or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in division (E)(1) or (2) of this section. Such determination shall be made as follows:
(a) By a majority vote of a quorum consisting of directors of the indemnifying corporation who were not and are not parties to or threatened with the action, suit, or proceeding referred to in division (E)(1) or (2) of this section;
(b) If the quorum described in division (E)(4)(a) of this section is not obtainable or if a majority vote of a quorum of disinterested directors so directs, in a written opinion by independent legal counsel other than an attorney, or a firm having associated with it an attorney, who has been retained by or who has performed services for the corporation or any person to be indemnified within the past five years;
(c) By the shareholders;
(d) By the court of common pleas or the court in which the action, suit, or proceeding referred to in division (E)(1) or (2) of this section was brought.
Any determination made by the disinterested directors under division (E)(4)(a) or by independent legal counsel under division (E)(4)(b) of this section shall be promptly communicated to the person who threatened or brought the action or suit by or in the right of the corporation under division (E)(2) of this section, and within ten days after receipt of such notification, such person shall have the right to petition the court of common pleas or the court in which such action or suit was brought to review the reasonableness of such determination.
(5)(a) Unless at the time of a director’s act or omission that is the subject of an action, suit, or proceeding referred to in division (E)(1) or (2) of this section, the articles or the regulations of a corporation state, by specific reference to this division, that the provisions of this division do not apply to the corporation and unless the only liability asserted against a director in an action, suit, or proceeding referred to in division (E)(1) or (2) of this section is pursuant to section 1701.95 of the Revised Code, expenses, including attorney’s fees, incurred by a director in defending the action, suit or proceeding shall be paid by the corporation as they are incurred, in advance of the final disposition of the action, suit, or
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proceeding upon receipt of an undertaking by or on behalf of the director in which he agrees to do both of the following:
(i) Repay such amount if it is proved by clear and convincing evidence in a court of competent jurisdiction that his action or failure to act involved an act or omission undertaken with deliberate intent to cause injury to the corporation or undertaken with reckless disregard for the best interests of the corporation;
(ii) Reasonably cooperate with the corporation concerning the action, suit, or proceeding.
(b) Expenses, including attorney’s fees, incurred by a director, trustee, officer, employee, member, manager, or agent in defending any action, suit, or proceeding referred to in division (E)(1) or (2) of this section, may be paid by the corporation as they are incurred, in advance of the final disposition of the action, suit, or proceeding, as authorized by the directors in the specific case, upon receipt of an undertaking by or on behalf of the director, trustee, officer, employee, member, manager, or agent to repay such amount, if it ultimately is determined that he is not entitled to be indemnified by the corporation.
(6) The indemnification authorized by this section shall not be exclusive of, and shall be in addition to, any other rights granted to those seeking indemnification under the articles, the regulations, any agreement, a vote of shareholders or disinterested directors, or otherwise, both as to action in their official capacities and as to action in another capacity while holding their offices or positions, and shall continue as to a person who has ceased to be a director, trustee, officer, employee, member, manager, or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person.
(7) A corporation may purchase and maintain insurance or furnish similar protection, including, but not limited to, trust funds, letters of credit, or self-insurance, on behalf of or for any person who is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, trustee, officer, employee, member, manager, or agent of another corporation, domestic or foreign, nonprofit or for profit, a limited liability company, or a partnership, joint venture, trust, or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under this section. Insurance may be purchased from, or maintained with, a person in which the corporation has a financial interest.
(8) The authority of a corporation to indemnify persons pursuant to division (E)(1) or (2) of this section does not limit the payment of expenses as they are incurred, indemnification, insurance, or other protection that may be provided pursuant to divisions (E)(5),(6), and (7) of this section. Divisions (E)(1) and (2) of this section do not create any obligation to repay or return payments made by the corporation pursuant to divisions (E)(5),(6) or (7).
