##### Table of Contents



Exhibit 13

National
Bancshares
Corporation

2000 Annual Report





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TABLE OF CONTENTS



|                                                           |  |  |  |  |  |  |  | 
|---------------------------------------------------------- |  |  |  |  |  |  |  | 
|Financial Highlights                                      
|Dear Shareholders                                         
|Financial Review                                          
|Price Ranges of Common Stock                              
|Shareholder Information                                   
|Consolidated Balance Sheets                               
|Consolidated Statements of Income                         
|Consolidated Statements of Changes in Shareholders' Equity
|Consolidated Statements of Cash Flows                     
|Notes to Consolidated Financial Statements                
|Report of Independent Auditors                            
|Analysis of Net Interest Earnings                         
|Historical Financial Summary                              
|Exhibit 10.1 Directors Defined Benefit Plan               
|Exhibit 10.2 Special Separation Agreement                 
|Exhibit 13  Annual Report                                 
|Exhibit 23  Consent of Independent Auditors               



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Financial Highlights

|                         |  |      |             |  |      |   |             |        |  |            |       |  
|------------------------ |  | ---- | ----------- |  | ---- | - | ----------- | ------ |  | ---------- | ----- | -
|Financial Position      
|                         |  |      |             |  |      |   |             |        |  | Percentage |      
|(Year End Balances)      |  | 2000 |             |  | 1999 |   |             | Change | 
|                        
|                        
|                        
|                        
|                        
|Total Assets             |  | $    | 200,792,706 |  |      | $ | 197,402,543 |        |  |            | 1.72  | %
|                        
|                        
|                        
|                        
|Deposits                 |  |      | 162,013,585 |  |      |   | 160,435,348 |        |  |            | 0.98  | %
|                        
|                        
|                        
|                        
|Loans-Net                |  |      | 107,551,674 |  |      |   | 99,531,223  |        |  |            | 8.06  | %
|                        
|                        
|                        
|                        
|Investment Securities    |  |      | 68,021,052  |  |      |   | 70,214,050  |        |  |            | -3.12 | %
|                        
|                        
|                        
|                        
|Shareholders Equity     |  |      | 28,939,329  |  |      |   | 26,856,195  |        |  |            | 7.76  | %
|                        
|                        
|                        
|                        
|                        
|                        
|                        
|                        
|                        
|Summary of Operations   
|                        
|                        
|                        
|                        
|Net Interest Income      |  | $    | 8,804,313   |  |      | $ | 8,633,998   |        |  |            | 1.97  | %
|                        
|                        
|                        
|                        
|Net Income               |  |      | 2,555,271   |  |      |   | 2,516,986   |        |  |            | 1.52  | %
|                        
|                        
|                        
|                        
|Regular Cash Dividends   |  |      | 1,119,697   |  |      |   | 1,078,202   |        |  |            | 3.85  | %
|                        
|                        
|                        
|                        
|Net Income Per Share     |  |      | 1.14        |  |      |   | 1.12        |        |  |            | 1.79  | %
|                        
|                        
|                        
|                        
|Cash Dividends Per Share |  |      | 0.50        |  |      |   | 0.48        |        |  |            | 4.17  | %
|                        
|                        
|                        
|                        
|Book Value Per Share     |  |      | 12.93       |  |      |   | 12.01       |        |  |            | 7.66  | %

National Bancshares Corporation is a one-bank holding company with assets
totaling over $200 million. First National Bank, its subsidiary, is
headquartered in Orrville, Ohio. Serving Wayne County, southern Medina County,
and parts of Stark and Holmes Counties through eleven banking offices, First
National Bank offers a variety of personal and commercial deposit and lending
services.





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A mans true wealth is the good he does in this world. Mohammed

First National Banks commitment to each individual customer is reinforced
by our commitment to the community. The communities we serve are the life-blood
of our business. First National has a corporate history dedicated to financially
supporting local organizations and charities. Additionally, we take pride in the work
and accomplishments of our caring associates. These associates,
who work enthusiastically for a variety of organizations, give freely of their time,
and serve to remind us all of the importance of community.

First National Banks involvement and sponsorship in community events
epitomizes family entertainment for hometown America. Concerts at Rehm Pavilion in
Orrville, the annual Woosterfest celebration, Christmas in Seville, the Dalton Holidays
Festival, and many others, benefit from our support. This support assists the
communities we serve and, of course, the families who reside there.





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The banking industry has become a model for the nation, said Colin L. Powell,
founding chairman of Americas Promise  the Alliance for Youth®.
First National Bank has pledged to help build and strengthen the character and
competence of youth with their support of
local youth
organizations.







Dear Shareholders

While operating results for the year 2000 posted new highs, the gains over
the previous year were somewhat modest. Income before income taxes increased
$121 thousand, or 3.9%, above that of 1999. With income taxes increasing $83
thousand, or 13.1%, net income was up $38 thousand, or 1.5%, above 1999. Total
assets increased approximately $3.4 million, or 1.7%, above the end of the
previous year. Asset growth was driven primarily by an increase in loans. Net
loans rose over $8 million, or 8.1%, above the end of the previous year. Most
of the loan activity during this past year was realized in commercial and real
estate mortgage loans. Total deposits posted a modest growth of 1%, increasing
over $1.5 million. With Certificates of Deposit being a popular product during
this past year, we experienced a movement of some funds from savings and
interest-bearing checking into time deposits. Total shareholders equity
increased by over $2 million, or 7.8%, above year end 1999. This increase is
primarily due to an increase in retained earnings and an increase in the market
value of securities available for sale. The difference between the market value
and book value of these securities (net of tax) is reflected in accumulated
other comprehensive income.

Total cash dividends declared in 2000 equaled 50¢ per share, a 4.2%
increase over the total cash dividends declared in 1999. This continues our
long-term trend of increasing cash dividends each year.

The stock market during this past year was not particularly kind to
financial stocks. The stock values of most financial institutions took quite a
beating throughout the year 2000. The price of many financial stocks sold on
the over the counter market (OTC), such as ours, tend to follow the regional
bank stocks. This trail seems to occur with a varying lag affect. The bid price
of our stock declined throughout this past year, hitting a low of $14.50 on
October 3, 2000. It rebounded modestly to $15.25 by December 31, 2000. With the
price of some regional bank stocks climbing near the end of this past year, we
are optimistic our stock may also enjoy an upward movement of market value
during the year 2001.

In April of this past year, we unveiled a new product in the
Visa® Check Card. This card can be used in lieu of writing a check
when paying for purchases from merchants that accept Visa. The amount of the
purchase is automatically deducted from the customers checking account. The
card will also enable our customers to obtain cash or transfer

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funds at any MAC® or PLUS® Network ATM. This
service has been very well received by our customers.

During the fourth quarter of 2000, we totally updated our Internet web
site for First National Bank and introduced transactional Online Banking.
Besides obtaining information about our products and services, customers can
now inquire on their account balances, transfer funds between accounts, or make
loan payments online. These transactions are accomplished through our secured
Internet site. All transactions are guarded with encryption and passwords for
each customers security and peace of mind. Customers may register for this
free service online. Other features of our interactive site allow you to
reorder checks, use financial calculators, view current savings rates and check
out recent news and bank happenings. If you have not yet seen our site, please
visit us on the web at www.fnborrville.com and try our Online Banking demo.

In December, we opened a new drive-up MAC ATM at our Mt. Eaton office
bringing 24-hour banking to the community. We also unveiled a new Preferred
Savings Account. This account offers a tiered rate of interest as the account
balance grows. Customers with a higher balance can realize interest rates like
those typically offered on certificates of deposit, with the advantage of
having immediate access to these funds. I invite you to stop at any of our
offices to learn more about this new savings product.

National Bancshares Corporation, through its subsidiary, First National
Bank, also supports the communities we serve through financial contributions
and the voluntary efforts of our employees. We financially support more than
fifty different community organizations each year. During the past five years,
First National Bank has contributed over $350 thousand to these local
organizations. The services provided by these groups range from education and
youth to medical and social services. Our employees have also given very
generously of their time and money to these organizations. During this past
year our employees raised over $20 thousand for charitable causes and donated
thousands of hours of their time to support many worthwhile causes in our
communities. This personal involvement is indicative of the many high-quality
people in our organization. These contributions, and the voluntary efforts of
our employees, make our communities a better place to live and work.



| | /s/ Charles J. Dolezal
Charles J. Dolezal
President and Chairman
| | ----------------------------------------------------------------

First National associates regularly donate to local causes to earn the right to
wear blue jeans to work during Casual for a Cause day. Customers are also
invited to participate, resulting in contributions
in excess of $9,300 for
several local causes during 2000.

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In 2000, First National associates volunteered over 2,000 hours to civic and
charitable involvement. Youth athletic teams, scouting groups, charitable
foundations and local non-profit boards comprise only a handful of the
organizations benefitting from the time and effort donated by our staff.

Financial Review

National Bancshares Corporation experienced continued success by setting
new records in 2000. Total assets grew approximately $3.4 million ending 2000
at $200,792,706. This represents a 1.7% increase over the previous year.
Average assets also experienced growth in 2000, increasing to approximately
$195.9 million from $193.7 million in 1999, or an increase of $2.2 million. Net
income in 2000 totaled $2,555,271 exceeding 1999 net income by approximately
1.5%.

Cash and due from banks amounted to $7,077,797 and $8,538,351 at December
31, 2000 and 1999, respectively. This was a decrease of $1.5 million, or 17.1%.
Cash reserves are maintained at appropriate levels in order to meet customer
needs with consideration given to security. Excess cash is invested in order to
maximize a safe and profitable return on assets. A significant portion of this
account represents the normal processing of outgoing cash letters, which
represents checks deposited with us that were drawn on other banks.

Federal funds sold were $8,135,000 and $8,770,000 as of December 31, 2000
and 1999, respectively. Average balances decreased during the year with 2000
averaging $5.5 million compared to $10.0 million during 1999. Federal funds
sold are overnight investments with our correspondent banks. This is an
investment tool that is used to maximize the earning assets of the bank.

Interest-bearing balances with banks were $2.0 million as of December 31,
2000 and 1999. Interest-bearing balances averaged $2.0 million during 2000 and
$1.1 million during 1999.






Total securities decreased approximately $2.2 million ending 2000 at
$68,021,052 compared to $70,214,050 at the end of 1999. The average balance of
taxable securities decreased from $50.1 million in 1999 to $49.5 million in
2000. The average balance of nontaxable
securities decreased from $21.5 million in
1999 to $20.7 million in 2000. The market or fair value of the total portfolio
was $68,686,804
and $69,673,753 as of December 31, 2000 and 1999, respectively.

U.S. treasury and agency obligations decreased approximately $1.7 million
or 6.4% with balances of $24,459,079 on December 31, 2000 compared to
$26,127,058 on December 31, 1999. The net market appreciation of this category
was approximately $285 thousand as of December 31, 2000.

Mortgage-backed securities were $331,043 and $927,073 on December 31, 2000
and 1999, respectively. This was a decline of $596 thousand or 64.3%. The net
market appreciation of these securities was $22 thousand on December 31, 2000.

Obligations of states and political subdivisions ended 2000 at
$19,734,709, which was 3.7% lower than the $20,500,646 balance on December 31,
1999. The net market appreciation was approximately $506 thousand as of
December 31, 2000. To assist in local development, the bank actively purchases
bonds issued by local municipalities, school systems and other public entities
when opportunities present themselves.

Other securities ended 2000 at $23,496,221, which was 3.7% higher than the
December 31, 1999 balance of $22,659,273. This group of securities is primarily
comprised of high quality corporate bonds and notes. The Corporation also
maintains a portfolio of approximately $1.9 million in equity securities. The
net market depreciation was approximately $340 thousand as of December 31,
2000.

Net loans increased by approximately $8.0 million, or 8.1% during 2000.
Net loan balances were $107,551,674 and $99,531,223 on December 31, 2000 and
1999, respectively. Average net loans posted an increase of $7.4 million with a
yearly average of $104.9 million for 2000.






Loans collateralized by real estate totaled $78,691,814 on December 31,
2000, as compared to $71,796,670 as of December 31, 1999. All real estate
categories, except construction, posted increases in 2000. There was a $2.0
million increase in commercial mortgage loans and a $2.9 million increase in
residential

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mortgage loans. Home equity loans increased $2.3 million while construction
loans decreased $0.2 million. Loan demand was strong in 2000 due to customers
confidence in the economy.

Consumer loans, totaling $7,151,394 on December 31, 2000, were 8.9% below
the 1999 year end total of $7,847,553. Commercial loans were $19,850,559 and
$17,851,661 as of December 31, 2000 and 1999, respectively. Credit card loans
decreased 1.6% during the year with balances of $1,188,297 on December 31,
2000. Other loans decreased $179 thousand during 2000 ending the year at
$2,273,180.

The allowance for loan losses was $1,343,124 and $1,308,630 as of December
31, 2000 and 1999, respectively. The allowance for loan losses to total loans
percentages were 1.23% and 1.30% and net charge-offs to total average loans
percentages were .03% and .11% for 2000 and 1999, respectively. As with any
charge-offs, the bank continues to attempt recovery where feasible. The ratio
of non-performing loans to total loans was .13% for 2000 compared to .25% in 1999. The
ratio of the allowance for loan losses to non-performing loans was 932% for
2000 compared to 524% for 1999. Non-performing loans consist of loans that have
been placed on nonaccrual status. Management reviews the allowance for loan
losses on a regular basis to determine the adequacy of the reserve. Management
reviews problem loans (loans past due 90 days or more and loans on non-accrual)
for unfavorable collectibility factors and assesses the requirement for
specific reserves on such credits. For those loans not subject to specific
reserves, management reviews previous loan loss experience, general economic
conditions and delinquent loan reports to establish appropriate reserves.

Premises and equipment totaled $2,621,483 on December 31, 2000 as compared
to $2,919,868 on December 31, 1999. During 2000 capital expenditures amounted
to $111 thousand and depreciation was $409 thousand. Improvements and repairs
to bank buildings and equipment are performed as needed to keep them in good
working order in an effort to provide convenient and pleasant banking offices
to meet our customers needs.






Total deposits posted a $1.6 million or
1.0% increase ending 2000 at $162,013,585, as compared to $160,435,348 on
December 31, 1999. Average deposits decreased from $159.1 million in 1999 to
$158.1 million in 2000.

Demand deposits, which represent noninterest-bearing checking accounts,
ended 2000 at $28,236,689, which was a decrease of 0.3% from the December 31,
1999 balance of $28,324,431. Demand deposits fluctuate based on the needs of
our customers. The average demand deposit accounts for 2000 were $26.5 million
as compared to $27.1 million in 1999.

