FARMERS NATIONAL BANC CORP /OH/

Previous wording

**Results of Operations.**The following is a comparison of selected financial ratios and other results at or for thethree month periods ended March 31, 2026 and 2025:

Current wording

**Results of Operations.**The following is a comparison of selected financial ratios and other results at or for thethree and six month periods ended June 30, 2026 and 2025:

Previous wording

Net Income. The Company reported net income of $16.3 million, or $0.36 per diluted share, for the quarter ended March 31, 2026 compared to $13.6 million, or $0.36 per diluted share, for the quarter ended March 31, 2025. Net income for the first quarter of 2026 included a charge of $4.0 million related to the Merger with Middlefield and the conversion of our core system to Jack Henry. The new core platform contract will save the Company approximately $2.0 million per year, or $0.04 in diluted earnings per share, once the conversion is complete in August of 2026.

Current wording

Net Income. The Company reported net income of $23.0 million, or $0.39 per diluted share, for the quarter ended June 30, 2026 compared to $13.9 million, or $0.37 per diluted share, for the quarter ended June 30, 2025. Net income for the second quarter of 2026 included a charge of $1.7 million related to the Merger with Middlefield and the conversion of our core system to Jack Henry. The new core platform contract will save the Company approximately $2.0 million per year, or $0.04 in diluted earnings per share, once the conversion is complete in August of 2026.

Previous wording

Net Interest Income. Net interest income for the three months ended March 31, 2026, was $42.6 million compared to $34.2 million for the three months ended March 31, 2025. The Merger with Middlefield and a 27 basis point increase in the net interest margin were the primary reasons for this increase.

Current wording

Net Interest Income. Net interest income for the three months ended June 30, 2026, was $56.0 million compared to $34.9 million for the three months ended June 30, 2025. The Merger with Middlefield and a 53 basis point increase in the net interest margin were the primary reasons for this increase.

Previous wording

The net interest margin for the three-month period ended March 31, 2026, was 3.12% compared to 2.85% for the same period in 2025. Interest-earning asset yields increased 15 basis points in thefirst quarter of 2026 compared to thefirst quarter of 2025 while the cost of interest-bearing liabilities decreased 17 basis points when comparing these two periods. This decrease in interest-bearing liabilities resulted from a reduction in deposit costs of 18 basis points and a 56 basis point reduction in costs on borrowings rates in comparing the first quarter of 2025 to the first quarter of 2026.

Current wording

The net interest margin for the three-month period ended June 30, 2026, was 3.44% compared to 2.91% for the same period in 2025. Interest-earning asset yields increased 48 basis points in thesecond quarter of 2026 compared to thesecond quarter of 2025 while the cost of interest-bearing liabilities decreased 5 basis points when comparing these two periods. This decrease in interest-bearing liabilities resulted from a reduction in deposit costs of 7 basis points and a 43 basis point reduction in costs on borrowings rates in comparing thesecond quarter of 2025 to thesecond quarter of 2026.

Previous wording

Provision for Credit Losses and Provision for Unfunded Loans. The provision for credit losses and unfunded loans was a benefit of $1.0 million for the three months ended March 31, 2026, compared to a benefit of $204,000 for the three months ended March 31, 2025. The provision in the first quarter of 2026 was positively impacted by improvements in qualitative factors in the Company’s CECL model.

Current wording

For the firstsix months of 2026, the Company recorded a provision for credit losses and unfunded loans of $1.4 million compared to a provision of credit losses and unfunded loans of $3.3 million for the first six months of 2025.

Previous wording

Noninterest Income. Noninterest income for thefirst quarter of 2026 was $13.7 million compared to $10.5 million for thefirst quarter of 2025. The increase was driven by the Middlefield acquisition, growth in the wealth lines of business and lower losses on the sale of securities.

Current wording

Noninterest Income. Noninterest income for thesecond quarter of 2026 was $14.4 million compared to $12.1 million for thesecond quarter of 2025. The increase was driven by the Middlefield acquisition and continued growth in the wealth line of business.

