[OUTSIDE FRONT COVER]

S  I  G  N  S     O  F     U  N  I  T  Y

FARMERS NATIONAL BANC CORP.
ANNUAL REPORT 2001

[INSIDE FRONT COVER]

BUSINESS DESCRIPTION

Farmers National Banc Corp. is a one-bank holding company headquartered in Canfield, OH. Its principal subsidiary is the Farmers National Bank of Canfield. The Bank is a full service national bank engaged in commercial and retail banking with the exception of trust services. The Bank's main office is located at 20 South Broad Street, Canfield, Ohio. Business is conducted at a total of sixteen (16) offices located in the counties of Mahoning, Trumbull and Columbiana. The Bank is a member of the Federal Reserve System, subject to supervision and regulation of the Comptroller of the Currency, and its deposits are insured by the Federal Deposit Insurance Corporation to the extent provided by law.

SIGNS OF UNITY

Who has not considered more directly and deeply what they must value in the aftermath of September 11, 2001?

The violence, injustice and suffering that marked that day in America will not be forgotten. But, the acts of heroism in New York, Washington D.C., and in the skies above our neighboring state of Pennsylvania will also be remembered.

In the aftermath of 9/11, we have been reawakened to the responsibilities we have to one another—including our civic responsibilities, which transform a place on the map into a place known as a community. In this year's annual report we celebrate communities Farmers is honored to serve as a locally-owned financial institution. These are places on the map where individuals and families find unity of purpose in everyday activities, from little league ball fields to town halls to volunteer fire stations.

Signs of unity, in both the literal and metaphorical sense, are everywhere throughout our Valley. They remind us that it is a community bank's privilege, as well as its obligation, to meet its civic responsibilities.

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

Highlights of 2001

Table of Contents
Highlights of 2001	1
President’s Letter	2
The Year in Review	3-6
Selected Financial Data	7-9
Management’s Discussion	9-17
Stock Prices and Dividends	17
Management’s Report	18
Accountant’s Report	19-33
Board of Directors	34
Officers	35

Selected Financial Data (In Thousands except Per Share Data)

For the Year	2001			2000			Percent Change
Net Income	$	7,290		$	5,748			26.83	%
Return on Average Assets		1.14	%		0.93	%		22.58	%
Return on Average Equity		9.88	%		8.37	%		18.04	%
Per Share
Net Income	$	0.61		$	0.49	*		24.49	%
Book Value		6.25			6.10			2.46	%
Balances at Year-End
Assets	$	656,694		$	626,122			4.88	%
Securities		143,575			127,761			12.38	%
Net Loans		429,028			444,596			-3.50	%
Deposits		503,644			468,336			7.54	%
Stockholders Equity		75,718			70,833			6.90	%
Shares Outstanding		12,111			11,604			4.37	%
Cash Dividends		6,243			4,770			30.88	%
* Restated to reflect weighted average shares outstanding adjusted for stock dividends.

[BAR GRAPH]

Net Income Per Share
$	0.55	$	0.46	$	0.53	$	0.49	$	0.61
	1997		1998		1999		2000		2001

[BAR GRAPH]

Net Income In Thousands
$	6,060	$	5,268	$	6,159	$	5,748	$	7,290
	1997		1998		1999		2000		2001

1

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY
President’s Letter

[PHOTO]
 

Dear Shareholders,

     Farmers National Banc Corp. posted another year of strong financial performance in 2001 and made significant progress in the preparation for the future growth of your corporation.

     In the face of the tragic events that our nation experienced during 2001 and their impact upon what was already a challenging economic climate — the driving force of our community banking strategies kept Farmers National Banc Corp. on course to a year of exceptional performance and accomplishments.

     As the cover of this year’s Annual Report shows, the impact and support of our local communities are the strength behind our community banking philosophy and play a vital role in our success. We are equally as proud that our philosophy of community-based banking has brought success to our bank, value to our shareholders and continued prosperity to the communities we serve.

     We undertook several strategic initiatives during 2001 to expand our community banking franchise in order to better position us in the financial services industry. Overall, the final results published in the Annual Report fit well with our corporate mission statement and vision — Profitability, Growth, Strength & Safety.

     We ended 2001 with $657 million in total assets and a market capitalization of approximately $136 million. In 2001, our net income per share increased 24.5 percent to $.61 or a record $7.3 million in after tax earnings. These results represent a return on average assets (ROA) of 1.14 percent and a return on average shareholders equity (ROE) of 9.88 percent. The Corporation’s total capital was $75.7 million at December 31, 2001, representing a book value per share of $6.25.

     Farmers National Banc Corp.’s common stock closed the year at $11.25 per share, compared to 2000’s closing price of $7.13, which translates into a 57.7 percent increase in market value over those twelve months. Total cash dividends paid per share were $.53, plus our shareholders received a 2 percent stock dividend in November.

     Strategically, we planned and implemented the final computer systems integration of the Security Dollar Bank into Farmers National Bank. This conversion was completed on March 31, 2001, at which time signage was changed and the six branch offices located in Trumbull County were changed over to function and operate as branches of Farmers National Bank. At the same time, certain check processing functions were relocated from Canfield to the Niles Operations Center. Over the remainder of the year, we methodically fine-tuned these changes into a more efficient operation that contributed to the overall success that we experienced in 2001.

     I have outlined some of the other newsworthy accomplishments completed last year:

• PrimeVest Financial Services @ Farmers National Bank, the bank’s investment and insurance center continues to gain popularity and growth as this product line is now available in all of the bank’s sixteen branches.
• IMAGE ADVANTAGE is the bank’s newest technology investment that will electronically scan checks and deposits — storing these images directly onto our computer system.
• New ATMs were purchased and installed at four (4) of our Trumbull Country branches. Certain locations were re-configured to install there ATMs in drive-up lanes to better accommodate the customer traffic patterns and provide additional convenience, improved security and added services.
• Our On-Line Banking and Phone Banking products and services were expanded when we introduced Commercial Cash Management and CorporateLink Telephone. These products are designed to provide direct access to our commercial banking customer’s account via the Internet or the telephone.

     Over the next few pages, we have given you a summary of the year in review. I encourage you to take the time to review this information. After the completion of the Security Dollar transaction on December 31, 2000, our officers and employees set some high standards for 2001. It is with great pleasure that we have this opportunity to share all those results with you in this year’s Annual Report.

     The national events that took place in New York, Washington and Pennsylvania, as well as the quick changes in the economic environment, forced our management team to implement some crisis management scenarios. Our staff was able to deal with concerned customers, while management needed to make some quick decisions regarding financial and operating strategies. I am extremely proud to report that your Board of Directors, officers and all employees responded to all events in a very professional and responsible manner.

     In closing, I would like to extend my appreciation to our loyal shareholders and dedicated board members for their continued support as we move forward. I also want to salute the 300 employees of Farmers National Bank whose hard work and productivity have given us a strong community banking franchise prepared for the future. I encourage you to read this report along with the independent report issued by our accountant's in the pages that follow — and hope you have the opportunity to attend our Annual Shareholder’s Meeting in March.

      Sincerely,

      /s/ Frank L. Paden

      Frank L. Paden, President & CEO

2

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY
The Year in Review

[BAR CHART]

Return on Average Assets
	1.17	%	0.96	%	1.05	%	0.93	%	1.14	%
	1997		1998		1999		2000		2001

[BAR CHART]

Cash Dividends per Share
$	0.29	$	0.34	$	0.42	$	0.51	$	0.53
	1997		1998		1999		2000		2001

Profitability

     Net income for the year reached a record high of $7.29 million, up 26.8 percent over 2000. Excluding the one-time Security Dollar merger related expenses recognized in December 2000, the operating income for this past year increased by $551 thousand or 8.2 percent. Interest income from earning assets on a taxable equivalent basis generated $46.6 million during 2001. Total interest expense, or the cost of our interest bearing liabilities was $21 million. Net interest income for the year was $25.6 million, up 2.8 percent, or $696 thousand from last year. The net interest margin on these assets and liabilities was 4.24 percent as compared to 4.27 percent in 2000.

     The net income was $.61 per share for 2001 as compared to $.49 per share in 2000. This represents a 24.5 percent increase. When excluding the one-time merger expenses in 2000, the net income per share increased from $.58 to $.61 or 5.2 percent.

Strength in Capital

     Cash dividends paid on Farmers National Banc Corp. common stock during 2001 were $.53 per share as compared to the $.51 per share paid during 2000. This marks the sixth consecutive year that our Directors have increased the annual cash dividend. In addition, our Board declared and paid a 2% stock dividend, marking the twenty-sixth consecutive year for paying an annual stock dividend.

     Shareholder's Equity increased by 6.9 percent during 2001 up to $75.72 million at the end of the year. This strong capital position gives the Corporation 11.5 percent capital to asset ratio. As of December 31, 2001, the Corporation's Tier Risk Based Capital Ratio was 16 percent, well in excess of the minimum regulatory level of 4 percent.

     The total capital account continues to grow at a pace greater than earnings growth primarily from the strong support and participation of our shareholders in the Corporation's Dividend Reinvestment Plan. Approximately 84 percent of our registered shareholders participate in this Plan. During 2001, shareholders reinvested cash dividends of $2.3 million and made additional cash contributions of $1.1 million for a total of $3.4 million, which purchased 359,112 shares of common stock at an average weighted price of $9.47 per share.

Achieving Growth

     As of December 31, 2001, total assets for the Corporation reached a record level of $656.7 million, an increase of $30.6 million, or 4.9 percent over the totals at the end of 2000. Net loans make-up approximately 65 percent of the Corporations total assets.

     Our loan footings actually decreased by $15.2 million during 2001, with most of the reductions in the two separate categories of our loan portfolio

3

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY
The Year in Review

The one-to-four family real estate category of our mortgage loan portfolio experienced accelerated repayments as borrowers refinanced mortgage loans to take advantage of long-term fixed rates offered through the secondary mortgage markets. The other portion of our loan portfolio that experienced some decline in balances was the indirect automobile loan category. Special rate programs offered through the automobile manufacturers captured some of that market this past year, but we were still able to originate nearly $70 million in new indirect loans through our network of local automobile dealers.

      Offsetting the decrease in loan assets, the Investment Securities Portfolio increased to $143.6 million on December 31, 2001 as compared to $127.9 million at the end of 2000. These investments, which are comprised mainly of various U.S. Governmental and State & Municipal Securities, are strategically purchased with maturities and interest rates that fit into the bank's asset/liability and interest rate models. In addition, the corporation was investing nearly $42 million in overnight Fed Funds at year end, this being up substantially from $11.4 million, in December 2000.

      On the liability side of the company's balance sheet, total deposits grew 7.5%, or $35.3 million during this past year. Lower interest rates caused a shift in deposit categories as we experienced most deposit growth to be in the tiered balance money market account category, which gives depositors more liquidity and flexibility should interest rates move upward in 2002.

[BAR GRAPH]

Total Deposits (in thousands)
$	451,182	$	470,435	$	476,829	$	468,336	$	503,644
	1997		1998		1999		2000		2001

Asset Quality and Risk Management

      In light of the weak economic market conditions, increase in bankruptcy petitions and higher unemployment, prudent risk management is necessary to monitor the credit quality within our loan portfolio and support the balance of our loan loss reserve account. There are three key ratios that we use to monitor our adequacy of loan loss reserve. The Allowance for Loan Losses to Total Loans was 1.48%; the percent of Allowance for Loan Losses to Non-performing Loans was 226%; and the Net Losses to Average Loans was .17%. As a comparison, these same three ratios in December 2000 were 1.36%, 458% and .12%.

      Utilizing a strategy that has been very helpful in guarding against some interest rate risk on our balance sheet, management continues to utilize loan advances from the Federal Home Loan Bank to match some fixed rate commercial real estate loans that originated during 2001. This type of transaction gives us the ability to offer attractive fixed rate terms and conditions to our commercial customers and not put the bank at great interest rate risk over the next five to ten years.

[BAR GRAPH]

Allowance for Loan Losses to Total Loans
	1.32	%	1.38	%	1.34	%	1.36	%	1.48	%
	1997		1998		1999		2000		2001

4

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY
The Year in Review

Enhancing Shareholder Value

      During 2001, we saw the market recognize the value in our common stock as the current market value increased from a low of $7.13 in January up to closing the year at $11.25. The corresponding graph shows the average weighted price for all shares of common stock that traded during the last five calendar quarters.