Interest-bearing checking accounts finished 2000 at $30,414,962 compared
to $32,326,299 a year earlier. This was a decrease of $1.9 million, or 5.9%.
Average balances decreased by $0.9 million from $30.8 million in 1999 to $29.9
million in 2000. Interest-bearing checking accounts include our Negotiable
Order of Withdrawal accounts and Money Market Deposit Accounts.

Savings accounts totaled $39,985,914 on December 31, 2000, approximately
$3.3 million below the end of the previous year. With certificates of deposit
being a popular product during 2000, funds moved from savings and
interest-bearing checking accounts into time deposits. Average savings accounts
decreased from $43.6 million during 1999 to approximately $41.3 million in
2000. First National offers both passbook and statement savings accounts.

Time deposits of less than $100,000 amounted to $49,317,909 and
$42,306,736 as of December 31, 2000 and 1999, respectively. This represents an
increase of $7.0 million or 16.6%. The increase was due mainly to a special
rate offered on our 15-month certificates of deposit. Average time balances of
less than $100,000 increased approximately $4.3 million giving 2000 an average
time deposit balance of $46.7 million compared to approximately $42.4 million
in 1999.

Time deposits of $100,000 and over decreased from $14,239,385 on December
31, 1999 to $14,058,111 on December 31, 2000. Average time deposits of $100,000
and over decreased by $1.4 million from 1999 giving 2000 an average of $13.7
million.

Securities sold under agreements to repurchase were $3,949,485 on December
31, 2000 compared to $2,057,041 at the end of 1999, or approximately $1.9
million higher. The Federal Reserve note account balance was $615,298 and
$1,000,000 as of December 31, 2000 and 1999, respectively. Since loan growth
exceeded deposit growth, the Bank obtained advances from the Federal Home Loan
Bank. Federal Home Loan Bank advances were $3,446,086 and $5,606,641 at
December 31, 2000 and 1999, respectively. The average of other funds purchased
increased in 2000 to $8.6 million from $6.3 million during 1999.

Fifty-four First National associates raised nearly $3,500 in the 2000 Wayne
County Junior Achievement Bowl-A-Thon. These contributions helped provide
business education to more than 150 students.

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The Board of Directors, on behalf of First National Bank, contributed nearly $75,000 to
charitable organizations during 2000. This generosity upholds the Banks
long-standing commitment to "give back" to the communities we serve.

Shareholders equity had an ending balance of $28,939,329 on December 31,
2000. This is an increase of $2.1 million or 7.8% from the 1999 ending balance
of $26,856,195. The increase is due mainly to retained earnings and an
improvement in accumulated other comprehensive income. This growth translates
to a $0.92 increase in book value per share, raising the book value per share
to $12.93 on December 31, 2000, compared to $12.01 on December 31, 1999. Under
the federal risk-based capital regulations, the Banks total capital to
risk-based assets of 19.40% on December 31, 2000 was more than twice the 8%
minimum required. The Bank remains in a very favorable position when compared
to its peer group in the area of capitalization.

Shareholders equity reflects the change in accumulated other
comprehensive income. This represents the unrealized appreciation or
depreciation in the market value of investment securities (net of taxes) that
are available for sale. During 2000, accumulated other comprehensive income
increased by $597,722, resulting in an unrealized depreciation balance of
$127,139 at December 31, 2000. A general improvement in the market value of
debt and equity investments owned, due to economic conditions and lower
interest rates, has increased the market value of securities
in the available for sale portfolio.

In summary, the Corporation continued to experience balance sheet growth
highlighted by increases of approximately 8.1% in loans, 1.0% in deposits and
7.8% in shareholders equity.






Liquidity

Liquidity is the consideration of the corporations ability to meet its
necessary outgoing cash flow needs. Cash equivalents for the cash flow
statement of $15.2 million is composed of $7.1 million in cash and due from
banks and $8.1 million in federal funds sold. Management considers the
corporation to be in a satisfactory liquidity position with the ability to meet
the demands of its customers and the local economy.

Results of Operations

Net income set a new record high of $2,555,271 in 2000, or approximately
1.5% over 1999s net income of $2,516,986. Net income for 1999 was
approximately 7.4% above 1998s net income of $2,344,645. This equates to net
income per share of $1.14 for 2000, $1.12 for 1999 and $1.03 for 1998. The
primary source of income continues to be interest on loans and other
investments with additional revenues generated from fees on non-interest
related services.






Interest and fees on loans of $9,280,026 for 2000 was above 1999 by 12.0%,
or approximately $995 thousand. Interest and fees on loans also increased from
1998 to 1999, improving by 5.9%, or approximately $461 thousand. The
improvement in 2000 was due to an increase in average loan volume and average
loan yields. The improvement in 1999 was due to an increase in average loan
volume. Average interest yields on loans were 8.85%, 8.50% and 9.25% for 2000,
1999 and 1998, respectively.

Interest on federal funds sold was $348,202, $488,523 and $621,579 for
2000, 1999 and 1998, respectively. The decrease of $140 thousand in 2000 was
the result of lower volume of funds sold. The decrease of $133 thousand in 1999
was the result of lower average rates and volume of funds sold.

Interest on taxable investment securities, which includes interest-bearing
deposits with banks, increased by approximately $25 thousand ending 2000 at
$3,419,441. This 0.7% increase in interest income was due primarily to an
increase in the average investment balances. In 1999, interest on taxable
investment securities decreased by approximately $175 thousand or 4.9% from
1998. This decrease was due to a decrease in average investment balances.

Interest on obligations of states and political subdivisions totaled
$1,166,910 for 2000, which was $47 thousand or 3.9% below 1999. The average
balance of these investments decreased $884 thousand while the average taxable
equivalent yield increased slightly from 8.54% in 1999 to 8.55% in 2000.
Interest on obligations of states and political subdivisions

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totaled $1,214,513 for 1999, which was $6 thousand or 0.5% below 1998. The
average balances increased $49 thousand in 1999 while the average taxable
equivalent yield declined from 8.60% to 8.54%.

Total interest and dividend income of $14,214,579 for 2000 was $832
thousand higher than 1999s total of $13,382,607 as a result of the generally
higher loan volumes and yields. 1999s total interest income exceeded 1998s by
$147 thousand due primarily to higher loan volumes.

Interest on deposits totaled $4,898,207 in 2000 as compared to $4,470,562
in 1999. This $428 thousand increase, which equaled a 9.6% increase, was due
principally to higher average rates on deposits. Comparing 1999 to 1998,
interest on deposits decreased $337 thousand or 7.0%. The decrease was due to
lower average rates on deposits.

Interest expense on other funds purchased, which includes Federal Home
Loan Bank advances, was $512,059, $278,047 and $191,603 for 2000, 1999 and
1998, respectively. The increases in 2000 and 1999 were primarily the result of
higher average balances of Federal Home Loan Bank advances.

Net interest income before provision for loan losses was $8,804,313,
$8,633,998 and $8,235,686 for 2000, 1999 and 1998 respectively. This represents
an increase of 2.0% in 2000 and 4.8% in 1999. The net interest margin, which is
calculated on a tax equivalent basis, was 5.15% for 2000 and 5.14% for 1999 and
1998.

The Bank provides for potential loan losses throughout the year. In 2000
the provision for loan losses was $62,500. In 1999 and 1998 the provision for
loan losses was $120,000. The total provision for loan losses for the last
three years was $302,500, compared to total net charge-offs of $191,840 for the
same three-year period. The provision for loan losses is based on the Banks
past loan loss experience, current delinquencies, mix and various types of
loans, general economic conditions and trends, and an evaluation of the losses
inherent in the current loan portfolio.

Net interest income after provision for
loan losses was $8,741,813, $8,513,998 and $8,115,686 in 2000, 1999 and 1998,
respectively. This represents an increase of 2.7% in 2000 and 4.9% in 1999.

Noninterest income totaled $849,467, $836,598 and $874,699 for 2000, 1999
and 1998, respectively. Noninterest income is
primarily comprised of checking account fees, which were $560 thousand in 2000,
$544
thousand in 1999 and $545 thousand in 1998. Other noninterest income includes
safety deposit box rents, net gains/losses on loans sold and other
miscellaneous fees and collections.

Noninterest expenses were $6,318,759 for 2000, $6,199,427 in 1999 and
$6,051,569 in 1998. This represents a $119 thousand or 1.9% increase in 2000
and a $148 thousand or 2.4% increase in 1999. The increase in 2000 was
primarily due to higher salaries and employee benefits and miscellaneous other
expenses. The higher salaries and employee benefits were mainly due to normal
salary increases. The increase in 1999 was due to higher salaries and employee
benefits. The higher salaries and employee benefits in 1999 were mainly due to
normal salary increases and staffing the new office in Wooster.

The income tax provision amounted to $717,250, $634,183 and $594,171 in
2000, 1999 and 1998, respectively. The increase in net interest income after
provision for loan losses and lower nontaxable interest income, offset by
higher noninterest expenses resulted in a higher tax provision in 2000. In
1999, the increase in net interest income was the main reason for a higher tax
provision. The effective tax rate was 21.9%, 20.1% and 20.2% in 2000, 1999 and
1998, respectively.

Cash dividends declared during 2000 were $0.50 per share, compared to
$0.48 per share in 1999 and $0.44 per share in 1998. The dividend payout
percentage was 43.82%, 42.84% and 42.72% in 2000, 1999 and 1998, respectively.
Return on average equity was 9.08%, 9.22% and 8.71% for 2000, 1999 and 1998,
respectively. Return on average assets was a respectable 1.30% in 2000 and
1999, and 1.27% in 1998.






Asset & Liability Management

Management considers interest rate risk to be the Corporations most
significant market risk. Management focuses on maintaining consistent growth in
net interest income, while managing interest rate risk within Board-approved
policy limits. The Corporations Asset/Liability Management Committee, which
consists of the Banks Executive Officers and reports directly to the Board of
Directors, monitors and manages interest rate risk in order to maintain an
acceptable level of possible change in net interest income as a result of
changes in interest rates. The Asset/Liability Management Committee also
monitors the Corporations

First National donates checking account simulation packets to local high
schools to help students develop personal financial skills. Associates also
speak to students regarding the importance of maintaining a good credit
history. On National Teach Children to Save Day, First National
associates stress the value of saving money to students at eight area
elementary schools.

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First National Bank has a long history of supporting the United Way. In 2000,
more than $17,000 was donated to local United Ways and Community Chests by the
Bank and its associates. FNB associates also support United Way by taking
leadership roles. These roles include board of trustee
positions, citizen review committees and fund-raising committees.

liquidity levels, which were within the Corporations policy guidelines at
December 31, 2000. The Corporation does own certain equity securities, which
have more price volatility compared to debt securities and does subject the
Corporation to some equity risk. The Corporation does not own any trading
assets and is not subject to foreign currency exchange or commodity price risk.

The Corporation uses a gap analysis model as its primary method to
identify and manage its interest rate risk. The model measures the difference
between the assets and liabilities repricing or maturing within specific time
periods. The model also considers prepayment assumptions and estimated paydowns
in the loan and investment portfolios. An asset-sensitive position indicates
that there are more rate-sensitive assets than rate-sensitive liabilities
repricing or maturing within specific time horizons, which would generally
imply a favorable impact on net interest income in periods of rising interest
rates and a negative impact in periods of falling rates. A liability-sensitive
position would generally imply a negative impact on net interest income in
periods of rising rates and a positive impact in periods of falling rates.

Managements goal is to manage the Corporations interest rate risk by
maintaining the gap between interest-earning assets and interest-bearing
liabilities repricing in a one-year period within a range of plus or minus 10%
of total assets.

Gap analysis has limitations because it cannot measure the effect of
interest rate movements and competitive pressures on the repricing and maturity
characteristics of interest-earning assets and interest-bearing liabilities.
The model assumes that certain assets and liabilities of similar maturity or
repricing opportunities will react the same to changes in interest rates.
However, certain types of financial instruments may react in advance to changes
in market rates, while other types of financial instruments may lag behind the
change in general market rates.

At December 31, 2000 the Corporation had a negative one year cumulative
gap of 2.9% of total assets, indicating a slightly higher balance of rate
sensitive liabilities than rate sensitive assets. The estimated impact on the
net interest margin from modestly rising or falling interest rates would be
relatively insignificant due to the short duration of mismatch within the first
12 months. The following table shows the estimated change in net interest
income over 12 months if interest rates were to immediately increase or
decrease by 200 basis points.

|               |  |                                   |  |  |               |       |  | 
|-------------- |  | --------------------------------- |  |  | ------------- | ----- |  | 
|Change in      |  | Percentage Change in Net Interest | 
|Interest Rates |  | Income Over 12 Months             | 
|(basis points) |  | Dec. 31, 2000                     |  |  | Dec. 31, 1999 |      
|               |  |                                   |  |  |               |      
|+200           |  | -2.6%                             |  |  |               | -3.7% | 
|              
|              
|              
|              
|-200           |  | 1.3%                              |  |  |               | 3.4%  | 

Forward-Looking Statements

The Corporation is not aware of any trend, events or uncertainties that
will have or are reasonably likely to have a material affect on the liquidity,
capital resources or operations except as discussed herein. Also, the
Corporation is not aware of any current recommendations by regulatory
authorities which would have such an affect if implemented. The Corporation
cautions that any forward-looking statements contained in this report, in a
report incorporated by reference to this report or made by management of the
Corporation involves risk and uncertainties and are subject to change based on
various important factors. Actual results could differ materially from those
expressed or implied. Additionally, the Corporation claims no notification
responsibilities should their opinions change from those expressed herein.

Impact of New Accounting Standard

A new standard requires companies to record derivatives on the balance
sheet as assets and liabilities, measured at fair value. Gains or losses
resulting from changes in the values of those derivatives would be accounted
for depending on the use of the derivative and whether it qualifies for hedge
accounting. The key criterion for hedge accounting is that the hedging
relationship must be highly effective in achieving offsetting changes in fair
value or cash flows. The standard does not allow hedging of a security, which
is classified as held to maturity. Accordingly, companies may reclassify any
security from held to maturity upon adoption of the pronouncement if they wish
to be able to hedge the security in the future. The standard is effective for
the Corporation in 2001.

In January 2001, the Corporation adopted the new standard and transferred
securities with an amortized cost of approximately $30.5 million and a fair
value of approximately $30.7 million from the held to maturity to the available
for sale category to take advantage of the
flexibility provided by this classification. The transfer had a positive impact
on the corporations capital, net of taxes, of approximately $134 thousand.

