FARMERS NATIONAL BANC CORP /OH/, 10-K, 1999-03-16

FARMERS NATIONAL BANC CORP /OH/
10-K, 1999-03-16
STATE COMMERCIAL BANKS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

For the fiscal year ended December 31, 1998

[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

For the transition period from ________ to __________

Commission file number 0-12055

Farmers National Banc Corp.
(Exact name of registrant as specified in its charter)

Ohio 34-1371693
(State or other jurisdiction of (I.R.S.Employer Identification No.)
incorporation or organization)

20 South Broad Street
Canfield, Ohio 44406
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: 330-533-3341

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, no par value
(Title of Class)

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

The registrant estimates that as of February 25, 1999, the
aggregate market value of the voting stock held by
non-affiliates of the registrant (including 243,681 shares held
by officers and directors of the registrant) was approximately
$154,520,418.

As of February 25, 1999, the registrant had outstanding
3,657,288 shares of common stock having no par value.

DOCUMENTS INCORPORATED BY REFERENCE

Parts of Form 10-K
into which
Document Document is Incorporated

1998 Annual Report to Shareholders II

Definitive proxy statement for the 1998 Annual
Meeting of Shareholders to be held on March 25, 1999 III

Farmers National Banc Corp 1999 Stock Option Plan III

Form 10-K Cross Reference Index to Annual Report to Shareholders

Part I
Item 1 - Business
Description of Business 9
Average Balance Sheets/Yields/Rates 11
Rate and Volume Analysis 12
Securities 18
Loans 15-16
Risk Elements of Loan Portfolio 17
Loan Loss Experience 16
Deposits 19
Financial Ratios 10
Short-Term Borrowings 30-31

Part II
Item 5
Market For Registrant's Common Stock
and Related Stockholder Matters 21

Item 6
Selected Financial Data 10-12

Item 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 13-20

Item 8
Financial Statements and Supplementary Data 23-36

Item 9
Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure - None

Part IV
Report of Hill, Barth & King, Inc.,
Independent Auditors 22

Financial Statements:
Consolidated Balance Sheets -
December 31, 1998 and 1997 23

Consolidated Statements of Income & Comprehensive Income -
Calendar Years 1998, 1997 and 1996 24

Consolidated Statement of Stockholders'
Equity - Calendar Years 1998, 1997 and 1996 25

Consolidated Statements of Cash
Flows - Calendar Years 1998, 1997 and 1996. 26

Notes to Consolidated Financial Statements 27-36

FARMERS NATIONAL BANC CORP.
FORM 10-K
1998

INDEX

Part I. Page

Item 1. Business:
General I-2

Item 2. Properties I-6

Item 3. Legal Proceedings I-6

Item 4. Submission of Matters to a Vote of Security Holders I-6

Part II

Item 7a. Quantitative and Qualitative Disclosures About
Market Risk II-1

Part III.

Item 10. Directors and Executive Officers of the Registrant III-1

Item 11. Executive Compensation III-2

Item 12. Security Ownership of Certain Beneficial Owners and
Management III-2

Item 13. Certain Relationships and Related Transactions III-2

Part IV.

Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K IV-1

Signatures IV-3

Index to Exhibits IV-4

Part I

Item 1. Business General

The Corporation

The registrant, Farmers National Banc Corp. (herein sometimes
referred to as the Corporation), is a one-bank holding company
registered under the Bank Holding Company Act of 1956, as
amended. The only subsidiary is The Farmers National Bank of
Canfield, which was acquired March 31, 1983. The Corporation
and its subsidiary operate in one industry, domestic banking.

The Corporation conducts no business activities except for
investment in securities permitted under the Bank Holding
Company Act. Bank holding companies are permitted under
Regulation Y of the Board of Governors of the Federal Reserve
System to engage in other activities such as leasing and
mortgage banking.

The Bank

The Bank is a full-service national bank engaged in commercial
and retail banking in Mahoning and Columbiana Counties, Ohio.
The Bank's commercial banking services include checking
accounts, savings accounts, time deposit accounts, commercial,
mortgage and installment loans, home equity loans, home equity
lines of credit, night depository, safe deposit boxes, money
orders, bank checks, automated teller machines and travelers
checks, "E" Bond transactions, utility bill payments, MasterCard
and Visa credit cards, and other miscellaneous services normally
offered by Commercial Banks.

Supervision and Regulation

The Corporation is a one bank holding company and is
regulated by the Federal Reserve Bank (the "FRB"). The bank is
a national bank and is regulated by the Office of the
Comptroller of the Currency (the "OCC"), as well as the Federal
Deposit Insurance Corporation (the "FDIC"). Changes have
developed over the past several years regarding minimum capital
requirements for financial institutions. A listing of the
minimum requirements for capital and the Corporation's capital
position as of December 31, 1998 are presented in Note K on
page 32 of the annual report to shareholders for the year ended
December 31, 1998 and is hereby incorporated by reference.

The Corporation is subject to regulation under the Bank
Holding Company Act of 1956, as amended. This Act restricts the
geographic and product range of bank holding companies by
defining the types and locations of institutions the holding
companies can own or acquire. This act also regulates
transactions between the Corporation and the bank and generally
prohibits tie-ins between credit and other products and
services.

The bank is subject to regulation under the National
Banking Act and is periodically examined by the OCC and is
subject to the rules and regulations of the FRB. As an insured
institution and member of the Bank Insurance Fund ("BIF"), the
bank is also subject to regulation by the FDIC. Establishment
of branches is subject to approval of the OCC and geographic
limits established by state law. Ohio branch banking law
permits a bank having its principal place of business in the
State of Ohio to establish branch offices in any county in Ohio
without geographic restrictions.

FDICIA

The Federal Deposit Insurance Corporation Improvement Act
of 1991 ("FDICIA") revised the bank regulatory and funding
provisions of the Federal Deposit Insurance Act and several
other federal banking statutes. Among other things, FDICIA
requires federal banking agencies to broaden the scope of
corrective action taken with respect to banks that do not meet
minimum capital requirements and to take such actions promptly
in order to minimize losses to the FDIC.

FDICIA established five capital tiers: "well capitalized";
"adequately capitalized"; "undercapitalized"; "significantly
undercapitalized"; and "critically undercapitalized" and imposes
significant restrictions on the operations of a depository
institution that is not in either of the first two of such
categories. A depository institution's capital tier will depend
upon the relationship of its capital to various capital
measures. A depository institution will be deemed to be "well
capitalized" if it significantly exceeds the minimum level
required by regulation for each relevant capital measure,
"adequately capitalized" if it meets each such measure,
"undercapitalized" if it is significantly below any such measure
and "critically undercapitalized" if it fails to meet any
critical capital level set forth in regulations. An institution
may be deemed to be in a capitalization category that is lower
than is indicated by its actual capital position if it receives
an unsatisfactory examination rating or is deemed to be in an
unsafe or unsound condition or to be engaging in unsafe or
unsound practices.

Under regulations adopted under these provisions, for an
institution to be well capitalized it must have a total
risk-based capital ratio of at least 10%, a Tier I risk-based
capital ratio of at least 6% and a Tier I leverage ratio of at
least 5% and not be subject to any specific capital order or
directive. For an institution to be adequately capitalized, it
must have a total risk-based capital ratio of at least 8%, a
Tier I risk-based capital ratio of at least 4% and a Tier I
leverage ratio of at least 4% (or in some cases 3%). Under the
regulations, an institution will be deemed to be
undercapitalized if the bank has a total risk-based capital
ratio that is less than 8%, a Tier I risk-based capital ratio
that is less than 4% or a Tier I leverage ratio of less than 4%
(or in some cases 3%). An institution will be deemed to be
significantly undercapitalized if the bank has a total
risk-based capital ratio that is less than 6%, a Tier I
risk-based capital ratio that is less than 3%, or a leverage
ratio that is less than 3% and will be deemed to be critically
undercapitalized if it has a ratio of tangible equity to total
assets that is equal to or less than 2%.

FDICIA generally prohibits a depository institution from
making a capital distribution (including payment of dividends)
or paying management fees to any entity that controls the
institution if it thereafter would be undercapitalized.

If an institution becomes undercapitalized, it will be
generally restricted from borrowing from the Federal Reserve,
increasing its average total assets, making any acquisitions,
establishing any branches or engaging in any new line of
business. An undercapitalized institution must submit an
acceptable capital restoration plan to the appropriate federal
banking agency, which plan must, in the opinion of such agency,
be based on realistic assumptions and be "likely to succeed" in
restoring the institution's capital. In connection with the
approval of such a plan, the holding company of the institution
must guarantee that the institution will comply with the plan,
subject to a limitation of liability equal to a portion of the
institution's assets. If an undercapitalized institution fails
to submit an acceptable plan or fails to implement such a plan,
it will be treated as if it is significantly undercapitalized.

Under FDICIA, bank regulators are directed to require
"significantly undercapitalized" institutions, among other
things, to restrict business activities, raise capital through a
sale of stock, merge with another institution and/or take any
other action which the agency determines would better carry out
the purposes of FDICIA.

Within 90 days after an institution is determined to be
"critically undercapitalized", the appropriate federal banking
agency must, in most cases, appoint a receiver or conservator
for the institution or take such other action as the agency
determines would better achieve the purposes of FDICIA. In
general, "critically undercapitalized" institutions will be
prohibited from paying principal or interest on their
subordinated debt and will be subject to other substantial
restrictions.

Under FDICIA, an institution that is not well capitalized
is generally prohibited from accepting brokered deposits.
Undercapitalized institutions are prohibited from offering
interest rates on deposits significantly higher than prevailing
rates.

The provisions of FDICIA governing capital regulations
became effective on December 19, 1992. FDICIA also directs that
each federal banking agency prescribe standards for depository
institutions and depository institution holding companies
relating to internal controls, information systems, internal
audit systems, loan documentation, credit underwriting, interest
rate exposure, asset growth, a maximum ratio of classified
assets to capital, a minimum ratio of market value to book value
for publicly traded shares (if feasible) and such other
standards as the agency deems appropriate.

Supervision and Regulation (Continued)

FDICIA also contains a variety of other provisions that
could affect the operations of the Corporation, including new
reporting requirements, regulatory standards for real estate
lending, "truth in savings" provisions, the requirement that a
depository institution give 90 days' prior notice to customers
and regulatory authorities before closing any branch, limitations
on credit exposure between banks, restrictions on loans to a
bank's insiders and guidelines governing regulatory examinations.

Pursuant to FDICIA, the FDIC has developed a transitional
risk-based assessment system, under which, beginning on January
1, 1993, the assessment rate for an insured depository
institution varied according to its level of risk. An
institution's risk category will depend upon whether the
institution is well capitalized, adequately capitalized or less
than adequately capitalized and whether it is assigned to
Subgroup A, B or C. Subgroup A institutions are financially
sound institutions with few minor weaknesses; Subgroup B
institutions are institutions that demonstrate weaknesses which,
if not corrected, could result in significant deterioration; and
Subgroup C institutions are institutions for which there is a
substantial probability that the FDIC will suffer a loss in
connection with the institution unless effective action is taken
to correct the area of weakness. Based on its capital and
supervisory subgroups, each BIF member institution will be
assigned an annual FDIC assessment rate per $100 of insured
deposits.

INTERSTATE BANKING AND BRANCHING LEGISLATION

The Riegle-Neal Interstate Banking and Branching Efficiency
Act of 1994 (the "IBBEA") authorizes interstate acquisitions of
banks and bank holding companies without geographic constraint
beginning September 29, 1995. Beginning June 1, 1997, the IBBEA
also authorizes banks to merge with banks located in another
state provided that neither state has "opted out" of interstate
branching between September 29, 1994 and May 31, 1997. States
also may enact legislation permitting interstate merger
transactions prior to June 1, 1997. After acquiring interstate
branches through a merger, a bank may establish additional
branches in that state at the same locations as any bank
involved in the merger could have established branches under
state and federal law. In addition, a bank may establish a de
novo branch in another state that expressly permits the
establishment of such branches. A bank that establishes a de
novo interstate branch may thereafter establish additional
branches on the same basis as a bank that has established
interstate branches through a merger transaction. If a state
"opts out" of interstate branching, no bank from another state
may establish a branch in that state, whether through a merger
or de novo establishment.

Item 2. Properties

Farmers National Banc Corp.'s Properties

The Farmers National Banc Corp. owns no property. Operations
are conducted at 20 South Broad Street, Canfield, Ohio.

Bank Property

The Main Office is located at 20 S. Broad Street, Canfield,
Ohio. The other ten offices of the bank are:

Austintown Office 22 N. Niles-Canfield Rd., Youngstown, Ohio

Lake Milton Office 17817 Mahoning Avenue, Lake Milton, Ohio

Cornersburg Office 3619 S. Meridian Rd., Youngstown, Ohio

Colonial Plaza Office 401 E. Main St. Canfield, Ohio

Western Reserve Office 102 W. Western Reserve Rd., Youngstown, Ohio

Salem Office 1858 E. State Street, Salem, Ohio

Columbiana Office 340 State Rt. 14, Columbiana, Ohio

Leetonia Office 16 Walnut St., Leetonia, Ohio

Damascus Office 29053 State Rt. 62 Damascus, Ohio

Poland Office 106 McKinley Way West, Poland, Ohio

The bank owns the Main Office, Austintown, Cornersburg, Lake
Milton, Western Reserve, Salem, Columbiana, Leetonia, Damascus
and Poland Offices. The Colonial Plaza is occupied under an
operating lease expiring in 2004.

Item 3. Legal Proceedings

There are no material pending legal proceedings to which the
registrant or its subsidiary is a party or of which any of its
property is subject, except proceedings which arise in the
ordinary course of business. In the opinion of management,
pending legal proceedings will not have a material affect on the
consolidated financial position of the registrant or its
subsidiary.

Item 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of security holders
through the solicitation of proxies or otherwise during the
fourth quarter of 1998.

Part II

Item 7A

Quantitative and Qualitative Disclosures About 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 in the event of a
sudden and sustained 100 or 200 basis point increase or decrease
in market interest rates:

Changes In Change In % Change
Interest Rate Net Interest In Net
(basis points) Income Interest Income

-200 359 2.14%
-100 179 1.07%
100 -327 -1.95%
200 -653 -3.89%

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 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.

PART III

Item 10. Directors and Executive Officers of the Registrant

Information relating to Directors is set forth in the
registrant's definitive proxy statement, which will be used in
connection with its annual meeting of shareholders which will be
held March 25, 1999. The proxy statement is attached hereto.

Executive Officers of the Registrant

The names, ages and positions of the executive officers as of
March 1, 1999:

Name Age Position Held

William D. Stewart 69 Chairman

Richard L. Calvin 72 Vice Chairman

Frank L. Paden 48 President and Secretary

Carl D. Culp 35 Exec. Vice Pres. and Treasurer

Donald F. Lukas 52 Senior Vice President

Officers are elected annually by the Board of Directors
immediately following the annual meeting of shareholders. The
term of office for all the above executive officers is for the
period ending with the next annual meeting.

Principal Occupation and Business Experience of Executive Officers

Mr. William D. Stewart has served as Chairman since March 1996.
Prior to that time, he was President and Secretary since the
inception of registrant on March 31, 1983, was President of the
Bank since 1972 and has held various other executive positions
with the Bank.

Mr. Richard L. Calvin has served as Vice Chairman since March
1996. Prior to that time, he was Executive Vice President and
Treasurer of the registrant since its inception on March 31,
1983, was Executive Vice President of the bank since 1972 and
has held various other executive positions with the Bank.

Mr. Frank L. Paden has served as President and Secretary since
March 1996. Prior to that time he was Executive Vice President
of the registrant since March 1995, was Executive Vice President
of the Bank since March 1995 and has held various other
executive positions with the Bank.

Mr. Carl D. Culp has served as Executive Vice President and
Treasurer since March 1996. Prior to that time he was
Controller of the registrant since November 1995 and was
Controller of the Bank since November 1995.

Mr. Donald F. Lukas has served as Senior Vice President of the
registrant since March 1996. Prior to that time, he was Vice
President of the Bank since March 1987.

Item 11. Executive Compensation

Information regarding this item is set forth in the registrant's
definitive proxy statement, which will be used in connection
with its annual meeting of shareholders to be held March 25,
1999. The proxy statement is attached hereto.

Item 12. Security Ownership of Certain Beneficial Owners and
Management

Information relating to this item is set forth in the
registrant's definitive proxy statement, which will be used in
connection with its annual meeting of shareholders to be held
March 25, 1999. The proxy statement is attached hereto.

Item 13. Certain Relationships and Related Transactions

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)1. Financial Statements

Included in Part II of this report

Item 8., Financial Statements and Supplementary Data
is set forth in the registrant's 1998 Annual Report to
Shareholders and is incorporated by reference in Part II
of this report

(a)2. Financial Statement Schedules Page

Accountant's consent IV-2

All schedules are omitted because they are
not applicable.

(a)3. Exhibits

The exhibits filed or incorporated by reference as a part of
this report are listed in the Index of Exhibits, which appears
at page IV-4 hereof and is incorporated herein by reference.

(b) Report on Form 8-K

No reports were filed for three months ended December 31, 1998.

INDEPENDENT AUDITORS' CONSENT

FARMERS NATIONAL BANC CORP:

We hereby consent to the incorporation by reference in this Registration
Statement of our report dated January 19, 1999, relating to the consolidated
financial statements of Farmers National Banc Corp. and subsidiary.

HILL, BARTH & KING, INC.

Warren, Ohio
March 16, 1999

SIGNATURES

Pursuant to the requirements of Section 13 or 15(D) of the
Securities and Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the under
signed, thereunto duly authorized.

Farmers National Banc Corp. Farmers National Banc Corp.

by /s/Frank L. Paden by /s/Carl D. Culp
President and Secretary Executive Vice President
and Treasurer

/s/William D. Stewart Chairman March 16, 1999

/s/ Benjamin R. Brown Director March 16, 1999

/s/Richard L. Calvin Vice Chairman March 16, 1999

/s/Joseph O. Lane Director March 16, 1999

/s/David C. Myers Director March 16, 1999

/s/Edward A. Ort Director March 16, 1999

/s/Frank L. Paden President March 16, 1999
and Director

/s/Ronald V. Wertz Director March 16, 1999

INDEX TO EXHIBITS

The following exhibits are filed or incorporated by references
as part of this report:

2. Not applicable.

3(i). Not applicable.

3(ii). Not applicable.

4. The registrant agrees to furnish to the Commission upon request
copies of all instruments not filed herewith defining the rights
of holders of long-term debt of the registrant and its
subsidiaries.

9. Not applicable.

10. Not applicable.

11. Not applicable.

12. Not applicable.

13. Annual Report to security holders (filed herewith).

16. Not applicable.

18. Not applicable.

21. Subsidiaries of the registrant (filed herewith).

22. Not applicable.

23. Not applicable.

24. Not applicable.

27. Financial Data Schedule (filed herewith)

99. Definitive Proxy Statement (filed herewith)

Copies of any exhibits will be furnished to shareholders upon
written request. Request should be directed to Carl D. Culp,
Executive Vice President, Farmers National Banc Corp., 20 S.
Broad Street, Canfield, Ohio 44406.