      In June 2001, our Directors reinstated our Stock Repurchase Plan. This program allows us to go to the market and re-purchase our common stock shares in open market transactions. This plan was originally started in early 2000, but was curtailed until the consummation of the Security Dollar transaction. During 2001, we have purchased shares totaling approximately $1 million at an average cost of $10.25 per share. Shares that are purchased are being treated as Treasury Stock on the corporate balance sheet. At this time, the corporation plans to continue to make purchases when appropriate and in accordance with the guidelines of our Stock Repurchase Plan.

Operational Initiatives

      All accomplishments attained in 2001 can be directly attributed to our dedicated staff of employees. Following the consummation of the Security Dollar Bank acquisition, we systematically formulated a plan to take advantages of the synergies recognized in this deal. Computer systems were converted, signs changed at branch locations, employees were trained on new policies and procedures, check processing operations were consolidated into one facility — all done in accordance with last year’s mission, “Building A Stronger Bank”. Progress on these changes were monitored and fine-tuned along the way.

      Some new products and services were introduced during this past year in all banking locations. PrimeVest Financial Services @ Farmers National Bank was expanded and is now available in all sixteen banking locations within Mahoning, Trumbull and Columbiana Counties. The products and services offered through this department include access to the retail non-traditional bank deposits such as mutual funds, annuities, equities and access to individuals for financial and estate planning. During this period of uncertainty, insecurity and apprehension, customers need to re-examine their priorities. Our mission with PrimeVest is to give our customers additional options for enhancing personal wealth and to compliment the traditional bank deposit products we have always made available for our customers.

[BAR GRAPH]

Average Weighted Price Per Share Common Stock (FMNB)
	$7.89	$8.11	$9.16	$10.06	$10.79
	December 2000	March 2001	June 2001	September 2001	December 2001

[BAR GRAPH]

Total Shareholders Equity (In Thousands)
$	55,556	$	62,018	$	66,233	$	70,833	$	75,718
	1997		1998		1999		2000		2001

5

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY
The Year in Review

Technology

      Our Electronic Banking products were also expanded. Following the successful introduction and implementation of On-Line Banking and Phone Banking in 2000, we expanded these products to include all commercial banking customers who now have the availability to transact business, via the Internet, through our Corporate Cash Management product. In addition, corporate customers can also use the CustomerLink Phone Banking services. As with any of these types of electronic services, security and customer privacy are priorities. We have taken great measures to ensure the safety of our customers' information and guard against anyone but authorized individuals transacting and viewing financial information. The number of transactions over our On-Line and Phone Banking products continues to increase on a monthly basis. In addition, our electronic bill paying service continues to gain popularity.

      Keeping with our long-term strategic commitment regarding technology, we are very enthused about our most recent technological enhancement—IMAGE ADVANTAGE. This new investment fits well with the recent relocation of our proof and bookkeeping, item processing and statement rendering departments to the Niles Operations Center. IMAGE ADVANTAGE allow us to process all paper checks through our Operations Center and convert those paper checks to a digital format and store copies of the original documents directly onto our core processing system. Deposit customers will soon receive all their cancelled checks in a new format along with their regular monthly statement. This is a major commitment on our part as we prepare for anticipated changes in processing paper checks through the Federal Reserve Bank’s payment and check systems.

Community Reinvestment

      Farmers National Bank’s commitment to community development is evidenced by our participation in two specific programs directed at first time homeowners as well as applicants in the low-to-moderate income levels. 2001 marks the third time that Farmers National Bank has been selected to participate in The Welcome Home Program. Under this program, financial assistance is provided to qualifying applicants through a cooperative effort by and between Farmers National Bank and the Federal Home Loan of Cincinnati—helping deserving families to acquire homes. This program, along with our own Affordable Housing Program has been very successful in giving financial assistance to applicants that possibly would not have qualified for conventional mortgage loans. In addition, Farmers National Bank offers a savings program that gives incentives to potential mortgage loan applicants as a means for saving towards a down payment.

[BAR GRAPH]

Return on Average Equity
	11.92	%	8.99	%	9.62	%	8.37	%	9.88	%
	1997		1998		1999		2000		2001

[BAR GRAPH]

Total Assets (in thousands)
$	535,707	$	573,695	$	603,798	$	626,122	$	656,694
	1997		1998		1999		2000		2001

6

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

Selected Financial Data

		(In Thousands except Per Share Data)
For the Years Ending		2001			2000			1999			1998			1997
Summary of Earnings
	Total Interest Income (including fees on loans)	$	45,686		$	45,842		$	42,631		$	41,884		$	40,424
	Total Interest Expense		21,003			21,550			18,653			19,228			18,457
	Net Interest Income		24,683			24,292			23,978			22,656			21,967
	Provision for Credit Losses		1,080			865			1,810			3,107			2,105
	Total Other Income		3,419			2,992			2,550			2,582			2,709
	Total Other Expense		16,818			18,023			15,864			14,544			13,702
	Income Before Federal Income Taxes		10,204			8,396			8,854			7,587			8,869
	Federal Income Taxes		2,914			2,648			2,695			2,319			2,809
	NET INCOME	$	7,290		$	5,748		$	6,159		$	5,268		$	6,060
Per Share Data (Note)
	Net Income	$	0.61		$	0.49		$	0.53		$	0.46		$	0.55
	Cash Dividends Paid		0.53			0.51			0.42			0.34			0.29
	Book Value at Year-End		6.25			6.10			5.91			5.74			5.34
Balances at Year-End
	Total Assets	$	656,694		$	626,122		$	603,798		$	573,695		$	535,707
	Earning Assets		620,588			589,829			561,544			535,305			504,660
	Total Deposits		503,644			468,336			476,829			470,435			451,182
	Net Loans		429,028			444,596			425,975			392,065			382,416
	Total Stockholder’s Equity		75,718			70,833			66,235			62,018			55,556
Average Balances
	Total Assets	$	637,877		$	616,059		$	586,562		$	549,482		$	516,317
	Total Stockholder’s Equity		73,780			68,639			64,011			58,571			50,836
Significant Ratios
	Return on Average Assets (ROA)		1.14	%		0.93	%		1.05	%		0.96	%		1.17	%
	Return on Average Equity (ROE)		9.88			8.37			9.62			8.99			11.92
	Average Earning Assets/Average Assets		94.60			94.65			93.99			94.32			94.42
	Average Equity/Average Assets		11.57			11.14			10.91			10.66			9.85
	Net Loans/Deposits		85.18			94.93			89.33			83.34			84.76
	Allowance for Credit Losses/Total Loans		1.48			1.36			1.34			1.38			1.32
	Allowance for Credit Losses/Nonperforming Loans		226.51			458.74			292.71			201.70			146.04
	Efficiency Ratio		60.08			66.14			59.80			57.63			55.53
	Dividend Payout Rate		85.64			82.99			57.87			53.93			38.51

Note: Per share data has been restated for the effect of common stock dividends, splits and merger accounted for as pooling-of-interests.

7

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

Selected Financial Data

		Average Balance Sheets and Related Yields and Rates
		(In Thousands of Dollars)
Years ended December 31,		2001								2000								1999
EARNING ASSETS
		AVERAGE								AVERAGE								AVERAGE
		BALANCE			INTEREST		RATE			BALANCE			INTEREST		RATE			BALANCE			INTEREST		RATE
	Loans	$	443,316		$	37,052		8.36	%	$	438,163		$	37,252		8.50	%	$	412,047		$	35,105		8.52	%
	Taxable securities		105,458			6,605		6.26			104,799			6,382		6.09			103,969			5,793		5.57
	Tax-exempt securities		26,776			2,022		7.55			23,462			1,764		7.52			23,136			1,710		7.39
	Federal funds sold		27,864			909		3.26			16,688			1,041		6.24			12,147			603		4.96
	Total earning assets		603,414			46,588		7.72			583,112			46,439		7.96			551,299			43,211		7.84
NONEARNING ASSETS
	Cash and due from banks		20,379								21,289								20,745
	Premises and equipment		12,615								12,823								12,999
	Allowance for Loan Losses		(6,379	)							(6,228	)							(5,730	)
	Other assets		7,848								5,063								7,249
	Total Assets	$	637,877							$	616,059							$	586,562
INTEREST-BEARING LIABILITIES
	Time deposits	$	228,855		$	12,729		5.56	%	$	217,979		$	12,269		5.63	%	$	224,366		$	11,893		5.30	%
	Savings deposits		131,906			3,493		2.65			128,006			3,834		3.00			123,219			3,355		2.72
	Demand deposits		80,112			1,238		1.55			77,998			1,286		1.65			72,887			1,194		1.64
	Repurchase agreements		42,287			1,605		3.80			39,705			2,020		5.09			35,152			1,399		3.98
	Borrowings		30,268			1,938		6.40			32,579			2,141		6.57			14,503			812		5.60
	Total Interest-Bearing Liabilities		513,428			21,003		4.09			496,267			21,550		4.34			470,127			18,653		3.97
NONINTEREST-BEARING LIABILITIES
	Demand deposits		44,329								46,948								46,349
	Other liabilities		6,340								4,205								6,075
	Stockholder’s equity		73,780								68,639								64,011
	Total Liabilities and Stockholders’ Equity	$	637,877							$	616,059							$	586,562
Net interest income					$	25,585							$	24,889							$	24,558
Net interest income to earning assets								4.24	%							4.27	%							4.45	%

Fully taxable equivalent basis computed at 35% in 2001, 2000 and 1999.

8

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

Management’s Discussion

RATE AND VOLUME ANALYSIS

The following table analyzes by rate and volume the dollar amount of changes in the components of the interest differential:

								(In Thousands of Dollars)
		2001 change from 2000									2000 change from 1999
		Net			Change Due			Change Due			Net		Change Due			Change Due
		Change			To Volume			To Rate			Change		To Volume			To Rate
Tax Equivalent Interest Income
	Loans	$	(200	)	$	429		$	(629	)	$	2,147	$	2,230		$	(83	)
	Taxable securities		223			42			181			589		45			544
	Tax-exempt securities		258			250			8			54		24			30
	Federal funds sold		(132	)		697			(829	)		438		226			212
	Total interest income	$	149		$	1,418		$	(1,269	)	$	3,228	$	2,525		$	703
Interest Expense
	Time deposits	$	460		$	616		$	(156	)	$	376	$	(341	)	$	717
	Savings deposits		(341	)		119			(460	)		479		126			353
	Demand deposits		(48	)		33			(81	)		92		84			8
	Repurchase agreements		(415	)		131			(546	)		621		181			440
	Borrowings		(203	)		(152	)		(51	)		1,329		1,013			316
	Total interest expense	$	(547	)	$	747		$	(1,294	)	$	2,897	$	1,063		$	1,834
	Increase in tax equivalent Net Interest Income	$	696		$	671		$	25		$	331	$	1,462		$	(1,131	)

         The amount of change not solely due to rate or volume changes was allocated between the change due to rate and the change due to volume based on the relative size of the rate and volume changes.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

         The following financial review presents an analysis of the assets and liability structure of the Corporation and a discussion of the results of operations for each of the periods presented in this annual report of liquidity, capital and credit quality. Certain statements in this report that relate to Farmers National Banc Corp.’s plans, objectives, or future performance may be deemed to be forward-looking statements within the Private Securities Litigation Reform Act of 1995. Such statements are based on management’s current expectations. Actual strategies and results in future periods may differ materially from those currently expected because of various risks and uncertainties.

         Among the important factors that could cause actual results to differ materially are interest rates, changes in the mix of the company’s business, competitive pressures, general economic conditions and the risk factors detailed in the company’s other periodic reports and registration statements filed with the Securities and Exchange Commission.

Results of Operations

Comparison of Operating Results for the Years Ended December 31, 2001 and 2000.

         The Corporation’s net income totaled $7.29 million during 2001, an increase of 26.83% from $5.748 million for 2000. On a per share basis, net income was $.61 for 2001 as compared to $.49 for 2000. Common comparative ratios for results of operations include the return on average assets and return on average stockholders equity. For 2001, the return on average equity was 9.88% compared to 8.37% for 2000. The return on average assets was 1.14% for 2001 and .93% for 2000.

         The Corporation’s operating earnings increased 8.18% to $7.29 million in 2001, compared to $6.739 million, after excluding an after tax non-recurring item in 2000. Stated on a per share basis, operating earnings were $.61 per share in 2001, compared to $.58 per share in 2000. The after-tax non-recurring expense in 2000, which amounted to $991 thousand, was merger related expense.

         These results of operations are the direct result of management’s concerted efforts to control expenses and increase interest from our interest bearing assets. Consistent growth in interest-bearing deposits and the effective use of those funds in the loan and investment security portfolios together with control over the bank’s general expenses have produced these results.