8



---



##### Table of Contents









Price Ranges of Common Stock

The stock prices below reflect inter-dealer bid prices, without
adjustments for retail markups, markdowns or commissions and may not represent
actual transactions.

---

|               |  |      |       |  |     |   |       |           |  |           |      | 
|-------------- |  | ---- | ----- |  | --- | - | ----- | --------- |  | --------- | ---- | 
|               |  |      |       |  |     |   |       |           |  | Dividends |     
|2000           |  | High |       |  | Low |   |       | Per Share | 
|              
|              
|              
|              
|              
|First Quarter  |  | $    | 24.50 |  |     | $ | 19.50 |           |  | $         | .120 | 
|              
|              
|              
|              
|Second Quarter |  |      | 20.00 |  |     |   | 16.87 |           |  |           | .120 | 
|              
|              
|              
|              
|Third Quarter  |  |      | 17.25 |  |     |   | 16.75 |           |  |           | .120 | 
|              
|              
|              
|              
|Fourth Quarter |  |      | 17.00 |  |     |   | 14.50 |           |  |           | .140 | 

---

|               |  |      |       |  |     |   |       |           |  |           |      | 
|-------------- |  | ---- | ----- |  | --- | - | ----- | --------- |  | --------- | ---- | 
|               |  |      |       |  |     |   |       |           |  | Dividends |     
|1999           |  | High |       |  | Low |   |       | Per Share | 
|              
|              
|              
|              
|              
|First Quarter  |  | $    | 29.00 |  |     | $ | 29.00 |           |  | $         | .100 | 
|              
|              
|              
|              
|Second Quarter |  |      | 30.00 |  |     |   | 29.00 |           |  |           | .100 | 
|              
|              
|              
|              
|Third Quarter  |  |      | 30.00 |  |     |   | 27.00 |           |  |           | .100 | 
|              
|              
|              
|              
|Fourth Quarter |  |      | 27.12 |  |     |   | 20.50 |           |  |           | .180 | 

---

The Heart Walk, a local fund- raiser to support the American Heart Association,
benefitted from First Nationals corporate sponsorship in 2000.
In addition, a team of First National associates walked the five-mile course to
raise $868.







Shareholder Information

Corporate Office

National Bancshares Corporation
112 West Market Street
P.O. Box 57
Orrville, Ohio 44667
(330)682-1010
www.fnborrville.com

Stock Trading Information

The shares of common stock of National Bancshares Corporation are
traded on the local over-the-counter market primarily with brokers in the
Corporations service area. The ticker symbol for National Bancshares
Corporation is NBOH.

Form 10-K

A copy of the Corporations 2000 Annual Report on Form 10-K as filed
with the SEC will be furnished free of charge to shareholders upon written
request to the company.

Shareholder Assistance and Transfer Agent

Shareholders with questions are invited to write or call the Transfer
Agent, Registrar and Transfer Company, 10 Commerce Drive, Cranford, NJ 07016,
1-800-368-5948 or National Bancshares Corporation, Shareholder Services
Department, at (330)682-1030. Registrar and Transfer Company can also be
contacted by e-mail at invrelations@rtco.com. Their website is rtco.com.

Dividend Reinvestment Plan

This plan makes available an opportunity to increase ownership of National
Bancshares Corporation common stock through the automatic reinvestment of all
or part of the dividends paid to shareholders without paying brokerage
commissions or service charges.

Dividend Direct Deposit Plan

This plan permits shareholders to electronically deposit cash dividends to
their checking or savings accounts. This free service provides a convenient and
safe method of receiving dividend payments.

9



---



##### Table of Contents









ConsolidatedBalance SheetsDecember 31, 2000 and 1999

|                                                                                |  |                                                 |                                                                                  |                            |             |            |             |   |             |            |             | 
|------------------------------------------------------------------------------- |  | ----------------------------------------------- | -------------------------------------------------------------------------------- | -------------------------- | ----------- | ---------- | ----------- | - | ----------- | ---------- | ----------- | 
|                                                                                |  |                                                 |                                                                                  |                            |             | 2000       |             |   | 1999        |           
|Assets                                                                         
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Cash and due from banks                                                         |  | $                                               | 7,077,797                                                                        |                            |             | $          | 8,538,351   |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Federal funds sold                                                              |  |                                                 | 8,135,000                                                                        |                            |             |            | 8,770,000   |  
|                                                                                |  |                                                 |                                                                                  |                            |             |           
|                                                                                |  | Total cash and cash equivalents                 |                                                                                  |                            | 15,212,797  |            |             |   | 17,308,351  |           
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Interest-bearing time deposits with other banks                                 |  |                                                 | 1,989,440                                                                        |                            |             |            | 1,985,122   |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Securities available for sale                                                   |  |                                                 | 20,168,513                                                                       |                            |             |            | 19,538,195  |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Securities held to maturity (fair value 2000  $48,518,291;
1999  $50,135,558) |  |                                                 | 47,852,539                                                                       |                            |             |            | 50,675,855  |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Federal bank stock                                                              |  |                                                 | 975,800                                                                          |                            |             |            | 928,000     |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Loans, net of allowance for loan losses 2000  $1,343,124;
1999  $1,308,630    |  |                                                 | 107,551,674                                                                      |                            |             |            | 99,531,223  |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Accrued interest receivable                                                     |  |                                                 | 1,492,613                                                                        |                            |             |            | 1,344,846   |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Premises and equipment, net                                                     |  |                                                 | 2,621,483                                                                        |                            |             |            | 2,919,868   |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Other assets                                                                    |  |                                                 | 2,927,847                                                                        |                            |             |            | 3,171,083   |  
|                                                                                |  |                                                 |                                                                                  |                            |             |           
|TOTAL                                                                           |  | $                                               | 200,792,706                                                                      |                            |             | $          | 197,402,543 |  
|                                                                                |  |                                                 |                                                                                  |                            |             |           
|Liabilities and Shareholders Equity                                           
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |  | Deposits                                        |                                                                                  | $                          | 162,013,585 |            |             | $ | 160,435,348 |           
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |  | Repurchase agreements                           |                                                                                  |                            | 3,949,485   |            |             |   | 2,057,041   |           
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |  | Federal Reserve note account                    |                                                                                  |                            | 615,298     |            |             |   | 1,000,000   |           
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |  | Federal Home Loan Bank advances                 |                                                                                  |                            | 3,446,086   |            |             |   | 5,606,641   |           
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |  | Accrued expenses and other liabilities          |                                                                                  |                            | 1,828,923   |            |             |   | 1,447,318   |           
|                                                                                |  |                                                 |                                                                                  |                            |             |           
|                                                                                |  |                                                 |                                                                                  | Total liabilities          |             |            | 171,853,377 |   |             |            | 170,546,348 | 
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Shareholders Equity:                                                          
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |  |                                                 | Common stock, no par value;
6,000,000 shares authorized;
2,289,528 shares issued |                            |             | 11,447,640 |             |   |             | 11,447,640 |            
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |  |                                                 | Additional paid-in-capital                                                       |                            |             | 4,689,800  |             |   |             | 4,689,800  |            
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |  |                                                 | Accumulated other comprehensive income (loss)                                    |                            |             | (127,139   | )           |   |             | (724,861   | )          
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |  | Retained earnings                               |                                                                                  |                            | 14,292,805  |            |             |   | 12,981,399  |           
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |  | Less 51,384 and 52,740 treasury shares at cost |                                                                                  |                            | (1,363,777  | )          |             |   | (1,537,783  | )         
|                                                                                |  |                                                 |                                                                                  |                            |             |           
|                                                                                |  |                                                 |                                                                                  | Total shareholders equity |             |            | 28,939,329  |   |             |            | 26,856,195  | 
|                                                                                |  |                                                 |                                                                                  |                            |             |           
|                                                                                |  | TOTAL                                           |                                                                                  | $                          | 200,792,706 |            |             | $ | 197,402,543 |           
|                                                                                |  |                                                 |                                                                                  |                            |             |           

See accompanying notes to consolidated financial statements.

10



---



##### Table of Contents









ConsolidatedStatements of IncomeYears Ended December 31, 2000, 1999 and 1998

|                                    |                                       |            |                                    |           |           |            |           |           |           |            |           |           |           |            | 
|----------------------------------- | ------------------------------------- | ---------- | ---------------------------------- | --------- | --------- | ---------- | --------- | --------- | --------- | ---------- | --------- | --------- | --------- | ---------- | 
|                                    |                                       |            |                                    |           | 2000      |            |           | 1999      |           |            | 1998      |          
|INTEREST AND DIVIDEND INCOME:      
|                                   
|                                   
|                                   
|                                   
|                                    | Loans, including fees                 |            | $                                  | 9,280,026 |           |            | $         | 8,284,749 |           |            | $         | 7,823,312 |          
|                                   
|                                   
|                                   
|                                   
|                                    | Federal funds sold                    |            |                                    | 348,202   |           |            |           | 488,523   |           |            |           | 621,579   |          
|                                   
|                                   
|                                   
|                                   
|                                    | Securities:                          
|                                   
|                                   
|                                   
|                                   
|                                    |                                       | Taxable    |                                    |           | 3,419,441 |            |           |           | 3,394,822 |            |           |           | 3,569,761 |           
|                                   
|                                   
|                                   
|                                   
|                                    |                                       | Nontaxable |                                    |           | 1,166,910 |            |           |           | 1,214,513 |            |           |           | 1,220,486 |           
|                                    |                                       |            |                                    |           |           |            |           |           |           |           
|                                    |                                       |            | Total interest and dividend income |           |           | 14,214,579 |           |           |           | 13,382,607 |           |           |           | 13,235,138 | 
|                                   
|                                   
|                                   
|                                   
|INTEREST EXPENSE:                  
|                                   
|                                   
|                                   
|                                   
|                                    | Deposits                              |            |                                    | 4,898,207 |           |            |           | 4,470,562 |           |            |           | 4,807,849 |          
|                                   
|                                   
|                                   
|                                   
|                                    | Short-term borrowings                 |            |                                    | 181,576   |           |            |           | 176,391   |           |            |           | 191,603   |          
|                                   
|                                   
|                                   
|                                   
|                                    | Federal Home Loan Bank advances       |            |                                    | 330,483   |           |            |           | 101,656   |           |            |           |          |          
|                                    |                                       |            |                                    |           |           |            |           |           |           |           
|                                    |                                       |            | Total interest expense             |           |           | 5,410,266  |           |           |           | 4,748,609  |           |           |           | 4,999,452  | 
|                                    |                                       |            |                                    |           |           |            |           |           |           |           
|NET INTEREST INCOME                 |                                       |            | 8,804,313                          |           |           |            | 8,633,998 |           |           |            | 8,235,686 |          
|                                   
|                                   
|                                   
|                                   
|PROVISION FOR LOAN LOSSES           |                                       |            | 62,500                             |           |           |            | 120,000   |           |           |            | 120,000   |          
|                                    |                                       |            |                                    |           |           |            |           |           |           |           
|NET INTEREST INCOME AFTER PROVISION
|                                   
|                                   
|                                   
|                                   
|                                    | FOR LOAN LOSSES                       |            |                                    | 8,741,813 |           |            |           | 8,513,998 |           |            |           | 8,115,686 |          
|                                    |                                       |            |                                    |           |           |            |           |           |           |           
|NONINTEREST INCOME                 
|                                   
|                                   
|                                   
|                                   
|                                    | Checking account fees                 |            |                                    | 559,750   |           |            |           | 543,631   |           |            |           | 545,212   |          
|                                   
|                                   
|                                   
|                                   
|                                    | Other                                 |            |                                    | 289,717   |           |            |           | 292,967   |           |            |           | 329,487   |          
|                                    |                                       |            |                                    |           |           |            |           |           |           |           
|                                    |                                       |            | Total noninterest income           |           |           | 849,467    |           |           |           | 836,598    |           |           |           | 874,699    | 
|                                    |                                       |            |                                    |           |           |            |           |           |           |           
|NONINTEREST EXPENSE                
|                                   
|                                   
|                                   
|                                   
|                                    | Salaries and employee benefits        |            |                                    | 3,353,392 |           |            |           | 3,183,466 |           |            |           | 2,959,396 |          
|                                   
|                                   
|                                   
|                                   
|                                    | Data processing fees                  |            |                                    | 653,001   |           |            |           | 709,038   |           |            |           | 761,320   |          
|                                   
|                                   
|                                   
|                                   
|                                    | Net occupancy expense                 |            |                                    | 216,918   |           |            |           | 206,157   |           |            |           | 245,834   |          
|                                   
|                                   
|                                   
|                                   
|                                    | Depreciation  furniture and fixtures |            |                                    | 306,831   |           |            |           | 315,366   |           |            |           | 276,490   |          
|                                   
|                                   
|                                   
|                                   
|                                    | Franchise taxes                       |            |                                    | 302,164   |           |            |           | 318,316   |           |            |           | 352,211   |          
|                                   
|                                   
|                                   
|                                   
|                                    | Maintenance and repairs               |            |                                    | 173,445   |           |            |           | 203,534   |           |            |           | 157,232   |          
|                                   
|                                   
|                                   
|                                   
|                                    | Other                                 |            |                                    | 1,313,008 |           |            |           | 1,263,550 |           |            |           | 1,299,086 |          
|                                    |                                       |            |                                    |           |           |            |           |           |           |           
|                                    |                                       |            | Total noninterest expense          |           |           | 6,318,759  |           |           |           | 6,199,427  |           |           |           | 6,051,569  | 
|                                    |                                       |            |                                    |           |           |            |           |           |           |           
|INCOME BEFORE INCOME TAXES          |                                       |            | 3,272,521                          |           |           |            | 3,151,169 |           |           |            | 2,938,816 |          
|                                   
|                                   
|                                   
|                                   
|INCOME TAX EXPENSE                  |                                       |            | 717,250                            |           |           |            | 634,183   |           |           |            | 594,171   |          
|                                    |                                       |            |                                    |           |           |            |           |           |           |           
|NET INCOME                          |                                       | $          | 2,555,271                          |           |           | $          | 2,516,986 |           |           | $          | 2,344,645 |          
|                                    |                                       |            |                                    |           |           |            |           |           |           |           
|WEIGHTED AVERAGE COMMON            
|                                   
|                                   
|                                   
|                                   
|                                    | SHARES OUTSTANDING                    |            |                                    | 2,240,534 |           |            |           | 2,253,650 |           |            |           | 2,281,166 |          
|                                    |                                       |            |                                    |           |           |            |           |           |           |           
|BASIC EARNINGS PER COMMON SHARE     |                                       | $          | 1.14                               |           |           | $          | 1.12      |           |           | $          | 1.03      |          
|                                    |                                       |            |                                    |           |           |            |           |           |           |           

See accompanying notes to consolidated financial statements.