<TABLE>
FARMERS NATIONAL BANC CORP AND SUBSIDIARY
HIGHLIGHTS OF 1998

Selected Financial Data (In Thousands except Per Share Data)

<CAPTION> Percent
For the Year 1998 1997 Change
<S> <C> <C> <C>
Net Income $5,115 $4,742 7.87%
Return on Average Assets 1.34% 1.34% 0.00%
Return on Average Equity 11.65% 12.67% -8.05%

Per Share
Net Income $1.42 $1.36 4.41%
Book Value 12.93 11.72 10.32%

Balances at Year-End
Assets $401,621 $368,449 9.00%
Securities 84,319 68,306 23.44%
Net Loans 283,113 271,665 4.21%
Deposits 321,518 305,830 5.13%
Stockholders Equity 47,274 40,923 15.52%
Shares Outstanding 3,657 3,491 4.76%
Cash Dividends 2,413 1,958 23.24%
<FN>
* Adjusted to reflect weighted outstanding shares and adjusted for stock dividends.
</FN>
</TABLE>

FORM 10-K

A copy of the Annual Report filed with the Securities and
Exchange Commission will be available on April 1, 1999
without charge upon written request to:

Mr. Carl D. Culp, Treasurer
Farmers National Banc Corp.
20 South Broad St. P.O. Box 555
Canfield, Ohio 44406

Mailing address and phone:
Farmers National Banc Corp.
20 South Broad St. P.O. Box 555
Canfield, Ohio 44406
Phone: (330) 533-3341

The Annual Meeting of the Shareholders of Farmers
National Banc Corp. will be held at Colonial Catering at
429 Lisbon St. Canfield, Ohio on Thursday, March 25,
1999 at 3:30 p.m.

TABLE OF CONTENTS

Highlights of 1998 1

Board of Directors 2

Report to Stockholders 3-7

Officers 8

Description of Business 9

Selected Financial Data 10-12

Management's Discussion 13-20

Stock Prices and Dividends 21

Accountant's Report 22

Financial Data 23-36

BOARD OF DIRECTORS

Picture of Board of Directors

Board of Directors for Farmers National Banc Corp.
and The Farmers National Bank of Canfield

William D. Stewart, Chairman of Farmers National Banc Corp.

Richard L. Calvin, Vice Chairman of Farmers National Banc Corp.

Frank L. Paden, President and Secretary of Farmers National Banc Corp.;
President and CEO of the Farmers National Bank of Canfield

Benjamin R. Brown, President - Castruction Co.

Joseph O. Lane, President - Lane Funeral Homes, Inc. and Lane Life Corp.

David C. Myers, President - Myers Equipment Corp.

Edward A. Ort, President - Ort Furniture Manufacturing Co.

Ronald V. Wertz - C.P.C.U., C.I.C., Vice President - Acordia of Ohio, Inc.

PRESIDENT'S LETTER TO STOCKHOLDERS

Dear Shareholders:

The cover of this year's annual report symbolizes the long-term
strategy of your corporation and its proven soundness.

The families who founded your corporation lived in an economic
and business environment that is in many ways different from our
own. But, the values and principles of commerce they held to be
true remain constant in the conduct of your corporation today.

As this century comes to a close and we prepare for the next,
we will continue to seek, evaluate and embrace new technologies
and methods of operation. However, our growth strategy and its
success has its roots in that which was originally sown 111
years ago.

In 1998, Farmers National Banc Corp. completed another year of
results befitting the mission statement and vision for the
company.

Profitability -- net earnings in excess of $5 million;

Growth -- assets now exceeding $400 million; and

Strength & Safety -- shareholder equity of $47 million.

Your Board of Directors and Management are pleased with our
1998 results and we remain very optimistic for the continued
success of these strategies as we move into the future. It is
with pleasure that I share some of the highlights and
accomplishments of your company that were attained in 1998.

Bar Graph Depicting Net Income in Thousands

Year Amount

1994 $3,424

1995 $3,576

1996 $4,131

1997 $4,742

1998 $5,115

FINANCIAL PERFORMANCE

Net income for the year reached a record high of $5.1 million,
up 7.87 percent over 1997. Interest income from earning assets
- -- loans and investments, is the major component that drives the
earnings of the company. Earning assets generated $29.5 million in
interest income during 1998. Total interest expense, or cost
of our interest bearing liabilities was $12.7 million. Net
interest income for the year was $16.7 million, up 7 percent,
or $1.1 million from last year. The net interest margin on
these assets and liabilities was 4.64 percent as compared to
4.65 percent in 1997.

Net income was $1.42 per share for 1998 as compared to $1.36
per share in 1997. This represents a 4.41 percent increase.
The corresponding graph depicts a favorable trend in earnings
per share increasing from $1.04 per share in 1994 to the current
level of $1.42 per share.

Bar Graph Depicting Net Income Per Share

Year Amount

1994 $1.04

1995 $1.05

1996 $1.18

1997 $1.36

1998 $1.42

Cash dividends paid on Farmers National Banc Corp. common stock
were $.68 per share in 1998, representing a 17.24 percent
increase over the $.58 per share paid a year ago. In addition
to the cash dividends, the Corporation also paid shareholders a
2 percent stock dividend in October 1998. This year marks the
third consecutive year of increased cash dividends and the
twenty-third consecutive year that your Directors approved and
paid a stock dividend.

Shareholders Equity is a measure used in defining safety within
the banking industry. The $47.3 million in Shareholder Equity
gives the Corporation an 11.8 percent total capital to asset
ratio -- well above regulatory measures and near the top
percentile in comparison to our peer group of banks.

Bar Graph Depicting Total Stockholders Equity in Thousands

Year Amount

1994 $28,915

1995 $33,976

1996 $34,809

1997 $40,923

1998 $47,274

Shareholder participation in the Corporation's Dividend
Reinvestment Plan continues to provide a source of additional
capital to the Corporation. During 1998, shareholders
reinvested cash dividends of $1.3 million and made supplemental
cash contributions in the amount of $2.4 million, totaling $3.7
million that was used to purchase 94,889 shares of common stock
in Farmers National Banc Corp. at an average weighted purchase
price of $39.91 per share.

Farmers National Banc Corp.'s common stock finished the year at
$42.25 per share as quoted on the OTC Bulletin Board. This
represents a 37 percent increase over 1997's year end quote of
$30.75 per share. Our common stock can be located under the
symbol FMNB. Stockholders Equity per share was $12.93 as of
December 31, 1998 as compared to $11.72 at the end of 1997. The
graph to the left gives a five year history on the book value
versus the quoted market value. These numbers have been
adjusted for previous stock dividends and stock splits.

Bar Graph Depicting Book Value and Market Value of Stock

Book Market
Year Value Value

1994 $9.29 $14.75

1995 $10.33 $19.70

1996 $10.46 $23.13

1997 $11.72 $30.75

1998 $12.93 $42.25

As disclosed in the quarterly reports, we have been able to
achieve both positive earnings and growth trends throughout the
year. As of December 31, 1998, total assets for the
corporation are reported as $401.6 million, an increase of 9 percent
from 1997. Net loans, which comprise approximately 71%
of the total assets of the corporation increased to $283.1
million representing a 4.21 percent increase over the year end
in 1997. Securities increased 23 percent to $84.3 million on
December 31, 1998. Total deposits also increased approximately
$15.7 million or 5.13 percent from $305.8 million in 1997 to
$321.5 million at year end December 31, 1998.

Bar Graph Depicting Total Loans in Thousands

Year Amount

1994 $214,988

1995 $229,249

1996 $263,504

1997 $271,665

1998 $283,113

You will note from the financial information outlined in this
report that Farmers National Banc Corp.'s operating and
performance measures identify continuing positive trends.
Nineteen hundred and ninety-eight, a financially successful year,
is detailed in the accompanying financial review and
discussion which summarize the careful management of operating
fundamentals, size of our Corporation and shareholder return.

OPERATIONS

In January 1999, Farmers National Bank opened a new branch
banking office in Poland Village. This new facility,
representing our tenth community branch banking office, marks
the fourth new full service branch location that Farmers
National Bank has established in the past three years. The
newly constructed building includes approximately 3,500 square
feet of retail and commercial banking space along with four
drive-up teller lanes and a 24 hour Automatic Teller Machine
conveniently located in a drive-up lane. This branch is staffed
to accommodate new account openings and is able to process any
type of loan application.

Bar Graph Depicting Total Assets in Thousands

Year Amount

1994 $284,445

1995 $314,229

1996 $338,112

1997 $368,449

1998 $401,621

Picture of Exterior of Poland Branch

To improve customer service during 1998, we also made other
capital improvements to other branch locations. The 24 hour ATM at
our Cornersburg Office was reconfigured from a walk-up ATM to
a drive-up unit located on the north side of the building. This
move offers more convenience to our customers, and enhances their
safety while using that machine. We also installed new drive-up
ATM machines at our Damascus and Leetonia branches. Both communities
lacked this type of banking service.

1998 marked the twentieth anniversary at our Boardman branch
location at Western Reserve Road and Market Street. During the past
year, this branch went through a major capital improvement
project that truly enhanced the appearance and efficiency of
the building. The improvements included an addition, a new
gable style roof, a newly configured customer service lobby
and the relocation of the 24 hour ATM to a drive-up unit with a
separate auto lane on the west side of the building.

Picture of Exterior of Boardman Branch

During 1998, Farmers National Bank was selected as one of 32
member institutions to participate in the Welcome Home Program
sponsored by the Federal Home Loan Bank of Cincinnati. This
program is designed to serve the owner-occupied housing needs of
low and moderate income residents located within our lending
areas. Funds provided through this program can be used for down
payments and closing costs incurred in conjunction with the
acquisition of owner-occupied housing units by low and moderate
income home buyers. Farmers National Bank also participated in
the Greater Salem Area Habitat for Humanity program in
Columbiana County. This particular program was expanded this
year and our bank was pleased to assist in the building and
funding for two homes in Columbiana County.

A complete review of 1998 could not be complete without a
report on the bank's progress on the Year 2000 (Y2K) issue as
part of the Year 2000 Information and Readiness Disclosure Act.

Much has been written about this topic during the past year and
how it can affect the banking industry. Your Board of Directors
and the Senior Management team have given the Y2K issue top
priority during 1998 and are fully committed to using
commercially reasonable efforts to ensure that all internal
systems will be Y2K compliant. As part of a detailed project
management plan, I am pleased to report that we have nearly
completed our Y2K testing of all "mission critical" inventory
items. Additional testing with third party vendors will
continue during 1999 along with an aggressive customer awareness
program to better prepare the public for this issue and the
potential effects on our financial communities. In addition, we
are working to have contingency plans in place to mitigate any
Y2K problems that may be caused by circumstances beyond the
bank's control, such as power or communications malfunctions.

The scope of the Y2K challenge itself is something we cannot
control, but we can control the way we manage the problem. As
interested citizens, dependable business professionals, leaders
in the community and caring family members, it is our duty to
raise the awareness of this problem in our communities and
offer help where we feel competent to do so.

While numbers usually dominate any President's message to his
shareholders, the story behind those numbers is always one
involving human beings. On March 25, 1999, Mr. Joseph O. Lane
will officially retire from the Board of Directors, a position
he has held since December 20, 1965.

Joe was appointed to the Board of Directors at the time Farmers
National Bank consisted of two offices, Canfield and Austintown,
with total assets of $15 million. During his tenure as
Director, he has participated in leading and guiding this corporation
as it expanded to ten community branch offices and total assets in
excess of $400 million.

His commitment to our community is enduring and he has
always been one of our bank's most influential boosters. We will
truly miss his vision and business talents that he so heartily
committed to our board for the past thirty-four years. A sincere
"Thank You" and best wishes to Joe and his wife Gerri.

Picture of Joseph O. Lane, Director

In closing, I would like to offer special thanks to our
shareholders, directors, officers and employees for their loyal
patronage of our services and steadfast commitment to our bank.
We are extremely confident as we prepare for the twenty-first
century and welcome you to be a part of it.

Sincerely,

Frank L. Paden
President & CEO

Farmers National Banc Corp.
Officers

William D. Stewart Richard L. Calvin
Chairman Vice Chairman

Frank L. Paden Carl D. Culp
President and Secretary Executive Vice President
& Treasurer

Donald F. Lukas
Senior Vice President

Farmers National Bank of Canfield
Officers & Management

Frank L. Paden Joseph E. Chapman
President & CEO Assistant Cashier,
Manager - Collection Department
Carl D. Culp
Executive Vice President, Janine M. Cox
Cashier & CFO Assistant Cashier, Credit Administration

Donald F. Lukas Charlene K. Daugherty
Senior Vice President, Assistant Cashier, Human Resources and
Bank Systems Branch Administration

Mark L. Graham Merle C. Garritano
Vice President/Loan Administrator Assistant Cashier/Consumer Loans

Bradley S. Henderson Linda M. Liston
Vice President, Compliance Officer
Branch Administration & Security
Joanie F. Orr
Anthony F. Peluso General Ledger Accounting Officer
Vice President/Human Resources
Gary J. Rosati
Alfred F. Ridel Staff Legal Counsel
Vice President/Consumer Loans
Anita L. Jarvis
Daniel G. Cerroni Internal Auditor
Assistant Vice President,
Main Office Loan Department Rob L. Mort
Corporate Financial Accountant
Barbara C. Fisher Y2K Project Manager
Assistant Vice President,
Marketing & Deposit Operations Dorothy J. Weeden
Assistant Cashier,
Roy A. Jackson Manager - Main Office
Assistant Vice President,Indirect Lending
Rhonda R. Learn
Frederick M. Kotheimer Manager - Colonial Plaza
Assistant Vice President/Loan Review
Keith A. Leonard
Susan E. Miller Assistant Cashier,
Assistant Vice President, Manager - Austintown Office
Corporate Services Administration
Jennifer C. Tikkanen
Phyllis A. Welton Asst. Manager - Austintown Office
Assistant Vice President,
Manager - Bookkeeping Dept. Patricia C. Rosko
Manager - Lake Milton Office
Andrew A. Baird
Assistant Cashier, Manager - Data Center Geraldine J. Gbur
Assistant Cashier,
Barbara L. Sitler Manager - Columbiana Office
Manager - Cornersburg Office
Jane C. Logan
Sharyn Staffrey Asst. Manager - Columbiana Office
Asst. Manager - Cornersburg Office
Robert L. Rozeski
Lynnita J. Kaschak Assistant Cashier,
Manager - Western Reserve Office Manager - Leetonia Office

Clare F. Baldwin Mellisa K. Woak
Asst. Manager - Western Reserve Office Asst. Manager - Leetonia Office

Larry E. White Michele M. Ossoff
Assistant Vice President, Assistant Cashier,
Manager - Salem Office Manager - Damascus Office

Pamela J. Cleghorn Dennis S. Vitt
Assistant Cashier, Assistant Cashier,
Asst. Manager - Salem Office Manager - Poland Office

Gregory V. Walla Diane C. Moran
Asst. Manager - Salem Office Asst. Manager - Poland Office

Brief Description of Business

Farmers National Banc Corp.

Farmers National Banc Corp. (the "Corporation") is a
one-bank holding company formed under the Bank Holding Company
Act of 1956, as amended, operating under regulations of the
Board of Governors of the Federal Reserve System. Its principal
subsidiary is The Farmers National Bank of Canfield, which was
acquired March 31, 1983. Presently the Corporation and its
subsidiary operate in one industry, domestic banking.

The Corporation conducts no business activities except
for investment in securities permitted under the Bank Holding
Company Act. The Board of Directors of the Corporation and the
Bank are identical. The officers of the Corporation are William
D. Stewart, Chairman, Richard L. Calvin, Vice Chairman, Frank L.
Paden, President and Secretary, Carl D. Culp, Executive Vice
President and Treasurer, and Donald F. Lukas, Senior Vice
President.

Bank holding companies are permitted under Regulation Y
of the Board of Governors of the Federal Reserve System to
engage in other activities considered closely related to banking
such as leasing and mortgage banking. The Corporation has no
other subsidiaries engaged in such activities at this time.

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 commercial banking services include
checking accounts, savings accounts, time deposit accounts,
commercial, mortgage and installment loans, night depository,
automatic teller machines, safe deposit boxes, money order
services, travelers checks, government bond sales, food stamp
redemption, utility bill payments, electronic payments, Visa
Deibt Cards, MasterCard and Visa Credit Cards, and other
miscellaneous services normally offered by commercial banks.

The Bank's main office is located at 20 South Broad Street,
Canfield, Ohio. Business is conducted at a total of eleven (11)
offices located in the counties of Mahoning and Columbiana in
Ohio. As a national banking association, 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. The Bank is affected also by the
monetary and fiscal policies of the United States and of various
regulatory agencies.

The Bank competes with state and national banks located in
Mahoning and Columbiana counties. The Bank also competes with a
large number of other financial institutions, such as savings and
loan associations, insurance companies, consumer finance companies,
credit unions and commercial finance and leasing companies, for
deposits, loans and service business. Money market mutual funds,
brokerage houses and similar institutions provide, in a
relatively unregulated environment, many of the financial
services offered by the Bank. In the opinion of management, the
principal methods of competition are the rates of interest
charged for loans, the rates of interest paid for funds, the
fees charged for services and the availability of services.

As of December 31, 1998, the Corporation and its subsidiary
had 193 employees. The bank considers its relations with its
employees to be satisfactory.