Previous wording

Service charges on deposit accounts increased $208,000 to $2.0 million for thefirst quarter of 2026 compared to $1.8 million for thefirst quarter in 2025 primarily as a result of the Merger. Bank owned life insurance income increased $682,000 during the first quarter of 2026 to $1.5 million compared to $810,000 in the first quarter of 2025. Death claims were higher by $416,000 in 2026 compared to 2025 and the addition of Middlefield was primarily responsible for the remaining difference. Trust fees increased to $3.0 million at March 31, 2026, from $2.6 million at March 31, 2025. The increase was due to continued growth in the business unit. Insurance agency commissions were $1.7 million both in thefirst quarter of 2026 and 2025. Losses on the sale of securities totaled $18,000 in thefirst quarter of 2026 compared to losses on the sale of securities of $1.3 million during thefirst quarter of 2025. The Company restructured $23.8 million of securities at the end of the first quarter of 2025 resulting in the loss realized on the sale. Retirement plan consulting fees increased slightly to $886,000 in the first quarter of 2026 from $798,000 in the first quarter of 2025. Investment commissions grew $342,000 to $871,000 in the first quarter of 2026 compared to $529,000 in the first quarter of 2025. The Company has a strong sales team in this line of business and is looking to grow with deeper penetration into newer markets. Other mortgage banking income was $477,000 in the first quarter of 2026 compared to $147,000 in the first quarter of 2025. This increase was primarily due to the Company recovering $303,000 of mortgage servicing rights impairment in the first quarter of 2026. Debit card income grew from $1.9 million in the first quarter of 2025 to $2.0 million in the first quarter of 2026 as better volumes were realized in the current period. Other noninterest income was $898,000 in the first quarter of 2026 compared to $1.2 million in the first quarter of 2025 primarily due to lower SBIC income in 2026.

Current wording

Service charges on deposit accounts increased $893,000 to $4.4 million for the firstsix months of 2026 compared to $3.5 million in the same period in 2025 primarily as a result of the Merger. BOLI income increased to $2.9 million during the firstsix months of 2026 compared to $1.6 million for thesix months ended June 30, 2025. Death claims were higher by $527,000 in 2026 compared to 2025 and the addition of Middlefield was primarily responsible for the difference. Trust fees increased to $6.1 million at June 30, 2026, from $5.2 million at June 30, 2025. The increase was due to continued growth in the business unit. Insurance agency commissions were $3.2 and $3.6 million for thesix months ended June 30,2026 and 2025, respectively. Gains on the sale of securities totaled $4,000 in the firstsix months of 2026 compared to losses on the sale of securities of $1.3 million during the firstsix months of 2025. The Company restructured $23.8 million of securities at the end of the first quarter of 2025 resulting in the loss realized on the sale. Retirement plan consulting fees increased slightly to $1.8 million in the firstsix months of 2026 from $1.6 million in the firstsix months of 2025. Investment commissions increased to $1.9 million in the first half of 2026 compared to $1.3 million in the first half of 2025. The Company has a strong sales team in this line of business and is looking to grow with deeper penetration into newer markets. Other mortgage banking income was $676,000 in first half of 2026 compared to $174,000 in thefirst half of 2025. This increase was primarily due to the Company recovering $516,000 of mortgage servicing rights impairment in the first quarter of 2026. Debit card income grew from $3.9 million in the firstsix months of 2025 to $4.6 million in the firstsix months of 2026 as better volumes were realized in the current period. Other noninterest income was $1.7 million in the firstsix months of 2026 compared to $2.4 million in the first half of 2025, primarily due to lower SBIC income in 2026.

