Farmers declares two cash dividends

By Jamison Cocklin


In an effort to protect shareholders against the potential of tax breaks expiring at year’s end, Farmers National Bank on Tuesday declared two separate cash dividends.

Companies large and small are scrambling to send millions back to shareholders with lawmakers at an impasse over negotiations concerning the fiscal cliff, a series of deep spending cuts and tax hikes set to take effect Jan. 1.

Farmers is one of the Mahoning Valley’s first financial institutions to declare a special dividend, falling in line with companies across the country that last week announced they would declare early dividends in December rather than January.

After solid earnings in the first nine months of the year, Farmers announced a regular cash dividend of 3 cents per share in addition to what it called a “special” cash dividend at the same rate. Both are available to common stockholders of record as of Dec. 14, and the earnings will be payable Dec. 31.

“I think one of the bullet points is the tax situation,” said Farmers President and Chief Executive John S. Gulas. “We just don’t know what’s going to happen, and we’re in a position now to make a special dividend available.”

The so-called Bush-era top tax rate of 15 percent on dividends is scheduled to expire at the end of the year, meaning rates could be the same as those for wages and salaries — about 35 percent for wealthier investors.

One proposal under consideration is President Barack Obama’s campaign pledge to increase top-tax rates for individuals earning more than $200,000 and married couples earning more than $250,000. If increased, top rates on dividends could be taxed at 39.6 percent.

Though companies are not legally required to pay dividends, investors often consider them a mark of performance and consistency, sometimes outweighing even quarterly reports in assessing a company’s overall strength. Farmers officials billed the special dividend as a testament to its sustained growth and profitability.

“With the earnings there, it’s why we wanted to do this,” Gulas said. “We’ve been looking at our risk-based numbers, and we’re well above our capital standards. We don’t have a use for those extra earnings and wanted to pass them on to our shareholders.”

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