(9) As used in division (E) of this section, “corporation” includes all constituent entities in a consolidation or merger and the new or surviving corporation, so that any person who is or was a director, officer, employee, trustee, member, manager, or agent of such a constituent entity, or is or was serving at the request of such constituent entity as a director, trustee, officer, employee, member, manager, or agent of another corporation, domestic or foreign, nonprofit or for profit, a limited liability company, or a partnership, joint venture, trust, or other enterprise, shall stand in the same position under this section with respect to the new or surviving corporation as he would if he had served the new or surviving corporation in the same capacity.
| |
(b) | Articles of Incorporation, as amended, of Farmers National Banc Corp. |
Article X of the Articles of Incorporation, as amended, governs the indemnification of our officers and directors. Article X.BX.B. provides:
The corporation shall have power to, and may (in addition to such other power conferred by law) indemnify any shareholder, officer, or director of the corporation who was or is a party or is threatened to
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be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, administrative, or investigative, by reason of the fact that he is or was a director of this corporation, or any corporation (hereinafter referred to as “subsidiary corporation”) of which more than 50 per cent of the issued and outstanding shares of common shares was or is owned by the corporation at the time such person was or is serving as such director of the “subsidiary corporation,” against expenses (including those reasonably incurred by him) in connection with such action, suit, and proceeding if the principal issue of such action, suit, or proceeding involved or involves a contract or transaction by and between the corporation and such “subsidiary corporation” and if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the “subsidiary corporation.” Any indemnification as above provided (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification is proper in the circumstances because the standard of conduct set forth above has been met. Such determination shall be made (a) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding; (b) if such a quorum is not obtainable, or even if obtainable, if a majority vote of a quorum of disinterested directors so directs, by independent legal counsel in a written opinion; or (c) by a majority of a quorum of the shareholders of the corporation consisting of shareholders who were not parties to such action, suit or proceeding.
| |
Item 15. | Recent Sales of Unregistered Securities |
Not Applicable.
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| |
Item 16. | Exhibits and Financial Statement Schedules |
| | | | |
| 1 | .1 | | Form of Underwriting Agreement* |
| 3 | .1 | | Articles of Incorporation of Farmers National Banc Corp., as amended (incorporated by reference from Exhibit 4.1 to Farmers National Banc Corp.’s Registration Statement on Form S-3 filed with the SEC on October 3, 2001 (File No. 333-70806). |
| 3 | .2 | | Amended Code of Regulations of Farmers National Banc Corp. (incorporate by reference from Exhibit 3(ii) to Farmers National Banc Corp.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, filed with the SEC on March 16, 2010). |
| 5 | .1 | | Opinion of Vorys, Sater, Seymour and Pease LLP as to the legality of the securities being registered.* |
| 10 | .1 | | Executive Incentive Plan, dated August 11, 2009 (incorporated by reference from Exhibit 10.2 to Farmers National Banc Corp.’s Current Report on Form 8-K filed with the SEC on August 17, 2009). |
| 10 | .2 | | Letter Agreement, dated July 22, 2008, between Farmers National Bank of Canfield and John S. Gulas (incorporated by reference from Exhibit 10.3 to Farmers National Banc Corp.’s Current Report on Form 8-K filed with the SEC on July 22, 2008). |
| 10 | .3 | | Letter Agreement, dated December 23, 2008, between Farmers National Bank of Canfield and Kevin J. Helmick (incorporated by reference from Exhibit 10.4 to Farmers National Banc Corp.’s Current Report on Form 8-K filed with the SEC on December 23, 2008). |
| 10 | .4 | | Letter Agreement, dated December 23, 2008, between Farmers National Bank of Canfield and Mark L. Graham (incorporated by reference from Exhibit 10.5 to Farmers National Banc Corp.’s Current Report on Form 8-K filed with the SEC on December 23, 2008). |
| 10 | .5 | | Letter Agreement, dated December 23, 2008, between Farmers National Bank of Canfield and Frank L. Paden (incorporated by reference from Exhibit 10.6 to Farmers National Banc Corp.’s Current Report on Form 8-K filed with the SEC on December 23, 2008). |