Previous wording

Noninterest Expense. Noninterest expense totaled $37.3 million for the quarter ended March 31, 2026 compared to $28.5 million for the quarter ended March 31, 2025. Salaries and employee benefits were $18.5 million in thefirst quarter of 2026 compared to $16.2 million in thefirst quarter of 2025. The increase was primarily driven by higher salaries associated with employee raises, the acquisition of Middlefield in the first quarter of 2026 and higher commission expense from increased revenue in the fee-based businesses. Occupancy and equipment expense increased to $5.1 million in the first quarter of 2026 from $4.1 million in the first quarter of 2025 due to the Merger and increased maintenance costs in 2026 due to more severe winter weather conditions. FDIC and state and local taxes increased by $341,000 to $1.6 million in the first quarter of 2026 compared to $1.3 million in the first quarter of 2025 due to the Merger and higher capital levels year-over-year. Expense related to the Merger and to convert our core processing system increased to $4.0 million. There were no expenses recognized for these activities in the first quarter of 2025. Core processing expense increased to $1.7 million in the first quarter of 2026 from $1.4 million in the first quarter of 2025. The increase was due to the Merger and a lower level of service credits in 2026. Other noninterest expense increased by $650,000 to $3.8 million in the first quarter of 2026 primarily as a result of the acquisition and timing issues.

Current wording

Noninterest Expense. Noninterest expense totaled $40.9 million for the quarter ended June 30, 2026 compared to $27.2 million for the quarter ended June 30, 2025. Salaries and employee benefits were $21.3 million in thesecond quarter of 2026 compared to $14.7 million in thesecond quarter of 2025. The increase was primarily driven by higher salaries associated with employee raises, the acquisition of Middlefield and higher commission expense from increased revenue in the fee-based businesses. Occupancy and equipment expense increased to $5.9 million in thesecond quarter of 2026 from $4.1 million in thesecond quarter of 2025 due to the Merger and increased maintenance costs in 2026 due to more severe winter weather conditions. FDIC and state and local taxes increased by $671,000 to $1.9 million in thesecond quarter of 2026 compared to $1.3 million in thesecond quarter of 2025 due to the Merger and higher capital levels year-over-year. Expense related to the Merger and to convert our core processing system increased to $1.7 million. There were no expenses recognized for these activities in thesecond quarter of 2025. Core processing expense increased to $2.3 million in thesecond quarter of 2026 from $1.4 million in thesecond quarter of 2025. The increase was due to the Merger and a lower level of service credits in 2026. Other noninterest expense increased by $1.0 million to $4.5 million in thesecond quarter of 2026 primarily as a result of the acquisition and timing differences.

Previous wording

Income Taxes. Income tax expense was $3.7 million for the three months ended March 31, 2026 compared to $2.8 million for the three months ended March 31, 2025 due to higher pretax income in the first quarter of 2026.

Current wording

Income Taxes. Income tax expense was $4.1 million for the three months ended June 30, 2026 compared to $2.4 million for the three months ended June 30, 2025.

Previous wording

Cash and Cash Equivalents. Cash and cash equivalents increased $93.7 million during the first three months of 2026 to $186.1 million from $92.4 million at December 31, 2025. The increase in the cash balances was primarily due to the Company intentionally holding more liquidity on its balance sheet at March 31, 2026 and the Merger with Middlefield.

Current wording

Cash and Cash Equivalents. Cash and cash equivalents increased $72.4 million during the firstsix months of 2026 to $164.8 million from $92.4 million at December 31, 2025. The increase in the cash balances was primarily due to the Company intentionally holding more liquidity on its balance sheet at June 30, 2026 and the Merger with Middlefield.

Previous wording

Securities. The Company had securities available for sale totaling $1.48 billion as of March 31, 2026 compared to $1.34 billion as of December 31, 2025. The increase is a direct result of the Merger. Net unrealized losses on the portfolio totaled $189.7 million at March 31, 2026, compared to $181.8 million at December 31, 2025. The Company anticipates continued volatility in the bond market in 2026, which will continue to affect the value of the portfolio.

Current wording

Securities. The Company had securities available for sale totaling $1.47 billion as of June 30, 2026 compared to $1.34 billion as of December 31, 2025. The increase is a direct result of the Merger. Net unrealized losses on the portfolio totaled $185.6 million at June 30, 2026, compared to $181.8 million at December 31, 2025. The Company anticipates continued volatility in the bond market in 2026, which will continue to affect the value of the portfolio.

Previous wording

Loans. Net loans (excluding loans held for sale) increased to $4.75 billion at March 31, 2026 from $3.27 billion at December 31, 2025. The increase in 2026 is primarily due to the Merger.