9

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

Management’s Discussion

Net Interest Income

         Net interest income, the principal source of the Corporation’s earnings, represents the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities. For 2001, taxable equivalent net interest income increased $696 thousand or 2.8% over 2000. Interest-earning assets averaged $603.414 million during 2001 representing a 3.48% increase over 2000.

         The Corporation finances its earning assets with a combination of interest-bearing and interest-free funds. The interest-bearing funds are composed of deposits, short-term borrowings and long-term debt. Interest paid for the use of these funds is the second factor in the net interest income equation. Interest-free funds, such as demand deposits and stockholders equity, require no interest expense and, therefore, contribute significantly to net interest income.

         The profit margin, or spread, on invested funds is a key performance measure. The Corporation monitors two key performance indicators — net interest spread and net interest margin. The net interest spread represents the difference between the average rate earned on interest-earning assets and the average rate paid on interest-bearing liabilities. The net interest margin represents the overall profit margin: net interest income as a percentage of total interest-earning assets. This performance indicator gives effect to interest earned for all investable funds including the substantial volume of interest-free funds. For 2001, the net interest margin, measured on a fully taxable equivalent basis was 4.24%, down slightly in comparison to 4.27% in 2000.

         Total interest income was $46.588 million for 2001, slightly higher than the $46.439 million reported for 2000. Average loans increased 1.18% during the year, but this growth was offset by a decrease in yields from 8.50% in 2000 to 8.36% in 2001. Income from securities and federal funds sold increased $349 thousand or 3.8%, however the Corporation saw its’ yields on these assets decline from 6.34% in 2000 to 5.95% in 2001. This drop in yield was offset by a 10.45% increase in average balances of investment securities and federal funds sold.

         Total interest expense amounted to $21.003 million for 2001, a 2.54% decrease from $21.550 million reported in 2000. The decrease in 2001 is primarily the result of lower rates of interest paid on deposits, repurchase agreements and borrowings. The cost of interest-bearing liabilities dropped from 4.34% in 2000 to 4.09% in 2001.

Other Income

         Total other income increased in 2001 by $427 thousand or 14.27% to $3.419 million. Most of this increase is the result of an increase in service charges on deposit products and fees from other banking products and services. Management continues to explore new products and nontraditional banking services that could increase other income in future years.

Other Expenses

         Total other expenses for 2001 decreased 6.69% or $1.205 million from 2000. Merger related expenses in 2000 amounted to $1.192 million compared to none in 2001. Management will continue to closely monitor and keep the increases in other expenses to a minimum.

Income Taxes

         Federal income taxes are computed using the appropriate effective tax rates for each period. The effective tax rates are less than the statutory tax rate primarily due to nontaxable interest and dividend income. The effective federal income tax rate was 29% and 32% for the periods ending 2001 and 2000, respectively.

Comparison of Operating Results for the Years Ended December 31, 2000 and 1999.

         The Corporation’s net income totaled $5.748 million during 2000, a decrease of 6.67% from $6.159 million for 1999. On a per share basis, net income was $.49 for 2000 as compared to $.53 for 1999. For 2000, the return on average equity was 8.37% as compared to 9.62% for 1999. The return on average assets was .93% for 2000 and 1.05% for 1999.

         The Corporation’s operating earnings, which exclude the after-tax non-recurring items, increased 9.42% to $6.739 million in 2000, compared to $6.159 million in 1999. Stated on a per share basis, operating earnings were $.58 per share in 2000, compared to $.53 per share in 1999. The after-tax non-recurring expense, which amounted to $991 thousand, was merger related expense.

Net Interest Income

         For 2000, taxable equivalent net interest income increased $331 thousand or 1.35% over 1999. Interest-earning assets averaged $583.112 million during 2000 representing a 5.77% increase over 1999.

         For 2000, the net interest margin, measured on a fully taxable equivalent basis was 4.27% in comparison to 4.45% for 1999.

         Total interest income was $46.439 million for 2000, as compared to $43.211 million for 1999. The 7.47% increase in interest income is largely attributed to a $2.148 million or 6.12% increase in income from loans. Average loans increased 6.3% during the past year, but this growth was offset by a slight decline in the overall yield from 8.52% in 1999 to 8.50% in 2000. Income from securities and federal funds sold increased $1.08 million or 13.32%, as a result of an increase in yields in these earning assets.

         Total interest expense amounted to $21.55 million for 2000, representing a 15.53% increase from 1999. The increase in 2000 is primarily the result of a higher level of interest expense on time deposits and borrowings. The cost of time deposits increased from 5.30% in 1999 to 5.63% in 2000, while borrowing costs rose from 5.60% in 1999 to 6.57% in 2000. Total interest-bearing liabilities amounted to $496.267 million in 2000, compared to $470.127 million in 1999.

Other Income

         Total other income increased in 2000 by $442 thousand or 17.33% to $2.992 million. Most of this increase is the result of an increase in service charges on deposit products, and commissions from sales of investment and insurance products.

10

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

Management’s Discussion

Other Expenses

         Total other expenses for 2000 increased 13.61% or $2.159 million over 1999. Merger related expenses in 2000 amounted to $1.192 million compared to none in 1999. Salaries and employee benefits also increased $626 thousand or 7.59%. This increase was the result of increases in salary rates and increased staffing to handle increased volume of operations of the Bank.

Income Taxes

         The effective federal income tax rate was 32% and 30% for the periods ending 2000 and 1999, respectively.

MARKET RISK

         Important considerations in asset/liability management are liquidity, the balance between interest rate sensitive assets and liabilities and the adequacy of capital. Interest rate sensitive assets and liabilities are those which have yields on rates subject to change within a future time period due to maturity of the instrument or changes in market rates. While liquidity management involves meeting the funds flow requirements of the Corporation, the management of interest rate sensitivity focuses on the structure of these assets and liabilities with respect to maturity and repricing characteristics. Balancing interest rate sensitive assets and liabilities provides a means of tempering fluctuating interest rates and maintaining net interest margins through periods of changing interest rates. The Corporation monitors interest rate sensitive assets and liabilities to determine the overall interest rate position over various time frames.

         The Corporation considers the primary market exposure to be interest rate risk. Simulation analysis is used to monitor the Corporation’s exposure to changes in interest rates, and the effect of the change to net interest income. The following table shows the effect on net interest income and the net present value of equity in the event of a 200 basis point increase or decrease in market interest rates:

Changes In
Interest Rate				ALCO
(basis points)	Result			Guidelines
Net Interest
Income Change
+200		-3.08	%		7.50	%
- 200		2.90	%		7.50	%
Net Present Value
Of Equity Change
+200	-	25.22	%		35.00	%
- 200		33.01	%		35.00	%

         The results of this analysis comply with internal limits established by the Corporation. A report on interest rate risk is presented to the Board of Directors and the Asset/Liability Committee on a quarterly basis. The Corporation has no market risk sensitive instruments held for trading purposes, nor does it hold derivative financial instruments, and does not plan to purchase these instruments in the near future.

         With the largest amount of interest sensitive assets and liabilities maturing within twelve months, the Corporation monitors this area most closely. The Corporation does not emphasize interest sensitivity analysis beyond this time frame because it believes various unpredictable factors could result in erroneous interpretations. Early withdrawal of deposits, prepayments of loans and loan delinquencies are some of the factors that could have such an effect. In addition, changes in rates on interest sensitive assets and liabilities may not be equal, which could result in a change in net margin.

         Interest rate sensitivity management provides some degree of protection against net interest income volatility. It is not possible or necessarily desirable to attempt to eliminate this risk completely by matching interest sensitive assets and liabilities. Other factors, such as market demand, interest rate outlook, regulatory restraint and strategic planning also have an effect on the desired balance sheet structure.

Liquidity

         The Corporation maintains, in the opinion of management, liquidity sufficient to satisfy depositors’ requirements and meet the credit needs of customers. The Corporation depends on its ability to maintain its market share of deposits as well as acquiring new funds. The Corporation’s ability to attract deposits and borrow funds depends in large measure on its profitability, capitalization and overall financial condition.

         Principal sources of liquidity for the Corporation include assets considered relatively liquid such as short-term investment securities, federal funds sold and cash and due from banks.

         Along with its liquid assets, the Corporation has additional sources of liquidity available which help to insure that funds are available as needed. These other sources include, but are not limited to, loan repayments, 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 three major domestic banks. At December 31, 2001, the Corporation had not borrowed against these lines of credit. Management feels that its liquidity position is more than adequate and will continue to monitor the position on a monthly basis. The Corporation also has additional borrowing capacity with the Federal Home Loan Bank of Cincinnati, as well as access to the Federal Reserve Discount Window, which provides an additional source of funds. Advances outstanding from the Federal Home Loan Bank at December 31, 2001 amounted to $26.832 million.

         Cash flows generated from operating activities increased 18.34% to $10.78 million in 2001 compared to $9.109 million in 2000. This increase is a result of an increase in interest in fees and commissions received, as well as a decrease in cash paid to suppliers and employees. Cash flows used in investing activities decreased to $2.286 million in 2001 compared to $30.441 million in 2000. Most of this decrease is attributable to a $13.152 million decline in net loans, compared to a $20.940 million increase in the prior year. Cash flows provided from financing activities increased to $22.211 million as compared to $15.014 million in 2000. Most of this increase resulted from a $35.324 million net increase in deposits, compared to a $9.162 million decrease in the prior year. Some of the increase in deposits were used to payoff Federal Home Loan Bank borrowings, which decreased $16.743 million in 2001.

11

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

Management’s Discussion

Maturities and Sensitivities of Loans to Interest Rates

         The following schedule shows the composition of loans and the percentage of loans in each category at the dates indicated.

	(In Thousands of Dollars)
Years Ended December 31,	2001				2000				1999				1998				1997
Commercial, Financial and Agricultural	$	18,856	4.3	%	$	17,916	4.0	%	$	17,710	4.1	%	$	21,140	5.3	%	$	24,182	6.2	%
Real Estate — Mortgage		261,268	60.0			267,529	59.3			257,246	59.6			230,664	58.0			211,231	54.5
Installment Loans to Individuals		155,346	35.7			165,266	36.7			156,797	36.3			145,753	36.7			152,110	39.3
Total Loans	$	435,470	100.0	%	$	450,711	100.0	%	$	431,753	100.0	%	$	397,557	100.0	%	$	387,523	100.0	%

         The following schedule sets forth maturities based on remaining scheduled repayments of principal for various categories of loans listed above as of December 31, 2001:

	(In Thousands of Dollars)
Types of Loans	1 Year or less		1 to 5 Years		Over 5 Years
Commercial, Financial and Agricultural	$	5,927	$	9,283	$	3,646

         The amounts of commercial, financial and agricultural loans as of December 31, 2001, based on remaining scheduled repayments of principal, are shown in the following table:

	(In Thousands of Dollars)
Loan Sensitivities	1 Year or less		Over 1 Year		Total
Floating or Adjustable Rates of Interest	$	4,195	$	3,536	$	7,731
Fixed Rates of Interest		1,732		9,393		11,125
Total Loans	$	5,927	$	12,929	$	18,856

Loan Portfolio

         Total net loans were $429.028 million at year-end 2001 compared to $444.596 million at year-end 2000. This represents a decrease of $15.568 million or 3.5%. Loans comprised 73.5% of the Bank’s average earning assets in 2001, compared to 75% in 2000. The product mix in the Loan Portfolio shows Commercial Loans comprising 4.3%, Real Estate Mortgage Loans (Residential and Commercial) 60% and Installment Loans to Individuals 35.7% at December 31, 2000 compared with 4%, 59.3% and 36.7%, respectively, at December 31, 2000.

         Loans contributed 81.1% of total interest income in 2001 and 81.3% in 2000. Loan yield was 8.36% in 2001, 64 basis points greater than the average rate for total earning assets. Management recognizes that while the Loan Portfolio holds some of the Bank’s highest yielding assets, it is inherently the most risky portfolio. Accordingly, Management attempts to balance credit risk versus return with conservative credit standards. Management has developed and maintains comprehensive underwriting guidelines and a loan review function which monitors credits during and after the approval process. To minimize risks associated with changes in the borrower’s future repayment capacity, the Bank generally requires scheduled periodic principal and interest payments on all types of loans and normally requires collateral.

         Installment Loans to Individuals decreased from $165.266 million on December 31, 2000 to $155.346 million on December 31, 2001 representing a 6% decrease. Management continues to target the automobile dealer network to purchase indirect Installment Loans. Dealer paper was purchased using strict underwriting guidelines with an emphasis on quality. Indirect Loans comprise 88.7% of the Installment Loan Portfolio. Net loan losses on the Installment Loan portfolio were $675 thousand in 2001 as compared to $166 thousand in 2000. When these net loan losses are stated as a percentage of average installment loans outstanding, the Bank reported an increase from .11% in 2000 to .42% in 2001. Recoveries on installment loan losses in 2000 were $608 thousand higher, primarily due to a favorable insurance settlement.