11



---



##### Table of Contents









ConsolidatedStatements of Changes in Shareholders EquityYears Ended December 31, 2000, 1999 and 1998

|                                                               |                                         |                                   |                            |  |        |   |           |         |            |   |               |       |             |          |            |            |           |   |            |               |  |   |            |            |           |           | 
|-------------------------------------------------------------- | --------------------------------------- | --------------------------------- | -------------------------- |  | ------ | - | --------- | ------- | ---------- | - | ------------- | ----- | ----------- | -------- | ---------- | ---------- | --------- | - | ---------- | ------------- |  | - | ---------- | ---------- | --------- | --------- | 
|                                                               |                                         |                                   |                            |  |        |   |           |         |            |   |               |       | Accumulated |         
|                                                               |                                         |                                   |                            |  |        |   |           |         | Additional |   |               | Other |             |          |            |            |           |   |            |               |  |   | Total      |           
|                                                               |                                         |                                   |                            |  | Common |   |           | Paid-in |            |   | Comprehensive |       |             | Retained |            |            | Treasury  |   |            | Shareholders' | 
|                                                               |                                         |                                   |                            |  | Stock  |   |           | Capital |            |   | Income (Loss) |       |             | Earnings |            |            | Shares    |   |            | Equity        | 
|                                                               |                                         |                                   |                            |  |        |   |           |         |            |   |               |       |             |          |            |            |           |   |            |               | 
|Balance, January 1, 1998                                       |                                         | $                                 | 11,447,640                 |  |        | $ | 4,689,800 |         |            | $ | 91,755        |       |             | $        | 10,137,118 |            |           | $ | (188,520   | )             |  | $ | 26,177,793 |           
|                                                              
|                                                              
|                                                              
|                                                              
|Comprehensive income:                                         
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                         | Net income                        |                            |  |        |   |           |         |            |   |               |       |             |          |            |            | 2,344,645 |   |            |               |  |   |            |            | 2,344,645 |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                         | Other comprehensive income (loss) |                            |  |        |   |           |         |            |   |               |       | (266,269    | )        |            |            |           |   |            |               |  |   |            |            | (266,269  | )        
|                                                               |                                         |                                   |                            |  |        |   |           |         |            |   |               |       |             |          |            |            |           |   |            |               |  |   |           
|                                                               |                                         |                                   | Total comprehensive income |  |        |   |           |         |            |   |               |       |             |          |            |            |           |   |            |               |  |   |            |            |           | 2,078,376 | 
|                                                              
|                                                              
|                                                              
|                                                              
|Stock split (2 for 1)                                         
|                                                              
|                                                              
|                                                              
|                                                              
|Cash dividends declared,
$.44 per share                        |                                         |                                   |                            |  |        |   |           |         |            |   |               |       |             |          | (1,001,743 | )          |           |   |            |               |  |   | (1,001,743 | )         
|                                                              
|                                                              
|                                                              
|                                                              
|Shares issued under dividend
reinvestment plan (6,867 shares)  |                                         |                                   |                            |  |        |   |           |         |            |   |               |       |             |          | 42,985     |            |           |   | 139,921    |               |  |   | 182,906    |           
|                                                              
|                                                              
|                                                              
|                                                              
|Purchase of 8,563 treasury shares                              |                                         |                                   |                            |  |        |   |           |         |            |   |               |       |             |          |            |            |           |   | (244,450   | )             |  |   | (244,450   | )         
|                                                               |                                         |                                   |                            |  |        |   |           |         |            |   |               |       |             |          |            |            |           |  
|Balance, December 31, 1998                                     |                                         |                                   | 11,447,640                 |  |        |   | 4,689,800 |         |            |   | (174,514      | )     |             |          | 11,523,005 |            |           |   | (293,049   | )             |  |   | 27,192,882 |           
|                                                              
|                                                              
|                                                              
|                                                              
|Comprehensive income:                                         
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                         | Net income                        |                            |  |        |   |           |         |            |   |               |       |             |          |            |            | 2,516,986 |   |            |               |  |   |            |            | 2,516,986 |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                         | Other comprehensive income (loss) |                            |  |        |   |           |         |            |   |               |       | (550,347    | )        |            |            |           |   |            |               |  |   |            |            | (550,347  | )        
|                                                               |                                         |                                   |                            |  |        |   |           |         |            |   |               |       |             |          |            |            |           |   |            |               |  |   |           
|                                                               |                                         |                                   | Total comprehensive income |  |        |   |           |         |            |   |               |       |             |          |            |            |           |   |            |               |  |   |            |            |           | 1,966,639 | 
|                                                              
|                                                              
|                                                              
|                                                              
|Cash dividends declared,
$.48 per share                        |                                         |                                   |                            |  |        |   |           |         |            |   |               |       |             |          | (1,078,202 | )          |           |   |            |               |  |   | (1,078,202 | )         
|                                                              
|                                                              
|                                                              
|                                                              
|Shares issued under dividend
reinvestment plan (5,144 shares)  |                                         |                                   |                            |  |        |   |           |         |            |   |               |       |             |          | 19,610     |            |           |   | 135,054    |               |  |   | 154,664    |           
|                                                              
|                                                              
|                                                              
|                                                              
|Purchase of 47,296 treasury shares                             |                                         |                                   |                            |  |        |   |           |         |            |   |               |       |             |          |            |            |           |   | (1,379,788 | )             |  |   | (1,379,788 | )         
|                                                               |                                         |                                   |                            |  |        |   |           |         |            |   |               |       |             |          |            |            |           |  
|                                                              
|                                                              
|                                                              
|                                                              
|Balance, December 31, 1999                                     |                                         |                                   | 11,447,640                 |  |        |   | 4,689,800 |         |            |   | (724,861      | )     |             |          | 12,981,399 |            |           |   | (1,537,783 | )             |  |   | 26,856,195 |           
|Comprehensive income:                                         
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                         | Net income                        |                            |  |        |   |           |         |            |   |               |       |             |          |            |            | 2,555,271 |   |            |               |  |   |            |            | 2,555,271 |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                         | Other comprehensive income        |                            |  |        |   |           |         |            |   |               |       | 597,722     |          |            |            |           |   |            |               |  |   |            |            | 597,722   |          
|                                                               |                                         |                                   |                            |  |        |   |           |         |            |   |               |       |             |          |            |            |           |   |            |               |  |   |           
|                                                               |                                         |                                   | Total comprehensive income |  |        |   |           |         |            |   |               |       |             |          |            |            |           |   |            |               |  |   |            |            |           | 3,152,993 | 
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Cash dividends declared,
$.50 per share |                                   |                            |  |        |   |           |         |            |   |               |       |             |          |            | (1,119,697 | )         |   |            |               |  |   |            | (1,119,697 | )        
|                                                              
|                                                              
|                                                              
|                                                              
|Shares issued under dividend
reinvestment plan (11,694 shares) |                                         |                                   |                            |  |        |   |           |         |            |   |               |       |             |          | (124,168   | )          |           |   | 348,620    |               |  |   | 224,452    |           
|                                                              
|                                                              
|                                                              
|                                                              
|Purchase of 10,338 treasury shares                             |                                         |                                   |                            |  |        |   |           |         |            |   |               |       |             |          |            |            |           |   | (174,614   | )             |  |   | (174,614   | )         
|                                                               |                                         |                                   |                            |  |        |   |           |         |            |   |               |       |             |          |            |            |           |  
|                                                              
|                                                              
|                                                              
|                                                              
|Balance, December 31, 2000                                     |                                         | $                                 | 11,447,640                 |  |        | $ | 4,689,800 |         |            | $ | (127,139      | )     |             | $        | 14,292,805 |            |           | $ | (1,363,777 | )             |  | $ | 28,939,329 |           
|                                                               |                                         |                                   |                            |  |        |   |           |         |            |   |               |       |             |          |            |            |           |  

See accompanying notes to consolidated financial statements.

12



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##### Table of Contents









ConsolidatedStatements of Cash FlowsYears Ended December 31, 2000, 1999 and 1998

|                                      |                                    |                                                                                   |            |                                          |            |      |            |             |            |   |            |            |             |   |            |  
|------------------------------------- | ---------------------------------- | --------------------------------------------------------------------------------- | ---------- | ---------------------------------------- | ---------- | ---- | ---------- | ----------- | ---------- | - | ---------- | ---------- | ----------- | - | ---------- | -
|                                      |                                    |                                                                                   |            |                                          |            | 2000 |            |             | 1999       |   |            | 1998       |            
|CASH FLOWS FROM OPERATING ACTIVITIES:
|                                     
|                                     
|                                     
|                                     
|                                      |                                    | Net income                                                                        |            | $                                        | 2,555,271  |      |            | $           | 2,516,986  |   |            | $          | 2,344,645   |  
|                                     
|                                     
|                                     
|                                     
|                                      |                                    | Adjustments to reconcile net income
to net cash provided by operating activities:
|                                     
|                                     
|                                     
|                                     
|                                      |                                    |                                                                                   |            | Provision for loan losses                |            |      | 62,500     |             |            |   | 120,000    |            |             |   | 120,000    |  
|                                     
|                                     
|                                     
|                                     
|                                      |                                    |                                                                                   |            | Depreciation, amortization and accretion |            |      | 352,948    |             |            |   | 492,404    |            |             |   | 539,665    |  
|                                     
|                                     
|                                     
|                                     
|                                      |                                    |                                                                                   |            | Federal Home Loan Bank stock dividend    |            |      | (47,800    | )           |            |   | (43,500    | )          |             |   | (41,700    | )
|                                     
|                                     
|                                     
|                                     
|                                      |                                    |                                                                                   |            | Gain on sale of loans                    |            |      |           |             |            |   |           |            |             |   | (43,395    | )
|                                     
|                                     
|                                     
|                                     
|                                      |                                    |                                                                                   |            | Change in deferred taxes                 |            |      | (12,888    | )           |            |   | 16,089     |            |             |   | (132,022   | )
|                                     
|                                     
|                                     
|                                     
|                                      |                                    |                                                                                   |            | Change in other assets and liabilities   |            |      | 215,686    |             |            |   | (207,856   | )          |             |   | 178,974    |  
|                                      |                                    |                                                                                   |            |                                          |            |      |            |             |            |   |           
|                                      | Net cash from operating activities |                                                                                   |            | 3,125,717                                |            |      |            | 2,894,123   |            |   |            | 2,966,167  |            
|                                     
|                                     
|                                     
|                                     
|CASH FLOWS FROM INVESTING ACTIVITIES:
|                                     
|                                     
|                                     
|                                     
|                                      |                                    | Net change in interest-bearing deposits with banks                                |            |                                          | (4,318     | )    |            |             | (1,985,122 | ) |            |            |            |  
|                                     
|                                     
|                                     
|                                     
|                                      |                                    | Securities held to maturity                                                      
|                                     
|                                     
|                                     
|                                     
|                                      |                                    |                                                                                   |            | Proceeds from maturities and repayments  |            |      | 6,321,926  |             |            |   | 13,128,950 |            |             |   | 20,015,915 |  
|                                     
|                                     
|                                     
|                                     
|                                      |                                    |                                                                                   |            | Purchases of investments                 |            |      | (3,410,530 | )           |            |   | (7,019,241 | )          |             |   | (6,462,252 | )
|                                     
|                                     
|                                     
|                                     
|                                      |                                    | Securities available for sale                                                    
|                                     
|                                     
|                                     
|                                     
|                                      |                                    |                                                                                   |            | Proceeds from maturities and repayments  |            |      | 3,310,000  |             |            |   | 2,090,000  |            |             |   | 1,860,000  |  
|                                     
|                                     
|                                     
|                                     
|                                      |                                    |                                                                                   |            | Purchases of investments                 |            |      | (3,010,892 | )           |            |   | (9,447,626 | )          |             |   | (4,761,674 | )
|                                     
|                                     
|                                     
|                                     
|                                      |                                    | Capital expenditures                                                              |            |                                          | (110,789   | )    |            |             | (681,203   | ) |            |            | (543,152    | )
|                                     
|                                     
|                                     
|                                     
|                                      |                                    | Net increase in loans to customers                                                |            |                                          | (8,082,951 | )    |            |             | (7,614,148 | ) |            |            | (13,855,902 | )
|                                      |                                    |                                                                                   |            |                                          |            |      |            |             |            |   |           
|                                      | Net cash from investing activities |                                                                                   |            | (4,987,554                               | )          |      |            | (11,528,390 | )          |   |            | (3,747,065 | )          
|                                     
|                                     
|                                     
|                                     
|CASH FLOWS FROM FINANCING ACTIVITIES:
|                                     
|                                     
|                                     
|                                     
|                                      |                                    | Net change in demand
and savings accounts                                         |            |                                          | (5,251,662 | )    |            |             | (1,449,426 | ) |            |            | 6,023,645   |  
|                                     
|                                     
|                                     
|                                     
|                                      |                                    | Net change in time deposits                                                       |            |                                          | 6,829,899  |      |            |             | 4,170,223  |   |            |            | 609,050     |  
|                                     
|                                     
|                                     
|                                     
|                                      |                                    | Net change in short-term borrowings                                               |            |                                          | 1,507,742  |      |            |             | (986,818   | ) |            |            | (533,107    | )
|                                     
|                                     
|                                     
|                                     
|                                      |                                    | Proceeds from Federal Home Loan Bank advances                                     |            |                                          | 1,000,000  |      |            |             | 6,700,000  |   |            |            |            |  
|                                     
|                                     
|                                     
|                                     
|                                      |                                    | Repayments of Federal Home Loan Bank advances                                     |            |                                          | (3,160,555 | )    |            |             | (1,093,359 | ) |            |            |            |  
|                                     
|                                     
|                                     
|                                     
|                                      |                                    | Dividends paid                                                                    |            |                                          | (1,208,979 | )    |            |             | (1,063,000 | ) |            |            | (980,647    | )
|                                     
|                                     
|                                     
|                                     
|                                      |                                    | Dividends reinvested                                                              |            |                                          | 224,452    |      |            |             | 154,664    |   |            |            | 182,906     |  
|                                     
|                                     
|                                     
|                                     
|                                      |                                    | Purchase of treasury shares                                                       |            |                                          | (174,614   | )    |            |             | (1,379,788 | ) |            |            | (244,450    | )
|                                      |                                    |                                                                                   |            |                                          |            |      |            |             |            |   |           
|                                      | Net cash from financing activities |                                                                                   |            | (233,717                                 | )          |      |            | 5,052,496   |            |   |            | 5,057,397  |            
|                                      |                                    |                                                                                   |            |                                          |            |      |            |             |            |   |           
|NET INCREASE (DECREASE) IN CASH      
|                                     
|                                     
|                                     
|                                     
|AND CASH EQUIVALENTS                  |                                    |                                                                                   | (2,095,554 | )                                        |            |      | (3,581,771 | )           |            |   | 4,276,499  |           
|                                     
|                                     
|                                     
|                                     
|BEGINNING CASH AND CASH EQUIVALENTS   |                                    |                                                                                   | 17,308,351 |                                          |            |      | 20,890,122 |             |            |   | 16,613,623 |           
|                                      |                                    |                                                                                   |            |                                          |            |      |            |             |            |   |           
|ENDING CASH AND CASH EQUIVALENTS      |                                    | $                                                                                 | 15,212,797 |                                          |            | $    | 17,308,351 |             |            | $ | 20,890,122 |           
|                                      |                                    |                                                                                   |            |                                          |            |      |            |             |            |   |           
|SUPPLEMENTAL DISCLOSURES             
|                                     
|                                     
|                                     
|                                     
|                                      |                                    | Cash paid for interest                                                            |            | $                                        | 5,105,860  |      |            | $           | 4,758,088  |   |            | $          | 5,010,902   |  
|                                     
|                                     
|                                     
|                                     
|                                      |                                    | Cash paid for income taxes                                                        |            |                                          | 625,000    |      |            |             | 690,000    |   |            |            | 632,762     |  

See accompanying notes to consolidated financial statements.