<TABLE>
SELECTED FINANCIAL DATA

(In Thousands except Per Share Data)
<CAPTION>
For the Years Ending 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Summary of Earnings
Total Interest Income (including fees on loans) $29,227 $27,576 $24,877 $21,960 $19,731
Total Interest Expense 12,736 12,129 10,756 9,688 8,000
Net Interest Income 16,491 15,447 14,121 12,272 11,731
Provision for Credit Losses 840 855 655 270 330
Total Other Income 1,698 1,768 1,478 1,342 1,357
Total Other Expense 9,815 9,418 8,883 8,118 7,755
Income Before Federal Income Taxes 7,534 6,942 6,061 5,226 5,003
Federal Income Taxes 2,419 2,200 1,930 1,650 1,579
NET INCOME 5,115 4,742 4,131 3,576 3,424

Per Share Data (Note)
Net Income 1.42 1.36 1.18 1.05 1.04
Cash Dividends Paid 0.68 0.58 0.44 0.40 0.40
Book Value at Year-End 12.93 11.72 10.51 10.33 9.29

Balances at Year-End
Total Assets 401,621 368,449 338,112 314,229 284,445
Earning Assets 377,115 349,102 319,449 294,122 268,724
Total Deposits 321,518 305,830 283,810 267,955 244,302
Net Loans 283,113 271,665 263,504 229,249 214,988
Total Stockholder's Equity 47,274 40,923 34,809 33,976 28,915

Average Balances
Total Assets 381,078 354,005 325,537 297,159 279,839
Total Stockholder's Equity 43,888 37,431 35,629 31,177 27,221

Significant Ratios
Return on Average Assets (ROA) 1.34% 1.34% 1.27% 1.20% 1.22%
Return on Average Equity (ROE) 11.65 12.67 11.60 11.45 12.58
Average Earning Assets/Average Assets 94.95 95.28 94.88 94.75 94.91
Net Loans/Deposits 88.06 88.83 92.85 85.56 88.00
Allowance for Credit Losses/Total Loans 1.29 1.25 1.20 1.25 1.26
Allowance for Credit Losses/Nonperforming Loans 364.39 383.13 152.42 192.87 154.63
Efficiency Ratio 53.96 54.71 56.50 59.63 59.66
Cash Dividends as a Percentage of Net Income 47.17 41.29 35.22 35.46 34.45
Dividends Per Share to Net Income Per Share 47.89 41.73 36.07 36.04 34.96
<FN>
Note: Per share data is based on weighted average shares outstanding adjusted for stock dividends.
</FN>
</TABLE>

<TABLE>
Average Balance Sheets and Related Yields and Rates
(In Thousands of Dollars)
<CAPTION>
Years ended December 31, 1998 1997 1996

EARNING ASSETS

AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans $281,660 $24,585 8.73% $268,581 $23,487 8.74% $250,616 $21,519 8.59%
Taxable securities 62,864 3,695 5.88 51,520 3,123 6.06 40,334 2,352 5.83
Tax-exempt securities 9,700 817 8.42 8,072 712 8.82 7,434 683 9.19
Federal funds sold 7,616 408 5.36 9,116 503 5.52 10,506 562 5.35
Total earning assets 361,840 29,505 8.15 337,289 27,825 8.25 308,890 25,116 8.13

NONEARNING ASSETS

Cash and due from banks 12,509 11,001 11,310
Premises and equipment 6,433 5,647 5,597
Allowance for Loan Losses (3,598) (3,282) (2,946)
Other assets 3,894 3,350 2,686
Total Assets 381,078 354,005 325,537

INTEREST-BEARING LIABILITIES

Time deposits 148,569 8,407 5.66 141,659 8,094 5.71 122,973 7,095 5.77
Savings deposits 76,720 1,984 2.59 74,117 1,870 2.52 76,182 1,931 2.53
Demand deposits 58,143 1,198 2.06 54,560 1,141 2.09 51,890 1,092 2.10
Repurchase agreements 18,059 790 4.37 15,039 676 4.49 12,075 497 4.12
Borrowings 6,203 357 5.76 6,000 348 5.80 2,651 142 5.36
Total Interest-Bearing Liabilities 307,694 12,736 4.14 291,375 12,129 4.16 265,771 10,757 4.05

NONINTEREST-BEARING LIABILITIES

Demand deposits 25,002 21,868 22,979
Other Liabilities 4,494 3,331 1,158
Stockholder's equity 43,888 37,431 35,629
Total Liabilities and
Stockholders' Equity 381,078 354,005 325,537

Net interest income 16,769 15,696 14,359
Net interest income to earning assets 4.64% 4.65% 4.65%
<FN>
Fully taxable equivalent basis computed at 35% in 1998, 1997 and 1996.
</FN>
</TABLE>

<TABLE>
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)
<CAPTION>
1998 change from 1997 1997 change from 1996
Net Change Due Change Due Net Change Due Change Due
Change To Volume To Rate Change To Volume To Rate
<S> <C> <C> <C> <C> <C> <C>
Tax Equivalent Interest Income
Loans $1,098 $1,134 ($36) $1,968 $1,554 $414
Taxable securities 572 686 (114) 771 653 118
Tax-exempt securities 105 144 (39) 29 58 (29)
Federal funds sold (95) (83) (12) (59) (74) 15
Total interest income $1,680 $1,881 ($201) $2,709 $2,191 $518

Interest Expense
Time deposits $313 $391 ($78) $999 $1,081 ($82)
Savings deposits 114 63 51 (61) (53) (8)
Demand deposits 57 74 (17) 49 55 (6)
Repurchase agreements 114 136 (22) 179 123 56
Borrowings 9 11 (2) 206 26 180
Total interest expense $607 $675 ($68) $1,372 $1,232 $140

Increase in tax equivalent
net interest income $1,073 $1,337
<FN>
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.
</FN>
</TABLE>

<TABLE>
QUARTERLY FINANCIAL DATA

(In Thousands except Per Share Data)
<CAPTION>
Quarter Ended 1998 March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
Total interest income $7,059 $7,280 $7,414 $7,474
Total interest expense 3,154 3,135 3,184 3,263
Net interest income 3,905 4,145 4,230 4,211
Provision for credit losses 210 210 210 210
Non-interest income 419 423 438 418
Non-interest expense 2,433 2,453 2,482 2,447
Income before federal income taxes 1,681 1,905 1,976 1,972
Federal income taxes 539 612 637 631
Net income $1,142 $1,293 $1,339 $1,341

Per share data:
Net income $0.32 $0.36 $0.37 $0.37
Dividends $0.16 $0.17 $0.17 $0.18

(In Thousands except Per Share Data)
Quarter Ended 1997 March 31 June 30 September 30 December 31

Total interest income $6,536 $6,842 $7,107 $7,091
Total interest expense 2,834 2,977 3,143 3,175
Net interest income 3,702 3,865 3,964 3,916
Provision for credit losses 150 200 240 265
Non-interest income 363 402 433 569
Non-interest expense 2,437 2,308 2,296 2,377
Income before federal income taxes 1,478 1,759 1,861 1,843
Federal income taxes 469 572 606 553
Net income $1,009 $1,187 $1,255 $1,290

Per share data:
Net income $0.29 $0.34 $0.36 $0.37
Dividends $0.13 $0.14 $0.15 $0.16
</TABLE>

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

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.

Results of Operations

The Corporation's net income totaled $5.115 million during
1998, an increase of 7.87% from $4.742 million for 1997. On a
per share basis, net income was $1.42 for 1998 as compared to
$1.36 for 1997 and $1.18 for 1996. Common comparative ratios
for results of operations include the return on average assets
and return on average stockholders equity. For 1998, the return
on average equity was 11.65% as compared to 12.67% for 1997 and
11.60% for 1996. The return on average assets was 1.34% for
1998 and 1997 as compared to 1.27% for 1996.

These results of operations are the direct result of
management's concerted efforts to control expenses and increase
interest from our interest bearing assets. Overall growth in
deposits and the use of those funds in the investment and loan
portfolio, particularly commercial real estate and home equity
loans, together with control over the bank's general expenses
have produced these results.

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 1998, net interest income increased $1.044
million or 6.76% over 1997. The increase for 1997 was $1.326
million or 9.39% over 1996. Interest-earning assets averaged
$361.840 million during 1998 representing a 7.28% increase over
1997, while 1997 averaged $337.289 million or a 9.19% increase
over 1996.

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 1998 the net interest margin,
measured on a fully taxable equivalent basis was 4.64% in
comparison to 4.65% for 1997 and 1996.

Total interest income was $29.227 million for 1998 as compared
to $27.576 million and $24.877 million for 1997 and 1996,
respectively. The 5.99% increase in interest income is largely
attributed to a $1.098 million or 4.67% increase in income from
loans. Average loans increased 4.87% during the past year,
while the overall yield dropped slightly from 8.74% to 8.73%.
Income from securities increased $648 thousand or 18.07%, which
was driven by a 22.58% increase in the balance of securities
available for sale. The drop in the overall rate environment
caused the tax equated yields in securities to drop from 6.43%
in 1997 to 6.22% in 1998.

Total interest expense amounted to $12.736 million for 1998,
representing a 4.97% increase from 1997 while interest expense
of $12.129 million for 1997 represents a 12.76% increase from
1996. The increase in interest expense is primarily due to a
$16.319 million or 5.6% increase in the level of
average interest-bearing liabilities. This increase in
interest-bearing liabilities was offset by a decrease in the
overall cost of these funds, which dropped from 4.16% in 1997 to
4.14% in 1998.

Other Income

Other income decreased $70 thousand or 3.96% from 1997.
Total other income for 1997 increased $290 thousand or 19.62%
from 1996. The decrease in other income is a result of a 35%
decrease in miscellaneous income. Management continues to
explore new products and non-traditional banking services that
could increase other income in future years.

Other Expenses

Total other expenses for 1998 increased 4.22% over 1997 as
compared to an increase of 6.03% from 1997 over 1996. The rise
in other expenses is primarily due to other operating expenses,
which increased $203 thousand or 7.32% from 1997. These
expenses are increasing each year due primarily to asset growth
and the increased volume of the operations of the bank.
Salaries and employee benefits also increased $84 thousand or
1.66%. This increase is the result of hiring additional
employees to staff the new branch offices. 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 32% for the periods ending 1998, 1997 and 1996.

Asset/Liability Management

As of year-end 1998, the Corporation had a negative gap at
both three month and twelve month time periods. This liability
sensitive position typically produces a favorable contribution
to earnings during a period of decreasing rates. Although in
general rates may rise, the Corporation has the capacity to take
steps to minimize the negative effect of such movement.

<TABLE>
Interest Rate Sensitivity
<CAPTION>
(In Thousands of Dollars)
December 31, 1998 December 31, 1997 December 31, 1996
Total Within Total Within Total Within
3 month 12 month 3 month 12 month 3 month 12 month
<S> <C> <C> <C> <C> <C> <C>
Total Interest-Sensitive Assets $43,976 $107,360 $43,489 $117,790 $36,137 $105,161
Total Interest-Sensitive Liabilities 63,695 125,304 70,990 129,809 56,249 112,027
Total Sensitivity Gap (19,719) (17,944) (27,501) (12,019) (20,112) (6,866)
Ratio of Interest-Sensitive Assets to
Interest-Sensitive Liabilities .69 .86 0.61 0.91 0.64 0.94
</TABLE>

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
adequate 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, 1998, 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, 1998 amounted to $5.343
million.

Cash flows generated from operating activities increased 6.53%
to $7.502 million in 1998 compared to $7.042 million in 1997.
This increase is a result of an increase in total interest
received, as explained in the Net Interest Income section of
this report. Cash flows used in investing activities decreased
6.44% to $30.098 million in 1998 compared to $32.171 million in
1997. This decrease in cash used resulted from an smaller net
increase in investment securities in 1998 compared to 1997.
Cash flows provided from financing activities amount to $26.094
million as compared to $25.342 million in 1997. This 2.97%
increase is primarily the result of an increase in deposits.

<TABLE>
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:
<CAPTION>
(In Thousands of Dollars)
Years Ended December 31, 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, Financial and Agricultural $10,885 3.8% $10,784 3.9% $8,454 3.1% $19,842 8.6% $22,465 10.3%
Real Estate - Mortgage 157,918 55.1 147,979 53.8 136,212 51.1 110,870 47.9 102,322 47.0
Installment Loans to Individuals 117,999 41.1 116,331 42.3 122,036 45.8 100,748 43.5 92,947 42.7
Total Loans $286,802 100.0% $275,094 100.0% $266,702 100.0% $231,460 100.0% $217,734 100.0%
</TABLE>

<TABLE>
The following schedule sets forth maturities based on remaining scheduled repayments of principal for various categories of loans
listed above as of December 31, 1998:
<CAPTION>
(In Thousands of Dollars)
Types of Loans 1 Year or less 1 to 5 Years Over 5 Years
<S> <C> <C> <C>
Commercial, Financial and Agricultural $3,608 $5,846 $1,431
</TABLE>

<TABLE>
The amounts of commercial, financial and agricultural loans as of December 31, 1998, based on remaining scheduled repayments of
principal, are shown in the following table:
<CAPTION>
(In Thousands of Dollars)
Loan Sensitivities 1 Year or less Over 1 Year Total
<S> <C> <C> <C>
Floating or Adjustable Rates of Interest $2,417 $1,866 $4,283
Fixed Rates of Interest 1,191 5,411 6,602
Total Loans $3,608 $7,277 $10,885
</TABLE>

Loan Portfolio

Total net loans were $283.113 million at year-end 1998 compared
to $271.665 million at year-end 1997. This represents an
increase of $11.448 million or 4.21%. Loans comprised 77.8% of
the Bank's average earning assets during 1998, compared to 79.6%
in 1997. The product mix in the Loan Portfolio shows Commercial
Loans comprising 3.8%, Real Estate Mortgage Loans (Residential
and Commercial) 55.1% and Installment Loans to Individuals 41.1%
at December 31, 1998 compared with 3.9%, 53.8% and 42.3%,
respectively, at December 31, 1997.

Loans contributed 84.1% of total interest income in 1998
compared to 85.2% in 1997. Loan yield was 8.73% in 1998, 58
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 increased slightly from
$116.331 million on December 31, 1997 to $117.999 million on
December 31, 1998 which represents a 1.4% increase. 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 84.5% of the Installment Loan Portfolio.
Net loan losses on the Installment Loan portfolio were $487
thousand in 1998 as compared to $667 thousand in 1997. This
represents .41% of total Installment Loans outstanding for 1998
and .57% for 1997. Management attributes these losses to the
national trend in the economy, indicating high consumer debt and
an increased number of personal bankruptcy filings.

Real Estate Mortgage Loans increased to $157.918 million at
December 31, 1998, an increase of 6.7% over 1997. Most of
this increase took place in home equity lines of credit and
non-residential real estate loans, which increased $6.609
million and $4.468 million respectively. This portfolio
consists of $113.548 million of 1-4 family residential
properties and $44.370 million in non-residential real estate
properties, all made within the Bank's primary market area. The
corporation originated both fixed rate and adjustable rate
mortgages during 1998. All mortgage loans made in 1998 are held
in the Mortgage Loan portfolio and are not sold on the secondary
market. 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, 1998 increased slightly from
year-end 1997 with outstanding balances of $10.885 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.

<TABLE>
Summary of Loan Loss Experience

The following is an analysis of the allowance for loan losses for the periods indicated:
<CAPTION>
(In Thousands of Dollars)

Years Ended December 31, 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Balance at Beginning of Year $3,429 $3,198 $2,911 $2,746 $2,621
Loan Losses:
Commercial, Financial and Agricultural (63) 0 (75) (1) (185)
Real Estate-Mortgage (39) 0 (22) 0 0
Installment Loans to Individuals (772) (824) (455) (275) (202)
Total Loan Losses (874) (824) (552) (276) (387)
Recoveries on Previous Loan Losses:
Commercial, Financial and Agricultural 0 3 9 44 39
Real Estate-Mortgage 9 40 15 0 0
Installment Loans to Individuals 285 157 160 127 143
Total Recoveries 294 200 184 171 182
Net Loan Losses (580) (624) (368) (105) (205)
Provision Charged to Operations (1) 840 855 655 270 330
Balance at End of Year $3,689 $3,429 $3,198 $2,911 $2,746
Ratio of Net Loan Losses to Average
Net Loans and Leases Outstanding 0.21% 0.23% 0.15% 0.05% 0.10%
<FN>
(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.
</FN>
</TABLE>

Provisions charged to operations decreased from $855 thousand
in 1997 to $840 thousand in 1998. The balance in the allowance
for credit losses has increased substantially since 1994 to
$3.689 million or 1.29% of loans at December 31,1998. This
ratio has increased from the 1.25% reported at December 31,
1997. The allowance for credit losses as a percentage of
nonperforming loans decreased from 383.13% at December 31, 1997
to 364.39% at December 31, 1998.

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:

<TABLE>
<CAPTION>
(In Thousands of Dollars)

December 31, 1998 1997 1996 1995 1994
Loans to Loans to Loans to Loans to Loans to
Total Total Total Total Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, Financial and Agricultural $812 3.8% $1,928 3.9% $1,873 3.1% $1,800 8.6% $1,700 10.3%
Real Estate-Mortgage 1,017 55.1% 275 53.8% 263 51.1% 250 47.9% 200 47.0%
Installment Loans to Individuals 1,860 41.1% 1,226 42.3% 1,062 45.8% 861 43.5% 846 42.7%
$3,689 100.0% $3,429 100.0% $3,198 100.0% $2,911 100.0% $2,746 100.0%
<FN>
The allocation of the allowance as shown in the table above
should not be interpreted as an indication that charge-offs in
1999 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.
</FN>
</TABLE>

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.

<TABLE>
Risk Elements
The following table sets forth aggregate loans in each of the following categories for the years indicated:
<CAPTION>
(In Thousands of Dollars)
December 31, 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Loans Accounted For on a Nonaccrual Basis $576 $493 $0 $125 $302
Loans Contractually Past Due 90 Days or More as to Interest
or Principal Payments (Not Included in Nonaccrual Loans Above) 435 402 2,098 1,384 1,475
Loans Considered Troubled Debt Restructuring
(Not Included in Nonaccrual Loans or Contractually Past Due Above) 0 0 0 75 0
<FN>
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.
</FN>
</TABLE>

Non-accrual 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, 1998, 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:

<TABLE>
<CAPTION>
December 31, 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Gross Interest Income That Would have been Recorded if the Loans
had been Current in Accordance with Their Original Terms $27 $9 $7 $5 $21
Interest Income Included in Income on the Loans 1 13 0 0 0
</TABLE>

Investment Securities

The investment securities portfolio increased 23.44% in 1998.
Most of this increase occurred in U.S. Treasury and U.S.
Government agencies, which grew $15.1 million in 1998. The
increase is primarily attributable to excess funds resulting
from deposit growth outpacing the current year loan demand. 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.

<TABLE>
The following table shows the book value of investment
securities by type of obligation at the dates indicated:
<CAPTION>
Type (In Thousands of Dollars)

December 31, 1998 1997 1996
<S> <C> <C> <C>
U.S. Treasury Securities and Government Agencies $68,593 $53,449 $31,449
Obligations of States and Political Subdivisons 11,067 9,145 7,501
Other Securities 4,659 5,712 8,130
$84,319 $68,306 $47,080
</TABLE>

<TABLE>
A summary of securities held at December 31, 1998, classified according to maturity and including weighted
average yield for each range of maturities is set forth below:
<CAPTION>
(In Thousands of Dollars)
Type and Maturity Grouping December 31, 1998

Book Value Weighted Average Yield (1)
<S> <C> <C>
U.S. Treasury and U.S. Government Agency Securities:
Maturing Within One Year $20,010 5.46%
Maturing After One Year But Within Five Years 35,906 5.57%
Maturing After Ten Years 12,677 6.41%
Total U.S. Treasury and U.S. Government Agency Securities $68,593 5.69%

Obligations of States and Political Subdivisions
Maturing Within One Year $349 9.73%
Maturing After One Year But Within Five Years 2,150 8.49%
Maturing After Five Years But Within Ten Years 2,544 8.18%
Maturing After Ten Years 6,024 7.92%
Total Obligations of States and Political Subdivisions $11,067 8.15%

Other Securities
Maturing Within One Year $4,659 6.22%
<FN>
(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 $11.444 thousand, $59.932
thousand, $70.069 thousand and $158.803 thousand for the four
ranges of maturities.
</FN>
</TABLE>

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 total deposits grew from $305.830 million in 1997
to $321.518 million in 1998, which equates to an increase of
5.13%. Most of this growth occurred in time deposits, which
increased in average balances from $141.659 million in 1997 to
$148.569 million in 1998, or 4.88%.