         Real Estate Mortgage Loans dropped to $261.268 million at December 31, 2001, a decrease of 2.3% from 2000. Most of this decrease took place in residential real estate loans. This portfolio consists of $163.938 million of 1-4 family and multi-family residential properties and $97.330 million in non-residential real estate properties, generally made within the Bank’s primary market area. The corporation originated both fixed rate and adjustable rate mortgages during 2001. Fixed rate terms are limited to fifteen year terms while adjustable rate products are offered with maturities up to thirty years.

         Commercial Loans at December 31, 2001 increased 5.25% from year-end 2000 with outstanding balances of $18.856 million. The Bank’s commercial loans are granted to customers within the immediate trade area of the Bank. The mix is diverse, covering a wide range of borrowers and business types. The Bank monitors and controls concentrations within a particular industry or segment of the economy. These loans are made for purposes such as equipment purchases, capital and leasehold improvements, the purchase of inventory, general working capital purposes and small business lines of credit.

12

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

Management’s Discussion

Summary of Loan Loss Experience

         The following is an analysis of the allowance for loan losses for the periods indicated:

	(In Thousands of Dollars)
Years Ended December 31,	2001			2000			1999			1998			1997
Balance at Beginning of Year	$	6,115		$	5,778		$	5,492		$	5,107		$	4,877
Loan Losses:
Commercial, Financial and Agricultural		(61	)		(50	)		(395	)		(379	)		(70	)
Real Estate-Mortgage		(51	)		(343	)		(117	)		(78	)		(12	)
Installment Loans to Individuals		(1,151	)		(1,250	)		(1,531	)		(2,671	)		(2,081	)
Total Loan Losses		(1,263	)		(1,643	)		(2,043	)		(3,128	)		(2,163	)
Recoveries on Previous Loan Losses:
Commercial, Financial and Agricultural		0			23			15			3			7
Real Estate-Mortgage		34			8			32			9			40
Installment Loans to Individuals		476			1,084			472			394			241
Total Recoveries		510			1,115			519			406			288
Net Loan Losses		(753	)		(528	)		(1,524	)		(2,722	)		(1,875	)
Provision Charged to Operations (1)		1,080			865			1,810			3,107			2,105
Balance at End of Year	$	6,442		$	6,115		$	5,778			5,492		$	5,107
Ratio of Net Loan Losses to Average Net Loans and Leases Outstanding		0.17	%		0.12	%		0.37	%		0.70	%		0.49	%

     (1) The provisions for possible credit losses charged to operating expense is based on management’s judgment after taking into consideration all factors connected with the collectability of the existing loan portfolio. Management evaluates the loan portfolio in light of economic conditions, changes in the nature and volume of the loan portfolio, industry standards and other relevant factors. Specific factors considered by management in determining the amounts charged to operating expenses include previous credit loss experience, the status of past due interest and principal payments, the quality of financial information supplied by loan customers and the general condition of the industries in the community to which loans have been made.

         Provisions charged to operations amounted to $1.08 million in 2001 and $865 thousand in 2000. The balance in the allowance for credit losses is $6.442 million or 1.48% of loans at December 31, 2001. This ratio has increased from the 1.32% reported five years ago at December 31, 1997. The allowance for credit losses as a percentage of nonperforming loans has decreased from 458.74% at December 31, 2000 to 226.51% in 2001.

         The allowance for possible credit losses has been allocated according to the amount deemed to be reasonably necessary to provide for the possibility of losses being incurred within the following categories of loans as of the dates indicated:

	(In Thousands of Dollars)
December 31,	2001					2000					1999					1998					1997
			Loans					Loans					Loans					Loans					Loans
			to Total					to Total					to Total					to Total					to Total
	Amount		Loans			Amount		Loans			Amount		Loans			Amount		Loans			Amount		Loans
Commercial, Financial and Agricultural	$	1,841		4.3	%	$	549		4.0	%	$	1,182		4.1	%	$	1,156		5.3	%	$	2,240		6.2	%
Real Estate-Mortgage		1,881		60.0			2,878		59.3			1,493		59.6			1,302		58.0			905		54.5
Installment Loans to Individuals		2,720		35.7			2,688		36.7			3,103		36.3			3,034		36.7			1,962		39.3
	$	6,442		100.0	%	$	6,115		100.0	%	$	5,778		100.0	%	$	5,492		100.0	%	$	5,107		100.0	%

         The allocation of the allowance as shown in the table above should not be interpreted as an indication that charge-offs in 2002 will occur in the same proportions or that the allocation indicates future charge-off trends. Furthermore, the portion allocated to each loan category is not the total amount available for future losses that might occur within such categories since the total allowance is a general allowance applicable to the entire portfolio.

13

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

Management’s Discussion

Loan Commitments and Lines of Credit

         In the normal course of business, the banking subsidiary has extended various commitments for credit. Commitments for mortgages, revolving lines of credit and letters of credit generally are extended for a period of one month up to one year. Normally no fees are charged on any unused portion. Normally, an annual fee of two percent is charged for the issuance of a letter of credit.

Risk Elements

         The following table sets forth aggregate loans in each of the following categories for the years indicated:

	(In Thousands of Dollars)
December 31,	2001		2000		1999		1998		1997
Loans Accounted For on a Nonaccrual Basis	$	1,669	$	664	$	1,351	$	1,876	$	2,784
Loans Contractually Past Due 90 Days or More as to Interest or Principal Payments (Not Included in Nonaccrual Loans Above)		1,175		669		623		847		713
Loans Considered Troubled Debt Restructuring (Not Included in Nonaccrual Loans or Contractually Past Due Above)		0		0		0		0		0

         Management is not aware of any loans not included in the table above where serious doubt exists as to the ability of the borrower to comply with the current loan repayment terms.

         Nonaccrual loans are loans which are 90 days past due and with respect to which, in Management’s opinion, collection of interest is doubtful. These loans no longer accrue interest and are accounted for on a cash basis. Loans which are 90 days or more past due but continue to accrue interest are loans which, in Management’s opinion, are well secured and are in the process of collection.

         As of December 31, 2001, there were no concentrations of loans exceeding 25% of total loans which are not disclosed as a category of loans. As of that date also, there were no other interest-earning assets that are either nonaccrual, past due, restructured or non-performing.

         The following shows the amounts of contracted interest income and interest income reflected in income on loans accounted for on a nonaccrual basis and loans considered troubled debt restructuring for the periods indicated:

	(In Thousands of Dollars)
December 31,	2001		2000		1999		1998		1997
Gross Interest Income That Would have been Recorded if the Loans had been Current in Accordance with Their Original Terms	$	50	$	107	$	137	$	197	$	295
Interest Income Included in Income on the Loans		0		4		73		44		128

Investment Securities

         The investment securities portfolio increased 12.38% or $15.814 million in 2001. Most of this increase was experienced in government agency securities, which grew $15.037 million. Mortgage-backed securities decreased $6.829 million as the Corporation experienced an increased level of paydowns as interest rates continued to fall during the year. Investments in securities of states and political subdivisions increased $7.121 million. The Corporation uses these tax-exempt municipal securities to increase investment yields and as a vehicle to lower our overall income tax rate.

         Our objective in managing the investment portfolio is to preserve and enhance corporate liquidity through investment in short and intermediate term securities which are readily marketable and of the highest credit quality. In general, investment in securities is limited to those funds the bank feels it has in excess of funds used to satisfy loan demand and operating considerations.

         The following table shows the book value of investment securities by type of obligation at the dates indicated:

Type	(In Thousands of Dollars)
December 31,	2001		2000		1999
U.S. Treasury Securities and Government Agencies	$	75,019	$	59,982	$	59,859
Obligations of States and Political Subdivisons		30,038		22,917		22,735
Mortgage-backed securities		19,119		25,948		29,731
Other Securities		19,399		18,914		4,496
	$	143,575	$	127,761	$	116,821

14

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

Management’s Discussion

         A summary of debt securities held at December 31, 2001, classified according to maturity and including weighted average yield for each range of maturities is set forth below:

	(In Thousands of Dollars)
Type and Maturity Grouping	December 31, 2001
			Weighted
	Book		Average
	Value		Yield (1)
U.S. Treasury and U.S. Government Agency Securities:
Maturing Within One Year	$	16,118		5.61	%
Maturing After One Year But Within Five Years		56,276		5.23	%
Maturing After Five Years But Within Ten Years		199		5.81	%
Maturing After Ten Years		2,426		5.28	%
Total U.S. Treasury and U.S. Government Agency Securities:	$	75,019		5.32	%
Mortgage-Backed Securities
Maturing Within One Year	$	101		7.03	%
Maturing After One Year But Within Five Years		609		7.78	%
Maturing After Five Years But Within Ten Years		2,149		7.52	%
Maturing After Ten Years		16,260		6.16	%
Total Mortgage-Backed Securities:	$	19,119		6.36	%
Obligations of States and Political Subdivisions
Maturing Within One Year	$	688		8.57	%
Maturing After One Year But Within Five Years		3,186		7.44	%
Maturing After Five Years But Within Ten Years		10,353		6.90	%
Maturing After Ten Years		15,811		7.54	%
Total Obligations of States and Political Subdivisions	$	30,038		7.33	%
Corporate Debt Securities Maturing After One Year But Within Five Years	$	4,593		7.37	%

     (1) The weighted average yield has been computed by dividing the total interest income adjusted for amortization of premium or accretion of discount over the life of the security by the par value of the securities outstanding. The weighted average yield of tax-exempt obligations of states and political subdivisions has been calculated on a fully taxable equivalent basis. The amounts of adjustments to interest which are based on the statutory tax rate of 34% were $19.752 thousand, $79.364 thousand, $239.752 thousand and $407.644 thousand for the four ranges of maturities.

Deposits

         Deposits represent the Corporation’s principal source of funds. The deposit base consists of demand deposits, savings and money market accounts and other time deposits. During the year, the Corporation’s average total deposits increased 3.03% from $470.931 million in 2000 to $485.202 million in 2001.

Average Deposits

         The following table shows the classification of average deposits for the periods indicated:

	(In Thousands of Dollars)
Average Balances
on December 31,	2001		2000		1999
Noninterest-Bearing Demand Deposits	$	44,329	$	46,948	$	46,349
Interest-Bearing Demand Deposits		80,112		77,998		72,887
Savings Deposits		131,906		128,006		123,219
Time Deposits		228,855		217,979		224,366
Total Average Deposits	$	485,202	$	470,931	$	466,821

         The following shows the average rate paid on the following deposit categories for the periods indicated:

Years ended December 31,	2001			2000			1999
Interest-Bearing Demand Deposits		1.55	%		1.65	%		1.64	%
Savings		2.65	%		3.00	%		2.72	%
Time Deposits		5.56	%		5.63	%		5.30	%

         The steady increase in total deposits over the years reflects managements’ efforts to continue to insure the growth of the bank and to maintain a viable banking institution. During 2001, the bank has attracted deposits due to its effort to remain competitive in the local community as to rates paid for all types of deposits, particularly in the time deposit area. The bank has been at or near the top in interest rates paid to depositors throughout most of 2001.

15

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

Management’s Discussion

Capital Resources

         The capital management function is a continuous process which consists of providing capital for both the current financial position and the anticipated future growth of the Corporation. Important to this process is internal equity generation, particularly through earnings retention. Internal capital generation is measured as the percent of return on equity multiplied by the percent of earnings retained. The return on average equity was 9.88%, 8.37% and 9.62% for 2001, 2000 and 1999, respectively. Total cash dividends declared in 2001 represented 85.64% of net income as compared to 82.99% in 2000 and 57.87% in 1999. The resulting internal equity growth percentage amounted to 1.42% in 2001 and 2000 compared to 4.05% in 1999.

         The bank subsidiary, as a national bank, is subject to the dividend restrictions set forth by the Comptroller of the Currency. The Comptroller of the Currency must approve declaration of any dividends in excess of the sum of profits for the current year and retained net profits for the preceding two years (as defined). As of December 31, 2001 the bank subsidiary had $31.44 million not available for distribution to the company as dividends without prior approval of the Comptroller of the Currency. The bank subsidiary is also required to maintain minimum amounts of capital to total “risk weighted” assets, as defined by the banking regulators. At December 31, 2001, the bank subsidiary is required to have a minimum Tier 1 and Total Capital ratios of 4.00% and 8.00%, respectively. The bank subsidiary’s actual Tier 1 and Total Capital ratios at that date were 16.24% and 17.49% respectively. The bank subsidiary’s leverage ratio at December 31, 2001 was 10.99%.

