FARMERS NATIONAL BANC CORP /OH/ Income Taxes Disclosure

NOTE 18 – INCOME TAXES

 

The provision for federal and state income taxes from continuing operations included in the accompanying consolidated statement of income consist of the following (in thousands):

		2025
Current expense
Federal		$	8,571
State			12
Foreign			0
Deferred expense (benefit)
Federal			1,867
State			10
Foreign			0
Totals		$	10,460

 

Disclosure of income tax expense into components of federal, state and foreign taxes is presented as a result of the adoption of ASU 2023-09 beginning with the year ended December 31, 2025, on a prospective basis. 

 

The provision for income taxes (credit) consists of the following (in thousands):

		2024				2023
Current expense		$	7,089			$	9,230
Deferred expense (benefit)			2,389				(464	)
Totals		$	9,478			$	8,766

 

Effective tax rates differ from the federal statutory rate of 21%, applied to income before income taxes, due to the following (dollar amounts in thousands): 

		2025
		Amount						%
Provision for income taxes at U.S. federal statutory rate		$	13,660				21.00	%
State and local income taxes, net of federal benefit*			17				0.03	%
Tax credits
Low income housing tax credit partnerships, net of amortization			(846	)			(1.30	%)
Solar investment tax credit partnerships, net of amortization			(558	)			(0.86	%)
Other tax credits			(14	)			(0.02	%)
Nontaxable or nondeductible items
Effect of nontaxable interest			(1,848	)			(2.84	%)
Bank owned life insurance, net			(711	)			(1.09	%)
Other nontaxable or nondeductible			487				0.75	%
Other			273				0.41	%
Effective tax rate		$	10,460				16.08	%

 

*State taxes in West Virginia made up the majority (greater than 50%) of the tax effect in this category.  

 

The tax credits section for the year ended December 31, 2025 includes investments related to investment tax credits for solar panels that originated during the current year via ownership in a partnership investment.  In addition, there are low-income housing tax credits earned during the 2025 year.  The tax credit investments for the years ended December 31, 2024 and 2023 include primarily Federal low-income housing tax credits earned through investments in partnerships structures.  The amounts presented represent the benefits from the income/loss generated from the investment in the partnerships, the credits earned and allocated as a result of the investment in the partnerships, the proportional amortization recorded in accounting for the investments, and amounts that represent changes realized in the current period for prior period changes in allocations of those tax benefits. 

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Effective tax rates differ from the federal statutory rate of 21% that were applied to income before income taxes due to the following (in thousands):

		2024				2023
Statutory tax		$	11,640			$	12,327
Effect of nontaxable interest			(1,771	)			(2,040	)
Bank owned life insurance, net			(558	)			(513	)
Tax credit investments			(565	)			(366	)
Effect of nontaxable insurance premiums			0				(404	)
Stock compensation			28				41
Other			704				(279	)
Actual tax		$	9,478			$	8,766

 

Deferred tax assets (liabilities) are comprised of the following (in thousands):

		2025				2024
Deferred tax assets:
Allowance for credit losses		$	7,745			$	7,548
Net unrealized loss on securities available for sale			38,171				51,267
Net unrealized loss on swap derivative			127				107
Basis in investment securities			6,413				6,551
Purchase accounting adjustments			1,770				2,797
Deferred and accrued compensation			2,599				2,310
Nonaccrual loan interest income			227				358
Restricted stock			761				856
Lease liabilities			1,945				2,340
Other			189				304
Gross deferred tax assets			59,947				74,438
Deferred tax liabilities:
Depreciation and amortization		$	(1,975	)		$	(1,738	)
Mortgage servicing rights			(601	)			(651	)
Prepaid expenses			(44	)			(45	)
Lease right of use asset			(1,884	)			(2,281	)
Basis in partnership investments			(870	)			(375	)
Accretion of discount on securities			(891	)			(712	)
Gross deferred tax liabilities			(6,265	)			(5,802	)
Net deferred tax asset		$	53,682			$	68,636

 

No valuation allowance for deferred tax assets was recorded at December 31, 2025 and 2024. 

 

The Company is subject to U.S. federal income tax.  The Company is no longer subject to examination by the federal taxing authority for years prior to 2022.  The tax years 2022 - 2024 remain open to examination by the U.S. taxing authority.  

 

The following table presents income taxes paid (net of refunds) for the year ended December 31, 2025 (in thousands): 

	2025
Federal	$	3,200
State and local		22
Foreign		0
Total	$	3,222