Average Deposits
<TABLE>
The following table shows the classification of average deposits for the periods
indicated:
<CAPTION>
(In Thousands of Dollars)
Average Balances on December 31, 1998 1997 1996
<S> <C> <C> <C>
Noninterest-Bearing Demand Deposits $25,002 $21,868 $22,979
Interest-Bearing Demand Deposits 58,143 54,560 51,890
Savings Deposits 76,720 74,117 76,182
Time Deposits 148,569 141,659 122,973
Total Average Deposits $308,434 $292,204 $274,024

</TABLE>
<TABLE>
The following shows the average rate paid on the following deposit categories for
the periods indicated:
<CAPTION>
Years ended December 31, 1998 1997 1996
<S> <C> <C> <C>
Interest-Bearing Demand Deposits 2.06% 2.09% 2.10%
Savings 2.59% 2.52% 2.53%
Time Deposits 5.66% 5.71% 5.77%
</TABLE>

A summary of time deposits of $100,000 or more as of December 31, 1998 by
maturity range is shown below:

(In Thousands of Dollars)
3 Months or Less Remaining Until Maturity $7,752
3 to 6 Months Remaining Until Maturity 4,406
6 to 12 Months Remaining Until Maturity 13,090
Over 12 Months Remaining Until Maturity 6,959
Total Outstanding $32,207

The steady increase in total deposits over the years reflects managements'
efforts to continue to insure growth of the bank and to maintain a viable
banking institution. During 1998, 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
1998.

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 11.65%, 12.67% and 11.60% for 1998, 1997 and
1996, respectively. Total cash dividends declared in 1998
represented 47.17% of net income as compared to 41.29% in 1997
and 35.22% in 1996. The resulting internal equity growth
percentage amounted to 6.15% in 1998 as compared to 7.44% in
1997 and 7.51% in 1996.

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, 1998 the bank subsidiary
had $14.92 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, 1998, 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 15.85% and 17.10% respectively. The bank subsidiary's
leverage ratio at December 31, 1998 was 10.85%.

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 nonemployee 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 four meetings during 1998.

Compliance

Our institution is committed to maintain a high level of
compliance with various laws and regulations. We recognize that
the laws and regulations are important tools in federal efforts
to give guidelines in order to comply within the standards of
today's banks. Failure to comply with regulations can result in
significant and often costly penalties or mandated actions from
regulatory agencies. Policies and procedures have been set
forth to govern the way departments function and ensure fair,
consistent and sound banking practices. Changes to the polices
and procedures are made when new regulations, or changes to
regulations, have been made. The Compliance Department is
interested in seeing that the institution adopts and follows
sound written policies as part of the compliance management
program.

The training segment of compliance has become extremely
important in the past few years and it is very important to
communicate the appropriate responsibilities to each area of the
bank. Training is available to personnel in order to assure
that they understand their compliance responsibilities and the
importance of achieving a high level of compliance with laws and
regulations.

The Compliance Department administers an effective system of
monitoring, or testing, procedures in several areas to ensure
that compliance of the regulations and laws are within
compliance standards. Upon the completion of monitoring
projects, areas where training are needed may be revealed.

We urge employees to ask questions and to use initiative in
becoming informed, as it is our bank's mission to keep our
employees well informed of the laws and regulations. We train
our personnel in order to help them understand their compliance
responsibilities and the importance of achieving a high level of
compliance with laws and regulations. This all translates in
efficient and better service for our customers.

Year 2000

The Year 2000 issue is the result of computer programs being
written using two digits rather than four to define the
applicable year. Any of the Corporation's programs that have
time sensitive software may recognize the date as the year 1900
rather than the year 2000. This could result in a major system
failure or miscalculations. The Federal Financial Institutions
Examination Council recognizes five phases that banks must
complete to achieve Year 2000 readiness: 1) Awareness of the
potential risks associated with Year 2000; 2) Assessment of all
information and environmental systems needing enhancements; 3)
Renovation of the systems that are not Year 2000 ready; 4)
Validation of the renovated systems to assure Year 2000
readiness; and 5) Implementation of the renovated product into
the ongoing operations. The Corporation has completed the
Awareness, Assessment and Renovation phases and has substantially
completed the validation of it's mission critical systems for Year
2000 readiness. At this time it is not expected that expenses
to address year 2000 issues will materially impact future
operating results. The Corporation has substantially
completed a year 2000 contingency plan to address the possible
risks that may be faced within and outside of the Corporation's
control.

Information as to Stock Prices and Dividends

The common stock of the Corporation is traded mostly through a
local brokerage firm and some private sales. 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, 1998, there were 2,585
shareholders of record of common stock.

Market and Dividend Summary

Dividend Date High Low Dividend

March 1997 26.75 23.13 0.13

June 1997 27.25 25.00 0.14

September 1997 29.00 25.63 0.15

October 1997 2% Stock Dividend

December 1997 33.00 27.38 0.16

March 1998 40.00 32.00 0.16

June 1998 40.00 38.13 0.17

September 1998 44.50 41.00 0.17

October 1998 2% Stock Dividend

December 1998 44.00 41.00 0.18

Hill, Barth & King, Inc.
Park Place South, Suite 200
155 South Park Avenue
Warren, Ohio 44481
(330) 394-3773 PHONE
(330) 395-3713 FAX
www.hbkcpa.com

January 19, 1999

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, 1998 and 1997 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, 1998. These consolidated financial
statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with 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, 1998 and 1997 and the
consolidated results of their operations and their consolidated
cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted
accounting principles.

Hill, Barth & King, Inc.
Certified Public Accountants

<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
(In Thousands of Dollars)
December 31, 1998 1997

ASSETS
<S> <C> <C>
Cash & due from banks $16,686 $13,480
Federal funds sold 5,994 5,702
TOTAL CASH AND CASH EQUIVALENTS 22,680 19,182

Securities available for sale - NOTE B 81,664 66,620
Other securities 2,655 1,686

Loans - NOTE C 286,802 275,094
Less allowance for credit losses - NOTE D 3,689 3,429
NET LOANS 283,113 271,665

Premises and equipment, net - NOTE E 7,785 6,025
Other assets 3,724 3,271
$401,621 $368,449

LIABILITIES AND STOCKHOLDERS EQUITY
Deposits (all domestic):
Noninterest-bearing $29,380 $26,282
Interest-bearing - NOTE F 292,138 279,548
TOTAL DEPOSITS 321,518 305,830

Borrowings:
U. S. Treasury interest-bearing demand note 72 559
Securities sold under repurchase agreements - NOTE G 24,473 14,659
Federal Home Loan Bank advances - NOTE H 5,343 4,612
TOTAL BORROWINGS 29,888 19,830

Other liabilities and deferred credits 2,941 1,866
TOTAL LIABILITIES 354,347 327,526

Commitments and contingent liabilities - NOTE I
Stockholders Equity - NOTES J, K:
Common Stock - Authorized 5,000,000 shares;
issued and outstanding 3,657,288 in 1998 and
3,491,137 in 1997 31,661 24,792
Retained earnings 15,337 15,717
Accumulated other comprehensive income 276 414
TOTAL STOCKHOLDERS EQUITY 47,274 40,923
$401,621 $368,449
<FN>
See accompanying notes to consolidated financial statements
</FN>
</TABLE>

<TABLE>
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
<CAPTION>
(In Thousands except Per Share Data)
Years ended December 31, 1998 1997 1996

INTEREST INCOME
<S> <C> <C> <C>
Interest and fees on loans $24,585 $23,487 $21,519
Interest and dividends on securities:
Taxable interest 3,558 3,017 2,257
Nontaxable interest 539 463 444
Dividends 137 106 95
Interest on federal funds sold 408 503 562
TOTAL INTEREST INCOME 29,227 27,576 24,877

INTEREST EXPENSE
Deposits 11,589 11,105 10,118
Short-term borrowings 1,147 1,024 638
TOTAL INTEREST EXPENSE 12,736 12,129 10,756
NET INTEREST INCOME 16,491 15,447 14,121
Provision for credit losses 840 855 655
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES 15,651 14,592 13,466

OTHER INCOME
Service charges on deposit accounts 1,175 1,176 1,090
Investment security gains 5 6 0
Other operating income 518 586 388
TOTAL OTHER INCOME 1,698 1,768 1,478
17,349 16,360 14,944
OTHER EXPENSES
Salaries and employee benefits - NOTE L 5,143 5,059 4,779
Net occupancy expense of premises 567 561 525
Furniture and equipment expense, including depreciation 549 491 521
State and local taxes 578 532 515
Other operating expenses 2,978 2,775 2,543
TOTAL OTHER EXPENSES 9,815 9,418 8,883
INCOME BEFORE FEDERAL INCOME TAXES 7,534 6,942 6,061

FEDERAL INCOME TAXES - NOTE M 2,419 2,200 1,930
NET INCOME 5,115 4,742 4,131

OTHER COMPREHENSIVE INCOME, NET OF TAX:
Unrealized gains (losses) on securities (138) 305 (107)
COMPREHENSIVE INCOME $4,977 $5,047 $4,024

NET INCOME PER SHARE $1.42 $1.36 $1.18
<FN>
See accompanying notes to consolidated financial statements
</FN>
</TABLE>

<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
(In Thousands of Dollars)
Years ended December 31, 1998 1997 1996
<S> <C> <C> <C>
COMMON STOCK
Balance at beginning of year $24,792 $24,254 $4,111
71,253 shares issued as a 2% stock dividend in 1998,
and 33,729 in 1996, including fractional shares 3,082 0 1,501
Excess of fair value of shares sold over treasury stock cost 0 15 0
Excess of fair value of shares issued as a stock dividend
over treasury stock cost 0 51 0
94,899 shares sold in 1998,
15,335 shares sold in 1997 and 59,618 in 1996 3,787 472 2,583
Transfer of additional paid-in capital to common stock 0 0 16,059
Balance at end of year 31,661 24,792 24,254

ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year 0 0 16,059
Transfer of balance to common stock 0 0 (16,059)
Balance at end of year 0 0 0

RETAINED EARNINGS
Balance at beginning of year 15,717 14,766 13,591
Net income 5,115 4,742 4,131
Dividends declared:
$.68 cash dividends per share in 1998,
$.58 in 1997 and $.88 in 1996 (2,413) (1,958) (1,455)
Stock dividends (3,082) (1,833) (1,501)
Balance at end of year 15,337 15,717 14,766

ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance at beginning of year 414 109 215
Net change in unrealized appreciation (depreciation) on
debt securities, net of income taxes (138) 305 (107)
Balance at end of year 276 414 108

TREASURY STOCK, AT COST
Balance at beginning of year 0 (4,319) 0
Purchase of treasury stock 0 0 (4,319)
67,907 shares reissued as a 2% stock dividend in 1997,
including fractional shares 0 1,783 0
Sale of treasury stock 0 2,536 0
Balance at end of year 0 0 (4,319)
TOTAL STOCKHOLDERS EQUITY AT END OF YEAR $47,274 $40,923 $34,809
<FN>
See accompanying notes to consolidated financial statements
</FN>
</TABLE>

<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
(In Thousands of Dollars)
Years ended December 31, 1998 1997 1996
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received $30,376 $28,327 $25,979
Fees and commissions received 1,670 1,723 1,418
Interest paid (12,769) (12,012) (10,759)
Cash paid to suppliers and employees (9,382) (8,777) (8,275)
Income taxes paid (2,393) (2,219) (2,075)
NET CASH PROVIDED BY OPERATING ACTIVITIES 7,502 7,042 6,288

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of investment securities available for sale 18,260 14,479 14,329
Proceeds from sales of investment securities available for sale 1,023 3,106 0
Purchases of other securities and securities available for sale (35,852) (38,547) (14,467)
Net increase in loans made to customers (11,973) (10,464) (35,031)
Purchases of premises and equipment (1,556) (745) (546)
NET CASH USED IN INVESTING ACTIVITIES (30,098) (32,171) (35,715)

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand deposits,
NOW accounts and savings accounts 13,818 3,115 (906)
Net increase in time deposits 10,528 17,848 21,381
Net increase in Federal Home Loan Bank Borrowings 731 3,212 1,400
Sale (Purchase) of Treasury Stock 0 2,537 (4,319)
Dividends paid (2,770) (1,858) (1,138)
Proceeds from sale of common stock 3,787 488 2,582
NET CASH PROVIDED BY FINANCING ACTIVITIES 26,094 25,342 19,000
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,498 213 (10,427)

CASH AND CASH EQUIVALENTS
Beginning of year 19,182 18,969 29,396
End of year $22,680 $19,182 $18,969

RECONCILIATION OF NET INCOME TO NET
CASH PROVIDED BY OPERATIONS
Net income $5,115 $4,742 $4,131
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 423 398 394
Amortization and accretion 1,353 1,228 1,178
Provision for credit losses 840 855 655
Gain on sale of investment securities (5) (6) 0
Deferred income taxes (84) (77) (70)
Other (140) (98) 0
NET CASH PROVIDED BY OPERATING ACTIVITIES $7,502 $7,042 $6,288

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
Supplemental schedule of noncash investing and financing activities:
Unrealized loss on available for sale securities $322 $42 $48
Real estate acquired by issuing note payable 650 0 0
<FN>
See accompanying notes to consolidated financial statements
</FN>
</TABLE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Farmers National Banc Corp. and Subsidiary
December 31, 1998, 1997, and 1996

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 eleven
(11) 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.

Other Securities:
Other securities include stock in the Federal Reserve Bank and the
Federal Home Loan Bank and are recorded at amortized cost.

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
and industrial loans.

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.

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".

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 3,599,096 for 1998, 3,490,644 for 1997 and 3,514,619 for
1996.

Comprehensive Income: Effective January 1, 1998, the Company
adopted Statement of Financial Accounting Standards no. 130,
"Reporting Comprehensive Income" ("SFAS 130") which establishes
new rules for the reporting and display of comprehensive income
and its components. The adoption had no impact on the company's
net income or stockholders equity. SFAS 130 requires unrealized
gains or losses on the Company's available-for-sale securities
to be included in other comprehensive income. Prior year
financial statements have been reclassified to conform to the
requirements of SFAS 130.

<TABLE>
NOTE B - SECURITIES AVAILABLE FOR SALE

Securities available for sale at December 31, 1998 and 1997 are summarized as follows:
<CAPTION>
(In Thousands of Dollars)
1998 1997
<S> <C> <C>
U.S. Treasury and U.S. Government agencies $68,593 $53,449
Corporate debt securities 2,004 4,026
Obligations of states and political subdivisions 11,067 9,145
TOTALS $81,664 $66,620
</TABLE>

<TABLE>
Net unrealized gains (losses) for securities available for sale at December 31, 1998 and 1997 are
summarized below:
<CAPTION>
(In Thousands of Dollars)
UNREALIZED UNREALIZED NET UNREALIZED
December 31, 1998 GAINS LOSSES GAINS (LOSSES)
<S> <C> <C> <C>
U.S. Treasury and U.S. Government agencies $594 ($274) $320
Corporate debt securities 2 (8) (6)
Obligations of states and political subdivisions 144 (40) 104
TOTALS $740 ($322) $418

December 31, 1997
U.S. Treasury and U.S. Government agencies $531 ($23) $508
Corporate debt securities 12 (15) (3)
Obligations of states and political subdivisions 126 (4) 122
TOTALS $669 ($42) $627
</TABLE>

<TABLE>
The fair value and book value of securities available for sale by contractual maturities at
December 31, 1998 are summarized below:
<CAPTION>
(In Thousands of Dollars)
FAIR VALUE BOOK VALUE
<S> <C> <C>
Due in 1 year or less $22,363 $22,278
Due after one year through five years 38,057 37,683
Due after five years through ten years 2,544 2,522
Due after ten years 18,700 18,763
TOTALS $81,664 $81,246
</TABLE>

Securities with a carrying value of $42 million at December 31, 1998
and $35 million at December 31, 1997 were pledged to secure deposits
in accordance with federal and state requirements and to secure
repurchase agreements sold.

NOTE C - LOANS
<TABLE>
Following is a summary of loans:
<CAPTION>
(In Thousands of Dollars)
December 31, 1998 1997
<S> <C> <C>
Real Estate - Mortgage $158,700 $148,740
Installment Loans to Individuals 116,164 114,470
Commercial, Financial and Agricultural 10,884 10,784
Subtotal 285,748 273,994
Net origination and deferred loan fees 1,054 1,100
TOTAL LOANS $286,802 $275,094
<FN>
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.
</FN>
</TABLE>

NOTE D - ALLOWANCE FOR CREDIT LOSSES
<TABLE>
Following is an analysis of changes in the allowance for credit losses for the years ended
December 31:
<CAPTION>
(In Thousands of Dollars)
1998 1997 1996
<S> <C> <C> <C>
Balance at beginning of year $3,429 $3,198 $2,911
Additions:
Provision for credit losses 840 855 655
Recoveries on loans previously charged off 294 200 184
TOTAL ADDITIONS 4,563 4,253 3,750
Credits charged off (874) (824) (552)
Balance at end of year $3,689 $3,429 $3,198
<FN>
The allowance for federal income tax purposes amounted to $753 thousand at December 31, 1998,
which is $2.936 million less than the allowance for financial accounting purposes.
</FN>
</TABLE>

NOTE E - PREMISES AND EQUIPMENT

Following is a summary of premises and equipment:

(In Thousands of Dollars)
December 31, 1998 1997
Land $2,046 $1,631
Premises 6,622 5,129
Equipment 3,896 3,625
Leasehold Improvements 185 180
12,749 10,565
Less accumulated depreciation (4,964) (4,540)
NET BOOK VALUE $7,785 $6,025

Depreciation expense was $423 thousand for the year ended December 31, 1998,
$398 thousand for 1997 and $394 thousand for 1996.

NOTE F - INTEREST-BEARING DEPOSITS

Following is a summary of scheduled maturities of certificates of deposit
during the years following December 31, 1998:

(In Thousands of Dollars)
1999 $109,869
2000 22,216
2001 5,850
2002 5,635
2003 and thereafter 7,987
TOTAL $151,557

Following is a summary of certificates of deposit of $100 thousand or more
by remaining maturities as of December 31, 1998:

(In Thousands of Dollars)
Three months or less $7,752
Three to six months 4,406
Six to twelve months 13,090
Over twelve months 6,959
TOTAL $32,207

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).
Securities underlying the agreements are U.S. Government
securities with a book value including accrued interest of
$17.511 million for the year ended December 31, 1998 and $15.593
million for 1997. The market value was $17.780 million for 1998
and $15.709 million for 1997. At December 31, 1998, these
agreements had a weighted average interest rate of 5.27% and
will mature January through March 1999. The securities,
although held in safekeeping outside the bank subsidiary, were
under the bank subsidiary's control. Securities sold under
repurchase agreements averaged monthly $18.397 million in 1998
and $14.887 million in 1997. Maximum amounts outstanding at any
month end during 1998 and 1997 were $25.792 million and $16.211
million, respectively.

The bank subsidiary has access to borrowing facilities at the
Federal Home Loan Bank, which totaled $31.766 million at
December 31, 1998.

NOTE H - FEDERAL HOME LOAN BANK ADVANCES

Federal Home Loan Bank advances at December 31, 1998 are secured
by a blanket pledge of residential mortgage loans totaling
$8.014 million.