Audit

         The Company’s internal auditor, who is responsible to the Audit Committee of the Board of Directors, reviews the results and performance of operating units within the Company for adequacy, effectiveness and reliability of accounting and reporting systems, as well as managerial and operating controls.

         The Company utilizes the services of an internal audit outsourcing firm to assist the internal auditor in developing and implementing a comprehensive internal audit plan and program.

         The Audit Committee consists of four non-employee directors whose duties include: consideration of the adequacy of the internal controls of the Company and the objectivity of financial reporting; inquiry into the number, extent, adequacy and validity of regular and special audits conducted by independent public accountants and the internal auditors; the recommendation to the Board of Directors of independent accountants to conduct the normal annual audit and special purpose audits as may be required; and reporting to the Board of Directors the Committee’s findings and any recommendation for changes in scope, methods or procedures of the auditing functions. The Audit Committee held five meetings during 2001.

Compliance

         There are many activities in today’s banking that are subject to compliance regulations. The bank’s policies and procedures govern the way departments function and ensure fair, consistent and sound banking practices. When those policies and procedures are affected by new regulations, or regulation changes, the Compliance Department is responsible to change those policies involved, and is responsible to inform and train personnel. For example, many of the forms used in opening deposit accounts and loan accounts must subscribe to standards of format that are designed to protect and to inform the customer.

Compliance is an ongoing effort that requires continuous training. New regulations are introduced, changes to existing regulations are made, employees change positions, and new employees are hired. Assessment is made for the training needs of the bank and then clearly communicated to all appropriate bank employees through training programs. Quite often, several sessions are required to reach all persons who need training due to conflicting schedules.

         From training, compliance objectives follow to monitoring or testing procedures. Monitoring can focus on a broad range of compliance issues and procedures, or it can be applied to limited areas. Often, the extent of monitoring relates to the complexity or length of the regulation. Upon the completion of monitoring projects, areas where training is needed may be revealed. The cycle of training, to monitoring, to training is ever continuing.

         It is our bank’s mission to keep our employees well informed. We urge them to ask questions and to use initiative in becoming informed, as compliance regulations have become very complex. This all translates in efficient and better service for our customers.

16

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

Management’s Discussion

QUARTERLY FINANCIAL DATA

	(In Thousands except Per Share Data)
Quarter Ended 2001	March 31		June 30		September 30		December 31
Total interest income	$	11,492	$	11,578	$	11,490	$	11,126
Total interest expense		5,547		5,322		5,185		4,949
Net interest income		5,945		6,256		6,305		6,177
Provision for credit losses		270		270		270		270
Non-interest income		722		882		927		888
Non-interest expense		4,028		4,141		4,177		4,472
Income before federal income taxes		2,369		2,727		2,785		2,323
Federal income taxes		688		805		776		645
Net income	$	1,681	$	1,922	$	2,009	$	1,678
Per share data:
Net income	$	0.14	$	0.16	$	0.17	$	0.14
Dividends	$	0.13	$	0.13	$	0.13	$	0.14

		(In Thousands except Per Share Data)
Quarter Ended 2000		March 31		June 30		September 30			December 31
Total interest income		$	11,112	$	11,403	$	11,697		$	11,630
Total interest expense			5,068		5,221		5,528			5,733
Net interest income			6,044		6,182		6,169			5,897
Provision for credit losses			360		360		(65	)		210
Non-interest income			610		680		815			887
Non-interest expense			4,289		4,322		4,174			5,238
Income before federal income taxes			2,005		2,180		2,875			1,336
Federal income taxes			610		629		846			563
Net income		$	1,395	$	1,551	$	2,029		$	773
Per share data:
	Net income	$	0.12	$	0.14	$	0.17		$	0.06
	Dividends	$	0.12	$	0.13	$	0.13		$	0.13

Information as to Stock Prices and Dividends

         The common stock of the Corporation trades on the OTC Bulletin Board under the symbol FMNB. There are approximately seven local and/or regional brokerage firms that are known to be relatively active in trading the Corporation’s common stock. Set forth in the accompanying table are per share prices at which common stock of the Corporation has actually been purchased and sold in transactions during the periods indicated, to the knowledge of the corporation. Also included in the table are dividends per share paid on the outstanding common stock and any stock dividends paid. As of December 31, 2001, there were 3,617 shareholders of record of common stock.

Market and Dividend Summary

Dividend Date	High		Low		Dividend
March 2000	$	14.00	$	13.50	$	0.12
June 2000		13.88		10.25		0.13
September 2000					2% Stock Dividend
September 2000		14.00		7.25		0.13
December 2000		9.88		7.13		0.13
March 2001	$	9.00	$	7.13	$	0.13
June 2001		10.60		8.00		0.13
September 2001		10.50		9.70		0.13
November 2001					2% Stock Dividend
December 2001		11.75		10.06		0.14

17

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

Management Report

January 18, 2002

INTERNAL CONTROL OVER FINANCIAL REPORTING

         Management is responsible for establishing and maintaining effective internal control over financial reporting presented in conformity with both U.S. generally accepted accounting principles and the Federal Financial Institutions Examination Council instructions for Consolidated Reports of Condition and Income. The system contains monitoring mechanisms, and actions are taken to correct deficiencies identified.

         There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal control can provide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control may vary over time.

         Management assessed the bank’s internal control over financial reporting presented in conformity with both U.S. generally accepted accounting principles and call report instructions as of December 31, 2001. This assessment was based on criteria for effective internal control over financial reporting described in “Internal Control — Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management believes that, as of December 31, 2001, Farmers National Banc Corp. and Subsidiary maintained effective internal control over financial reporting presented in conformity with both U.S. generally accepted accounting principles and call report instructions.

COMPLIANCE WITH LAWS AND REGULATIONS

         Management is also responsible for compliance with the federal and state laws and regulations concerning dividend restrictions and federal laws and regulations concerning loans to insiders designated by the FDIC as safety and soundness laws and regulations.

         Management assessed compliance by Farmers National Banc Corp and subsidiary bank with the designated laws and regulations relating to safety and soundness. Based on this assessment, management believes the bank complied, in all significant respects, with the designated laws and regulations related to safety and soundness for the year ended December 31, 2001.

FARMERS NATIONAL BANC CORP.
AND SUBSIDIARY

/s/ Frank L. Paden
Frank L. Paden, President and Secretary

/s/ Carl D. Culp
Carl D. Culp, Executive Vice-President and Treasurer

18

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

Independent Auditors’ Report

January 18, 2002

[HBK LOGO]
Park Place South, Suite 200
155 South Park Avenue
Warren, Ohio 44481
(330) 394-3773 PHONE
(330) 395-3713 FAX

Board of Directors
Farmers National Banc Corp.
Canfield, Ohio

Independent Auditors’ Report

         We have audited the accompanying consolidated balance sheets of Farmers National Banc Corp. and subsidiary as of December 31, 2001 and 2000 and the related consolidated statements of income and comprehensive income, stockholders equity and cash flows for each of the three years in the period ended December 31, 2001. These consolidated financial statements are the responsibility of the company’s management. Our responsibility is to express an opinion on these consolidated financial statements on our audits.

         We conducted our audits in accordance with U.S. generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

         In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Farmers National Banc Corp. and subsidiary as of December 31, 2001 and 2000 and the consolidated results of their operations and their consolidated cash flows for each of the three years in the period ended December 31, 2001 in conformity with U.S. generally accepted accounting principles.

/s/ Hill, Barth & King LLC
Certified Public Accountants

19

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

Consolidated Balance Sheets

			(In Thousands of Dollars)
December 31,			2001			2000
ASSETS
	Cash and due from banks		$	23,871		$	23,350
	Federal funds sold			41,542			11,358
		TOTAL CASH AND CASH EQUIVALENTS		65,413			34,708
	Long-term interest bearing deposits			0			99
	Securities available for sale			143,575			127,761
	Loans			435,470			450,711
	Less allowance for credit losses			6,442			6,115
		NET LOANS		429,028			444,596
	Premises and equipment, net			13,009			12,549
	Other assets			5,669			6,409
			$	656,694		$	626,122
LIABILITIES AND STOCKHOLDERS EQUITY
	Deposits (all domestic):
	Noninterest-bearing		$	52,754		$	48,935
	Interest-bearing			450,890			419,401
		TOTAL DEPOSITS		503,644			468,336
	Borrowings:
	U. S. Treasury interest-bearing demand note			141			1,009
	Securities sold under repurchase agreements			47,444			39,099
	Federal Home Loan Bank advances			26,832			43,575
		TOTAL BORROWINGS		74,417			83,683
	Other liabilities and deferred credits			2,915			3,270
		TOTAL LIABILITIES		580,976			555,289
	Stockholders Equity:
	Common Stock — Authorized 25,000,000 shares; issued and outstanding 12,111,331 in 2001 and 11,604,252 in 2000			55,419			49,451
	Retained earnings			20,672			22,226
	Accumulated other comprehensive income			1,741			372
	Treasury stock, at cost; 176,351 shares in 2001 and 87,835 shares in 2000			(2,114	)		(1,216	)
		TOTAL STOCKHOLDERS EQUITY		75,718			70,833
			$	656,694		$	626,122

See accompanying notes to consolidated financial statements

20

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

Consolidated Statements of Income and Comprehensive Income

			(In Thousands except Per Share Data)
Years ended December 31,			2001		2000		1999
INTEREST INCOME
	Interest and fees on loans		$	37,052	$	37,252	$	35,105
	Interest and dividends on securities:
	Taxable interest			5,483		5,733		5,480
	Nontaxable interest			1,334		1,167		1,129
	Dividends			897		627		263
	Interest-bearing deposits in other banks			11		22		51
	Interest on federal funds sold			909		1,041		603
		TOTAL INTEREST INCOME		45,686		45,842		42,631
INTEREST EXPENSE
	Deposits			17,460		17,389		16,441
	Borrowings			3,543		4,161		2,212
		TOTAL INTEREST EXPENSE		21,003		21,550		18,653
		NET INTEREST INCOME		24,683		24,292		23,978
	Provision for credit losses			1,080		865		1,810
		NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		23,603		23,427		22,168
OTHER INCOME
	Service charges on deposit accounts			2,098		1,857		1,789
	Investment security gains (losses)			112		34		(4	)
	Gain on sale of mortgage loans, net			0		4		12
	Brokerage income			121		210		148
	Other operating income			1,088		887		605
		TOTAL OTHER INCOME		3,419		2,992		2,550
				27,022		26,419		24,718
OTHER EXPENSES
	Salaries and employee benefits			9,002		8,870		8,245
	Net occupancy expense of premises			1,055		1,039		953
	Furniture and equipment expense, including depreciation			1,261		1,179		1,102
	State and local taxes			856		767		783
	Merger related expense			0		1,192		0
	Other operating expenses			4,644		4,976		4,781
		TOTAL OTHER EXPENSES		16,818		18,023		15,864
		INCOME BEFORE FEDERAL INCOME TAXES		10,204		8,396		8,854
FEDERAL INCOME TAXES				2,914		2,648		2,695
		NET INCOME		7,290		5,748		6,159
OTHER COMPREHENSIVE INCOME, NET OF TAX:
	Unrealized gains (losses) on securities			1,369		1,909		(2,067	)
		COMPREHENSIVE INCOME	$	8,659	$	7,657	$	4,092
NET INCOME PER SHARE			$	0.61	$	0.49	$	0.53

See accompanying notes to consolidated financial statements

21

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

Consolidated Statements of Stockholders’ Equity

			(In Thousands of Dollars)
Years ended December 31,			2001			2000			1999
COMMON STOCK
	Balance at beginning of year		$	49,451		$	45,155		$	38,455
	Stock options exercised			0			89			27
	Stock dividend, including fractional shares			2,601			1,461			2,914
	Common stock issued			3,367			2,746			3,759
	Balance at end of year			55,419			49,451			45,155
RETAINED EARNINGS
	Balance at beginning of year			22,226			22,709			23,033
	Net income			7,290			5,748			6,159
	Dividends declared:
	$.53 cash dividends per share in 2001, $.51 in 2000 and $.42 in 1999			(6,243	)		(4,770	)		(3,564	)
	Stock dividends			(2,601	)		(1,461	)		(2,919	)
	Balance at end of year			20,672			22,226			22,709
ACCUMULATED OTHER COMPREHENSIVE INCOME
	Balance at beginning of year			372			(1,537	)		530
	Net change in unrealized appreciation (depreciation) on available for sale securities, net of income taxes			1,369			1,909			(2,067	)
	Balance at end of year			1,741			372			(1,537	)
TREASURY STOCK, AT COST
	Balance at beginning of year			(1,216	)		(92	)		0
	Treasury shares acquired			(898	)		(1,124	)		(92	)
	Balance at end of year			(2,114	)		(1,216	)		(92	)
		TOTAL STOCKHOLDERS EQUITY AT END OF YEAR	$	75,718		$	70,833		$	66,235