Current wording

Loans. Net loans (excluding loans held for sale) increased to $4.72 billion at June 30, 2026 from $3.27 billion at December 31, 2025. The increase in 2026 is primarily due to the Merger.

Previous wording

The Company's allowance for credit losses increased to $54.7 million for the period ended March 31, 2026, from $36.8 million for the period ended December 31, 2025. The increase in the allowance for credit losses was primarily driven by the Merger. The Company recorded a $4.0 million and $15.3 million increase to the allowance for credit losses for the Day 1 reserve for purchased financial assets with credit deterioration and purchased seasoned loans, respectively. The Company estimates the ACL based on the amortized cost basis of the underlying loan and has made an accounting policy election to exclude accrued interest from the loan’s amortized cost basis and the related measurement of the ACL. Estimating the amount of the ACL is a function of a number of factors, including but not limited to changes in the loan portfolio, net charge-offs, trends in past due and nonaccrual loans, and the level of potential problem loans, all of which may be susceptible to significant change.

Current wording

The Company's allowance for credit losses increased to $53.3 million for the period ended June 30, 2026, from $36.8 million for the period ended December 31, 2025. The increase in the allowance for credit losses was primarily driven by the Merger. The Company recorded a $4.0 million and $15.3 million increase to the allowance for credit losses for the Day 1 reserve for purchased financial assets with credit deterioration and purchased seasoned loans, respectively. The Company estimates the ACL based on the amortized cost basis of the underlying loan and has made an accounting policy election to exclude accrued interest from the loan’s amortized cost basis and the related measurement of the ACL. Estimating the amount of the ACL is a function of a number of factors, including but not limited to changes in the loan portfolio, net charge-offs, trends in past due and nonaccrual loans, and the level of potential problem loans, all of which may be susceptible to significant change.

Previous wording

Deposits. Total deposits increased to $5.9 billion at March 31, 2026 from $4.34 billion at December 31, 2025. Customer deposits grew $1.6 billion, including an increase of $282.7 million in public funds. The increase was primarily due to Middlefield, which added $1.49 billion in deposits, as well as seasonal growth in public funds.

Current wording

Deposits. Total deposits increased to $5.83 billion at June 30, 2026 from $4.34 billion at December 31, 2025. Deposits grew $1.49 billion, including an increase of $215.7 million in public funds. The increase was primarily due to Middlefield, which added $1.49 billion in deposits.

Previous wording

Short-term Borrowings. Total short-term borrowing balances increased from $281.0 million at December 31, 2025 to $341.0 million at March 31, 2026. The Middlefield Merger added $145.0 million in short-term borrowings offset by payoffs.

Current wording

Short-term Borrowings. Total short-term borrowing balances increased from $281.0 million at December 31, 2025 to $361.0 million at June 30, 2026. The Middlefield Merger added $145.0 million in short-term borrowings offset by payoffs.

Previous wording

Total Stockholders' Equity. Total stockholders’ equity increased to $766.9 million at March 31, 2026 from $485.7 million at December 31, 2025. The increase was primarily due to an increase in common stock of $276.2 million from the Merger coupled with growth in retained earnings of $9.8 million due to $16.3 million of net income recognized during the first three months of the year partially offset by dividends paid on outstanding common shares.

Current wording

Total Stockholders' Equity. Total stockholders’ equity increased to $784.0 million at June 30, 2026 from $485.7 million at December 31, 2025. The increase was primarily due to an increase in common stock of $276.2 million from the Merger coupled with growth in retained earnings of $22.8 million due to $39.3 million of net income recognized during the firstsix months of the year partially offset by dividends paid on outstanding common shares.

Previous wording

The capital management function is a regular process that consists of providing capital for both the current financial position and the anticipated future growth of the Company. At March 31, 2026, the Company is required to maintain 4.5% common equity tier 1 to risk weighted assets excluding the conservation buffer to be adequately capitalized. The Company’s common equity tier 1 to risk weighted assets was 11.70%, total risk-based capital ratio stood at 14.63%, and the Tier 1 risk-based capital ratio and Tier 1 leverage ratio were at 12.19% and 11.21%, respectively, at March 31, 2026. Management believes that the Company and the Bank meet all capital adequacy requirements to which they are subject, as of March 31, 2026.

