Farmers National Banc Corp

This management-sponsored advisory proposal asks shareholders to approve, on a non-binding basis, the compensation of Farmers’ named executive officers as disclosed in the proxy materials, including the Compensation Discussion and Analysis and accompanying compensation tables. Management and the Compensation Committee argue that the executive pay program is predominantly performance-based, uses objective metrics (adjusted EPS, pre-tax pre-provision income, and return on average assets) supplemented by individual subjective scorecards, and is benchmarked to a peer group to attract and retain talent. The advisory vote is intended to provide shareholders with a mechanism to express support or concerns about pay-for-performance alignment without altering pay arrangements directly. The Board recommends a “FOR” vote, citing over 85% shareholder support in 2025 and ongoing use of independent compensation consultants and peer benchmarking to refine program design. Because the vote is non-binding, the Board and Compensation Committee will review results and consider them in future compensation decisions, providing responsiveness to shareholder sentiment while retaining flexibility to manage executive talent. Potential governance considerations include whether the disclosed metrics and weightings sufficiently tie pay to long-term shareholder value, how certain discretionary elements (e.g., subjective scorecards, special one-time awards) are used, and whether change-in-control and severance arrangements are consistent with shareholder interests. Institutional investors may request additional disclosure on goal-setting, peer group selection, and realized pay outcomes; the Company’s policy to include a circuit breaker tied to a Texas ratio and a clawback policy are risk-mitigating features. In assessing the proposal’s merits, an analyst should weigh the demonstrable link between the Company’s recent strong financial results and incentive payouts, the presence of safeguards (clawback, circuit breaker), and the non-binding nature of the vote which limits immediate operational impact but provides important shareholder feedback for governance and compensation oversight.

This management proposal requests shareholder approval of the Farmers National Banc Corp. 2026 Equity Incentive Plan, authorizing an aggregate of 1,000,000 common shares to be used primarily for full-value awards (restricted stock, stock units, and share awards) administered by the independent Compensation Committee. Management frames the plan as a necessary tool to attract and retain talent, align executives’ and directors’ incentives with shareholder interests, and provide competitive equity compensation; noteworthy design features include the exclusion of stock options or SARs, a minimum one-year vesting requirement (subject to limited exceptions and change-in-control acceleration), prohibition on liberal share counting and tax-withholding reissuance, a $100,000 annual cap on awards to non-employee directors, and governance safeguards such as independent administration and clawback/recoupment commitments. The Board provides context that there are 539,012 shares subject to outstanding awards under the 2022 plan and that the requested 1,000,000-share reserve represents a modest percentage of outstanding shares (approx. 2.66% of shares outstanding as of February 25, 2026 and about 1.69% post-closing of the Middlefield acquisition on March 2, 2026). From a governance and investor perspective, the plan’s elimination of options reduces leverage-induced upside-only dilution but raises questions about long-term performance linkage compared with option-based structures; however, the plan retains performance-based awards tied to objective metrics and peer-relative measures. The plan’s disclosure highlights anti-dilution adjustments, limits on re-granting tax-withheld shares, and a one-year minimum vesting policy with narrow exceptions — all features that tend to be shareholder-friendly. Key risks to shareholders include potential dilution depending on future grant practices, and the breadth of permissible performance criteria which could permit awards tied to metrics less directly correlated with long-term shareholder value; mitigants include Compensation Committee discretion, peer benchmarking, and stated limits on award types and director caps. Analysts evaluating the proposal should weigh the modest size of the request relative to the company’s capitalization, the post-acquisition change in share count which reduces per-share dilution, the plan’s emphasis on full-value and performance-based awards, and the presence of governance safeguards; given these factors, the Board’s recommendation for approval is consistent with a rationale to preserve competitive compensation flexibility while embedding several investor-protective features.