See accompanying notes to consolidated financial statements

22

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

Consolidated Statements of Cash Flows

			(In Thousands of Dollars)
Years ended December 31,			2001			2000			1999
CASH FLOWS FROM OPERATING ACTIVITIES
	Interest received		$	48,196		$	47,373		$	44,791
	Fees and commissions received			3,380			2,929			2,518
	Mortgage loans originated for sale			0			(205	)		(316	)
	Proceeds from sales of mortgage loans			0			209			182
	Interest paid			(21,268	)		(21,249	)		(18,619	)
	Cash paid to suppliers and employees			(16,209	)		(16,927	)		(15,114	)
	Income taxes paid			(3,319	)		(3,021	)		(2,549	)
		NET CASH PROVIDED BY OPERATING ACTIVITIES		10,780			9,109			10,893
CASH FLOWS FROM INVESTING ACTIVITIES
	Decrease in interest-bearing time deposits maturing in more than 90 days			99			100			199
	Proceeds from maturities and repayments of securities available for sale			27,301			23,534			36,349
	Proceeds from sales of securities available for sale			9,395			2,483			11,704
	Purchases of securities available for sale			(50,924	)		(34,921	)		(40,340	)
	Net decrease (increase) in loans made to customers			13,152			(20,940	)		(37,565	)
	Purchases of premises and equipment			(1,309	)		(697	)		(1,023	)
		NET CASH USED IN INVESTING ACTIVITIES		(2,286	)		(30,441	)		(30,676	)
CASH FLOWS FROM FINANCING ACTIVITIES
	Net increase (decrease) in deposits			35,324			(9,162	)		6,394
	Net increase in short-term borrowings			7,421			1,891			7,467
	Net increase (decrease) in Federal Home Loan Bank Borrowings			(16,743	)		24,639			13,593
	Purchase of Treasury Stock			(898	)		(1,088	)		(92	)
	Dividends paid			(6,260	)		(4,101	)		(3,747	)
	Proceeds from stock options			0			89			27
	Proceeds from sale of common stock			3,367			2,746			3,754
		NET CASH PROVIDED BY FINANCING ACTIVITIES		22,211			15,014			27,396
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS				30,705			(6,318	)		7,613
		CASH AND CASH EQUIVALENTS
	Beginning of year			34,708			41,026			33,413
	End of year		$	65,413		$	34,708		$	41,026
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATIONS
	Net income		$	7,290		$	5,748		$	6,159
	Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation				794			864			799
Amortization and accretion				2,158			2,242			2,039
Provision for credit losses				1,080			865			1,810
(Gain) Loss on sale of investment securities				(112	)		(34	)		4
Other				(430	)		(575	)		82
		NET CASH PROVIDED BY OPERATING ACTIVITIES	$	10,780		$	9,109		$	10,893
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
	Supplemental schedule of noncash investing and financing activities:
	Unrealized loss on available for sale securities		$	444		$	734		$	2,696
	Merger related transfer of equity securities to treasury stock			0			37			0

See accompanying notes to consolidated financial statements

23

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 2001, 2000 and 1999

NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principals of Consolidation:

         The consolidated financial statements include the accounts of the company and its wholly-owned subsidiary, The Farmers National Bank of Canfield. All significant intercompany balances and transactions have been eliminated.

Nature of Operations:

         The Company’s wholly owned subsidiary, The Farmers National Bank of Canfield, operates under a national bank charter and provides full banking services. As a national bank, the Bank is subject to regulation of the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation. The area served by the Bank is the northeastern region of Ohio and service is provided at seventeen (17) locations.

Estimates:

         The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents:

         Cash and cash equivalents include cash on hand, due from banks and federal funds sold. Generally, federal funds are purchased and sold for one-day periods.

Securities Available for Sale:

         Securities available for sale are carried at fair value. Fair value is based on market price if available. If market price is not available, fair value is based on broker quotations. Deferred income taxes are provided on any unrealized appreciation or decline in value. Such appreciation or decline in value, net of deferred taxes, is reflected as a separate component of stockholders equity. Gains and losses are determined using the specific identification method. The company does not utilize a trading account.

Loans:

         Interest on loans is accrued and credited to income based on the principal amount outstanding. The accrual of interest income is ordinarily discontinued when a loan becomes 90 days past due as to principal or interest; however, management may elect to continue the accrual when the estimated net realizable value of collateral is sufficient to cover the principal balance and the accrued interest. When interest accruals are discontinued, interest credited to income in the current year is reversed. When the loan is determined to be uncollectible, interest accrued in prior years and the principal are charged to the allowance for loan losses. This policy applies to the bank’s installment, real estate and commercial loans. Loans held for sale are reported at the lower of cost or market, on an aggregate basis.

Loan Origination Fees and Costs:

         Loan origination fees and certain direct origination costs are capitalized and recognized as an adjustment of the yield on the related loan.

Impaired Loans:

         Impaired loans are classified according to the Financial Accounting Standards Board Statement 114, “Accounting by creditors for impairment of loans”. Under this standard, the reserve for loan losses related to loans that are considered impaired is based on discounted cash flows using the loan’s initial effective interest rate and the fair value of the collateral for certain collateral dependent loans.

Allowance for Credit Losses:

         The allowance for credit losses represents the amounts which, in management’s judgment, are adequate to absorb charge-offs of existing loans which may become uncollectible. The allowance is based on management’s judgment taking into consideration past loss experience, reviews of individual credits, current economic conditions and other factors considered relevant by management at the financial statement date. While management uses the best information available to establish the allowance, future adjustments to the allowance may be necessary, which may be material, if economic conditions differ substantially from the assumptions used in estimating the allowances. If additions to the original estimate of the allowance for credit losses are deemed necessary, they will be reported in earnings in the period in which they become reasonably estimable.

Premises and Equipment:

         Premises and equipment are stated at cost. Depreciation is computed on the straight-line method.

Intangibles:

         Purchased intangibles, primarily goodwill and core deposit value, are recorded at cost and amortized over the estimated life. Goodwill is being amortized over 15 years and the core deposit is being amortized over 8 years. Intangible amortization of $97,000 was recorded in 2001, 2000 and 1999.

Income Taxes:

         Income taxes, based on filing a consolidated return with the Company’s subsidiary, are provided for amounts currently due and deferred amounts arising from temporary differences between the financial accounting and income tax basis of assets and liabilities. Deferred taxes are computed on the liability method as prescribed in Statement of Financial Accounting Standards (SFAS) No. 109, “Accounting for Income Taxes”.

24

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Advertising:

         The company expenses the costs of advertising as incurred. Advertising expense for the years ended December 31, 2001, 2000 and 1999 was $428 thousand, $399 thousand and $417 thousand, respectively.

Per Share Amounts:

         Earnings per share are based on weighted average shares outstanding. Average shares outstanding, per share amounts and reference to number of shares in notes to consolidated financial statements have been restated to give effect to stock dividends. Weighted average shares outstanding were 11,957,538 for 2001, 11,671,753 for 2000 and 11,525,085 for 1999.

Comprehensive Income:

         Comprehensive income consists of net income and other comprehensive income. Other comprehensive income consists solely of unrealized gains and losses on securities available for sale.

New Accounting Pronouncements:

         In June 1998, the Financial Accounting Standards Board (FASB) issued Statement No. 133 (SFAS 133), “Accounting for Derivative Instruments and Hedging Activities”. This statement establishes accounting and reporting standards for derivative instruments embedded in other contracts and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. In June 1999, the FASB issued SFAS 137 which deferred the effective date of SFAS 133 to years beginning after June 15, 2000. This statement, which was adopted January 1, 2001, did not impact the company’s financial condition and results of operations.

         In June 2001, the FASB issued Statement No. 141 (SFAS 141), “Business Combinations.” This statement requires that all business combinations initiated after June 30, 2001 be accounted for using the purchase method, rather than the pooling-of-interests method. The adoption of this statement will only impact the company’s financial statements if it enters into a business combination.

         Also in June 2001, the FASB issued Statement No. 142 (SFAS 142), “Goodwill and Other Intangible Assets”, which addresses the accounting for such assets arising from prior and future combinations. Upon adoption of SFAS 142, goodwill arising from combinations will no longer be amortized, but rather will be assessed regularly for impairment, with any such impairment recognized as a reduction to earnings in the period identified. Existing goodwill and intangible assets on the company’s consolidated financial statements are recognized under Statement No. 72, “Accounting for Certain Acquisitions of Banking or Thrift Institutions”, and therefore are excluded from the scope of SFAS No. 142. As a result, this statement did not impact the company’s financial condition and results of operations.

NOTE B — SECURITIES AVAILABLE FOR SALE

Securities available for sale at December 31, 2001 and 2000 are summarized as follows:

	(In Thousands of Dollars)
	2001		2000
U.S. Treasury and U.S. Government agencies	$	75,019	$	59,982
Corporate debt securities		4,593		4,513
Mortgage-backed securities		19,119		25,948
Obligations of states and political subdivisions		30,038		22,917
Total debt securities		128,769		113,360
Equity securities		14,806		14,401
TOTALS	$	143,575	$	127,761

         Net unrealized gains (losses) for securities available for sale at December 31, 2001 and 2000 are summarized below:

		(In Thousands of Dollars)
							NET
							UNREALIZED
		UNREALIZED		UNREALIZED			GAINS
December 31, 2001		GAINS		LOSSES			(LOSSES)
U.S. Treasury and U.S. Government agencies		$	2,050	$	(101	)	$	1,949
Corporate debt securities			178		(40	)		138
Mortgage-backed securities			343		(43	)		300
Obligations of states and political subdivisions			248		(251	)		(3	)
Total debt securities			2,819		(435	)		2,384
Equity securities			273		(9	)		264
	TOTALS	$	3,092	$	(444	)	$	2,648
December 31, 2000
U.S. Treasury and U.S. Government agencies		$	705	$	(325	)	$	380
Corporate debt securities			87		(24	)		63
Mortgage-backed securities			170		(161	)		9
Obligations of states and political subdivisions			225		(179	)		46
Total debt securities			1,187		(689	)		498
Equity securities			111		(45	)		66
	TOTALS	$	1,298	$	(734	)	$	564

25

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

Notes to Consolidated Financial Statements

         The fair value and amortized cost of debt securities available for sale by contractual maturities at December 31, 2001 are summarized below. Mortgage-backed securities are not due at a single maturity date; periodic payments are received on the securities based on the payment patterns of the underlying collateral. For purposes of the maturity table, mortgage-backed securities have been allocated over the maturity groupings based on the final maturities of the securities. These securities may mature earlier than their final maturities because of principal prepayments.

		(In Thousands of Dollars)
		FAIR		AMORTIZED
		VALUE		COST
Due in 1 year or less		$	16,907	$	16,604
Due after one year through five years			64,399		62,531
Due after five years through ten years			12,701		12,600
Due after ten years			34,762		34,650
	TOTALS	$	128,769	$	126,385

         Securities with a carrying value of $77 million at December 31, 2001 and $68 million at December 31, 2000 were pledged to secure deposits in accordance with federal and state requirements and to secure repurchase agreements sold.

NOTE C — LOANS

         Following is a summary of loans:

		(In Thousands of Dollars)
December 31,		2001		2000
Real Estate — Mortgage		$	260,389	$	268,320
Installment Loans to Individuals			154,470		162,675
Commercial, Financial and Agricultural			18,841		17,916
Subtotal			433,700		448,911
Net origination and deferred loan fees			1,770		1,800
	TOTAL LOANS	$	435,470	$	450,711

         Nonperforming loans have not been separately classified because such loans are not material compared to total loans and nonaccrued interest is not material in relation to net income.

