On March 23, 2022, Farmers entered into an agreement and plan of merger with Emclaire Financial (“Emclaire”), the parent company of The Farmers National Bank of Emlenton (“Emlenton”). The transaction has received Emclaire shareholder approval but is still subject to customary regulatory approvals and is expected to close in the second half of 2022. The transaction will create a large expansion in Pennsylvania and into the Pittsburgh market. Emclaire operates 19 branches in ten counties throughout western Pennsylvania. As of June 30, 2022, Emclaire had total assets of $1 billion, gross loans of $810.7 million, deposits of $937.6 million and equity of $80.2 million.

On November 1, 2021, the Company completed the merger with Cortland Bancorp (“Cortland”), the parent company of The Cortland Savings and Banking Company (“Cortland Bank”), pursuant to the Agreement and Plan of Merger, dated as of June 22, 2021, as amended by that certain Amendment to Agreement and Plan of Merger, dated October 12, 2021 (collectively, the “Merger Agreement”), by and among the Company, Cortland, and FMNB Merger Subsidiary IV, LLC, a wholly-owned subsidiary of the Company (“Merger Sub”). Pursuant to the terms of the Merger Agreement, on November 1, 2021, Cortland merged with and into Merger Sub (the “Merger”), with Merger Sub as the surviving entity in the Merger. Promptly following the consummation of the Merger, Merger Sub was dissolved and liquidated and Cortland Bank merged with and into the Bank (the “Bank Merger”), with the Bank as the surviving bank in the Bank Merger. The transaction received the approval of Cortland’s shareholders and all customary regulatory approvals. Pursuant to the terms of the Merger Agreement, at the effective time of the Merger, each common share, without par value, of Cortland issued and outstanding immediately prior to the effective time (except for certain Cortland common shares held directly by Cortland or the Company) was converted into the right to receive, without interest, $28.00 per share in cash or 1.75 shares of the Company’s common stock, subject to an overall limitation of 75% of the Cortland shares being exchanged for the Company’s shares and the remaining 25% being exchanged for cash. The Company issued 5.6 million shares of its common stock along with cash of $29.6 million, which represented a transaction value of approximately $128.5 million based on its closing stock price of $17.82 on October 31, 2021, the closing of the Merger.

In accordance with ASC 805, the Company expensed approximately $2.6 million of merger related costs during the six month period ended June 30, 2022, in addition to $7.1 million expensed in the year ended 2021. The Company recorded goodwill of $48.5 million as a result of the Cortland combination. Goodwill represents the future economic benefits arising from net assets acquired that are not individually identified and separately recognized and is attributable to synergies, including the reduction of personnel and overlapping contracts, expected to be derived from the Company’s strategy to enhance and expand its presence in northeast Ohio. The merger offers the Company the opportunity to increase profitability by introducing existing products and services to the acquired customer base as well as add new customers in the expanded market area. The goodwill was determined not to be deductible for income tax purposes.

The following table summarizes the consideration paid for Cortland and the amounts of the assets acquired and liabilities assumed on the closing date of the acquisition.


(In Thousands of Dollars)
Consideration
Cash	$	29,618
Stock		98,921
Fair value of total consideration transferred	$	128,539
Fair value of assets acquired
Cash and cash equivalents	$	113,391
Securities available for sale		130,574
Other investments		16,092
Loans		482,168
Premises and equipment		12,644
Bank owned life insurance		21,547
Core deposit intangible		5,886
Current and deferred taxes		3,135
Other assets		7,805
Total assets acquired		793,242
Fair value of liabilities assumed
Deposits		695,274
Short-term borrowings		4,246
Long-term borrowings		4,262
Accrued interest payable and other liabilities		9,386
Total liabilities		713,168
Net assets acquired	$	80,074
Goodwill created		48,465
Total net assets acquired	$	128,539