December 31,
1998 1997
Weighted Weighted
Average Average
(In Thousands of Dollars) Amount Rate Amount Rate

Fixed-rate advances $1,440 5.80% $ 0 0.00%
Variable-rate advances 3,903 5.28% 4,612 5.84%
Total advances $5,343 5.42% $4,612 5.84%

Scheduled repayments of FHLB advances are as follows:

(In Thousands of Dollars)
Maturing in:
1999 $3,646
2000 257
2001 273
2002 289
2003 218
Later years 660
Total $5,343

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 $ 82
thousand for 1998, $114 thousand for 1997 and $125 thousand
for 1996. 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, 1998:

(In Thousands of Dollars)

Year ending:
December 31, 1999 $ 36
December 31, 2000 36
December 31, 2001 36
December 31, 2002 36
December 31, 2003 36
Later years 30
TOTAL $ 210

The bank subsidiary is required to maintain noninterest-bearing
reserve balances with the Federal Reserve Bank. The average
reserve balance was $7.677 million for 1998.

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
Financial instruments whose contract amounts
represent credit risk:
Commitments to extend credit $ 28,475
Standby letters of credit and financial guarantees written $ 473

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 and Columbiana
Counties in Ohio. The concentrations of credit by type of loan
are presented in Note C.

As the year 2000 approaches, the company recognizes the need to
ensure its operations will not be adversely impacted by year
2000 software failures. The Company is addressing this issue to
ensure the availability and integrity of its financial systems
and the reliability of its operational systems. The Company has
and will continue to make expenditures necessary to ensure that
its software systems and applications continue to function
before, during and after the year 2000. These expenses have not
been and are not expected to be material to the Company's
financial position or results of operations.

NOTE J - STOCKHOLDERS EQUITY

On March 28, 1996, 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 2.4 million shares, par value $2.50, to 5
million shares, without par value. The additional paid-in
capital account has been combined with common stock as presented
in the Consolidated Statements of Stockholders Equity.

NOTE K - REGULATORY MATTERS

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, 1998, that the bank subsidiary meets all capital
adequacy requirements to which it is subject.

As of December 31, 1998, 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 category.

<TABLE>
The following table reflects various measures of capital at year-end:
<CAPTION>
(In Thousands of Dollars)

Requirement
For Capital
Actual Adequacy Purposes:
Amount Ratio Amount Ratio
<S> <C> <C> <C> <C>
As of December 31, 1998

Total Capital
(to Risk-Weighted Assets) $45,724 17.10% $21,393 8.00%
Tier I Capital
(to Risk-Weighted Assets) $42,377 15.85% $10,697 4.00%
Tier I Capital
(to Average Assets) $42,377 10.85% $15,621 4.00%

As of December 31, 1997

Total Capital
(to Risk-Weighted Assets) $39,215 15.55% $20,181 8.00%
Tier I Capital
(to Risk-Weighted Assets) $36,058 14.29% $10,090 4.00%
Tier I Capital
(to Average Assets) $36,058 9.89% $14,589 4.00%
</TABLE>

NOTE L - RETIREMENT PLANS

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 to company retirement plans were
$207 thousand, $203 thousand and $179 thousand for the years
ended December 31, 1998, 1997 and 1996 respectively.

NOTE M - FEDERAL INCOME TAXES

<TABLE>
The provision for income taxes (credit) consists of the following:
<CAPTION>
(In Thousands of Dollars)
Years ended December 31 1998 1997 1996
<S> <C> <C> <C>
Current $2,503 $2,277 $2,000
Deferred (84) (77) (70)
TOTALS $2,419 $2,200 $1,930
</TABLE>

<TABLE>
Following is a reconciliation between federal income taxes at statutory rates and actual taxes based on
income before federal income taxes:
<CAPTION>
(In Thousands of Dollars)
Years ended December 31 1998 1997 1996
Percent of Percent of Percent of
Amount pretax inc Amount pretax inc Amount pretax inc
<S> <C> <C> <C> <C> <C> <C>
Statutory tax $2,637 35% $2,429 35% $2,122 35%
Effect of nontaxable interest (189) (3) (162) (2) (156) (3)
Other (29) 0 (67) (1) (36) 0
ACTUAL TAX $2,419 32% $2,200 32% $1,930 32%
</TABLE>

<TABLE>
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:
<CAPTION>
(In Thousands of Dollars)
Years ended December 31 1998 1997 1996
<S> <C> <C> <C>
Depreciation ($1) $41 $42
Provision for credit losses (89) (78) (98)
Deferred loan fees and origination costs 29 2 (13)
Federal Home Loan Bank dividends 32 26 0
Deferred compensation (80) (67) 0
Other (25) (1) (1)
TOTALS ($84) ($77) ($70)
</TABLE>

<TABLE>
Deferred tax liabilities (assets) are comprised of the following at December 31:
<CAPTION>
(In Thousands of Dollars)
Deferred tax assets: 1998 1997
<S> <C> <C>
Allowance for credit losses ($985) ($896)
Deferred compensation (210) (130)
Deferred loan fee income (31) (59)
Gross deferred tax assets (1,226) (1,085)

Deferred tax liabilities:
Depreciation 480 481
Mark-to-market adjustment - securities
available for sale 139 213
Federal Home Loan Bank dividends 77 45
Gross deferred tax liabilities 696 739
($530) ($346)
<FN>
No valuation allowance for deferred tax assets was recorded at December 31, 1998 and 1997. Federal
income taxes applicable to investment securities gains in 1998 and 1997 were $2 thousand each
year. Federal income taxes (benefit) applicable to other comprehensive income were $(71) thousand,
$157 thousand and $(55) thousand for 1998, 1997 and 1996, respectively.
</FN>
</TABLE>

NOTE N - LOANS TO RELATED PARTIES

Certain directors, executive officers and associates of such
persons were loan customers during 1998. Such loans were made
in the ordinary course of business under normal credit terms and
do not represent more that a normal risk of collection.
Following is an analysis of the amount of loans in which the
aggregate of the loans to any such person exceeded $60 thousand
during 1998:

(In Thousands of Dollars)
Total loans at December 31, 1997 $ 864
New loans 481
Repayments 237
Total loans at December 31, 1998 $ 1,108

NOTE O - 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, 1998:

Cash and cash equivalents:
The carrying amounts in the consolidated balance sheets of cash
and cash equivalents approximates their 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.

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 agreement
approximates their fair value.

Short-term borrowings:
The carrying amounts of short-term borrowings approximates their 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
counterparties. 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 counterparties at the
reporting date.

<TABLE>
The estimated fair values of the company's financial instruments as of December 31, 1998 and 1997 are
as follows:
<CAPTION>
(In Thousands of Dollars)
1998 1997
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $22,680 $22,680 $19,182 $19,182
Investment securities:
Available for sale 81,664 81,440 66,620 66,720
Other securities 2,655 2,655 1,686 1,686
Loans - Net 283,113 288,356 271,665 272,442
TOTAL FINANCIAL ASSETS $390,112 $395,131 $359,153 $360,030

Financial liabilities:
Deposits $321,518 $323,898 $305,830 $306,611
Securities sold under repurchase agreements 24,473 24,473 14,659 14,659
Short term borrowings 5,415 5,415 5,171 5,171
TOTAL FINANCIAL LIABILITIES $351,406 $353,786 $325,660 $326,441

Unrecognized financial instruments:
Commitments to extend credit $29,504 $29,504 $14,479 $14,479
Standby letters of credit and financial guarantees 473 473 406 406
</TABLE>

NOTE P - 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.

<TABLE>
(In Thousands of Dollars)
December 31, 1998 December 31, 1997
BALANCE SHEETS
<S> <C> <C>
Assets:
Cash $764 $5,186
Investment in bank subsidiary 42,667 36,373
Securities available for sale 3,830 0
Other securities 435 54
Other 71 8
$47,767 $41,621
Liabilities:
Accounts payable $763 $1,112
Stockholders equity:
Common stock 31,661 24,792
Retained earnings 15,337 15,717
Unrealized appreciation of debt securities,
net of applicable income taxes 6 0
TOTAL STOCKHOLDERS EQUITY 47,004 40,509
$47,767 $41,621
</TABLE>

<TABLE>
<CAPTION>
STATEMENTS OF INCOME (In Thousands of Dollars)
Years ended December 31, 1998 December 31, 1997 December 31, 1996
<S> <C> <C> <C>
Income:
Equity in net income of subsidiary $5,021 $4,819 $4,194
Interest and dividends on securities 209 0 0
TOTAL INCOME 5,230 4,819 4,194
Other expenses (115) (77) (63)
NET INCOME $5,115 $4,742 $4,131
</TABLE>

<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS (In Thousands of Dollars)
Years ended December 31, 1998 December 31, 1997 December 31, 1996
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $5,115 $4,742 $4,131
Adjustments to reconcile net income to net cash
provided by operating activities:
Income from subsidiary (5,021) (4,819) (4,194)
Dividends received from subsidiary 0 5,977 6,027
Other (59) 2 (1)
NET CASH PROVIDED BY OPERATING ACTIVITIES 35 5,902 5,963

Cash flows from investing activities:
Investment in subsidiary (1,273) (3,025) (2,582)
Purchases of other securities and securities available for sale (4,201) (54) 0
NET CASH USED IN INVESTING ACTIVITIES (5,474) (3,079) (2,582)
Cash flows from financing activities:
Purchase of treasury stock 0 0 (4,319)
Proceeds from sale of treasury stock 0 2,536 0
Dividends paid (2,770) (1,858) (1,138)
Proceeds from sale of common stock 3,787 488 2,582
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,017 1,166 (2,875)
NET INCREASE (DECREASE) IN CASH (4,422) 3,989 506

CASH
Beginning of year 5,186 1,197 692
End of year $764 $5,186 $1,197
<FN>
Cash dividends of $0, $5.976 million and $6.027 million were recevied from the bank subsidiary in 1998, 1997 and 1996,
respectively.
</FN>
</TABLE>

INSIDE BACK COVER

Drawing of Map of Ohio Highlighting Branch Locations

MAIN OFFICE

20 S. Broad St. Canfield, OH 44406 533-3341

AUSTNTOWN

22 N. Niles-Canfield Rd. Youngstown, OH 44515 792-1411

COLONIAL PLAZA

401 E. Main St. Canfield, OH 44406 533-2686

CORNERSBURG

3619 S. Meridian Rd. Youngstown, OH 44511 793-3971

LAKE MILTON

17817 Mahoning Ave. Lake Milton, OH 44429 654-3351

SALEM

1858 E. State St. Salem, OH 44460 332-1558

BOARDMAN

102 W. Western Reserve Rd. Youngstown, OH 44514 726-8896

COLUMBIANA

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

LEETONIA

16 Walnut St. Leetonia, OH 44431 427-2436

DAMASCUS

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

POLAND

106 McKinley Way West Poland, OH 44514 757-7508

<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000709337
<NAME> FARMERS NATIONAL BANC CORP
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 16,686
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5,994
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 81,664
<INVESTMENTS-CARRYING> 2,655
<INVESTMENTS-MARKET> 2,655
<LOANS> 286,802
<ALLOWANCE> 3,689
<TOTAL-ASSETS> 401,621
<DEPOSITS> 321,518
<SHORT-TERM> 27,362
<LIABILITIES-OTHER> 2,941
<LONG-TERM> 2,526
0
0
<COMMON> 31,661
<OTHER-SE> 15,613
<TOTAL-LIABILITIES-AND-EQUITY> 401,621
<INTEREST-LOAN> 24,585
<INTEREST-INVEST> 4,642
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 29,227
<INTEREST-DEPOSIT> 11,589
<INTEREST-EXPENSE> 12,736
<INTEREST-INCOME-NET> 16,491
<LOAN-LOSSES> 840
<SECURITIES-GAINS> 5
<EXPENSE-OTHER> 9,815
<INCOME-PRETAX> 7,534
<INCOME-PRE-EXTRAORDINARY> 7,534
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5115
<EPS-PRIMARY> 1.42
<EPS-DILUTED> 1.42
<YIELD-ACTUAL> 8.15
<LOANS-NON> 576
<LOANS-PAST> 435
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,429
<CHARGE-OFFS> 874
<RECOVERIES> 294
<ALLOWANCE-CLOSE> 3,689
<ALLOWANCE-DOMESTIC> 3,689
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0

</TABLE>

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No.)

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12

Farmers National Banc Corp.
(Name of Registrant of Specified in its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11:

Title of each class of securities to which transaction applies:
.................................................................
....................................................

Aggregate number of securities to which transaction applies:
.................................................................
...................................................

Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was
determined):
.................................................................
...................................................

Proposed maximum aggregate value of transaction:
.................................................................
...................................................

Total fee paid:
.................................................................
............................

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number or the Form or Schedule
and the date of its filing.

1. Amount Previously Paid:
......................................................

2. Form, Schedule or Registration Statement No.:
......................................................

3. Filing Party:
......................................................

4. Date Filed:
......................................................

(Amended by Sec. Act Rel No. 7331; Exch. Act Rel. No. 37692, eff 10/7/96)

FARMERS NATIONAL BANC CORP.
20 SOUTH BROAD STREET
CANFIELD, OHIO 44406

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON THURSDAY, MARCH 25, 1999

TO THE HOLDERS OF SHARES OF COMMON STOCK:

NOTICE IS HEREBY GIVEN that pursuant to call of its Directors,
the Annual Meeting of the Shareholders of FARMERS NATIONAL BANC
CORP., Canfield, Ohio will be held at Colonial Catering located
at 429 Lisbon Street, Canfield, Ohio 44406 on Thursday, March
25, 1999 at three-thirty o'clock (3:30) P.M., Eastern Standard
Time, for the purpose of considering and voting upon the
following matters:

1. ELECTION OF DIRECTORS. The election of the eight (8) persons
listed in the accompanying Proxy Statement.

2. AMENDMENT TO ARTICLE IV. To approve the proposal to amend
Article IV of the Corporation's Articles of Incorporation to
increase the authorized number of shares of common stock, no par
value, of the Corporation from 5,000,000 to 12,500,000.

3. APPROVAL OF THE 1999 STOCK OPTION PLAN AND RELEASE OF PREEMPTIVE
RIGHTS AS TO THE SHARES ISSUED UNDER THE PLAN. To approve the
adoption of the Farmers National Banc Corp. 1999 Stock Option
Plan and release of preemptive rights as to shares issued under
the Plan. A copy of the Stock Option Plan is included as
Exhibit 'A' to the Proxy Statement accompanying this Notice.

4. TO TRANSACT SUCH OTHER BUSINESS as may properly come before the
Meeting or any adjournment thereof.

Shareholders of record at the close of business on February 5,
1999 are the only shareholders entitled to notice of and to vote
at the Annual Shareholders Meeting.

By Order of the Board of Directors

/s/Frank L. Paden, President & Secretary

Canfield, Ohio
March 4, 1999

IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE,
WHETHER OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL
MEETING, PLEASE SIGN, DATE AND COMPLETE THE ENCLOSED PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE.

FARMERS NATIONAL BANC CORP.
CANFIELD, OHIO 44406

PROXY STATEMENT

ANNUAL MEETING OF SHAREHOLDERS

MARCH 25, 1999

Farmers National Banc Corp., herein referred to as "Farmers" or
the "Corporation" is furnishing this Proxy Statement to its
shareholders in connection with the solicitation, by order of
the Board of Directors of Farmers, of proxies to be used at the
Annual Meeting of Shareholders to be held on Thursday, March 25,
1999 at 3:30 P.M., Eastern Standard Time, at Colonial Catering,
429 Lisbon Street, Canfield, Ohio 44406, and at any adjournments
thereof. The Corporation is a one-bank holding company of which
The Farmers National Bank of Canfield is the wholly owned
subsidiary.

The cost for solicitation of proxies will be borne by Farmers.
Brokerage firms and other custodians, nominees and fiduciaries
may be requested to forward soliciting material to their
principals and to obtain authorization for the execution of
proxies. Farmers will, upon request, reimburse brokerage firms,
and other custodians, nominees and fiduciaries for the execution
of proxies and for their expenses in forwarding proxy material
to their principals.

The proxy statement and the form of proxy are being mailed on
March 4, 1999 or as soon thereafter as practicable to all
shareholders entitled to vote at the meeting. In addition to
use of mails, proxies may be solicited by officers, directors,
and employees of Farmers by personal interview, telephone and
telegraph.

The 1998 Annual Report, including the required audited
financial statements of the Corporation and related financial
information, is enclosed with this proxy soliciting material.

VOTING RIGHTS

Only shareholders of record at the close of business on
February 5, 1999 will be entitled to vote at the meeting. As of
February 5, 1999, Farmers had issued and outstanding 3,657,289
shares of common stock with no par value held by approximately
2,586 holders of record eligible to vote. Each outstanding
share entitles the recordholder to one vote. The number of
shares present at the meeting in person or by proxy will
constitute a quorum for the transaction of business.

It is important that your stock be represented at the meeting,
regardless of the number of shares you may own. We would
appreciate your signing and returning the enclosed proxy. The
shares represented by each proxy, which is properly executed and
returned to Farmers, will be voted in accordance with the
instructions indicated in such proxy. If no instructions are
indicated, shares represented by proxy will be voted "FOR" the
election of each of the Directors as described herein under
Proposal 1, "FOR" approval of the amendment to Article IV of the
Corporation's Articles of Incorporation as described herein
under Proposal 2, and "FOR" approval of the 1999 Stock Option
Plan and release of preemptive rights as to shares issued under
the plan as described herein under Proposal 3. The proxy may be
revoked at any time prior to its exercise, by delivering notice
of revocation or a duly executed proxy bearing a later date to
the Treasurer of the Corporation at any time before the proxy is
voted. Shareholders who attend the meeting in person may vote
their stock even though they may have sent in a proxy. No
officer or employee of Farmers may be named as a proxy. If you
received two or more proxy forms because of difference in
addresses or registration of shareholdings, each should be
executed and returned in order to assure a complete tabulation
of shares.

The corporation will appoint two officers to act as inspectors
for the purpose of tabulating the votes cast by proxy. Broker
non-votes and abstentions are not treated as votes cast for
purposes of any of the matters to be voted on at the meeting.

The Board of Directors knows of no other business that will be
presented for consideration at the 1998 Annual Meeting other
than the matters described in this Proxy Statement. If any
other matters should come before the meeting, the proxy holders
will vote upon them in accordance with their best judgment.

PROPOSAL 1:

ELECTION OF DIRECTORS

Pursuant to the Code of Regulations, the authorized number of
Directors of Farmers has been set at eight (8). The Board of
Directors has nominated the eight (8) persons named below to
serve as Directors until the next Annual Meeting or until their
earlier death, resignation or removal from office. With the
exception of Mr. Joseph D. Lane, each of the nominees currently
serves as a Director of Farmers. Election of Directors by
shareholders shall be determined by a plurality of the votes
cast by the shareholders who are entitled to vote at the
meeting, present in person or by proxy. If any of the nominees
should be unavailable to serve for any reason (which is not
anticipated), the Board of Directors may designate a substitute
nominee or nominees (in which case the persons named on the
enclosed proxy card will vote all valid proxy cards for the
election of such substitute nominee or nominees), allow the
vacancy or vacancies to remain open until a suitable candidate
or candidates are located, or by resolution provide for a lesser
number of Directors. It is presently anticipated that each
person elected as a Director of the Corporation at the Annual
Meeting will be elected by the Corporation as a Director of the
Corporation's wholly-owned subsidiary, Farmers National Bank of
Canfield.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
ELECTION OF THE EIGHT NOMINEES LISTED BELOW:

INFORMATION WITH RESPECT TO NOMINEES

Certain information in the following tabulation has been
furnished to Farmers by the respective nominees for Director.