13



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##### Table of Contents









Notes to Consolidated Financial Statements

Years Ended December 31, 2000, 1999 and 1998

1. Summary of Significant Accounting Policies

Nature of Operations and Principles of Consolidation:The consolidated
financial statements include National Bancshares Corporation and its
wholly-owned subsidiary, First National Bank, Orrville, Ohio, together referred
to as the Corporation. Intercompany transactions and balances are eliminated
in consolidation.

The Corporation provides financial services through its offices in Orrville,
Ohio, and surrounding communities. Its primary deposit products are checking,
savings, and term certificate accounts, and its primary lending products are
residential mortgage, commercial, and installment loans. Most loans are secured
by specific items of collateral including business assets, consumer assets and
real estate. Commercial loans are expected to be repaid from cash flow from
operations of businesses. Real estate loans are secured by both residential and
commercial real estate. Other financial instruments, which potentially
represent concentrations of credit risk, include deposit accounts in other
financial institutions and federal funds sold.

Segments:As noted above, the Corporation provides a broad range of financial
services to individuals and companies in northern Ohio. While the Corporations
chief decision makers monitor the revenue streams of the various products and
services, operations are managed and financial performance is evaluated on a
Corporation-wide basis. Accordingly, all of the Corporations banking
operations are considered by management to be aggregated in one reportable
operating segment.

Use of Estimates:To prepare financial statements in conformity with generally
accepted accounting principles, management makes estimates and assumptions
based on available information. These estimates and assumptions affect the
amounts reported in the financial statements and the disclosures provided, and
future results could differ. The allowance for loan losses, fair values of
financial instruments and fair values of certain securities are particularly
subject to change.

Cash Flows:Cash and cash equivalents include cash, deposits with other
financial institutions with original maturities under 90 days, and federal
funds sold. Net cash flows are reported for customer loan and deposit
transactions and deposits with other banks.

Securities:Securities are classified as held to maturity and carried at
amortized cost when management has the positive intent and ability to hold them
to maturity. Securities are classified as available for sale when they might be
sold before maturity. Securities available for sale are carried at fair value,
with unrealized holding gains and losses reported in other comprehensive
income. Other securities such as Federal Home Loan Bank stock are carried at
cost.

Interest income includes amortization of purchase premium or discount. Gains
and losses on sales are based on the amortized cost of the security sold.
Securities are written down to fair value when a decline in fair value is not
temporary.

Loans:Loans are reported at the principal balance outstanding, net of unearned
interest, deferred loan fees and costs, and an allowance for loan losses. Loans
held for sale are reported at the lower of cost or market, on an aggregate
basis.

Interest income is reported on the interest method and includes amortization of
net deferred loan fees and costs over the loan term. Interest income is not
reported when full loan repayment is in doubt, typically when the loan is
impaired or payments are past due over 90 days. Payments received on such loans
are reported as principal reductions.

Allowance for Loan Losses:The allowance for loan losses is a valuation
allowance for probable credit losses, increased by the provision for loan
losses and decreased by charge-offs less recoveries. Management estimates the
allowance balance required using past loan loss experience, known and inherent
risks in the nature and volume of the portfolio, information about specific
borrower situations and estimated collateral values, economic conditions, and
other factors. Allocations of the allowance may be made for specific loans, but
the entire allowance is available for any loan that, in managements judgment,
should be charged-off.

A loan is impaired when full payment under the loan terms is not expected.
Impairment is evaluated in total for smaller-balance loans of similar nature
such as residential mortgage, consumer, and credit card loans, and on an
individual loan basis for other loans. If a loan is impaired, a portion of the
allowance is allocated so that the loan is reported, net, at the present value
of estimated future cash flows using the loans existing rate or at the fair
value of collateral if repayment is expected solely from the collateral.

Foreclosed Assets:Assets acquired through or instead of loan foreclosure are
initially recorded at fair value when acquired, establishing a new cost basis.
If fair value declines, a valuation allowance is recorded through expense.
Costs after acquisition are expensed.

14



---



##### Table of Contents



Premises and Equipment:Premises and equipment are stated at cost less
accumulated depreciation. Depreciation is computed over the asset useful lives
on the straight-line basis.

Intangibles:Purchased intangibles, including goodwill of $261,000 and core
deposit value of $75,000 at year-end 2000, are recorded at cost and amortized
over the estimated life. Goodwill amortization is straight-line and core
deposit amortization is accelerated.

Long-term Assets:These assets are reviewed for impairment when events indicate
their carrying amount may not be recoverable from future undiscounted cash
flows. If impaired, the assets are recorded at discounted amounts.

Repurchase Agreements:Substantially all
repurchase agreement liabilities represent amounts advanced by various
customers. Securities are pledged to cover these liabilities, which are not
covered by
federal deposit insurance.

Benefit Plans:Retirement plan expense is the amount of required matching
contributions plus any discretionary contributions as determined by Board
decision. Deferred compensation plan expense allocates the benefits over the
estimated years of service.

Income Taxes:Income tax expense is the total of the current-year income tax
due or refundable and the change in deferred tax assets and liabilities.
Deferred tax assets and liabilities are the expected future tax amounts for the
temporary differences between carrying amounts and tax bases of assets and
liabilities, computed using enacted tax rates. A valuation allowance, if
needed, reduces deferred tax assets to
the amount expected to be realized.

Financial Instruments:Financial instruments include credit instruments, such
as commitments to make loans and standby letters of credit, issued to meet
customer-financing needs. The face amount for these items represents the
exposure to loss, before considering customer collateral or ability to repay.

Earnings Per Common
Share:Earnings per common share are calculated based on the
weighted average number of shares outstanding during the period.
There are no potentially dilutive instruments. During 1998, the
Corporation declared a 2-for-1 stock split effected in the form of a
100% stock dividend.

Comprehensive Income:Comprehensive income
consists of net income and other comprehensive income. Other
comprehensive income includes unrealized gains and losses on
securities available for sale, which is also recognized as a separate
component of equity.

Loss Contingencies:Loss contingencies, including claims and legal actions
arising in the ordinary course of business, are recorded as liabilities when
the likelihood of loss is probable and an amount or range of loss can be
reasonably estimated. Management does not believe there now are such matters
that will have a material effect on the financial statements.

Dividend Restriction:Banking regulations require maintaining certain capital
levels and limit the dividends paid by the bank to the holding company.
Dividends paid by the bank to the holding company
are the primary source of funds for dividends by the holding company to its
shareholders.

Fair Value of Financial Instruments:Fair values of financial instruments are
estimated using relevant market information and other assumptions, as more
fully disclosed in a separate note. Fair value estimates involve uncertainties
and matters of significant judgment regarding interest rates, credit risk,
prepayments, and other factors, especially in the absence of broad markets for
particular items. Changes in assumptions or in market conditions could
significantly affect the estimates.

Impact of Recent Accounting Standards:In June 1998, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards
(SFAS) No. 133, Accounting for Derivative Instruments and Hedging
Activities. SFAS No. 133, as amended by SFAS No. 137, is effective for fiscal
years beginning after June 15, 2000 with early adoption encouraged for any
fiscal quarter beginning July 1, 1998 or later, with no retroactive
application. The Corporation adopted SFAS No. 133 effective January 1, 2001.
SFAS No. 133 requires companies to record derivatives on the balance sheet as
assets or liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives are accounted for depending on the
use of the derivative and whether it qualifies for hedge accounting. The key
criterion for hedge accounting is that the hedging relationship must be highly
effective in achieving offsetting changes in fair value or cash flows. SFAS No.
133 does not allow hedging of a security which is classified as held to
maturity, accordingly upon adoption of SFAS No. 133, companies may reclassify
any security from held to maturity to available for sale if they wish to be
able to hedge the security in the future. As a result, the Company transferred
$30,458,397 of securities classified as held to maturity to available for sale.
The unrealized gain at the time the securities were transferred was
approximately $203,588. The after tax effect of the transfer was to increase
equity by $134,368 and is shown as cumulative effect adjustment in other
comprehensive income. The adoption of SFAS No. 133 did not have any other
significant impact on the Companys financial statements.

15



---



##### Table of Contents



2. Securities

Year-end securities are as follows:

|                          |                                    |                       |            |            |                   |            |         |            |         |         |            |         |         |            |            |            |            |            | 
|------------------------- | ---------------------------------- | --------------------- | ---------- | ---------- | ----------------- | ---------- | ------- | ---------- | ------- | ------- | ---------- | ------- | ------- | ---------- | ---------- | ---------- | ---------- | ---------- | 
|                          |                                    |                       |            |            | December 31, 2000 |           
|                          |                                    |                       |            |            |                   |           
|                          |                                    |                       |            |            |                   |            |         |            | Gross   |         |            | Gross   |        
|                          |                                    |                       |            |            | Amortized         |            |         | Unrealized |         |         | Unrealized |        
|                          |                                    |                       |            |            | Cost              |            |         | Gains      |         |         | Losses     |         |         | Fair Value |           
|                          |                                    |                       |            |            |                   |            |         |            |         |         |            |         |         |            |           
|Available for Sale:      
|                         
|                         
|                         
|                         
|                          | U.S. Government and
federal agency |                       | $          | 4,967,267  |                   |            | $       | 68,045     |         |         | $          | (5,000  | )       |            | $          | 5,030,312  |           
|                         
|                         
|                         
|                         
|State and Municipal       |                                    |                       | 2,296,630  |            |                   |            | 44,381  |            |         |         | (444       | )       |         |            | 2,340,567  |           
|                         
|                         
|                         
|                         
|Corporate bonds and notes |                                    |                       | 10,816,204 |            |                   |            | 169,842 |            |         |         | (80,474    | )       |         |            | 10,905,572 |           
|                          |                                    |                       |            |            |                   |            |         |            |         |         |            |         |        
|                         
|                         
|                         
|                         
|                          |                                    | Total debt securities |            |            | 18,080,101        |            |         |            | 282,268 |         |            |         | (85,918 | )          |            |            | 18,276,451 |           
|                         
|                         
|                         
|                         
|Equity securities         |                                    |                       | 2,281,047  |            |                   |            | 131,500 |            |         |         | (520,485   | )       |         |            | 1,892,062  |           
|                          |                                    |                       |            |            |                   |            |         |            |         |         |            |         |        
|                          |                                    |                       | Total      |            | $                 | 20,361,148 |         |            | $       | 413,768 |            |         | $       | (606,403   | )          |            | $          | 20,168,513 | 
|                          |                                    |                       |            |            |                   |            |         |            |         |         |            |         |        
|Held to Maturity:        
|                         
|                         
|                         
|                         
|                          | U.S. Government and
federal agency |                       | $          | 19,428,767 |                   |            | $       | 257,726    |         |         | $          | (35,597 | )       |            | $          | 19,650,896 |           
|                         
|                         
|                         
|                         
|State and Municipal       |                                    |                       | 17,394,142 |            |                   |            | 476,061 |            |         |         | (13,897    | )       |         |            | 17,856,306 |           
|                         
|                         
|                         
|                         
|Mortgage-backed           |                                    |                       | 331,043    |            |                   |            | 21,672  |            |         |         |           |         |         |            | 352,715    |           
|                         
|                         
|                         
|                         
|Corporate bonds and notes |                                    |                       | 10,698,587 |            |                   |            | 56,035  |            |         |         | (96,248    | )       |         |            | 10,658,374 |           
|                          |                                    |                       |            |            |                   |            |         |            |         |         |            |         |        
|                          |                                    |                       | Total      |            | $                 | 47,852,539 |         |            | $       | 811,494 |            |         | $       | (145,742   | )          |            | $          | 48,518,291 | 
|                          |                                    |                       |            |            |                   |            |         |            |         |         |            |         |        

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                          |                                    |                       |            |            |                   |            |         |            |        |         |            |          |          |            |            |            |            |            | 
|------------------------- | ---------------------------------- | --------------------- | ---------- | ---------- | ----------------- | ---------- | ------- | ---------- | ------ | ------- | ---------- | -------- | -------- | ---------- | ---------- | ---------- | ---------- | ---------- | 
|                          |                                    |                       |            |            | December 31, 1999 |           
|                          |                                    |                       |            |            |                   |           
|                          |                                    |                       |            |            |                   |            |         |            | Gross  |         |            | Gross    |         
|                          |                                    |                       |            |            | Amortized         |            |         | Unrealized |        |         | Unrealized |         
|                          |                                    |                       |            |            | Cost              |            |         | Gains      |        |         | Losses     |          |          | Fair Value |           
|                          |                                    |                       |            |            |                   |            |         |            |        |         |            |          |          |            |           
|Available for Sale:      
|                         
|                         
|                         
|                         
|                          | U.S. Government and
federal agency |                       | $          | 6,964,005  |                   |            | $       |           |        |         | $          | (164,006 | )        |            | $          | 6,799,999  |           
|                         
|                         
|                         
|                         
|State and Municipal       |                                    |                       | 2,805,214  |            |                   |            | 25,759  |            |        |         | (104,499   | )        |          |            | 2,726,474  |           
|                         
|                         
|                         
|                         
|Corporate bonds and notes |                                    |                       | 8,586,202  |            |                   |            | 906     |            |        |         | (243,148   | )        |          |            | 8,343,960  |           
|                          |                                    |                       |            |            |                   |            |         |            |        |         |            |          |         
|                         
|                         
|                         
|                         
|                          |                                    | Total debt securities |            |            | 18,355,421        |            |         |            | 26,665 |         |            |          | (511,653 | )          |            |            | 17,870,433 |           
|                         
|                         
|                         
|                         
|Equity securities         |                                    |                       | 2,281,047  |            |                   |            | 20,400  |            |        |         | (633,685   | )        |          |            | 1,667,762  |           
|                          |                                    |                       |            |            |                   |            |         |            |        |         |            |          |         
|                          |                                    |                       | Total      |            | $                 | 20,636,468 |         |            | $      | 47,065  |            |          | $        | (1,145,338 | )          |            | $          | 19,538,195 | 
|                          |                                    |                       |            |            |                   |            |         |            |        |         |            |          |         
|Held to Maturity:        
|                         
|                         
|                         
|                         
|                          | U.S. Government and
federal agency |                       | $          | 19,327,059 |                   |            | $       | 133,908    |        |         | $          | (579,589 | )        |            | $          | 18,881,378 |           
|                         
|                         
|                         
|                         
|State and Municipal       |                                    |                       | 17,774,172 |            |                   |            | 391,800 |            |        |         | (229,792   | )        |          |            | 17,936,180 |           
|                         
|                         
|                         
|                         
|Mortgage-backed           |                                    |                       | 927,073    |            |                   |            | 21,334  |            |        |         | (4,033     | )        |          |            | 944,374    |           
|                         
|                         
|                         
|                         
|Corporate bonds and notes |                                    |                       | 12,647,551 |            |                   |            | 24,632  |            |        |         | (298,557   | )        |          |            | 12,373,626 |           
|                          |                                    |                       |            |            |                   |            |         |            |        |         |            |          |         
|                          |                                    |                       | Total      |            | $                 | 50,675,855 |         |            | $      | 571,674 |            |          | $        | (1,111,971 | )          |            | $          | 50,135,558 | 
|                          |                                    |                       |            |            |                   |            |         |            |        |         |            |          |         

There were no sales of securities in any period presented.