| 10 | .6 | | Letter Agreement, dated December 23, 2008, between Farmers National Bank of Canfield and Carl D. Culp (incorporated by reference from Exhibit 10.7 to Farmers National Banc Corp.’s Current Report on Form 8-K filed with the SEC on December 23, 2008). |
| 10 | .7 | | Farmers National Banc Corp. 1999 Stock Option Plan (incorporated by reference from Exhibit 1 to Farmers National Banc Corp’s definitive proxy statement, filed with the SEC on February 24, 1999). |
| 21 | | | Subsidiaries of Farmers National Banc Corp. (filed herewith). |
| 23 | .1 | | Consent of Crowe Horwath LLP, independent registered public accounting firm (filed herewith). |
| 23 | .2 | | Consent of Vorys, Sater, Seymour and Pease LLP (included as part of its opinion filed as Exhibit 5.1)* |
| 24 | | | Power of Attorney (filed herewith). |
| | | | |
| 1 | .1 | | Form of Agency Agreement between Farmers National Banc Corp. and Sandler O’Neill & Partners, L.P.* |
| 3 | .1 | | Articles of Incorporation of Farmers National Banc Corp., as amended (incorporated by reference from Exhibit 4.1 to Farmers National Banc Corp.’s Registration Statement on Form S-3 filed with the SEC on October 3, 2001 (File No. 333-70806). |
| 3 | .2 | | Amended Code of Regulations of Farmers National Banc Corp. (incorporate by reference from Exhibit 3(ii) to Farmers National Banc Corp.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, filed with the SEC on March 16, 2010). |
| 4 | .1 | | Form of Rights Certificate.* |
| 5 | .1 | | Opinion of Vorys, Sater, Seymour and Pease LLP as to the legality of the securities being registered.* |
| 10 | .1 | | Executive Incentive Plan, dated August 11, 2009 (incorporated by reference from Farmers National Banc Corp.’s Current Report on Form 8-K filed with the SEC on August 17, 2009). |
| 10 | .2 | | Letter Agreement, dated January 27, 2009, between Farmers National Bank of Canfield and John S. Gulas (incorporated by reference from Exhibit 10.1 to Farmers National Banc Corp.’s Current Report on Form 8-K filed with the SEC on February 2, 2009). |
| 10 | .3 | | Letter Agreement, dated December 23, 2008, between Farmers National Bank of Canfield and Kevin J. Helmick (incorporated by reference from Exhibit 10.1 to Farmers National Banc Corp.’s Current Report on Form 8-K filed with the SEC on December 30, 2008). |
| 10 | .4 | | Letter Agreement, dated December 23, 2008, between Farmers National Bank of Canfield and Mark L. Graham (incorporated by reference from Exhibit 10.1 to Farmers National Banc Corp.’s Current Report on Form 8-K filed with the SEC on December 30, 2008). |
| 10 | .5 | | Letter Agreement, dated December 23, 2008, between Farmers National Bank of Canfield and Frank L. Paden (incorporated by reference from Exhibit 10.1 to Farmers National Banc Corp.’s Current Report on Form 8-K filed with the SEC on December 30, 2008). |
| 10 | .6 | | Letter Agreement, dated December 23, 2008, between Farmers National Bank of Canfield and Carl D. Culp (incorporated by reference from Exhibit 10.1 to Farmers National Banc Corp.’s Current Report on Form 8-K filed with the SEC on December 30, 2008). |
| 10 | .7 | | Farmers National Banc Corp. 1999 Stock Option Plan (incorporated by reference from Exhibit A to Farmers National Banc Corp’s definitive proxy statement, filed with the SEC on February 24, 1999). |
| 21 | .1 | | Subsidiaries of Farmers National Banc Corp. (filed herewith). |
| 23 | .1 | | Consent of Crowe Horwath LLP, independent registered public accounting firm (filed herewith). |
| 23 | .2 | | Consent of Vorys, Sater, Seymour and Pease LLP (included as part of its opinion filed as Exhibit 5.1)* |
| 24 | .1 | | Power of Attorney (previously Filed). |
| 99 | .1 | | Form of Instruction as to Use of Rights Certificates.* |
| 99 | .2 | | Form of Notice of Guaranteed Delivery.* |
| 99 | .3 | | Form of Letter to Shareholders.* |
| 99 | .4 | | Form of Letter to Brokers, Securities Dealers, Commercial Banks, Trust Companies and other Nominees.* |
| 99 | .5 | | Form of Letter to Clients Who are Beneficial Holders.* |
| 99 | .6 | | Form of Nominee Holder Certification.* |
| 99 | .7 | | Form of Beneficial Owner Election Form.* |
| | |
* | | To be filed by an amendment to this registration statement. |
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The undersigned registrant hereby undertakes:
(1) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant under the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
(2) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A
II-5
and contained in a form of prospectus filed by the registrant under Rule 424(b)(1), or (4), or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(3) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statementAmendment No. 2 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Canfield, State of Ohio, on the 25th15th day of May,November, 2010.
FARMERS NATIONAL BANC CORP.
| | |
| By: | /s/ Frank L. PadenJohn S. Gulas |
Frank L. Paden,John S. Gulas, President and SecretaryChief Executive Officer of
Farmers National Banc Corp.
(Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 2 to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
| | | | | | |
Signature | | Capacity | | Date |
|
| | | | |
/s/ Frank L. PadenJohn S. Gulas
Frank L. PadenJohn S. Gulas | | President, SecretaryChief Executive Officer and Director (Principal Executive Officer) | | May 28, November 15, 2010 |
| | | | |
/s/ Carl D. Culp Carl D. Culp | | Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) | | May 28,November 15, 2010 |
| | | | |
/s/ Benjamin R. Brown* Benjamin R. Brown | | Director | | May 28,November 15, 2010 |
| | | | |
/s/ Lance J. Ciroli* Lance J. Ciroli | | Director | | November 15, 2010 |
| | | | |
/s/ Anne Fredrick Crawford* Anne Fredrick Crawford | | Director | | May 28, 2010 |
| | | | |
/s/ James R. Fisher*
James R. Fisher | | Director | | May 28,November 15, 2010 |
| | | | |
/s/ Joseph D. Lane* Joseph D. Lane | | Director | | May 28,November 15, 2010 |
| | | | |
/s/ Ralph D. Macali* Ralph D. Macali | | Director | | May 28,November 15, 2010 |
| | | | |
/s/ Frank L. Paden* Frank L. Paden | | Director | | November 15, 2010 |
| | | | |
/s/ Earl R. Scott* Earl R. Scott | | Director | | May 28,November 15, 2010 |
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| | | | | | |
Signature | | Capacity | | Date |
|
| | | | |
/s/ Ronald V. Wertz* Ronald V. Wertz | | Director | | May 28,November 15, 2010 |
| |
* By: | Frank L. Paden/s/ John S. Gulas |
Attorney-in-Fact
| |
* | Powers of attorney authorizing Frank L. PadenJohn S. Gulas to sign this registration statement on Form S-1 on behalf of the directors of Farmers National Banc Corp. are being file with the Securities and Exchange Commission herewith. |
II-7II-8
INDEX TO EXHIBITS
| | | | |
| 1 | .1 | | Form of Underwriting Agreement* |
| 3 | .1 | | Articles of Incorporation of Farmers National Banc Corp., as amended (incorporated by reference from Exhibit 4.1 to Farmers National Banc Corp.’s Registration Statement onForm S-3 filed with the SEC on October 3, 2001 (FileNo. 333-70806). |
| 3 | .2 | | Amended Code of Regulations of Farmers National Banc Corp. (incorporate by reference from Exhibit 3(ii) to Farmers National Banc Corp.’s Annual Report onForm 10-K for the fiscal year ended December 31, 2009, filed with the SEC on March 16, 2010). |
| 5 | .1 | | Opinion of Vorys, Sater, Seymour and Pease LLP as to the legality of the securities being registered.* |
| 10 | .1 | | Executive Incentive Plan, dated August 11, 2009 (incorporated by reference from Exhibit 10.2 to Farmers National Banc Corp.’s Current Report onForm 8-K filed with the SEC on August 17, 2009). |
| 10 | .2 | | Letter Agreement, dated July 22, 2008, between Farmers National Bank of Canfield and John S. Gulas (incorporated by reference from Exhibit 10.3 to Farmers National Banc Corp.’s Current Report onForm 8-K filed with the SEC on July 22, 2008). |
| 10 | .3 | | Letter Agreement, dated December 23, 2008, between Farmers National Bank of Canfield and Kevin J. Helmick (incorporated by reference from Exhibit 10.4 to Farmers National Banc Corp.’s Current Report onForm 8-K filed with the SEC on December 23, 2008). |
| 10 | .4 | | Letter Agreement, dated December 23, 2008, between Farmers National Bank of Canfield and Mark L. Graham (incorporated by reference from Exhibit 10.5 to Farmers National Banc Corp.’s Current Report onForm 8-K filed with the SEC on December 23, 2008). |
| 10 | .5 | | Letter Agreement, dated December 23, 2008, between Farmers National Bank of Canfield and Frank L. Paden (incorporated by reference from Exhibit 10.6 to Farmers National Banc Corp.’s Current Report onForm 8-K filed with the SEC on December 23, 2008). |
| 10 | .6 | | Letter Agreement, dated December 23, 2008, between Farmers National Bank of Canfield and Carl D. Culp (incorporated by reference from Exhibit 10.7 to Farmers National Banc Corp.’s Current Report onForm 8-K filed with the SEC on December 23, 2008). |