         Certain directors, executive officers and associates of such persons were loan customers during 2001. Such loans were made in the ordinary course of business under normal credit terms and do not represent more than a normal risk of collection. Following is an analysis of the amount of loans in which the aggregate of the total loans to any such person exceeded $60 thousand during 2001:

	(In Thousands of Dollars)
Total loans at December 31, 2000	$	1,934
New loans		947
Repayments		(442	)
Total loans at December 31, 2001	$	2,439

NOTE D — ALLOWANCE FOR CREDIT LOSSES

         Following is an analysis of changes in the allowance for credit losses for the years ended December 31:

			(In Thousands of Dollars)
			2001			2000			1999
Balance at beginning of year			$	6,115		$	5,778		$	5,492
Additions:
	Provision for credit losses			1,080			865			1,810
	Recoveries on loans previously charged off			510			1,115			519
		TOTAL ADDITIONS		7,705			7,758			7,821
Credits charged off				(1,263	)		(1,643	)		(2,043	)
Balance at end of year			$	6,442		$	6,115		$	5,778

         The allowance for federal income tax purposes amounted to $1.8 million at December 31, 2001 which is $4.642 million less than the allowance for financial accounting purposes.

NOTE E — PREMISES AND EQUIPMENT

Following is a summary of premises and equipment:

		(In Thousands of Dollars)
December 31,		2001			2000
Land		$	2,665		$	2,665
Premises			11,476			11,416
Equipment			6,852			5,658
Leasehold Improvements			195			195
			21,188			19,934
Less accumulated depreciation			(8,179	)		(7,385	)
	NET BOOK VALUE	$	13,009		$	12,549

         Depreciation expense was $794 thousand for the year ended December 31, 2001, $864 thousand for 2000 and $727 thousand for 1999.

26

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

Notes to Consolidated Financial Statements

NOTE F — INTEREST-BEARING DEPOSITS

         Following is a summary of scheduled maturities of certificates of deposit during the years following December 31, 2001:

		(In Thousands of Dollars)
2002		$	179,399
2003			20,473
2004			5,154
2005			9,547
2006 and thereafter			4,810
	TOTAL	$	219,383

         Following is a summary of certificates of deposit of $100 thousand or more by remaining maturities as of December 31, 2001:

	(In Thousands of Dollars)
Three months or less	$	15,213
Three to six months		17,953
Six to twelve months		16,778
Over twelve months		7,902
TOTAL	$	57,846

NOTE G — SECURITIES SOLD UNDER REPURCHASE
AGREEMENTS AND UNUSED LINES OF CREDIT

         The bank subsidiary enters into sales of securities under repurchase agreements (reverse repurchase agreements). The securities, although held in safekeeping outside the bank subsidiary, were under the bank subsidiary’s control. The outstanding balances and related information are summarized as follows:

	(In Thousands of Dollars)
	2001			2000
Book value including accrued interest	$	58,545		$	47,904
Market value		59,424			47,455
Maximum month end balance during the year		47,444			43,084
Average balance during the year		42,287			39,705
Average year end interest rate		3.12	%		5.42	%
Average interest rate during the year		3.80	%		5.08	%

         The bank subsidiary has access to borrowing facilities at the Federal Home Loan Bank, which totaled $68.074 million at December 31, 2001.

NOTE H — FEDERAL HOME LOAN BANK ADVANCES

         Federal Home Loan Bank advances at December 31, 2001 are secured by a blanket pledge of residential mortgage loans totaling $83.595 million and the Bank’s investment in FHLB stock.

			December 31,
	2001					2000
			Weighted					Weighted
			Average					Average
(In Thousands of Dollars)	Amount		Rate			Amount		Rate
Fixed-rate advances	$	25,603		6.45	%	$	39,559		6.64	%
Variable-rate advances		1,229		2.71	%		4,016		5.38	%
Total advances	$	26,832		6.28	%	$	43,575		6.52	%

         Scheduled repayments of FHLB advances are as follows:

Maturing in:		(In Thousands of Dollars)
2002		$	12,306
2003			2,270
2004			2,678
2005			1,647
2006			1,512
Later years			6,419
	TOTAL	$	26,832

NOTE I — COMMITMENTS AND CONTINGENT LIABILITIES

         The bank subsidiary utilizes equipment and leases a branch location under a noncancelable operating lease extending to 2004. Rental expense charged to operations totaled $44 thousand for 2001, $36 thousand for 2000 and $36 thousand for 1999. Following is a summary of future minimum rental payments under operating leases that have initial or remaining noncancelable terms in excess of one year as of December 31, 2001:

Year ending:		(In Thousands of Dollars)
December 31, 2002		$	43
December 31, 2003			43
December 31, 2004			37
	TOTAL	$	123

         The bank subsidiary is required to maintain noninterest-bearing reserve balances with the Federal Reserve Bank. The average reserve balance was $9.602 million in 2001 and $12.489 million in 2000.

27

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

Notes to Consolidated Financial Statements

         The bank subsidiary is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and financial guarantees. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized on the consolidated balance sheet. The contract or notional amounts of those instruments reflect the extent of involvement the bank subsidiary has in particular classes of financial instruments.

         The bank subsidiary’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit and financial guarantees written is represented by the contractual notional amount of those instruments. The bank subsidiary uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

	(In Thousands of Dollars)
CONTRACT OR NOTIONAL AMOUNT	2001		2000
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit	$	43,251	$	42,250
Standby letters of credit and financial guarantees written	$	1,053	$	742

         Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The bank subsidiary evaluates customers creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the bank subsidiary upon extension of credit, is based on management’s credit evaluation of the counter-party. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment and income producing commercial properties.

         Standby letters of credit and financial guarantees written are conditional commitments issued by the bank subsidiary to guarantee the performance of a customer to a third party. Those guarantees are primarily issued 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.

         Most of the bank subsidiary’s business activity is with a diversified customer base located within Mahoning, Trumbull and Columbiana Counties in Ohio. The concentrations of credit by type of loan are presented in Note C.

NOTE J — STOCKHOLDERS EQUITY

         On March 30, 2001, the shareholders of the company approved a resolution which amended the company’s Restated Articles of Incorporation to increase the number of authorized shares of common stock from 12.5 million shares to 25 million shares.

         In December 1998, the Board of Directors adopted an incentive stock option plan for the Directors, officers and employees which was approved by stockholders at their annual meeting on March 25, 1999. An aggregate of 375,000 common shares were reserved for future issuance under the plan. The incentive stock options have expiration terms of ten years subject to certain extensions and early terminations. The per share exercise price of an incentive stock option shall be, at a minimum, equal to the fair value of a share of common stock on the date the incentive stock option is granted.

         At December 31, 2000, no options were outstanding. Stock options exercised in 2000 and 1999 were from the stock option plan of Security Financial Corp., which terminated upon its merger with the company.

         On November 13, 2001, incentive stock options were granted for the purchase of 56,000 shares, exercisable at the market price of $11 per share. The recipients of the stock options vest over a five year period. At December 31, 2001, none of the stock options were exercisable, and all initial stock options granted remained outstanding.

         The company accounts for stock based compensation using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations, under which no compensation cost for stock options is recognized for stock option awards granted at or above fair market value. Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” established accounting and disclosure requirements using a fair-value-based method of accounting for stock-based employee compensation plans. As options are granted, the Company has elected to remain on its current method of accounting as described above, and has adopted the disclosure requirements of SFAS No.123. The pro forma net income impact under SFAS No. 123 is not material in 2001.

28

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

Notes to Consolidated Financial Statements

NOTE K — REGULATORY MATTERS

         The bank subsidiary, as a national bank, is subject to the dividend restrictions set forth by the Comptroller of the Currency. The Comptroller of the Currency must approve declaration of any dividends in excess of the sum of profits for the current year and retained net profits for the preceding two years (as defined). As of December 31, 2001, the bank subsidiary had $14.66 million of retained earnings available for distribution and $31.44 million not available for distribution to the company as dividends without prior approval of the Comptroller of the Currency.

         The bank subsidiary is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory-and possibly additional discretionary-actions by regulators that, if undertaken, could have a direct material effect on the bank subsidiary’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the bank subsidiary must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The bank subsidiary’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

         Quantitative measures established by regulation to ensure capital adequacy require the bank subsidiary to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). Management believes, as of December 31, 2001, that the bank subsidiary meets all capital adequacy requirements to which it is subject.

         As of December 31, 2001, the most recent notification from the Office of the Comptroller of the Currency categorized the bank subsidiary as “well capitalized” under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s capital category.

         The following table reflects various measures of capital at year-end:

	(In Thousands of Dollars)
						Requirement					To be "Well Capitalized"
						For Capital					Under Prompt Corrective
	Actual					Adequacy Purposes:					Action Provisions:
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2001
Total Capital (to Risk-Weighted Assets)	$	76,290		17.49	%	$	34,888		8.00	%	$	43,609		10.00	%
Tier I Capital (to Risk-Weighted Assets)	$	70,827		16.24	%	$	17,444		4.00	%	$	26,166		6.00	%
Tier I Capital (to Average Assets)	$	70,827		10.99	%	$	25,778		4.00	%	$	32,223		5.00	%
As of December 31, 2000
Total Capital (to Risk-Weighted Assets)	$	72,895		16.73	%	$	34,858		8.00	%	$	43,572		10.00	%
Tier I Capital (to Risk-Weighted Assets)	$	67,440		15.48	%	$	17,429		4.00	%	$	26,143		6.00	%
Tier I Capital (to Average Assets)	$	67,440		10.88	%	$	24,792		4.00	%	$	30,990		5.00	%

29

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

Notes to Consolidated Financial Statements

NOTE L — RETIREMENT PLAN

         The company has a qualified 401(k) deferred compensation, noncontributory Retirement Savings Plan. All employees of the bank who have completed at least one year of service and meet certain other eligibility requirements are eligible to participate in the plan. Under the terms of the Plan, employees may voluntarily defer a portion of their annual compensation, not to exceed 15%, pursuant to section 401(k) of the Internal Revenue Code. The company matches a percentage of the participants’ voluntary contributions up to 6% of gross wages. In addition, at the discretion of the Board of Directors, the company may make an additional profit sharing contribution to the plan. Total contributions were $390 thousand, $386 thousand and $362 thousand for the years ended December 31, 2001, 2000 and 1999, respectively. In 2000 and 1999, these contributions included the cost of Security Dollar Bank’s retirement plan, which was merged into the company’s plan.

NOTE M — FEDERAL INCOME TAXES

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

		(In Thousands of Dollars)
Years ended December 31,		2001			2000			1999
Current		$	3,105		$	2,733		$	2,814
Deferred			(191	)		(85	)		(119	)
	TOTALS	$	2,914		$	2,648		$	2,695

         Following is a reconciliation between federal income taxes at statutory rates and actual taxes based on income before federal income taxes:

Years ended		(In Thousands of Dollars)
December 31,		2001						2000						1999
					Percent						Percent						Percent
					of Pretax						of Pretax						of Pretax
		Amount			Income			Amount			Income			Amount			Income
Statutory tax		$	3,571			35	%	$	2,938			35	%	$	3,091			35	%
Effect of nontaxable interest			(548	)		(5	)		(378	)		(4	)		(404	)		(5	)
Other			109			1			88			1			8			0
	ACTUAL TAX	$	2,914			29	%	$	2,648			32	%	$	2,695			30	%

         Deferred taxes (credit) result from certain temporary differences in the recognition of income and expenses for financial reporting and income tax purposes. The sources and tax effects of significant temporary differences are as follows:

		(In Thousands of Dollars)
Years ended December 31,		2001			2000			1999
Depreciation		$	105		$	(43	)	$	0
Provision for credit losses			(173	)		(115	)		(52	)
Deferred loan fees and origination costs			(179	)		(53	)		(63	)
Federal Home Loan Bank dividends			75			71			61
Deferred compensation			11			(16	)		(11	)
Other			(30	)		71			54
	TOTALS	$	(191	)	$	(85	)	$	(119	)

Deferred tax liabilities (assets) are comprised of the following at December 31:

		(In Thousands of Dollars)
		2001			2000
Deferred tax assets:
	Allowance for credit losses	$	(1,461	)	$	(1,454	)
	Deferred compensation		(250	)		(261	)
	Other		(55	)		(35	)
	Gross deferred tax assets	$	(1,766	)	$	(1,750	)
Deferred tax liabilities:
	Depreciation		567			462
	Mark-to-market adjustment securities available for sale		907			192
	Federal Home Loan Bank dividends		349			275
	Deferred loan fees		0			165
	Other		36			124
	Gross deferred tax liabilities		1,859			1,218
	NET DEFERRED TAX (ASSET) LIABILITY	$	93		$	(532	)

         No valuation allowance for deferred tax assets was recorded at December 31, 2001 and 2000. Federal income taxes (benefit) applicable to investment securities gains in 2001 and 2000 were $38 thousand and $12 thousand, respectively. Federal income taxes (benefit) applicable to other comprehensive income were $715 thousand, $984 thousand and $(1.061) million for 2001, 2000 and 1999, respectively.