Contractual maturities of debt securities at year-end 2000 were as follows.

|                           |  |           |            |  |       |   |            | 
|-------------------------- |  | --------- | ---------- |  | ----- | - | ---------- | 
|                           |  | Amortized |            |  | Fair  |  
|                           |  | Cost      |            |  | Value |  
|Available for Sale:       
|                          
|                          
|                          
|                          
|Due in one year or less    |  | $         |           |  |       | $ |           | 
|                          
|                          
|                          
|                          
|Due from one to five years |  |           | 6,140,512  |  |       |   | 6,243,261  | 
|                          
|                          
|                          
|                          
|Due from five to ten years |  |           | 9,642,958  |  |       |   | 9,692,623  | 
|                          
|                          
|                          
|                          
|Due after ten years        |  |           | 2,296,631  |  |       |   | 2,340,567  | 
|                           |  |           |            |  |       |  
|                           |  | $         | 18,080,101 |  |       | $ | 18,276,451 | 
|                           |  |           |            |  |       |  

|                           |  |           |            |  |       |   |            | 
|-------------------------- |  | --------- | ---------- |  | ----- | - | ---------- | 
|                           |  | Amortized |            |  | Fair  |  
|                           |  | Cost      |            |  | Value |  
|Held to Maturity:         
|                          
|                          
|                          
|                          
|Due in one year or less    |  | $         | 7,051,757  |  |       | $ | 7,069,590  | 
|                          
|                          
|                          
|                          
|Due from one to five years |  |           | 19,435,662 |  |       |   | 19,863,111 | 
|                          
|                          
|                          
|                          
|Due from five to ten years |  |           | 16,283,512 |  |       |   | 16,374,278 | 
|                          
|                          
|                          
|                          
|Due after ten years        |  |           | 5,081,608  |  |       |   | 5,211,312  | 
|                           |  |           |            |  |       |  
|                           |  | $         | 47,852,539 |  |       | $ | 48,518,291 | 
|                           |  |           |            |  |       |  

Securities pledged at year-end 2000 and 1999 had carrying values of $33,104,000
and $32,313,000, and were pledged to secure public deposits and repurchase
agreements.

3. Loans

Loans at year-end were as follows:

|                                        |              |  |            |             |             |  |            |             |            
|--------------------------------------- | ------------ |  | ---------- | ----------- | ----------- |  | ---------- | ----------- | -----------
|                                        |              |  |            |             | 2000        |  |            | 1999        |            
|Collateralized by real estate:         
|                                       
|                                       
|                                       
|                                       
|                                        | Commercial   |  |            | $           | 27,005,236  |  |            | $           | 25,030,907 
|                                       
|                                       
|                                       
|                                       
|                                        | Residential  |  |            |             | 42,063,386  |  |            |             | 39,206,446 
|                                       
|                                       
|                                       
|                                       
|                                        | Home equity  |  |            |             | 8,612,004   |  |            |             | 6,334,052  
|                                       
|                                       
|                                       
|                                       
|                                        | Construction |  |            |             | 1,011,188   |  |            |             | 1,225,265  
|                                        |              |  |            |             |             |  |            |            
|                                        |              |  |            | 78,691,814  |             |  |            | 71,796,670  |            
|                                       
|Consumer                                |              |  | 7,151,394  |             |             |  | 7,847,553  |            
|                                       
|                                       
|                                       
|                                       
|Commercial                              |              |  | 19,850,559 |             |             |  | 17,851,661 |            
|                                       
|                                       
|                                       
|                                       
|Credit cards                            |              |  | 1,188,297  |             |             |  | 1,207,352  |            
|                                       
|                                       
|                                       
|                                       
|Other                                   |              |  | 2,273,180  |             |             |  | 2,452,641  |            
|                                        |              |  |            |             |             | 
|                                        |              |  |            | 109,155,244 |             |  |            | 101,155,877 |            
|                                       
|                                       
|                                       
|                                       
|Unearned and
deferred income            |              |  | (153,114   | )           |             |  | (162,866   | )          
|                                       
|                                       
|                                       
|                                       
|Unamortized discount
on purchased loans |              |  | (107,332   | )           |             |  | (153,158   | )          
|                                        |              |  |            |             |             | 
|                                        |              |  |            |             | 108,894,798 |  |            |             | 100,839,853
|                                       
|                                       
|                                       
|                                       
|Allowance for loan losses               |              |  | (1,343,124 | )           |             |  | (1,308,630 | )          
|                                        |              |  |            |             |             | 
|                                        |              |  | $          | 107,551,674 |             |  | $          | 99,531,223  |            
|                                        |              |  |            |             |             | 

Activity in the allowance for loan losses for the year was as follows.

|                          |  |      |           |   |      |   |           |      |  |   |           |  
|------------------------- |  | ---- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                          |  | 2000 |           |   | 1999 |   |           | 1998 | 
|                         
|                         
|                         
|                         
|                         
|Beginning balance         |  | $    | 1,308,630 |   |      | $ | 1,296,513 |      |  | $ | 1,232,464 |  
|                         
|                         
|                         
|                         
|Provision for
loan losses |  |      | 62,500    |   |      |   | 120,000   |      |  |   | 120,000   |  
|                         
|                         
|                         
|                         
|Loans charged-off         |  |      | (56,737   | ) |      |   | (145,959  | )    |  |   | (135,408  | )
|                         
|                         
|                         
|                         
|Recoveries                |  |      | 28,731    |   |      |   | 38,076    |      |  |   | 79,457    |  
|                          |  |      |           |   |      |   |           |      | 
|Ending balance            |  | $    | 1,343,124 |   |      | $ | 1,308,630 |      |  | $ | 1,296,513 |  
|                          |  |      |           |   |      |   |           |      | 

Impaired loans were as follows:

|                                                           |  |      |        |  |      |   |        | 
|---------------------------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | 
|                                                           |  | 2000 |        |  | 1999 |  
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|Year-end loans with no allocated
allowance for loan losses |  | $    |       |  |      | $ |       | 
|                                                          
|                                                          
|                                                          
|                                                          
|Year-end loans with allocated
allowance for loan losses    |  |      | 14,863 |  |      |   | 60,580 | 
|                                                          
|                                                          
|                                                          
|                                                          
|Amount of the allowance
for loan losses allocated          |  |      | 14,863 |  |      |   | 32,884 | 
|                                                          
|                                                          
|                                                          
|                                                          
|Average of impaired loans
during the year                  |  | $    | 21,178 |  |      | $ | 45,757 | 
|                                                          
|                                                          
|                                                          
|                                                          
|Interest income recognized
during impairment               |  |      | 4,315  |  |      |   | 4,066  | 
|                                                          
|                                                          
|                                                          
|                                                          
|Cash-basis interest
income recognized                      |  |      | 4,315  |  |      |   | 4,066  | 

16



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##### Table of Contents



Loans past due over 90 days and still accruing interest at year-end 2000 and
1999 were $112,094 and $225,000. Nonaccrual loans for the same periods were
$144,130 and $250,000.

4. Premises and Equipment

Year-end premises and equipment were as follows:

|                                  |  |   |           |           |           |   |           |           |           | 
|--------------------------------- |  | - | --------- | --------- | --------- | - | --------- | --------- | --------- | 
|                                  |  |   |           | 2000      |           |   | 1999      |          
|                                 
|                                 
|                                 
|                                 
|                                 
|Land                              |  | $ | 446,070   |           |           | $ | 446,070   |          
|                                 
|                                 
|                                 
|                                 
|Buildings                         |  |   | 3,558,760 |           |           |   | 3,520,337 |          
|                                 
|                                 
|                                 
|                                 
|Furniture, fixtures and equipment |  |   | 3,311,697 |           |           |   | 3,278,293 |          
|                                  |  |   |           |           |           |  
|                                  |  |   |           | 7,316,527 |           |   |           | 7,244,700 |          
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|Less: Accumulated depreciation    |  |   | 4,695,044 |           |           |   | 4,324,832 |          
|                                  |  |   |           |           |           |  
|                                  |  |   |           | $         | 2,621,483 |   |           | $         | 2,919,868 | 
|                                  |  |   |           |           |           |  

Depreciation included in noninterest expense was $409,174, $411,440 and
$370,105 in 2000, 1999 and 1998.

5. Deposits

Year-end deposits were as follows:

|                            |  |   |            |             |  |      |            |             | 
|--------------------------- |  | - | ---------- | ----------- |  | ---- | ---------- | ----------- | 
|                            |  |   | 2000       |             |  | 1999 |           
|                           
|                           
|                           
|                           
|                           
|Demand, noninterest-bearing |  | $ | 28,236,689 |             |  | $    | 28,324,431 |            
|                           
|                           
|                           
|                           
|Demand, interest-bearing    |  |   | 30,414,962 |             |  |      | 32,326,299 |            
|                           
|                           
|                           
|                           
|Savings                     |  |   | 39,985,914 |             |  |      | 43,238,497 |            
|                           
|                           
|                           
|                           
|Time, $100,000 and over     |  |   | 14,058,111 |             |  |      | 14,239,385 |            
|                           
|                           
|                           
|                           
|Time, other                 |  |   | 49,317,909 |             |  |      | 42,306,736 |            
|                            |  |   |            |             |  |     
|                            |  |   | $          | 162,013,585 |  |      | $          | 160,435,348 | 
|                            |  |   |            |             |  |     

A summary of time deposits at year-end 2000 by maturity follows:

|                    |  |      |            | 
|------------------- |  | ---- | ---------- | 
|                    |  | 2000 |           
|                   
|                   
|                   
|                   
|                   
|2001                |  | $    | 51,636,509 | 
|                   
|                   
|                   
|                   
|2002                |  |      | 7,402,225  | 
|                   
|                   
|                   
|                   
|2003                |  |      | 3,618,848  | 
|                   
|                   
|                   
|                   
|2004                |  |      | 699,468    | 
|                   
|                   
|                   
|                   
|2005 and thereafter |  |      | 18,970     | 
|                    |  |      |           
|                    |  | $    | 63,376,020 | 
|                    |  |      |           

6. Federal Home Loan Bank Advances

At year-end, advances from the Federal Home Loan Bank were as follows:

|                                                                                                                            |  |      |           |  |      |   |           | 
|--------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- |  | ---- | - | --------- | 
|                                                                                                                            |  | 2000 |           |  | 1999 |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Maturities through 2002,
fixed rate at 6.5%                                                                                 |  | $    | 2,446,086 |  |      | $ | 3,606,641 | 
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Maturity in 2000
variable rate at 6.0%                                                                                      |  |      |          |  |      |   | 2,000,000 | 
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Maturity in 2010, fixed rate
at 6.26% convertible to
variable rate if 3-month
LIBOR is at or above
predetermined conversion |  |      | 1,000,000 |  |      |   |          | 
|                                                                                                                            |  |      |           |  |      |  
|Total                                                                                                                       |  | $    | 3,446,086 |  |      | $ | 5,606,641 | 
|                                                                                                                            |  |      |           |  |      |  

Each advance is payable at its maturity date; advances may be paid prior to
maturity with a prepayment penalty. The Bank has $33,940,000 of
first mortgage loans available under a blanket lien arrangement at year-end
2000.

Minimum required principal payments are:

|     |  |  |      |   |  |   |           | 
|---- |  |  | ---- | - |  | - | --------- | 
|     |  |  | Rate |  
|    
|    
|    
|    
|2001 |  |  | 6.50 | % |  | $ | 1,238,279 | 
|    
|    
|    
|    
|2002 |  |  | 6.50 | % |  |   | 1,207,807 | 
|    
|    
|    
|    
|2010 |  |  | 6.26 | % |  |   | 1,000,000 | 
|     |  |  |      |   |  |   |          
|     |  |  |      |   |  | $ | 3,446,086 | 
|     |  |  |      |   |  |   |          

7. Repurchase Agreements

Repurchase agreements generally mature within thirty days from the transaction
date. Information concerning repurchase agreements is summarized
as follows:

|                                          |  |      |           |   |      |   |           |  
|----------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                          |  | 2000 |           |   | 1999 |  
|                                         
|                                         
|                                         
|                                         
|                                         
|Average balance during the year           |  | $    | 3,090,913 |   |      | $ | 4,164,589 |  
|                                         
|                                         
|                                         
|                                         
|Average interest rate
during the year     |  |      | 4.87      | % |      |   | 3.68      | %
|                                         
|                                         
|                                         
|                                         
|Maximum month-end
balance during the year |  |      | 4,558,650 |   |      |   | 5,976,150 |  

8. Benefit Plans

The Corporation has a 401(k) retirement plan that covers substantially all
employees. The plan allows employees to contribute up to 15% of their pay with
the Corporation matching 50% of contributions up to 6% of an employees pay.
Discretionary contributions may also be made to the plan. Total matching and
discretionary contributions made by the Corporation during 2000, 1999 and 1998
amounted to $112,011, $106,711 and $100,814, respectively.