Current wording

The capital management function is a regular process that consists of providing capital for both the current financial position and the anticipated future growth of the Company. At June 30, 2026, the Company is required to maintain 4.5% common equity tier 1 to risk weighted assets excluding the conservation buffer to be adequately capitalized. The Company’s common equity tier 1 to risk weighted assets was 12.64%, total risk-based capital ratio stood at 13.69%, and the Tier 1 risk-based capital ratio and Tier 1 leverage ratio were at 12.64% and 9.55%, respectively, at June 30, 2026. Management believes that the Company and the Bank meet all capital adequacy requirements to which they are subject, as of June 30, 2026.

Previous wording

For example, compared to the Company’s central scenario that is based on a four-quarter forecasted change in U.S. real GDP of 2.40% from 4Q2025 to 4Q2026, U.S. PCE inflation of 2.70%, and U.S. unemployment of 4.40%, the Company’s relative adverse scenario assumes a four-quarter forecast with a contraction of U.S. real GDP, a PCE inflation between 5.00% and 7.00% and an elevated U.S. unemployment rate between 6.00% and 7.00%. This analysis is not intended to estimate expected future changes in the allowance for credit losses, for a number of reasons, including:

Current wording

For example, compared to the Company’s central scenario that is based on a four-quarter forecasted change in U.S. real GDP of 2.20% from 4Q2025 to 4Q2026, U.S. PCE inflation of 3.60%, and U.S. unemployment of 4.30%, the Company’s relative adverse scenario assumes a four-quarter forecast with a contraction of U.S. real GDP, a PCE inflation greater than 7.00% and an elevated U.S. unemployment rate between 5.00% and 6.00%. This analysis is not intended to estimate expected future changes in the allowance for credit losses, for a number of reasons, including:

Previous wording

Management believes that the accounting for goodwill and other intangible assets also involves a higher degree of judgment than most other significant accounting policies. GAAP establishes standards for the amortization of acquired intangible assets and the impairment assessment of goodwill. Goodwill arising from business combinations represents the value attributable to unidentifiable intangible assets in the business acquired. The Company’s goodwill relates to the value inherent in the banking industry and that value is dependent upon the ability of the Company’s subsidiaries to provide quality, cost-effective services in a competitive marketplace. The goodwill value is supported by revenue that is in part driven by the volume of business transacted. A decrease in earnings resulting from a decline in the customer base or the inability to deliver cost-effective services over sustained periods can lead to impairment of goodwill that could adversely impact earnings in future periods. GAAP requires an annual evaluation of goodwill for impairment, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The fair value of the goodwill is estimated by reviewing the past and projected operating results for the subsidiaries and comparable industry information. At March 31, 2026, on a consolidated basis, Farmers had intangibles of $36.8 million subject to amortization and $271.7 million in goodwill, which was not subject to periodic amortization.

Current wording

Management believes that the accounting for goodwill and other intangible assets also involves a higher degree of judgment than most other significant accounting policies. GAAP establishes standards for the amortization of acquired intangible assets and the impairment assessment of goodwill. Goodwill arising from business combinations represents the value attributable to unidentifiable intangible assets in the business acquired. The Company’s goodwill relates to the value inherent in the banking industry and that value is dependent upon the ability of the Company’s subsidiaries to provide quality, cost-effective services in a competitive marketplace. The goodwill value is supported by revenue that is in part driven by the volume of business transacted. A decrease in earnings resulting from a decline in the customer base or the inability to deliver cost-effective services over sustained periods can lead to impairment of goodwill that could adversely impact earnings in future periods. GAAP requires an annual evaluation of goodwill for impairment, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The fair value of the goodwill is estimated by reviewing the past and projected operating results for the subsidiaries and comparable industry information. At June 30, 2026, on a consolidated basis, Farmers had intangibles of $35.6 million subject to amortization and $271.4 million in goodwill, which was not subject to periodic amortization.