Principal Occupation and Director
Name Five Year Business Experience Age Since (A)

Benjamin R. Brown President and Owner of Castruction 53 1991
Company, Incorporated in 1965. The
Company designs and manufactures
pre-cast shapes and associated
products for the steel industry.

Richard L. Calvin Vice Chairman since 1996, formerly, 72 1975
Executive Vice President/Cashier of
Farmers National Bank since 1972
and Executive Vice President/
Treasurer of Farmers National Banc
Corp. since 1983.

Joseph D. Lane Attorney and Principal of Lane & 46 N/A
Rusu Co. L.P.A. since 1995. Vice
President of Lane Funeral Homes,
Inc. since 1975 and Vice President
of Lane Life Paramedics Ambulance
Services since 1985.

David C. Myers President and Owner of Myers 70 1988
Equipment Corp. since 1955. The
Company sells truck equipment and
school buses. Mr. Myers has
operated a 2,000 - acre farm since
1946.

Edward A. Ort President of Ort Furniture Mfg. Co. 69 1993
since 1973. The Company
manufactures upholstered furniture
which is shipped to retail furniture
stores in northeastern United States
since 1957.

Frank L. Paden President & CEO of Farmers National 47 1992
Bank since 1996 and EVP/Sr. Loan
Officer since 1991. President &
Secretary of Farmers National Banc
Corp. since 1996.

William D. Stewart Chairman since 1996, formerly, 69 1972
President of Farmers National Bank
since 1972 and President &
Secretary of Farmers National Banc
Corp. since 1983.

Ronald V. Wertz C.P.C.U., C.I.C., Vice President 52 1989
with Acordia Insurance since 1998.
Previously was President and Owner
of Boyer Insurance, Inc. since 1981.

(A) Includes the period served as a Director of The Farmers
National Bank of Canfield prior to its reorganization into a
wholly owned subsidiary of this Corporation in 1983.

PROPOSAL 2:

PROPOSAL TO AMEND ARTICLES OF INCORPORATION TO INCREASE
AUTHORIZED NUMBER OF COMMON SHARES.

The Articles of Incorporation of the Corporation presently
authorize 5,000,000 shares, no par value. The Corporation's
Board of Directors unanimously adopted a resolution proposing
and declaring it advisable that Article IV of the Corporation's
Articles of Incorporation (the "Articles") be amended in order
to increase the authorized number of shares of the Corporation
to 12,500,000 shares, no par value ("Common Shares"), and
recommending to the shareholders of the Corporation the approval
of the proposed amendment. Of the Corporation's presently
authorized 5,000,000 Common Shares, as of December 31, 1998,
3,657,289 shares were outstanding.

The Board of Directors believes that it is desirable and in the
best interests of the Corporation and its shareholders to
increase the number of Common Shares that the Corporation is
authorized to issue. This will ensure that the Corporation will
have a sufficient number of authorized Common Shares available
in the future to provide it with the desired flexibility
necessary to meet its business needs. If this proposal is
approved by the shareholders, the additional Common Shares will
be available for a variety of corporate purposes, including for
example, the declaration and payment of share dividends to the
Corporation's shareholders; issuance of shares under the
Dividend Reinvestment Plan; share splits; use in the financing
of expansion or future acquisitions; issuance pursuant to the
terms of employee benefit plans; and use in other possible
further transactions of a currently undetermined nature.

If the proposed amendment is adopted, the Corporation would be
permitted to issue the additional authorized Common Shares
without further shareholder approval, except to the extent
otherwise required by the Articles, by law or by any securities
exchange on which the Common Shares may be listed at the time.
The authorization of additional Common Shares will enable the
Corporation, as the need may arise, to take timely advantage of
market conditions and the availability of favorable
opportunities without the delay and expense associated with the
holding of a special meeting of its shareholders. It is the
belief of the Board of Directors that the delay necessary for
shareholder approval of a specific issuance could be detrimental
to the Corporation and its shareholders. The Board of Directors
does not intend to issue any Common Shares except on terms which
the Board deems to be in the best interests of the Corporation
and its shareholders. Shareholders of the Corporation may have
preemptive rights to purchase Common Shares issued in the
future, unless such rights are specifically limited by the
Articles. Depending on the terms thereof, the issuance of the
Common Shares may or may not have a dilutive effect on the
Corporation's then-existing shareholders. Other than the Common
Shares which may be acquired pursuant to the Corporation's
existing Dividend Reinvestment Plan and Stock Option Plan (see
Proposal No. 3), the Corporation presently has no plans,
agreements or understandings to issue any of the newly
authorized Common Shares.

If the amendment is approved, it will become effective upon the
filing of a Certificate of Amendment to the Corporation's
Articles with the Ohio Secretary of State, which is expected to
be accomplished as promptly as practicable after such approval
is obtained.

ADOPTION OF THE PROPOSED AMENDMENT REQUIRES THE AFFIRMATIVE VOTE
OF THE HOLDERS OF TWO THIRDS (2/3) OF THE COMMON SHARES. THE
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE AMENDMENT.

PROPOSAL 3:

APPROVAL OF THE ADOPTION OF THE FARMERS NATIONAL BANC CORP. 1999
STOCK OPTION PLAN AND RELEASE OF PREEMPTIVE RIGHTS AS TO SHARES
ISSUED UNDER THE PLAN.

The following is a summary of the material provisions of the
Farmers National Banc Corp. 1999 Stock Option Plan (the "Plan")
which is attached as Exhibit `A' to this Proxy Statement and is
incorporated by reference into this summary description. This
summary is qualified entirely by reference to the Plan. Any
capitalized terms which are used in this summary description but
not defined have the meanings assigned to them in the Plan.

Introduction. On December 15, 1998, the Board of Directors
adopted the Plan. The Board of Directors urges stockholders to
read the Plan in its entirety. The Plan provides stock-based
compensation to eligible employees, including incentive and
nonqualified stock options and stock appreciation rights.
Stock-based compensation will typically be issued in
consideration for the performance of services to the Corporation.

The Board of Directors believes that the Plan will optimize the
profitability and growth of the Corporation through incentives
that link the interests of the Plan participants with those of
the Corporation's stockholders. The Board further believes that
the Plan will enable the Corporation to attract, retain and
motivate employees capable of making significant contributions
to the Corporation's success and to allow employees to share in
the success of the Corporation.

The Board of Directors expects the Plan to link the interests
of participants with those of the Corporation's stockholders by
giving participants an incentive to perform at a superior level
consistent with the Corporation's goals. The Board of Directors
believes that approval of the Plan is, therefore, in the
stockholders best interests.

Release of Preemptive Rights. Holders of Common Shares are
generally entitled to preemptive rights, subject to certain
exceptions described in Article XIII of the Corporation's
Articles of Incorporation. Consistent with the General
Corporation Law of Ohio, Article XIII allows for the release of
preemptive rights on shares issued under a stock option plan if
the release is approved by the affirmative vote of the holders
of a majority of the shares entitled to such preemptive rights.
If the holders of a majority of the common shares of the
Corporation vote "FOR" this proposal, shareholders will not have
preemptive rights on shares issued under the Plan. While the
release of preemptive rights may have a dilutive effect on the
holders of Common Shares, the Board of Directors feels that it
would not be practicable to implement a Stock Option Plan with
such shares subject to preemptive rights.

Administration. The Plan shall be administered by the
Compensation Committee of the Board or, alternatively at the
discretion of the Board, the Board may appoint a Stock Option
Plan Committee consisting of not less than two nor more than
five members to administer the Plan (collectively referred to as
the "Committee"). All Committee members shall be disinterested
directors qualified to serve pursuant to Rule 16b-3 under
Section 16 of the Securities Exchange Act of 1934, as amended
and in effect from time to time. Subject to the express
provisions of the Plan, the Committee shall have sole discretion
and authority to determine from time to time the individuals to
whom Options may be granted, the terms of the Stock Option
Agreement with the Optionee, including but not limited to, the
number of shares of Stock to be subject to each Option, the
period during which such Option may be exercised and the price
at which such Option may be exercised.

Eligibility. Directors and Officers of the Corporation and its
subsidiaries and such other employees, consultants or other
individuals the Board of Directors may from time to time
designate, shall be eligible to participate in the Plan.

Options. The Committee has discretion to award incentive stock
options ("ISOs"), which are intended to comply with Section 422
of the Internal Revenue Code, or nonqualified stock options
("NQSOs"), which are not intended to comply with Section 422 of
the Internal Revenue Code. Each option issued under the Plan
must be exercised within a period of ten years from the date of
grant, and the exercise price of an option may not be less than
the fair market value of the underlying shares of the
Corporation's Common Stock on the date of grant. At the time of
exercise, the full exercise price for a stock option must be
paid in cash or, if the Committee so provides, in shares of the
Corporation's Common Stock. Subject to the specific terms of
the Plan, the Committee has discretion to set such additional
limitations on option grants (including expiration or
termination provisions) as it deems appropriate. Options become
exercisable according to the following vesting schedule:

20% after one year from the date of grant
40% after two years from the date of grant
60% after three years from the date of grant
80% after four years from the date of grant
100% after five years from the date of grant

Stock Appreciation Rights. The Committee may grant Stock
Appreciation Rights (SAR) to participants under the Plan. A SAR
may be granted simultaneously with or subsequent to the option
to which the right is related, but each SAR must relate to a
particular option. In exchange for the surrender in whole or in
part of the related option to purchase shares of Common Stock,
the exercise of a SAR shall entitle a Participant to an amount
equal to the appreciation in value of the shares to which the
related option is being surrendered pursuant to such exercise.
Such appreciation in value shall be equal to the excess of the
Fair Market Value of such shares.

Option Grant. Options granted under the Plan will be evidenced
by written Stock Option Agreements specifying the number of
shares covered thereby and the option price, the exercise period
and all other terms, restrictions and conditions of the option.
The exercise price of all stock options granted under the Plan
must be at least equal to the Fair Market Value of such shares
on the date of grant. With respect to any Optionee who owns
stock possessing more than 10% of the voting rights of the
Corporation's outstanding Common Stock, the exercise price of
any stock option must be not less than 110% of the Fair Market
Value on the date of grant for ISO's.

Number of Available Shares. Up to 375,000 shares of the
Corporation's Common Stock are authorized for issuance through
the Plan. The Plan provides for appropriate adjustments in the
number of shares of the Corporation's Common Stock subject to
awards and available for future awards in the event of changes
in outstanding Common Stock by reason of a merger, stock split
or certain other events.

Amendment and Termination. The Board of Directors may modify,
amend or terminate the Plan at any time. However, no such
action may materially increase either the benefits to
Participants under the Plan or the number of shares that may be
issued under the Plan, materially modify the eligibility
requirements, reduce the Option Price or impair any outstanding
option or SAR. The Board of Directors will seek stockholder
approval of an amendment if necessary under Internal Revenue
Service Regulations or any applicable law. Subject to the right
of the Board of Directors to modify, amend or terminate the
Plan, the Plan will remain in effect until all options and
rights granted thereunder have been exercised or expired in
accordance with the terms of the Plan. However, in no event
will the Board of Directors grant awards under the Plan on or
after December 15, 2008.

Federal Income Tax Consequences. The following description of
Federal Income Tax Consequences is based upon existing statutes,
regulations and interpretations as of the date of this Proxy
Statement. Because the currently applicable rules are complex
and the tax laws may change and because income tax consequences
may vary depending upon the particular circumstances of each
participant, each participant should consult his or her own tax
advisor concerning Federal (and any state and local) Income Tax
Consequences. The following discussion does not purport to
describe state or local income tax consequences.

Options so designated under the Option Plan are intended to
qualify as Incentive Stock Options ("ISOs") within the meaning
of Section 422 of the Internal Revenue Code of 1986 (the
"Code"). All Options that are not designated as ISOs are
intended to be Non-Qualified Stock Options ("NQSO").

Incentive Stock Options. The Optionee will recognize no income
upon the grant of an ISO and incur no tax on its exercise
(unless the Optionee is subject to the alternative minimum tax).
If the Optionee holds the stock acquired upon exercise of an
ISO (the "ISO Shares") for more than one year after the date the
option was exercised and for more than two years after the date
the option was granted, the Optionee generally will realize
long-term capital gain or loss (rather than ordinary income or
loss) upon disposition of the ISO Shares. This gain or loss
will be equal to the difference between the amount realized upon
such disposition and the amount paid for the shares.

If the Optionee disposes of ISO Shares prior to the expiration
of either holding period (a "disqualifying disposition"), then
gain realized upon such disposition, up to the difference
between the Fair Market Value of the shares on the date of
exercise (or, if less, the amount realized on a sale of such
shares) and the option exercise price, will be treated as
ordinary income. Any additional gain will be long-term or
short-term capital gain, depending upon the amount of time the
ISO Shares were held by the Optionee.

Non-Qualified Stock Options. An Optionee will not recognize
any taxable income at the time a NQSO is granted. However, upon
exercise of a NQSO, the Optionee will include in income as
compensation an amount equal to the difference between the Fair
Market Value of the shares on the date of exercise (or, in the
case of exercise for stock subject to a substantial risk of
forfeiture, at the time such forfeiture restriction lapses) and
the amount paid for that stock upon exercise of the NQSO. In
the case of stock subject to a substantial risk of forfeiture,
if the Optionee makes an 83(b) election, the included amount
will be based on the difference between the Fair Market Value on
the date of exercise and the Option exercise price. The
included amount will be treated as ordinary income by the
Optionee and will be subject to income tax withholding by the
Corporation (either by payment in cash by the Optionee or
withholding out of the Optionee's salary). Upon sale of the
shares by the Optionee, any appreciation or depreciation in the
value of the shares will be treated as capital gain or loss
(either long- or short-term, depending upon the time the
Optionee holds the shares after exercising the NQSO).

Tax Treatment of the Corporation. The Corporation will be
entitled to a deduction in connection with the exercise of a
NQSO by a domestic employee or Director to the extent that the
Optionee recognizes ordinary income and the Corporation
withholds tax. The Corporation will be entitled to a deduction
in connection with the disposition of ISO Shares only to the
extent that the Optionee recognizes ordinary income on a
disqualifying disposition of the ISO Shares.

ADOPTION AND APPROVAL OF THE FARMERS NATIONAL BANC CORP. 1999
STOCK OPTION PLAN REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS
OF A MAJORITY OF THE COMMON SHARES. THE BOARD OF DIRECTORS
RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSAL.

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth information regarding beneficial
ownership as of December 31, 1998, of the Corporation's common
shares of each Director and all Executive Officers as a group.

Aggregate Number of Percent of
Shares Beneficially Outstanding
Name Owned (A) Shares

Benjamin R. Brown 28,543 .78%

Richard L. Calvin 33,652 .92%

Joseph O. Lane 83,378 2.28%

David C. Myers 22,982 .63%

Edward A. Ort 6,562 .18%

Frank L. Paden 8,861 .24%

William D. Stewart 29,001 .79%

Ronald V. Wertz 27,536 .75%

Executive Officers as a Group 12,027 (B) .33%

All Directors and
Executive Officers as a Group 243,681 6.66%

(A) Information relating to beneficial ownership is based upon
information available to Farmers and uses "Beneficial Ownership"
concepts set forth in the rules of the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as
amended. Under such rules, Beneficial Ownership includes those
shares over which an individual has sole or shared voting,
and/or investment powers such as beneficial interest of a
spouse, minor children, or other relatives living in the home of
the named individual, trusts, estates and certain affiliated
companies.

(B) Includes 8,861 shares held by Frank L. Paden, President and
CEO of Farmers National Bank of Canfield and President and
Secretary of the Corporation.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires
the Corporation's Directors and executive officers, and persons
who own more than 10% of a registered class of the Corporation's
equity securities, to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports
of changes in ownership of Common Stock and other equity
securities of the Corporation. Officers, Directors and greater
than 10% stockholders are required by SEC regulation to furnish
the Corporation with copies of all Section 16(a) forms they file.

To the Corporation's knowledge, based solely on a review of the
copies of such reports furnished to the Corporation and written
representations that no other reports were required, during
1998, all Section 16(a) filing requirements applicable to its
officers, Directors and greater than 10% beneficial owners were
complied with.

COMMITTEES OF THE BOARD OF DIRECTORS

At the Directors' organizational meeting, held immediately
following the last Annual Shareholders Meeting of The Farmers
National Banc Corp. held on March 26, 1998, the following
committees were appointed by the Chairman:

EXECUTIVE COMPENSATION AND EMPLOYEES SALARY COMMITTEE: Joseph
O. Lane, Chairman; Benjamin R. Brown, Richard L. Calvin, David
C. Myers, Edward A. Ort, William D. Stewart and Ronald V. Wertz.

The Executive Compensation and Employees Salary Committee
reviews the compensation of the official staff and makes
recommendations regarding all employee benefits to the Board of
Directors. This committee met one time in 1998.

AUDIT & EXAMINING COMMITTEE: David C. Myers, Chairman;
Benjamin R. Brown, Edward A. Ort, and Ronald V. Wertz.

The Audit and Examining Committee directs the activities of the
internal audit staff, reviews the internal auditor's reports,
reviews all examinations of the Comptroller of the Currency and
makes recommendations to the Board regarding the engagement of
an external auditing firm to perform the annual audit and
prepare income tax returns. This committee met four times in
1998.

DISCOUNT LOAN COMMITTEE: Frank L. Paden, Chairman; Benjamin
R. Brown, Richard L. Calvin, Joseph O. Lane, David C. Myers,
Edward A. Ort, William D. Stewart, and Ronald V. Wertz.

The Discount Loan Committee meets weekly to review all loans
made during the previous week and to approve all loan
commitments which are either above the assigned lending limits
of the loan officers or are not in keeping with existing bank
policy.

BUILDING COMMITTEE: Richard L. Calvin, Chairman; Ad Hoc.

The Building Committee oversees site selection, office
additions and modifications. This committee met one time in 1998.

LONG RANGE AND STRATEGIC PLANNING COMMITTEE: Frank L. Paden,
Chairman; Benjamin R. Brown, Richard L. Calvin, Joseph O. Lane,
David C. Myers, Edward A. Ort, William D. Stewart, and Ronald V.
Wertz.

The Long Range and Strategic Planning Committee is responsible
for formulation and implementation of the Strategic Plan for the
operation of the Corporation. This committee met once in 1998.

NOMINATING COMMITTEE: Frank L. Paden, Chairman; Benjamin R.
Brown, Richard L. Calvin, Joseph O. Lane, David C. Myers, Edward
A. Ort, William D. Stewart, and Ronald V. Wertz.

The Nominating Committee makes decisions with respect to: (a)
nominees for election as Director at the Annual Meeting of
shareholders; (b) nominees to fill Board vacancies between
Annual Meetings; and (c) the composition of membership of the
various other standing committees. This committee met once in
1998.

RISK MANAGEMENT AND INSURANCE COMMITTEE: Ronald V. Wertz,
Chairman; Benjamin R. Brown, Richard L. Calvin, and Carl D.
Culp, EVP/Cashier/CFO.

The Risk Management and Insurance Committee is responsible for
reviewing coverage and protection levels of insurance maintained
by the Bank. The committee met once in 1998.