The Corporation has an Employee Stock Purchase Incentive Plan for full-time
employees. Under the Plan, each employee is entitled to receive a cash payment
equal to 20% of the purchase price of Corporation common stock acquired by the
employee on the open market, up to a maximum of 100 shares per calendar year.

The Corporation has a director retirement and death benefit plan for the
benefit of all members of the Board of Directors. The plan is designed to
provide an annual retirement benefit to be paid to each director upon
retirement from the board. The retirement benefit provided to each director is
an annual benefit equal to $1,000 for each year of service on the board after
August 24, 1994. In addition, each director has the option of deferring any
portion of directors fees to a maximum of $1,000 per month until retirement.
Expense recognized in 2000, 1999 and 1998 for this plan was $48,232, $32,127
and $35,476, respectively.

9. Income Taxes

The components of deferred taxes were as follows:

|                     |                              |  |        |         |  |      |         |         | 
|-------------------- | ---------------------------- |  | ------ | ------- |  | ---- | ------- | ------- | 
|                     |                              |  | 2000   |         |  | 1999 |        
|Deferred tax assets:
|                    
|                    
|                    
|                    
|                     | Bad debts                    |  | $      | 296,532 |  |      | $       | 284,804 | 
|                    
|                    
|                    
|                    
|                     | Deferred loan fees           |  |        | 49,552  |  |      |         | 52,758  | 
|                    
|                    
|                    
|                    
|                     | Core deposit intangibles     |  |        | 39,258  |  |      |         | 37,552  | 
|                    
|                    
|                    
|                    
|                     | Deferred compensation        |  |        | 126,892 |  |      |         | 102,162 | 
|                    
|                    
|                    
|                    
|                     | Capital loss carryforward    |  |        | 67,694  |  |      |         | 69,439  | 
|                    
|                    
|                    
|                    
|                     | Unrealized securities losses |  | 65,496 |         |  |      | 373,413 |        
|                     |                              |  |        |         |  |      |        
|                     | Total                        |  | $      | 645,424 |  |      | $       | 920,128 | 
|                     |                              |  |        |         |  |      |        

17



---



##### Table of Contents



|                          |                                        |   |         |         |  |      |         |         | 
|------------------------- | -------------------------------------- | - | ------- | ------- |  | ---- | ------- | ------- | 
|                          |                                        |   | 2000    |         |  | 1999 |        
|Deferred tax liabilities:
|                         
|                         
|                         
|                         
|                          | Securities accretion                   |   | $       | 33,800  |  |      | $       | 34,896  | 
|                         
|                         
|                         
|                         
|                          | Depreciation                           |   |         | 70,448  |  |      |         | 77,503  | 
|                         
|                         
|                         
|                         
|                          | Federal Home Loan Bank
stock dividends |   |         | 43,724  |  |      |         | 21,131  | 
|                         
|                         
|                         
|                         
|                          | Investment financial stock fund        |   | 104,193 |         |  |      | 98,310  |        
|                          |                                        |   |         |         |  |      |        
|                          | Total                                  |   |         | 252,165 |  |      |         | 231,840 | 
|                          |                                        |   |         |         |  |      |        
|Net deferred tax asset    |                                        | $ | 393,259 |         |  | $    | 688,288 |        
|                          |                                        |   |         |         |  |      |        

The capital loss carryforward expires in 2003.

The components of income tax expense are as follows:

|                  |  |      |         |   |      |   |         |      |  |   |          |  
|----------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | -------- | -
|                  |  | 2000 |         |   | 1999 |   |         | 1998 | 
|                 
|                 
|                 
|                 
|                 
|Currently payable |  | $    | 730,138 |   |      | $ | 618,094 |      |  | $ | 726,193  |  
|                 
|                 
|                 
|                 
|Deferred          |  |      | (12,888 | ) |      |   | 16,089  |      |  |   | (132,022 | )
|                  |  |      |         |   |      |   |         |      | 
|Total             |  | $    | 717,250 |   |      | $ | 634,183 |      |  | $ | 594,171  |  
|                  |  |      |         |   |      |   |         |      | 

The following is a reconciliation of income tax at the federal statutory rate
to the effective rate of tax on the financial statements:

|                              |  |                          |     |   |        |   |           |      |  |  |        |   |  |      |           |   |        |  |     |   |  |   |          |  
|----------------------------- |  | ------------------------ | --- | - | ------ | - | --------- | ---- |  |  | ------ | - |  | ---- | --------- | - | ------ |  | --- | - |  | - | -------- | -
|                              |  | Years Ended December 31, |    
|                              |  | 2000                     |     |   | 1999   |   |           | 1998 | 
|                              |  | Rate                     |     |   | Amount |   |           | Rate |  |  | Amount |   |  | Rate |           |   | Amount | 
|                              |  |                          |     |   |        |   |           |      |  |  |        |   |  |      |           |   |        | 
|Tax at federal
statutory rate |  |                          | 34  | % |        | $ | 1,112,657 |      |  |  | 34     | % |  | $    | 1,071,397 |   |        |  | 34  | % |  | $ | 999,197  |  
|                             
|                             
|                             
|                             
|Tax-exempt
income             |  |                          | (12 | ) |        |   | (384,858  | )    |  |  | (13    | ) |  |      | (406,658  | ) |        |  | (15 | ) |  |   | (428,371 | )
|                             
|                             
|                             
|                             
|Other                         |  |                          |    |   |        |   | (10,549   | )    |  |  | (1     | ) |  |      | (30,556   | ) |        |  | 1   |   |  |   | 23,345   |  
|                              |  |                          |     |   |        |   |           |      |  |  |        |   |  |      |           |   |        | 
|Income tax
expense            |  |                          | 22  | % |        | $ | 717,250   |      |  |  | 20     | % |  | $    | 634,183   |   |        |  | 20  | % |  | $ | 594,171  |  
|                              |  |                          |     |   |        |   |           |      |  |  |        |   |  |      |           |   |        | 

10. Related Party Transactions

Loans to principal officers, directors, and their affiliates in 2000 were as
follows:

|                  |  |   |            |  
|----------------- |  | - | ---------- | -
|Beginning balance |  | $ | 4,214,211  |  
|                 
|                 
|                 
|                 
|New loans         |  |   | 1,544,427  |  
|                 
|                 
|                 
|                 
|Repayments        |  |   | (1,377,327 | )
|                  |  |   |           
|Ending balance    |  | $ | 4,381,311  |  
|                  |  |   |           

Unused commitments to these related parties totaled $1,199,641 at year-end
2000.

11. Capital Requirements and Restrictions on Retained Earnings

The Company and the Bank are subject to
regulatory capital requirements administered by federal banking agencies.
Capital adequacy guidelines and prompt corrective-action regulations involve
quantitative measures of assets, liabilities, and
certain off-balance-sheet items calculated under regulatory accounting
practices. Capital amounts and classifications are also subject to qualitative
judgments by regulators. Failure to meet capital requirements can initiate
regulatory action.

Prompt corrective-action regulations provide five classifications: well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized, although these terms are
not used to represent overall financial condition. If

Actual and required capital amounts and ratios are presented below at year-end.

|                                              |  |   |        |  |  |                   |       |   |                   |   |             |       |  |                         |        |   |  |       |                        |  |  |  |       |   | 
|--------------------------------------------- |  | - | ------ |  |  | ----------------- | ----- | - | ----------------- | - | ----------- | ----- |  | ----------------------- | ------ | - |  | ----- | ---------------------- |  |  |  | ----- | - | 
|                                              |  |   |        |  |  |                   |       |   |                   |   |             |       |  |                         |        |   |  |       | To Be Well Capitalized | 
|                                              |  |   |        |  |  |                   |       |   |                   |   | For Capital |       |  | Under Prompt Corrective |       
|                                              |  |   | Actual |  |  | Adequacy Purposes |       |   | Action Provisions |  
|                                              |  |   |        |  |  |                   |       |   |                   |  
|(Dollars in thousands)                        |  |   | Amount |  |  | Ratio             |       |   | Amount            |   |             | Ratio |  |                         | Amount |   |  | Ratio |                       
|                                              |  |   |        |  |  |                   |       |   |                   |   |             |       |  |                         |        |   |  |       |                       
|2000                                         
|                                             
|                                             
|                                             
|                                             
|Total capital to risk-weighted assets        
|                                             
|                                             
|                                             
|                                             
|Consolidated                                  |  | $ | 29,817 |  |  |                   | 22.22 | % |                   | $ | 10,735      |       |  |                         | 8.00   | % |  | $     | 13,419                 |  |  |  | 10.00 | %
|                                             
|                                             
|                                             
|                                             
|Bank                                          |  |   | 25,644 |  |  |                   | 19.40 |   |                   |   | 10,573      |       |  |                         | 8.00   |   |  |       | 13,217                 |  |  |  | 10.00 |  
|                                             
|                                             
|                                             
|                                             
|Tier 1 (core) capital to risk-weighted assets
|                                             
|                                             
|                                             
|                                             
|Consolidated                                  |  |   | 28,474 |  |  |                   | 21.22 |   |                   |   | 5,368       |       |  |                         | 4.00   |   |  |       | 8,051                  |  |  |  | 6.00  |  
|                                             
|                                             
|                                             
|                                             
|Bank                                          |  |   | 24,301 |  |  |                   | 18.39 |   |                   |   | 5,287       |       |  |                         | 4.00   |   |  |       | 7,930                  |  |  |  | 6.00  |  
|                                             
|                                             
|                                             
|                                             
|Tier 1 (core) capital to average assets      
|                                             
|                                             
|                                             
|                                             
|Consolidated                                  |  |   | 28,474 |  |  |                   | 14.53 |   |                   |   | 7,836       |       |  |                         | 4.00   |   |  |       | 9,795                  |  |  |  | 5.00  |  
|                                             
|                                             
|                                             
|                                             
|Bank                                          |  |   | 24,301 |  |  |                   | 12.52 |   |                   |   | 7,762       |       |  |                         | 4.00   |   |  |       | 9,703                  |  |  |  | 5.00  |  
|                                             
|                                             
|                                             
|                                             
|                                             
|                                             
|                                             
|                                             
|                                             
|1999                                         
|                                             
|                                             
|                                             
|                                             
|Total capital to risk-weighted assets        
|                                             
|                                             
|                                             
|                                             
|Consolidated                                  |  | $ | 28,093 |  |  |                   | 21.81 | % |                   | $ | 10,303      |       |  |                         | 8.00   | % |  | $     | 12,879                 |  |  |  | 10.00 | %
|                                             
|                                             
|                                             
|                                             
|Bank                                          |  |   | 25,269 |  |  |                   | 19.91 |   |                   |   | 10,153      |       |  |                         | 8.00   |   |  |       | 12,691                 |  |  |  | 10.00 |  
|                                             
|                                             
|                                             
|                                             
|Tier 1 (core) capital to risk-weighted assets
|                                             
|                                             
|                                             
|                                             
|Consolidated                                  |  |   | 26,784 |  |  |                   | 20.80 |   |                   |   | 5,152       |       |  |                         | 4.00   |   |  |       | 7,727                  |  |  |  | 6.00  |  
|                                             
|                                             
|                                             
|                                             
|Bank                                          |  |   | 23,960 |  |  |                   | 18.88 |   |                   |   | 5,077       |       |  |                         | 4.00   |   |  |       | 7,615                  |  |  |  | 6.00  |  
|                                             
|                                             
|                                             
|                                             
|Tier 1 (core) capital to average assets      
|                                             
|                                             
|                                             
|                                             
|Consolidated                                  |  |   | 26,784 |  |  |                   | 13.83 |   |                   |   | 7,746       |       |  |                         | 4.00   |   |  |       | 9,683                  |  |  |  | 5.00  |  
|                                             
|                                             
|                                             
|                                             
|Bank                                          |  |   | 23,960 |  |  |                   | 12.49 |   |                   |   | 7,674       |       |  |                         | 4.00   |   |  |       | 9,592                  |  |  |  | 5.00  |  

18



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##### Table of Contents



adequately capitalized, regulatory approval is required to accept brokered
deposits. If undercapitalized, capital distributions are limited, as is asset
growth and expansion, and capital restoration plans are required. The
Corporation is considered well capitalized under the Federal Deposit Insurance
Act at year-end 2000 and 1999. Management is not aware of any matters after
December 31, 2000 that would cause the Corporations capital category to
change.

The Bank is restricted by regulation in the amount of dividends it may pay to
the holding company. Under the most restrictive dividend limitations, at
year-end 2000 approximately $98,860 is available for the Bank to pay dividends
to the holding company.

12. Commitments, Contingencies and Financial Instruments with Off-Balance-Sheet
Risk

Some financial instruments, such as loan commitments, credit lines, letters of
credit, and overdraft protection, are issued to meet customer-financing needs.
These are agreements to provide credit or to support the credit of others, as
long as conditions established in the contract are met. These agreements
usually have fixed expiration dates. Commitments may expire without being used.
Off-balance-sheet risk to credit loss exists up to the face amount of these
instruments, although material losses are not anticipated. The same credit
policies are used to make such commitments as are used for loans, including
obtaining collateral at exercise of the commitment.

Financial instruments with off-balance-sheet risk were as follows at year-end.

|                       |  |      |            |  |      |   |            | 
|---------------------- |  | ---- | ---------- |  | ---- | - | ---------- | 
|                       |  | 2000 |            |  | 1999 |  
|                       |  |      |            | 
|                      
|                      
|                      
|                      
|                      
|Unused lines of credit |  | $    | 24,113,000 |  |      | $ | 23,472,000 | 
|                      
|                      
|                      
|                      
|Letters of credit      |  |      | 1,012,000  |  |      |   | 1,575,000  | 

The Corporation was required to have approximately $2,060,000 and $1,722,000 of
cash on hand or on deposit with the Federal Reserve Bank at year-end 2000 and
1999. These balances do not earn interest. The Corporation has also committed
to invest up to $112,500 in a limited partnership that purchases stock of
financial companies.

Of the above-unused lines of credit, approximately $4,729,000 pertains to
fixed-rate commitments, and variable-rate commitments account for approximately
$19,384,000. In addition, rates on unused lines of credit range from 6.99% to
16.9%.