Previous wording

Along with its liquid assets, the Bank has additional sources of liquidity available which help to ensure that adequate funds are available as needed. These other sources include, but are not limited to, access to funds in the wholesale arena, the ability to obtain deposits through the adjustment of interest rates and the purchasing of federal funds and borrowings on approved lines of credit at major domestic banks. The Bank has a line of credit totaling $25.0 million and there was no balance on this line at either March 31, 2026 or December 31, 2025. The Company also has access to borrow $11.5 million at the Federal Reserve Discount Window, however, there was no balance on this line at March 31, 2026 or December 31, 2025. The Federal Reserve Discount Window can be an additional source of funds with the posting of additional collateral. As of March 31, 2026, the Bank had $341.0 million in outstanding balances with the FHLB. Additional borrowing capacity at the FHLB was approximately $788.9 million at March 31, 2026. The Bank views its membership in the FHLB as a solid source of liquidity. Management feels that its liquidity position is adequate and will continue to monitor the position on a monthly basis.

Current wording

Along with its liquid assets, the Bank has additional sources of liquidity available which help to ensure that adequate funds are available as needed. These other sources include, but are not limited to, access to funds in the wholesale arena, the ability to obtain deposits through the adjustment of interest rates and the purchasing of federal funds and borrowings on approved lines of credit at major domestic banks. The Bank has a line of credit totaling $25.0 million and there was no balance on this line at either June 30, 2026 or December 31, 2025. The Company also has access to borrow $11.3 million at the Federal Reserve Discount Window, however, there was no balance on this line at June 30, 2026 or December 31, 2025. The Federal Reserve Discount Window can be an additional source of funds with the posting of additional collateral. As of June 30, 2026, the Bank had $361.0 million in outstanding balances with the FHLB. Additional borrowing capacity at the FHLB was approximately $608.5 million at June 30, 2026. The Bank views its membership in the FHLB as a solid source of liquidity. Management feels that its liquidity position is adequate and will continue to monitor the position on a monthly basis.

Previous wording

In the normal course of business, to meet the financial needs of our customers, we are a party to financial instruments with off-balance sheet risk. These financial instruments generally include commitments to originate mortgage, commercial and consumer loans, and involve to varying degrees, elements of credit and interest rate risk in excess of amounts recognized in the Consolidated Balance Sheets. The Bank’s maximum exposure to credit loss in the event of nonperformance by the borrower is represented by the contractual amount of those instruments. Because some commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The same credit policies are used in making commitments as are used for on-balance sheet instruments. Collateral is required in instances where deemed necessary. Undisbursed balances of loans closed include funds not disbursed but committed for construction projects. Unused lines of credit include funds not disbursed, but committed for, home equity, commercial and consumer lines of credit. Financial standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Those guarantees are primarily used to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Total unused commitments were $1.03 billion at March 31, 2026, and $710 million at December 31, 2025. Additionally, the Company has committed up to $21.2 million in subscriptions in SBIC investment funds and at March 31, 2026, the Company had invested $16.0 million in these funds.

Current wording

In the normal course of business, to meet the financial needs of our customers, we are a party to financial instruments with off-balance sheet risk. These financial instruments generally include commitments to originate mortgage, commercial and consumer loans, and involve to varying degrees, elements of credit and interest rate risk in excess of amounts recognized in the Consolidated Balance Sheets. The Bank’s maximum exposure to credit loss in the event of nonperformance by the borrower is represented by the contractual amount of those instruments. Because some commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The same credit policies are used in making commitments as are used for on-balance sheet instruments. Collateral is required in instances where deemed necessary. Undisbursed balances of loans closed include funds not disbursed but committed for construction projects. Unused lines of credit include funds not disbursed, but committed for, home equity, commercial and consumer lines of credit. Financial standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Those guarantees are primarily used to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Total unused commitments were $1.07 billion at June 30, 2026, and $710 million at December 31, 2025. Additionally, the Company has committed up to $21.2 million in subscriptions in SBIC investment funds and at June 30, 2026, the Company had invested $16.4 million in these funds.