NOTE N — DISCLOSURE ABOUT FAIR VALUE
OF FINANCIAL INSTRUMENTS

         The following methods and assumptions were used to estimate the fair value of each class of financial instruments at December 31, 2001:

Cash and cash equivalents:

         The carrying amounts in the consolidated balance sheets of cash and cash equivalents approximates their fair value.

Long-term interest bearing deposits:

         The carrying amount is a reasonable estimate of fair value.

Investment securities:

         The fair value of securities available for sale equals quoted market price, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

30

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Loans:

         For certain homogeneous categories of loans, such as credit card receivables, and other consumer loans, fair value is estimated using the quoted market prices for similar loans, adjusted for differences in loan characteristics. The fair value of other types of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Deposits:

         The fair value of demand deposits, savings accounts and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities.

Securities sold under repurchase agreements:

         The carrying amount for securities sold under repurchase agreements approximates their fair value.

Federal Home Loan Bank advances:

The fair values of the advances are estimated using discounted cash flow analyses based on the current incremental borrowing rates for similar types of borrowing arrangements.

Accrued interest:

         The carrying amounts of accrued interest approximate fair value.

Commitments to extend credit, standby letters of credit and financial guarantees written:

         The fair value of commitments is estimated using the fees currently charged to enter similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counter-parties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of guarantees and letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counter-parties at the reporting date.

         The estimated fair values of the company’s financial instruments as of December 31, 2001 and 2000 are as follows:

			(In Thousands of Dollars)
			2001				2000
			CARRYING		FAIR		CARRYING		FAIR
			AMOUNT		VALUE		AMOUNT		VALUE
Financial assets:
	Cash and cash equivalents		$	65,413	$	65,413	$	34,708	$	34,708
	Investment securities:
	Available for sale			143,575		144,007		127,761		127,914
	Loans — Net			429,028		453,748		444,596		442,569
	Long-term interest bearing deposits			0		0		99		99
	Accrued interest receivable			3,637		3,637		4,040		4,040
		TOTAL FINANCIAL ASSETS	$	641,653	$	666,805	$	611,204	$	609,330
Financial liabilities:
	Deposits		$	503,644	$	507,664	$	468,336	$	469,602
	Securities sold under repurchase agreements			47,444		47,444		39,099		39,099
	Federal Home Loan Bank advances			26,832		28,993		43,575		43,776
	Accrued interest payable			1,287		1,287		1,552		1,552
		TOTAL FINANCIAL LIABILITIES	$	579,207	$	585,388	$	552,562	$	554,029
Unrecognized financial instruments:
	Commitments to extend credit		$	43,251	$	43,251	$	42,250	$	42,250
	Standby letters of credit and financial guarantees			1,053		1,053		742		742

31

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

Notes to Consolidated Financial Statements

NOTE O — CONDENSED FINANCIAL INFORMATION

         Below is condensed financial information of Farmers National Banc Corp. (parent company only). In this information, the parent’s investment in bank subsidiary is stated at cost plus equity in undistributed earnings of the subsidiary since acquisition. This information should be read in conjunction with the consolidated financial statements and related notes.

			(In Thousands of Dollars)
			December 31, 2001			December 31, 2000
BALANCE SHEETS
Assets:
	Cash		$	1,858		$	1,265
	Investment in bank subsidiary			71,416			68,117
	Securities available for sale			1,699			1,800
	Other securities			561			395
	Other			41			120
			$	75,575		$	71,697
Liabilities:
	Accounts payable		$	1,417		$	1,163
Stockholders equity:
	Common stock			55,419			49,451
	Retained earnings			20,672			22,226
	Unrealized appreciation of available for sale securities, net of applicable income taxes			181			73
	Treasury stock, at cost; 176,351 shares in 2001 and 87,835 shares in 2000			(2,114	)		(1,216	)
		TOTAL STOCKHOLDERS EQUITY		74,158			70,534
			$	75,575		$	71,697

32

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

Notes to Consolidated Financial Statements

STATEMENTS OF INCOME		(In Thousands of Dollars)
Years ended		December 31, 2001			December 31, 2000			December 31, 1999
Income:
Equity in net income of subsidiary		$	3,298		$	5,388		$	5,973
Dividends from subsidiary bank			4,099			1,140			125
Interest and dividends on securities			103			188			221
Investment security gains			0			72			0
	TOTAL INCOME		7,500			6,788			6,319
Other expenses			(210	)		(1,063	)		(183	)
Income tax benefit			0			23			23
	NET INCOME	$	7,290		$	5,748		$	6,159

STATEMENTS OF CASH FLOWS			(In Thousands of Dollars)
Years ended			December 31, 2001			December 31, 2000			December 31, 1999
Cash flows from operating activities:
	Net income		$	7,290		$	5,748		$	6,159
	Adjustments to reconcile net income to net cash provided by operating activities:
	Income from subsidiary			(3,298	)		(5,388	)		(5,973	)
	Other			263			(78	)		0
		NET CASH PROVIDED BY OPERATING ACTIVITIES		4,255			282			186
Cash flows from investing activities:
	Investment in subsidiary			0			0			(570	)
	Proceeds from maturities of investment securities available for sale			1,800			3,080			3,800
	Proceeds from sales of investment securities available for sale			0			176			0
	Proceeds from return of capital on other securities			0			3			300
	Purchases of other securities and securities available for sale			(1,671	)		(973	)		(3,720	)
	NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES			129			2,286			(190	)
Cash flows from financing activities:
	Purchase of treasury stock			(898	)		(1,088	)		(92	)
	Dividends paid			(6,260	)		(4,101	)		(3,747	)
	Proceeds from sale of common stock			3,367			2,835			3,782
		NET CASH USED IN FINANCING ACTIVITIES		(3,791	)		(2,354	)		(57	)
		NET INCREASE (DECREASE) IN CASH		593			214			(61	)
CASH
	Beginning of year			1,265			1,051			1,112
	End of year		$	1,858		$	1,265		$	1,051

33

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY

BOARD OF DIRECTORS

Photo of executives

Annual Meeting Notice

The annual meeting of Shareholders will be held at Kenneth F. McMahon Hall at the Mill Creek MetroParks Experimental & Educational Building at 7574 Columbiana-Canfield Rd., Canfield, OH 44406, at 3:30 p.m. local time, on Thursday, March 28, 2002.

Common Stock Listing

Farmers National Banc Corp. common stock trades on the OIC Bulletin Board under the symbol FMNB.OB. At December 31, 2001, there were 12,100,000 shares outstanding and approximately 3,600 shareholders.

Dividend Payments

Subject to the approval of the Board of Directors, quarterly cash dividends are customarily payable on or about the 30th day of March, June, September and December.

Dividend Reinvestment Plan (DRIP)

Registered shareholders can purchase additional shares of Farmers’ common stock through Farmers Dividend Reinvestment Plan. Participation is voluntary and allows for automatic reinvestment of cash dividends, supplemental cash contributions, not to exceed $1,000 per quarter and the safekeeping of stock certificates. To obtain our Plan prospectus, contact Susan Miller at Toll Free 1-888-988-3276 or email exec@fnbcanfield.com.

Direct Deposit of Cash Dividends

Shareholders have the option of having their cash dividends sent directly to their financial institution for deposit into their savings or checking account.

Stock Transfer Agent
   Farmers National Bank
   Attention: Susan Miller, AVP,
   Corporate Services Administration
   P.O. Box 555 Canfield, OH 44406
   Toll Free 1.888.988.3276

Form 10-K

A copy of the Annual Report filed with the Securities and Exchange Commission will be provided to any shareholder on request to the Corporation, to the attention:

   Mr. Carl D. Culp, Treasurer
   Farmers National Banc Corp.
   20 South Broad Street, P.O. Box 555
   Canfield, OH 44406
   Toll Free 1.888.988.3276

34

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY
Officers
35

Farmers National
Banc Corp. Officers

William D. Stewart
Chairman

Frank L. Paden
President & Secretary

Carl D. Culp
Executive Vice President & Treasurer

Donald F. Lukas
Senior Vice President

Farmers National
Bank Officers

Frank L. Paden
President & CEO

Carl D. Culp
Executive Vice President
Cashier & CFO

Donald F. Lukas
Senior Vice President
Bank Systems

Mark L. Graham
Vice President
Loan Administrator

Bradley S. Henderson
Vice President
Branch Adm. & Security

Anthony F. Peluso
Vice President
Human Resources

Barbara C. Fisher
Vice President
Deposit Operations & Marketing

Fremont J. Camerino
Vice President
Niles

Daniel G. Cerroni
Vice President
Niles

Joseph E. Chapman
Vice President
Niles

Richard G. Ferraro
Vice President
Niles

Thomas G. Hatthorn
Vice President
Niles

Roy A. Jackson
Vice President
Indirect Lending

Frederick M. Kotheimer
Vice President
Loan Review

Kevin T. Lamar
Vice President
Niles

Paul D. Rhodes
Vice President
Niles

Alfred F. Ridel
Vice President
Consumer Loans

James G. Swift
Vice President
Niles Operations Center

Robert E. True
Vice President
Niles

Larry E. White
Vice President
Salem

Keith A. Leonard
Assistant Vice President
Austintown

Richard R. Lytle
Assistant Vice President
Youngstown Rd.

Susan E. Miller
Assistant Vice President
Corporate Services Administration

Mary Jane Naples
Assistant Vice President
Niles Operations Center

Phyllis A. Welton
Assistant Vice President
Niles Operation Center

Andrew A. Baird
Assistant Cashier
Canfield Data Center

Pamela J. Cleghorn
Assistant Cashier
Niles

Matthew W. Close
Assistant Cashier
Damascus

Janine E. Cox
Assistant Cashier
Credit Administration

Charlene K. Daugherty
Assistant Cashier
Human Resources

David E. Enterline
Assistant Cashier
Network Administrator

Merle C. Garritano
Assistant Cashier
Canfield

Geraldine J. Gbur Polas
Assistant Cashier
Columbiana

Lynnita J. Himes
Assistant Cashier
Western Reserve

Linda M. Liston
Assistant Cashier
Compliance/CRA/BSA

Diane C. Moran
Assistant Cashier
Girard

Rob L. Mort
Corporate Acct. Officer
Canfield

Joanie F. Orr
General Ledger
Accounting Officer

Patricia C. Rosko
Assistant Cashier
Lake Milton

Robert L. Rozeski
Assistant Cashier
Leetonia

Barbara L. Sitler
Assistant Cashier
Cornersburg

Deborah N. Testa
Assistant Cashier
Eastwood

Dennis S. Vitt
Assistant Cashier
Poland

Dorothy J. Weeden
Assistant Cashier
Canfield

35

FARMERS NATIONAL BANC CORP. AND SUBSIDIARY
BRANCH LOCATIONS

[MAP GRAPHIC]

AUSTINTOWN 22 North Niles-Canfield Road • Youngstown, OH 44515 • 330-792-1411

BOARDMAN 102 West Western Reserve Road • Boardman, OH 44512 • 330-726-8896

CANFIELD, MAIN OFFICE 20 South Broad Street • Canfield, OH 44406 • 330-533-3341

COLONIAL PLAZA 401 East Main Street • Canfield, OH 44406 • 330-533-2686

COLUMBIANA 340 State Rt. 14 • Columbiana, OH 44408 • 330-482-1974

CORNERSBURG 3619 S. Meridian Road • Youngstown, OH 44511 • 330-793-3971

DAMASCUS 29053 State Rt. 62 • Damascus, OH 44619 • 330-537-4004

GIRARD 121 North State Street • Girard, OH 44420 • 330-545-9791

LAKE MILTON 17817 Mahoning Avenue • Lake Milton, OH 44429 • 330-654-3351

LEETONIA 16 Walnut Street • Leetonia, OH 44431 • 330-427-2436

MINERAL RIDGE 3826 South Main Street • Mineral Ridge, OH 44440 • 330-544-7430

NILES 1 South Main Street • Niles, OH 44446 • 330-544-7400

NILES DRIVE UP 170 East State Street • Niles, OH 44446 • 330-544-7420

NILES OPERATIONS CENTER 51 South Main Street • Niles, OH 44446 • 330-544-7400

NILES 5845 Youngstown-Warren Road • Niles, OH 44446 • 330-544-7410

POLAND 106 McKinley Way West • Poland, OH 44514 • 330-757-7508

SALEM 1858 East State Street • Salem, OH 44460 • 330-332-1558

WARREN 2910 Youngstown-Warren Road • Warren, OH 44484 • 330-369-5400

36

[INSIDE BACK COVER]

[OUTSIDE BACK COVER]

[FARMERS NATIONAL BANC CORP. LOGO]

20 South Broad Street
P.O. Box 555
Canfield, Ohio 44406
www.fnbcanfield.com