During 1998, each Director standing for re-election, was
present for more that 75% of the combined number of meetings of
the Board of Directors and of each committee of the Board on
which such director served. There were twelve regular and six
special meetings of the Board of Directors in 1998.

Members of the Board of Directors receive $500.00 for each
board meeting they attend, and $300.00 for each committee
meeting they attend with the exception of inside Directors who
receive no compensation for committee meetings.

NOTE: THE ABOVE COMMITTEES ARE COMMITTEES OF THE FARMERS
NATIONAL BANK OF CANFIELD (THE BANK), A WHOLLY OWNED SUBSIDIARY
OF FARMERS NATIONAL BANC CORP. CURRENTLY, THE MEMBERS OF
FARMERS' BOARD OF DIRECTORS ALSO SERVE AS THE DIRECTORS OF THE
BANK, AND ATTEND BOARD MEETINGS FOR BOTH FARMERS AND THE BANK.
ALTHOUGH THESE MEETINGS ARE CONDUCTED SEPARATELY ON THE SAME
DAY, A MEMBER RECEIVES COMPENSATION (WHICH IS PAID BY FARMERS)
FOR ONLY ONE MEETING, CONSEQUENTLY, MEMBERS ATTENDING A MEETING
OF THE BOARDS OF BOTH FARMERS AND THE BANK ON A SINGLE DAY ARE
CREDITED WITH ONE BOARD MEETING FOR ATTENDANCE AND COMPENSATION
PURPOSES.

<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>

Name and Principal Position Year Annual Salary Bonus 401(k) All Other
and Director Corporation Compensation
Fees (a) Contribution (c)
(b)
<S> <C> <C> <C> <C> <C>
Frank L. Paden, President & CEO 1998 118,917 0 7,975 383

1997 103,665 0 7,486 1,098

1996 86,318 0 4,749 1,038
<FN>

(a) The amount of Director Fees included in this annual amount
is as follows: Paden ($9,300, $7,900 and $6,250).

(b) In May, 1996, the Corporation adopted a 401(k) Profit
Sharing Retirement Savings Plan. All employees of Farmers
National 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 Corporation 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
Corporation may make an additional profit sharing contribution
to the Plan. The Corporation's contributions are subject to a
vesting schedule and the Plan meets the requirements of Section
401(a) of the Internal Revenue Code and Department of Labor
Regulations under ERISA.
(c) Amounts represent cost of group term life insurance and
other benefits.

Listed is the total compensation paid by the Corporation's
subsidiary, The Farmers National Bank of Canfield during the
latest fiscal year to the named person(s) for services in all
capacities, specifically setting forth the direct compensation
to the President & CEO. No other executive officer of Farmers
receives the total annual salary and bonus in excess of $100,000.

In 1991, as a result of certain changes in the Internal Revenue
Code, the Bank's pension plan was amended to reduce
significantly the benefits of several key employees, including
those of Mr. Paden. As a result, the Bank has entered into
Deferred Compensation Agreements with certain of its executive
officers, including Mr. Paden. Under the terms of the Deferred
Compensation Agreement, he will receive monthly payments of
$930.00 for a period of two hundred and four (204) months,
commencing with retirement age of 65. This agreement also
provides that these executive officers will be available to
perform consulting services for the Bank during the period he is
receiving these payments, and prohibits him from entering into
competition with the Corporation during that same period. In
the event that any payments should still remain due and payable
to the executive officer under the Agreement at the time of his
death, those payments would be made to his surviving spouse. In
the event that any payment should still remain due and payable
to either the executive officer or his spouse under the
Agreement at the death of the survivor of them, those payments
would be reduced to their then present value at a predetermined
rate of interest and paid to the estate of the survivor in a
lump sum. Payments will be prorated in the event the employee
retires before the age of 65, and will be increased
proportionately if he retires after the age of 65. The
Agreement is funded by a life insurance policy owned by the
bank, on which the Bank is the beneficiary and the premiums of
which are paid by the Bank.

NOTE: Tables containing disclosures of Stock Appreciation
Rights and Plans and Long Term Incentive Plans have been omitted
because no such programs exists for The Farmers National Bank of
Canfield and although the Farmers National Banc Corp. 1999 Stock
Option Plan has been approved by the Board of Directors on
December 15, 1998, no Options or Stock Appreciation rights have
been granted in 1998.

No Employment Contracts or Golden Parachute Agreements exist
between any executive officer and either Farmers National Banc
Corp. or The Farmers National Bank of Canfield.

INDEBTEDNESS OF MANAGEMENT

Farmers has had, and expects to have in the future, banking
transactions in the ordinary course of business with Directors,
executive officers and their associates on the same terms,
including interest rates and collateral on loans, as those
prevailing at the same time for comparable transactions with
others. Since the beginning of 1998, the largest aggregate
extensions of credit to executive officers, Directors and their
associates during the year ended December 31, 1998 was
$1,514,016 or 3.20% of Equity Capital Accounts. In the opinion
of the management of Farmers, these transactions do not involve
more than a normal risk of collectability or present other
unfavorable features.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee of the Board of Directors is made up
of all of the outside Directors of Farmers. No officers of the
corporation sit on this committee. This committee reports back
to the full board but its decisions are not subject to full
board approval. The committee has the purpose and
responsibility of providing the Bank, its staff and the
communities it serves with consistent long-term leadership of
the highest quality possible while protecting the interests of
the shareholders.

The committee sets the limits for increases in the aggregate
for all staff, reviews performance of executive officers and
sets their salaries for the coming year. In addition, any
incentive/bonus program is set by the board based on the
recommendation of the compensation committee.

The committee takes a straightforward approach to the review of
executives and bases its consideration of salaries on specific
job performance, contribution to target levels of growth,
profitability, stability, capital and return on equity (ROE) and
return on assets (ROA). Also considered is the executive's
contribution to the general success of the Bank and its business
plan and community standing, which cannot necessarily be
quantified in an appropriated manner but is weighted heavily in
a community bank, which is located exclusively in small
communities. Successful bank operations are contingent upon
accomplishment in all areas and integration with the business
community's direction and success in our market areas.
Executive performance must therefore be evaluated by using these
factors as well. Specific results of each executive's area of
responsibility are evaluated and considered, but would not be
appropriately discussed here as a matter of confidentiality.

The committee evaluates the President on the same basis as
other executive offices with weight being given to the
achievement of target levels of growth, capital and return on
equity and, in addition, specific target goals of the overall
strategic plan of the Bank. The accomplishment of meeting the
goals and targets are reflected in the Summary Compensation
Table.

The members of the Compensation Committee are Joseph O. Lane,
Chairman; Benjamin R. Brown, Richard L. Calvin, David C. Myers,
Edward A. Ort, William D. Stewart and Ronald V. Wertz. None has
registered a disagreement with the above report.

Compensation Committee Interlocks and Insider Participation

No member of the Compensation Committee is currently or was at
any time during 1998, an officer or an employee of, or had an
employment agreement with the Corporation or the Bank. No
corporate or committee interlocks exist which require disclosure
under SEC regulations.

PERFORMANCE GRAPH

The Securities and Exchange Commission requires a line graph
presentation comparing cumulative, five-year shareholder returns
on an indexed basis with a broad equity market index and either
a nationally recognized industry standard or an index of peer
companies selected by the Corporation. The Corporation has
selected the NASDAQ Stock Market US Index and the NASDAQ Banks
Index for purposes of this performance comparison which appears
below. The Performance Graph presents a comparison which
assumes $100 invested on December 31, 1993, in the Corporation's
common stock, The NASDAQ Stock Market US Index and the NASDAQ
Banks Index.

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN *
AMONG FARMERS NATIONAL BANC CORP., THE NASDAQ STOCK MARKET - US
INDEX AND THE NASDAQ BANKS INDEX

[PERFORMANCE GRAPH PAPER COPY MAILED TO SEC]

TOTAL RETURN GRAPH DATA

12/93 12/94 12/95 12/96 12/97 12/98

Farmers National Banc Corp. 100 131 192 251 350 499

NASDAQ Stock Mkt-US 100 98 138 170 209 293

NASDAQ Bank 100 100 148 196 328 325

RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors has elected Hill, Barth and King to
serve as the Corporation's independent public accountant for the
fiscal year ending December 31, 1999. Hill, Barth and King also
served as the Corporation's independent public accountant for
the fiscal year ended December 31, 1998. Hill, Barth and King
is expected to have a representative present at the Annual
Meeting and will be available to respond to shareholders'
questions and if they desire, will have an opportunity to make
any statement they consider appropriate.

SHAREHOLDER PROPOSALS

Any Shareholder proposal intended to be placed in the Proxy
Statement for the 1999 Annual Meeting to be held in March 2000
must be received by the Corporation no later than December 1,
1999. Written proposals should be sent to Carl D. Culp,
Executive Vice President and Treasurer, Farmers National Banc
Corp., 20 South Broad Street, P.O. Box 555, Canfield, Ohio
44406. Each proposal submitted should be accompanied by the
name and address of the shareholder submitting the proposal and
the number of shares owned. If the proponent is not a
shareholder of record, proof of beneficial ownership should also
be submitted. All proposals must be a proper subject for action
and comply with the proxy rules of the Securities and Exchange
Commission. Reference is made to Rule 14a-8 under the
Securities Exchange Act of 1934, as amended, for information
concerning the content and form of such proposal and the manner
in which such proposal must be made.

ANNUAL REPORT ON FORM 10-K

A copy of the Corporation's 1998 report filed with the
Securities and Exchange Commission, on Form 10-K, will be
available without charge to shareholders upon written request to
Carl D. Culp, Executive Vice President and Treasurer, Farmers
National Banc Corp., 20 South Broad Street, P.O. Box 555,
Canfield, Ohio 44406.

BY ORDER OF THE BOARD OF DIRECTORS

FRANK L. PADEN, PRESIDENT & SECRETARY

FARMERS NATIONAL BANC CORP.
20 South Broad St., P.O. Box 555, Canfield, Ohio 44406

PROXY FOR ANNUAL MEETING
SOLICITED BY THE BOARD OF DIRECTORS

KNOW ALL MEN BY THESE PRESENT, that I, the Undersigned
Shareholder of Farmers National Banc Corp. of Canfield, Ohio, do
hereby nominate and appoint William D. Calhoun, Ronald V. Wertz
and David W. Yeany (no officer or employee of the Corporation
may be named as proxy) or any one of them (with full power to
act alone), my true and lawful attorney(s) with full power of
substitution, for me and in my name, place and stead to vote all
the Common Stock of said Corporation standing in my name on its
books on February 5, 1999, at the Annual Meeting of its
Shareholders to be held at Colonial Catering, 429 Lisbon Street,
Canfield, Ohio 44406, on Thursday, March 25, 1999, at 3:30 P.M.,
Eastern Standard Time, or any adjournment thereof with all the
powers the undersigned would possess if personally present as
follows:

1. ELECTION OF DIRECTORS: The election of the eight (8) persons
listed in the Proxy Statement dated March 4, 1999 accompanying
the notice of said meeting.

FOR (all nominees except as indicated below) ______
WITHHOLD AUTHORITY (as to all nominees)______ To withhold your
vote from certain nominees, strike a line through their name.
Benjamin R. Brown, Richard L. Calvin, Joseph D. Lane,
David C. Myers, Edward A. Ort, Frank L. Paden,
William D. Stewart, Ronald V. Wertz

2. AMENDMENT TO ARTICLE IV: To approve the proposal to amend
Article IV of the Corporation's Articles of Incorporation to
increase the authorized number of common shares, no par value,
of the Corporation from 5,000,000 to 12,500,000.
( ) FOR ( ) AGAINST ( ) ABSTAIN

3. APPROVAL OF THE 1999 STOCK OPTION PLAN AND RELEASE OF PREEMPTIVE
RIGHTS AS TO THE SHARES ISSUED UNDER THE PLAN. To approve the
adoption of the Farmers National Banc Corp. 1999 Stock Option Plan
and release of preemptive rights as to shares issued under the Plan.
( ) FOR ( ) AGAINST ( ) ABSTAIN

4. SUCH OTHER BUSINESS as may properly come before the meeting or
any adjournment thereof.

IN THE ABSENCE OF INSTRUCTIONS TO THE CONTRARY, THIS PROXY
CONFERS AUTHORITY TO VOTE AND WILL BE VOTED "FOR" EACH
PROPOSITION LISTED. If any other business is presented at said
meeting, this Proxy shall be voted in accordance with the
recommendations of The Board of Directors.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE
LISTED PROPOSITIONS. This proxy is solicited on behalf of The
Board of Directors and may be revoked prior to its exercise.

WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY
AS POSSIBLE (whether or not you plan to attend the meeting in
person).

IF YOU DO ATTEND THE MEETING, YOU MAY THEN WITHDRAW YOUR PROXY.
THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS EXERCISE.

DATED ________________________________________

________________________________________

Signature of Shareholder(s) *

*When signing as attorney, executor, administrator, trustee or
guardian, please give full title. If more than one trustee, all
should sign. All joint others must sign.

The following exhibits are filed or incorporated by reference as part
of this report:

1. Farmers National Banc Corp. 1999 Stock Option Plan (filed herewith).

</TABLE>

FARMERS NATIONAL BANC CORP.
1999 STOCK OPTION PLAN

ARTICLE I
THE PLAN

Section 1.1 Name. This plan shall be known as the "Farmers
National Banc Corp. 1999 Stock Option Plan."

Section 1.2 Purpose. The purpose of the Plan is to advance the
interests of Farmers National Banc Corp. (the "Company") and its
shareholders by affording to Directors and officers of the
Company and Farmers National Bank (the "Bank") an opportunity to
acquire or increase their proprietary interest in the Company by
the grant to such persons of (a) options to purchase shares of
the Company's common stock and (b) Stock Appreciation Rights
related to the Options under the terms set forth herein. By
encouraging such persons to become owners of the Company, the
Company seeks to attract, motivate, reward and retain those
highly competent individuals upon whose judgment, initiative,
leadership and efforts the success of the Company depends. It
is intended that certain Options granted under this Plan will
qualify and that certain other Options will not qualify as
incentive stock options as defined in Section 422 of the
Internal Revenue Code of 1986, as amended, and the terms of the
Options shall be interpreted in accordance with their
designation in the Option Agreement.

Section 1.3 Effective Date and Term. The Plan was approved by
the Board of Directors of the Company on December 15, 1998, and
shall be effective March 25, 1999, subject to approval and
ratification by a majority of the shareholders of the Company,
present in person or by proxy, at the annual meeting of
shareholders of the Company to be held in 1999. The Plan shall
terminate upon the tenth (10th) anniversary of the Effective
Date.

ARTICLE II
DEFINITIONS

Section 2.1 Definitions. As used herein, the following terms
shall have the meaning set forth below, unless the context
clearly requires otherwise:

(a) "Bank" shall mean the Farmers National Bank.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended, and any successor statutes.
(d) "Committee" shall mean the Compensation Committee of the
Board, or the Stock Option Plan Committee if one is appointed by
the Board to administer the Plan.
(e) "Company" shall mean Farmers National Banc Corp.
(f) "Director" shall mean a member of the Board of Directors of
the Company and, or the Bank.
(g) "Effective Date" with respect to the Plan shall mean the
date specified in Section 1.3 as the Effective Date.
(h) "Fair Market Value" with respect to a share of Stock shall
mean the Fair Market Value of the Stock as determined by the
Committee on the basis of such factors as they deem appropriate;
provided, however, that if at the time the determination of fair
market value is made, those shares are admitted to trading on a
national securities exchange for which sales prices are
regularly reported the fair market value of those shares shall
not be less than the mean of the high and low asked or closing
sales price reported for the Common Stock on that exchange on
the day or most recent trading day preceding the date on which
the Option is granted. For purposes of this Section 2.1(h), the
term "national securities exchange" shall include the National
Association of Securities Dealers Automated Quotation System and
the over-the-counter market.
(i) "ISO" shall mean any Option under this Plan which is to be
an incentive stock option under Code Sections 422.
(j) "NQSO" shall mean any Option granted under this Plan which
is not intended to qualify as an incentive stock option under
Code Section 422.
(k) "Option" shall mean a stock option, whether an ISO or NQSO,
granted pursuant to this Plan.
(l) "Optioned Stock" shall mean the Stock subject to an
Option or Stock Appreciation Right.
(m) "Optionee" or "Participant" shall mean a Director,
officer or employee of the Bank or the Company to whom an Option
has been granted.
(n) "Plan" shall mean the Farmers National Banc Corp. 1999 Stock
Option Plan, the terms of which are set forth herein.
(o) "SEC" shall mean the Securities and Exchange Commission.
(p) "Plan Year" shall mean the twelve-month period beginning on
the Effective Date, and each twelve-month period thereafter
beginning on the anniversary date of the Effective Date.
(q) "Stock" shall mean the Common Stock of the Company or, in
the event that the outstanding shares of Stock are changed into
or exchanged for shares of a different stock or securities of
the Company or some other entity, such other stock or securities.
(r) "SAR" or "Stock Appreciation Right" shall mean a right to
receive cash in an amount equal to the excess of the fair market
value of a share of Stock on the exercise date over the fair
market value of a share of Stock on the date the Stock
Appreciation Right is granted pursuant to the provisions of the
Plan.
(s) "Stock Option Agreement" shall mean the agreement between
the Company and the Optionee under which the Optionee may
purchase Stock pursuant to the terms of the Plan.

ARTICLE III
CHARACTERIZATION OF OPTIONS

Section 3.1 Characterization of Options. Options granted in
accordance with the terms hereof within the limits prescribed by
Article VII hereof and which are specified in the Option
Agreement as intended to be incentive stock options, are to be
incentive stock options as provided in Code Section 422. All
other Options granted hereunder shall be nonqualified options.

ARTICLE IV
ADMINISTRATION

Section 4.1 Administration.

(a) The Plan shall be administered by the Compensation Committee
of the Board or, alternatively at the discretion of the Board,
the Board may appoint a Stock Option Plan Committee consisting
of not less that two nor more than five members to administer
the Plan. All Committee members shall be disinterested
directors qualified to serve pursuant to Rule 16b-3 under
Section 16 of the Securities Exchange Act of 1934, as amended
and in effect from time to time.

(b) Subject to the express provisions of the Plan, the Committee
shall have sole discretion and authority to determine from time
to time the individuals to whom Options may be granted, the
terms of the Stock Option Agreement with the Optionee, including
but not limited to, the number of shares of Stock to be subject
to each Option, the period during which such Option may be
exercised and the price at which such Option may be exercised.

(c) Meetings of the Committee shall be held at such times and
places as shall be determined from time to time by the
Committee. A majority of the members of the Committee shall
constitute a quorum for the transaction of business and the vote
of a majority of those members present at any meeting shall
decide any question brought before the meeting. In addition, the
Committee may take any action otherwise proper under the Plan by
the affirmative vote, taken without a meeting, of a majority of
the members.

(d) No member of the Committee shall be liable for any act or
omission of any other member of the Committee or for any act or
omission on his own part, including, but not limited to, the
exercise of any power or discretion given to him under the Plan,
except those resulting from his own gross negligence or willful
misconduct. All questions of interpretations and application
with respect to the Plan or Options granted thereunder shall be
subject to the determination, which shall be final and binding,
of a majority of the whole Committee.