| 10 | .7 | | Farmers National Banc Corp. 1999 Stock Option Plan (incorporated by reference from Exhibit 1 to Farmers National Banc Corp’s definitive proxy statement, filed with the SEC on February 24, 1999). |
| 21 | | | Subsidiaries of Farmers National Banc Corp. (filed herewith). |
| 23 | .1 | | Consent of Crowe Horwath LLP, independent registered public accounting firm (filed herewith). |
| 23 | .2 | | Consent of Vorys, Sater, Seymour and Pease LLP (included as part of its opinion filed as Exhibit 5.1)* |
| 24 | | | Power of Attorney (filed herewith). |
| | | | |
| 1 | .1 | | Form of Agency Agreement between Farmers National Banc Corp. and Sandler O’Neill & Partners, L.P.* |
| 3 | .1 | | Articles of Incorporation of Farmers National Banc Corp., as amended (incorporated by reference from Exhibit 4.1 to Farmers National Banc Corp.’s Registration Statement onForm S-3 filed with the SEC on October 3, 2001 (FileNo. 333-70806). |
| 3 | .2 | | Amended Code of Regulations of Farmers National Banc Corp. (incorporate by reference from Exhibit 3(ii) to Farmers National Banc Corp.’s Annual Report onForm 10-K for the fiscal year ended December 31, 2009, filed with the SEC on March 16, 2010). |
| 4 | .1 | | Form of Rights Certificate.* |
| 5 | .1 | | Opinion of Vorys, Sater, Seymour and Pease LLP as to the legality of the securities being registered.* |
| 10 | .1 | | Executive Incentive Plan, dated August 11, 2009 (incorporated by reference from Farmers National Banc Corp.’s Current Report onForm 8-K filed with the SEC on August 17, 2009). |
| 10 | .2 | | Letter Agreement, dated January 27, 2009, between Farmers National Bank of Canfield and John S. Gulas (incorporated by reference from Exhibit 10.1 to Farmers National Banc Corp.’s Current Report onForm 8-K filed with the SEC on February 2, 2009). |
| 10 | .3 | | Letter Agreement, dated December 23, 2008, between Farmers National Bank of Canfield and Kevin J. Helmick (incorporated by reference from Exhibit 10.1 to Farmers National Banc Corp.’s Current Report onForm 8-K filed with the SEC on December 30, 2008). |
| 10 | .4 | | Letter Agreement, dated December 23, 2008, between Farmers National Bank of Canfield and Mark L. Graham (incorporated by reference from Exhibit 10.1 to Farmers National Banc Corp.’s Current Report onForm 8-K filed with the SEC on December 30, 2008). |
| 10 | .5 | | Letter Agreement, dated December 23, 2008, between Farmers National Bank of Canfield and Frank L. Paden (incorporated by reference from Exhibit 10.1 to Farmers National Banc Corp.’s Current Report onForm 8-K filed with the SEC on December 30, 2008). |
| 10 | .6 | | Letter Agreement, dated December 23, 2008, between Farmers National Bank of Canfield and Carl D. Culp (incorporated by reference from Exhibit 10.1 to Farmers National Banc Corp.’s Current Report onForm 8-K filed with the SEC on December 30, 2008). |
| 10 | .7 | | Farmers National Banc Corp. 1999 Stock Option Plan (incorporated by reference from Exhibit A to Farmers National Banc Corp’s definitive proxy statement, filed with the SEC on February 24, 1999). |
| 21 | .1 | | Subsidiaries of Farmers National Banc Corp. (filed herewith). |
| 23 | .1 | | Consent of Crowe Horwath LLP, independent registered public accounting firm (filed herewith). |
| 23 | .2 | | Consent of Vorys, Sater, Seymour and Pease LLP (included as part of its opinion filed as Exhibit 5.1)* |
| 24 | .1 | | Power of Attorney (previously filed). |
| 99 | .1 | | Form of Instruction as to Use of Rights Certificates.* |
| 99 | .2 | | Form of Notice of Guaranteed Delivery.* |
| 99 | .3 | | Form of Letter to Shareholders.* |
| 99 | .4 | | Form of Letter to Brokers, Securities Dealers, Commercial Banks, Trust Companies and other Nominees.* |
| 99 | .5 | | Form of Letter to Clients Who are Beneficial Holders.* |
| 99 | .6 | | Form of Nominee Holder Certification.* |
| 99 | .7 | | Form of Beneficial Owner Election Form.* |
| |
* | To be filed by an amendment to this registration statement. |