(e) In addition, the Committee shall have the sole discretion
and authority to determine whether an Option shall be an
Incentive Stock Option or a Non-qualified Stock Option, or both
types of options, provided that Incentive Stock Options may be
granted only to persons who are employees of the Company or the
Bank.

Section 4.2 Company Assistance. The Company and the Bank shall
supply full and timely information to the Committee on all
matters relating to eligible employees, their employment, death,
retirement, disability or other termination of employment and
such other pertinent facts as the Committee may require. The
Company and the Bank shall furnish the Committee with such
clerical and other assistance as is necessary in the performance
of its duties.

ARTICLE V
OPTIONEES

Section 5.1 Eligibility. Directors and officers of the Company
and the Bank and such other employees, consultants, or other
individuals as the Board of Directors may from time to time
designate shall be eligible to participate in the Plan. The
Committee may grant Options to any eligible individual subject
to the provisions of Section 6.1.

ARTICLE VI
SHARES SUBJECT TO PLAN

Section 6.1 Stock Available for Options. Subject to adjustment
pursuant to the provisions of Section 9.2 hereof, the number of
shares with respect to which Options may be granted during the
term of the Plan shall not exceed 375,000 shares of Company
Stock provided, however, that the number of shares which may be
designated as Incentive Stock Options shall be limited to
375,000, subject to adjustment in accordance with paragraph 9.2
hereof. Shares with respect to which Options may be granted may
be either authorized and unissued shares or shares issued and
thereafter acquired by the Company.

Section 6.2 Options Under the Plan. Shares of Stock with respect
to which an Option granted hereunder shall have been exercised
shall not again be available for grant hereunder. If Options
granted hereunder shall expire, terminate or be canceled for any
reason without being wholly exercised, new Options may be
granted hereunder covering the number of shares to which such
Option expiration, termination or cancellation relates.

Section 6.3 Adjustments in Authorized Shares. In the event of
any change in corporate capitalization, such as a stock split,
or a corporate transaction, such as any merger, consolidation,
separation, including a spin-off, or other distribution of stock
or property of the Company, any reorganization (whether or not
such reorganization comes within the definition of such term in
Code Section 368) or any partial or complete liquidation of the
Company, such adjustment shall be made in the number of Shares
which may be delivered under Section 6.1, as may be determined
to be appropriate and equitable by the Committee, in its sole
discretion, to prevent dilution or enlargement of rights;
provided, however, that the number of Shares subject to any
Option shall always be a whole number.

ARTICLE VII
OPTIONS

Section 7.1 Terms and Conditions of Options. Each Option shall
be evidenced by a Stock Option Agreement which shall contain
such terms and conditions consistent with the provisions of the
Plan as may be approved by the Committee and shall be signed by
an officer of the Company and the Optionee. The Stock Option
Agreement shall specify the Option Price, the duration of the
option, the number of shares to which the option pertains, and
such other provisions as the Committee shall determine. The
Stock Option Agreement shall specify whether the Option is
intended to be an ISO or a NQSO. Each Option granted under the
Plan shall be subject to such terms and conditions as follows:

(a) Terms of ISO's. ISO's granted hereunder shall be subject
to the terms and conditions contained in subparagraphs (i)-(v)
below of this Plan and to such other terms and conditions as the
Committee may deem appropriate contained in the Stock Option
Agreement with the Optionee; provided, however, that no Option
that is intended to qualify as an ISO shall be subject to any
condition that is inconsistent with the provisions of Code
Section 422(b). In the event that any condition imposed
hereunder on an Option intended to qualify as an ISO is at any
time determined by the Internal Revenue Service or a court of
competent jurisdiction to be inconsistent with Code Section 422,
then such Option shall be deemed to have been granted without
such conditions as may be applicable as if the invalid condition
had not been included.

(i) Option Period. Each Stock Option Agreement
shall specify the period during which the ISO thereunder is
exercisable (which shall not exceed ten years from the date of
grant) and shall provide that the ISO shall expire at the end of
such period.

(ii) Option Price. The Option Price per share shall be
determined by the Committee at the time any ISO is granted and
shall not be less than one hundred percent (100%) of the Fair
Market Value of a share of Stock on the day that the ISO is
granted. Such price shall be subject to adjustment as provided
in Section 9.2.

(iii) Ten Percent Stockholders. ISO's shall not
be granted to any person who, immediately before the ISO is granted,
owns stock possessing more than ten percent (10%) of the total
combined voting power of all classes of Stock of the Company;
provided, however, that this prohibition shall not apply if at
the time such ISO is granted the Option Price is at least one
hundred ten percent (110%) of the Fair Market Value of the stock
and such ISO is not exercisable after the expiration of five (5)
years from the date such ISO is granted.

(iv) Limit on Incentive Stock Options. To the extent the
aggregate Fair Market Value of the shares (valued at the time of
grant in accordance with subparagraph (ii) above) with respect
to which ISO's (determined without regard to this subparagraph
(iv) are exercisable for the first time by any individual during
any calendar year (under all stock option plans of the Company)
exceeds $100,000.00, such ISO's in excess of $100,000.00 shall
be treated as Options which are NQSO's. This subparagraph (iv)
shall be applied by taking ISO's into account in the order in
which they were granted.

(v) Period to Exercise Option. Any ISO granted
hereunder may, prior to its expiration or termination, be exercised
from time to time, in whole or in part, up to the total number of shares
with respect to which it shall have then become exercisable. An
ISO granted hereunder may become exercisable in installments as
determined by the Committee; provided, however, that if the
Committee grants an ISO or ISO's exercisable in more than one
installment, and if the employment of an Optionee holding such
ISO is terminated, the ISO shall be exercisable in accordance
with the terms of the Option Agreement only as to such number of
shares as to which the Participant had the right to exercise the
ISO on the date of termination of employment.

(b) Terms of NQSO's. NQSO's granted hereunder shall be subject
to the terms and conditions contained in subparagraphs (i)-(iii)
below and to such other terms and conditions as the Committee
may deem appropriate which shall be contained in the Stock
Option Agreement.

(i) Option Period. Each Stock Option Agreement shall
specify the period during which the Option thereunder is exercisable,
(which shall not exceed ten years from the date of grant) and
shall provide that the NQSO shall expire at the end of such
period.

(ii) Option Price. The Committee shall determine the
Option Price per Share at the time any NQSO is granted. Such price
shall be subject to adjustment as provided in Section 9.2.

(iii) Period to Exercise Option. Any NQSO granted
hereunder may, prior to its expiration or termination, be exercised
from time to time, in whole or in part, up to the total number of
Shares with respect to which it shall have then become
exercisable. A NQSO granted hereunder may become exercisable in
installments as determined by the Committee; provided, however,
that if the Committee grants an Option exercisable in more than
one installment, and if the employment of an Optionee holding
such Option is terminated, the Option shall be exercisable in
accordance with the terms of the Option Agreement only as to
such number of shares as to which the Optionee had the right to
exercise the Option on the date of termination of Employment.

Section 7.2 Option Exercise.

(a) The Company shall not be required to sell or issue shares
under any Option if the issuance of such shares shall constitute
or result in a violation by the Optionee or the Company of any
provisions of any law, statute or regulation of any governmental
authority. Specifically, in connection with the Securities Act
of 1933, (the "Act"), upon exercise of any Option, the Company
shall not be required to issue such shares unless the Committee
has received evidence satisfactory to it to the effect that
registration under the Act and applicable state securities laws
is not required, unless the offer and sale of securities under
the Plan is registered or qualified under the Act and applicable
state laws. Any determination in this connection by the
Committee shall be final, binding and conclusive. If shares are
issued under any Option without registrations under the Act or
applicable state securities laws, the Optionee may be required
to accept the shares subject to such restrictions on
transferability as may in the reasonable judgment of the
Committee be required to comply with exemptions from
registrations under such laws. The Company may, but shall in no
event be obligated to, register any securities covered hereby
pursuant to the Act of applicable state securities laws. The
Company shall not be obligated to take any other affirmative
action in order to cause the exercise of an Option or the
issuance of shares pursuant thereto to comply with any law or
regulation of any governmental authority.

(b) Subject to Section 7.2(c) and such terms and conditions as
may be determined by the Committee in its sole discretion upon
the grant of an Option, an Option may be exercised in whole or
in part and from time to time by delivering to the Company at
its principal office written notice of intent to exercise the
Option with respect to a specified number of shares. In the
case of an ISO, the aggregate Fair Market Value of the Stock
(under all plans of the Company), with respect to which such
options are exercisable for the first time by an Optionee during
any calendar year may not exceed $100,000.00. The aggregate fair
market value of the shares is determined at the date of grant.

(d) Subject to such terms and conditions as may be determined
by the Committee in its sole discretion upon grant of any
Option, payment for the shares to be acquired pursuant to
exercise of the Option shall be made as follows:

1. by delivering to the Company at its principal office a
check payable to the order of the Company, in the amount
of the Option price for the number of shares of Stock with
respect to which the Option in then being exercised; or

2. by delivering to the Company at its principal office
certificates representing Stock, duly endorsed for transfer
to the Company, having an aggregate Fair Market Value as of
the date of exercise equal to the amount of the Option price,
for the number of shares of Stock with respect to which the
Option is then being exercised; or

3. by any combination of payments delivered pursuant to
paragraphs (d)(1) and (d)(2) above.

Section 7.3 Rights as Shareholder. An Optionee shall have no SAR
as a Shareholder with respect to any share subject to such
Option prior to the exercise of the Option and the purchase of
such shares.

Section 7.4 Termination of Employment. Each Participant's Stock
Option Agreement shall set forth the extent to which the
Participant shall have the right to exercise the Option
following the termination of the Participant's employment with
the Company. Such provisions shall be determined in the sole
discretion of the Committee, shall be included in the Stock
Option Agreement entered into with each Participant, need not be
uniform among all Options issued pursuant to this Article 6, and
may reflect distinctions based on the reasons for termination of
employment.

Section 7.5 Committee Discretion. Option Agreements need not
contain provisions identical to or similar to other Option
Agreements. The Committee may, in its discretion, vary among
Participants and among Options granted to the same Participant
any and all of the terms and conditions of Options granted under
the Plan, including the term during which and the amounts in
which and dates at or after which such Options may be exercised.

ARTICLE VIII
STOCK APPRECIATION RIGHTS

Section 8.1 Stock Appreciation Rights. The Committee may grant
Stock Appreciation Rights to individuals granted related Options
under the Plan. A SAR may be granted simultaneously with or
subsequent to the Option to which the right is related, but each
SAR must relate to a particular Option. In exchange for the
surrender in whole or in part of the related Option to purchase
shares of Common Stock, the exercise of a SAR shall entitle a
Participant to an amount equal to the appreciation in value of
the shares to which the related Option is being surrendered
pursuant to such exercise. Such appreciation in value shall be
equal to the excess of the Market Value of such shares. Upon
the exercise of a SAR, payment by the Company may be made in
cash and partly in share of Common Stock as determined by the
Committee. If payment is made in shares of Common Stock, such
shares shall be valued at their Market Value as of the date of
surrender of the Option.

Section 8.2 Terms and Conditions of Stock Appreciation Rights.
The grant of SARs shall be evidenced by written agreements
(which may also be Option Agreements) containing such terms and
conditions, consistent with the provisions of this Plan, as the
Committee shall from time to time determine. SARs shall be
exercisable in whole or in part in such amounts and at or after
such dates as may be specified in the agreement; provided,
however, that SARs may be exercised only when the related Option
could be exercised and only when the Market Value of the Common
Stock subject to the Option exceeds the Option Price. In no
event, however, shall any SAR be exercisable after the
expiration of ten years from the date of grant. The Committee
may in its discretion require a Participant to continue his
service with the Company and its Subsidiaries for a certain
length of time prior to the SARs becoming exercisable. Unless
otherwise provided in the written agreement, a SAR shall be
deemed outstanding until it either expires, is canceled by
mutual consent, or is exercised in full. As described above in
Section 7.5 with respect to Options, the Committee may also
vary, among the Participants and among SAR granted to the same
Participants, any and all of the terms and conditions of SAR
granted under the Plan. Neither SARs nor any related Option
issued to Directors and officers subject to Section 16 of the
Securities and Exchange Act of 1934 shall be exercisable during
the first six months of their respective terms.

ARTICLE IX
TERMINATION, AMENDMENT AND MODIFICATION OF PLAN

Section 9.1 Termination and Amendment. The Board may terminate
or suspend the Plan at any time, or may from time to time amend
the Plan as it deems proper and in the best interests of the
Company, provided that no such amendment may materially increase
either the benefits to Participants under the Plan or the number
of shares that may be issued under the Plan, materially modify
the eligibility requirements, reduce the Option Price (except
pursuant to adjustments under Section 9.2) or impair any
outstanding Option or SAR.

9.2 Adjustment of Options Upon the Occurrence of Certain Unusual
or Nonrecurring Events. The Committee may make adjustments in
the terms and conditions of, and the criteria included in,
Options in recognition of unusual or nonrecurring events
(including, without limitation, the events described in Section
6.3 hereof) affecting the Company or the financial statements of
the Company or of changes in applicable laws, regulations, or
accounting principles, whenever the Committee determines that
such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be
made available under the Plan.

ARTICLE X
MISCELLANEOUS

Section 10.1 Transferability During the Grantee's Lifetime. Any
Option or Stock Appreciation SAR may be exercised only by the
Grantee or any guardian or legal representative of the Grantee,
and the Option shall not be transferable except, with respect to
both NQSOs and ISOs, in case of the death of the Grantee, by
will or the laws of descent and distribution, and with respect
to NQSO; (i) as specifically permitted by and solely to the
extent permitted in the Stock Option Agreement, or (ii) to an
immediate family member, a partnership consisting solely of
immediate family members or trusts for the benefit of immediate
family members.

Section 10.2 Designation of Beneficiary. A participant may file
a written designation of a beneficiary who is to receive any
stock and/or cash. Such designation of beneficiary may be
changed by the participant at any time by written notice to the
Treasurer of the Company. Upon the death of a participant and
upon receipt by the Company of proof of identity and existence
at the participant's death of a beneficiary validly designated
by him under the Plan, the Company shall deliver such stock
and/or cash to such beneficiary. In the event of the death of a
participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such
participant's death, the Company shall deliver such stock and/or
cash to the executor or administrator of the estate of the
participant or if no such executor or administrator has been
appointed (to the knowledge of the Company), the Company, in its
discretion, may deliver such stock and/or cash to the spouse or
to any one or more dependents of the participant as the Company
may designate. No beneficiary shall, prior to the death of the
participant by whom he has been designated, acquire any interest
in the stock or cash credited to the participant under the Plan.

Section 10.3 Application of Funds. The proceeds received by the
Company from the sale of Stock pursuant to Options shall be used
for general corporate purposes.

Section 10.4 Tenure. Nothing in the Plan or in any Option or SAR
granted hereunder or in any Stock Option Agreement or SAR
Agreement relating thereto shall confer upon any Director, or
upon any officer or employee, the right to continue in such
position with the Company or the Bank.

Section 10.5 Other Compensation Plans. The adoption of the Plan
shall not affect any other stock option or incentive or other
compensation plans in effect for the Company or the Bank, nor
shall the Plan preclude the Company or the Bank from
establishing any other forms of incentive or other compensation
for Directors, officers or employees of the Company or the Bank.

Section 10.6 Tax Withholding. The Company shall have the power
and the right to deduct or withhold, or require a Participant to
remit to the Company, an amount sufficient to satisfy Federal,
state, and local taxes, domestic or foreign, required by law or
regulation to be withheld or deducted with respect to any
taxable event arising as a result of this Plan.

Section 10.7 Share Withholding. With respect to withholding
required upon the exercise of Options or SARs or upon any other
taxable event arising as a result of Awards granted hereunder,
Participants may elect, subject to the approval of the
Committee, to satisfy the withholding requirement, in whole or
in part, by having the Company withhold Shares having a Fair
Market Value on the date the tax is to be determined equal to
the minimum statutory total tax which could be imposed on the
transaction. All such elections shall be irrevocable, made in
writing, signed by the Participant, and shall be subject to any
restrictions or limitations that the Committee, in its sole
discretion, deems appropriate.

Section 10.8 Indemnification. Each person who is or shall have
been a member of the Committee, or of the Board, shall be
indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon
or reasonably incurred by him or her in connection with or
resulting from any claim, action, suit, or proceeding to which
he or she may be a party or in which he or she may be involved
by reason of any actions taken or failure to act under the Plan
and against and from any and all amounts paid by him or her in
settlement thereof, with the Company's approval, or paid by him
or her in satisfaction of any judgment in any such action, suit,
or proceeding against him or her, provided he or she shall give
the Company an opportunity, at its own expense, to handle and
defend the same before he or she undertakes to handle and defend
it on his or her own behalf. The foregoing right of
indemnification shall not be exclusive of any other right of
indemnification to which such persons may be entitled under the
Company's Articles of Incorporation or Bylaws.

Section 10.9 Merger or Asset Sale. In the event of a merger of
the Company with or into another corporation, or the sale of
substantially all of the assets of the Company, each outstanding
Option and SAR will be assumed or an equivalent Option and SAR
substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation (the "Successor
Corporation"), unless the Successor Corporation refuses to
assume or substitute for the Option and SAR, in which case the
Optionee shall have the right to exercise the Option and SAR as
to all of the Optioned Stock, including Shares as to which it
would not otherwise be exercisable. If an Option or SAR is
exercisable in lieu of assumption or substitution in the event
of a merger or sale of assets, the Committee shall notify the
Optionee that the Option shall be fully exercisable for a period
of thirty (30) days from the date of such notice, and the Option
shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option and SAR shall be
considered assumed if, following the merger or sale of assets,
the option and SAR confers the right to purchase or receive, for
each share of Optioned Stock subject to the Option or SAR
immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of
Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders
of a majority of the outstanding Shares); provided, however,
that if such consideration received in the merger or sale of
assets was not solely common stock of the Successor Corporation,
the Committee may, with the consent of the Successor
Corporation, provide for the consideration to be received upon
the exercise of the Option or SAR, for each Share of Optioned
Stock subject to the Option or SAR, to be solely common stock of
the Successor Corporation equal in fair market value to the per
share consideration received by holders of Common Stock in the
merger or sale of assets.

Section 10.10 Gender and Number. Except where otherwise
indicated by the context, any masculine term used herein also
shall include the feminine; the plural shall include the
singular and the singular shall include the plural.

Section 10.11 Severability. In the event any provision of the
Plan shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts of
the Plan, and the Plan shall be construed and enforced as if the
illegal or invalid provision had not been included.

Section 10.12 Requirements of the Law. The granting of awards
and the issuance of Shares under the Plan shall be subject to
all applicable laws, rules, and regulations, and to such
approvals by any governmental agencies or national securities
exchanges as may be required.

Section 10.13 Governing Law. To the extent not preempted by
Federal Law, the Plan, an all agreements hereunder, shall be
construed in accordance with and governed by the laws of the
State of Ohio.

BY ORDER OF THE BOARD OF DIRECTORS

FRANK L. PADEN, PRESIDENT & SECRETARY