13. Fair Values of Financial Instruments

Carrying amount and estimated fair values of financial instruments were as
follows at year-end.

|                       |                                 |  |             |              |   |       |             |              |          |  |            |              |   |  |            |              |  
|---------------------- | ------------------------------- |  | ----------- | ------------ | - | ----- | ----------- | ------------ | -------- |  | ---------- | ------------ | - |  | ---------- | ------------ | -
|                       |                                 |  | 2000        |              |   | 1999  |            
|                       |                                 |  |             |              |   |       |            
|                       |                                 |  | Carrying    |              |   | Fair  |             |              | Carrying |  |            | Fair         |  
|                       |                                 |  | Amount      |              |   | Value |             |              | Amount   |  |            | Value        |  
|                       |                                 |  |             |              |   |       |             |              |          |  |            |              |  
|Financial Assets:     
|                      
|                      
|                      
|                      
|                       | Cash and cash
equivalents       |  | $           | 15,212,797   |   |       | $           | 15,213,000   |          |  | $          | 17,308,351   |   |  | $          | 17,308,000   |  
|                      
|                      
|                      
|                      
|                       | Interest-bearing
deposits       |  |             | 1,989,440    |   |       |             | 1,992,000    |          |  |            | 1,985,122    |   |  |            | 1,992,000    |  
|                      
|                      
|                      
|                      
|                       | Securities
available
for sale   |  |             | 20,168,513   |   |       |             | 20,169,000   |          |  |            | 19,538,195   |   |  |            | 19,538,000   |  
|                      
|                      
|                      
|                      
|                       | Securities held
to maturity     |  |             | 47,852,539   |   |       |             | 48,518,000   |          |  |            | 50,675,855   |   |  |            | 50,136,000   |  
|                      
|                      
|                      
|                      
|                       | Federal bank
stock              |  |             | 975,800      |   |       |             | 976,000      |          |  |            | 928,000      |   |  |            | 928,000      |  
|                      
|                      
|                      
|                      
|                       | Loans, net                      |  | 107,551,674 |              |   |       | 106,753,000 |              |          |  | 99,531,223 |              |   |  | 98,391,000 |             
|                      
|                      
|                      
|                      
|                       | Accrued interest
receivable     |  | 1,492,613   |              |   |       | 1,493,000   |              |          |  | 1,344,846  |              |   |  | 1,345,000  |             
|                      
|                      
|                      
|                      
|                      
|                      
|                      
|                      
|                      
|Financial Liabilities:
|                      
|                      
|                      
|                      
|                       | Deposits                        |  |             | (162,013,585 | ) |       |             | (161,809,000 | )        |  |            | (160,435,348 | ) |  |            | (160,341,000 | )
|                      
|                      
|                      
|                      
|                       | Short-term
borrowings           |  |             | (4,564,783   | ) |       |             | (4,565,000   | )        |  |            | (3,057,041   | ) |  |            | (3,057,000   | )
|                      
|                      
|                      
|                      
|                       | Federal Home
Loan Bank
advances |  |             | (3,446,086   | ) |       |             | (3,443,000   | )        |  |            | (5,606,641   | ) |  |            | (5,645,000   | )
|                      
|                      
|                      
|                      
|                       | Accrued interest
payable        |  |             | (840,304     | ) |       |             | (840,000     | )        |  |            | (535,898     | ) |  |            | (536,000     | )

The methods and assumptions used to estimate fair value are described as
follows.

Carrying amount is the estimated fair value for cash and cash equivalents,
short-term borrowings, Federal bank stock, accrued interest receivable and
payable, demand and savings deposits, short-term debt, and variable rate loans
or deposits that reprice frequently and fully. Security fair values are based
on market prices or dealer quotes, and if no such information is available, on
the rate and term of the security and information about the issuer. For fixed
rate loans or deposits and for variable rate loans or deposits with infrequent
repricing or repricing limits, fair value is based on discounted cash flows
using current market rates applied to the estimated life and credit risk. Fair
values for impaired loans are estimated using discounted cash flow analysis or
underlying collateral values. Fair value of loans held for sale is based on
market quotes. Fair value of debt is based on current rates for similar
financing. The fair value of off-balance-sheet items, based on the current fees
or cost that would be charged to enter into or terminate such arrangements, is
not material.

19



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##### Table of Contents



14. Other Comprehensive Income

Other comprehensive income components and related taxes were as follows.

|                                                                                 |  |      |          |   |      |   |          |      |  |   |          |  
|-------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                                 |  | 2000 |          |   | 1999 |   |          | 1998 | 
|                                                                                 |  |      |          |   |      |  
|Unrealized holding
gains and losses on
available-for-sale
securities             |  | $    | 905,639  |   |      | $ | (833,859 | )    |  | $ | (403,438 | )
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Less reclassification
adjustment for gains
and losses later
recognized in income |  |      |         |   |      |   |         |      |  |   |         |  
|                                                                                 |  |      |          |   |      |   |          |      | 
|Net unrealized gains
and losses                                                  |  |      | 905,639  |   |      |   | (833,859 | )    |  |   | (403,438 | )
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Tax effect                                                                       |  |      | (307,917 | ) |      |   | 283,512  |      |  |   | 137,169  |  
|                                                                                 |  |      |          |   |      |   |          |      | 
|Other comprehensive
income                                                       |  | $    | 597,722  |   |      | $ | (550,347 | )    |  | $ | (266,269 | )
|                                                                                 |  |      |          |   |      |   |          |      | 

15. Quarterly Financial Data
(unaudited)

|     |                |  |          |           |  |              |   |           |        |  |   |                    |  |  |   |      | 
|---- | -------------- |  | -------- | --------- |  | ------------ | - | --------- | ------ |  | - | ------------------ |  |  | - | ---- | 
|     |                |  | Interest |           |  | Net Interest |   |           | Net    |  |   | Earnings per Share | 
|     |                |  | Income   |           |  | Income       |   |           | Income |  |   | Basic and Diluted  | 
|     |                |  |          |           |  |              |   |           |        |  |   |                    | 
|2000
|    
|    
|    
|    
|     | First quarter  |  | $        | 3,356,065 |  |              | $ | 2,138,497 |        |  | $ | 571,436            |  |  | $ | 0.26 | 
|    
|    
|    
|    
|     | Second quarter |  |          | 3,503,382 |  |              |   | 2,223,594 |        |  |   | 600,917            |  |  |   | 0.27 | 
|    
|    
|    
|    
|     | Third quarter  |  |          | 3,658,595 |  |              |   | 2,200,604 |        |  |   | 660,791            |  |  |   | 0.29 | 
|    
|    
|    
|    
|     | Fourth quarter |  |          | 3,696,537 |  |              |   | 2,241,618 |        |  |   | 722,127            |  |  |   | 0.32 | 
|    
|    
|    
|    
|    
|    
|    
|    
|    
|1999
|    
|    
|    
|    
|     | First quarter  |  | $        | 3,220,453 |  |              | $ | 2,066,171 |        |  | $ | 619,351            |  |  | $ | 0.27 | 
|    
|    
|    
|    
|     | Second quarter |  |          | 3,326,359 |  |              |   | 2,134,813 |        |  |   | 592,441            |  |  |   | 0.26 | 
|    
|    
|    
|    
|     | Third quarter  |  |          | 3,352,683 |  |              |   | 2,190,244 |        |  |   | 647,607            |  |  |   | 0.29 | 
|    
|    
|    
|    
|     | Fourth quarter |  |          | 3,483,112 |  |              |   | 2,242,770 |        |  |   | 657,587            |  |  |   | 0.30 | 

16. Parent Company Only Condensed Financial Information

Condensed financial statements for National Bancshares Corporation (parent
only) are as follows:

BALANCE SHEETS

|                                     |                                            |  |              |            |  |      |   |            | 
|------------------------------------ | ------------------------------------------ |  | ------------ | ---------- |  | ---- | - | ---------- | 
|                                     |                                            |  | December 31, |           
|                                     |                                            |  |             
|                                     |                                            |  | 2000         |            |  | 1999 |  
|                                     |                                            |  |              |            | 
|Assets                              
|                                    
|                                    
|                                    
|                                    
|                                     | Cash                                       |  | $            | 2,462,067  |  |      | $ | 1,350,817  | 
|                                    
|                                    
|                                    
|                                    
|                                     | Investment in Bank subsidiary              |  |              | 24,766,285 |  |      |   | 24,031,721 | 
|                                    
|                                    
|                                    
|                                    
|                                     | Securities available for sale              |  |              | 1,892,062  |  |      |   | 1,667,762  | 
|                                    
|                                    
|                                    
|                                    
|                                     | Other assets                               |  |              | 132,255    |  |      |   | 208,517    | 
|                                     |                                            |  |              |            |  |      |  
|                                     | Total assets                               |  | $            | 29,252,669 |  |      | $ | 27,258,817 | 
|                                     |                                            |  |              |            |  |      |  
|Liabilities and shareholders equity
|                                    
|                                    
|                                    
|                                    
|                                     | Dividends payable                          |  | $            | 313,340    |  |      | $ | 402,622    | 
|                                    
|                                    
|                                    
|                                    
|                                     | Shareholders equity                       |  |              | 28,939,329 |  |      |   | 26,856,195 | 
|                                     |                                            |  |              |            |  |      |  
|                                     | Total liabilities and
shareholders equity |  | $            | 29,252,669 |  |      | $ | 27,258,817 | 
|                                     |                                            |  |              |            |  |      |  

STATEMENTS OF INCOME

|         |                                            |  |                          |           |   |      |   |           |      |  |   |           |  
|-------- | ------------------------------------------ |  | ------------------------ | --------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|         |                                            |  | Years Ended December 31, |          
|         |                                            |  |                         
|         |                                            |  | 2000                     |           |   | 1999 |   |           | 1998 | 
|         |                                            |  |                          |           |   |      |  
|Income  
|        
|        
|        
|        
|         | Dividends from
Bank subsidiary             |  | $                        | 2,265,174 |   |      | $ | 2,255,794 |      |  | $ | 2,752,913 |  
|        
|        
|        
|        
|         | Other dividends                            |  |                          | 30,000    |   |      |   | 92,300    |      |  |   | 12,724    |  
|         |                                            |  |                          |           |   |      |   |           |      | 
|         | Total income                               |  |                          | 2,295,174 |   |      |   | 2,348,094 |      |  |   | 2,765,637 |  
|        
|        
|        
|        
|        
|        
|        
|        
|        
|Expenses
|        
|        
|        
|        
|         | Miscellaneous
expense                      |  |                          | (24,783   | ) |      |   | (25,508   | )    |  |   | (40,571   | )
|        
|        
|        
|        
|         | Undistributed equity
in net income
of Bank |  |                          | 284,880   |   |      |   | 194,400   |      |  |   | (380,421  | )
|         |                                            |  |                          |           |   |      |   |           |      | 
|         | Net income                                 |  | $                        | 2,555,271 |   |      | $ | 2,516,986 |      |  | $ | 2,344,645 |  
|         |                                            |  |                          |           |   |      |   |           |      | 

STATEMENTS OF CASH FLOWS

|                                      |                                                                                   |                                    |                                |                                    |            |                          |           |            |            |          |           |           |            |         |           | 
|------------------------------------- | --------------------------------------------------------------------------------- | ---------------------------------- | ------------------------------ | ---------------------------------- | ---------- | ------------------------ | --------- | ---------- | ---------- | -------- | --------- | --------- | ---------- | ------- | --------- | 
|                                      |                                                                                   |                                    |                                |                                    |            | Years Ended December 31, |          
|                                      |                                                                                   |                                    |                                |                                    |            |                         
|                                      |                                                                                   |                                    |                                |                                    |            | 2000                     |           |            | 1999       |          |           | 1998      |           
|                                      |                                                                                   |                                    |                                |                                    |            |                          |           |            |            |         
|Cash flows from
operating activities:
|                                     
|                                     
|                                     
|                                     
|                                      | Net income                                                                        |                                    | $                              | 2,555,271                          |            |                          | $         | 2,516,986  |            |          | $         | 2,344,645 |           
|                                     
|                                     
|                                     
|                                     
|                                      | Adjustments to
reconcile net income
to net cash provided
by operating activities:
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                   |                                    | Undistributed
earnings of Bank |                                    |            | (284,880                 | )         |            |            | (194,400 | )         |           |            | 380,421 |          
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                   |                                    | Change in dividends
receivable |                                    |            |                         |           |            |            |         |           |           |            | 600,294 |          
|                                      |                                                                                   |                                    |                                |                                    |            |                          |           |            |            |         
|                                      |                                                                                   |                                    |                                | Net cash from
operating
activities |            |                          | 2,270,391 |            |            |          | 2,322,586 |           |            |         | 3,325,360 | 
|                                     
|                                     
|                                     
|                                     
|Cash flows from
investing activities:
|                                     
|                                     
|                                     
|                                     
|                                      | Purchase of securities                                                            |                                    |                                |                                   |            |                          |           | (651,250   | )          |          |           | (434,999  | )         
|                                     
|                                     
|                                     
|                                     
|                                      | Return of capital                                                                 |                                    |                                |                                   |            |                          |           | 90,000     |            |          |           |          |           
|                                      |                                                                                   |                                    |                                |                                    |            |                          |           |            |            |         
|                                      |                                                                                   | Net cash from
investing activities |                                |                                    |           |                          |           |            | (561,250   | )        |           |           | (434,999   | )      
|                                     
|                                     
|                                     
|                                     
|Cash flows from
financing activities:
|                                     
|                                     
|                                     
|                                     
|                                      | Dividends paid                                                                    |                                    |                                | (1,208,979                         | )          |                          |           | (1,063,000 | )          |          |           | (980,647  | )         
|                                     
|                                     
|                                     
|                                     
|                                      | Dividends reinvested                                                              |                                    |                                | 224,452                            |            |                          |           | 154,664    |            |          |           | 182,906   |           
|                                     
|                                     
|                                     
|                                     
|                                      | Purchase of
treasury shares                                                       |                                    |                                | (174,614                           | )          |                          |           | (1,379,788 | )          |          |           | (244,450  | )         
|                                      |                                                                                   |                                    |                                |                                    |            |                          |           |            |            |         
|                                      |                                                                                   | Net cash from
financing activities |                                |                                    | (1,159,141 | )                        |           |            | (2,288,124 | )        |           |           | (1,042,191 | )      
|                                      |                                                                                   |                                    |                                |                                    |            |                          |           |            |            |         
|Net increase (decrease)
in cash       |                                                                                   |                                    | 1,111,250                      |                                    |            |                          | (526,788  | )          |            |          | 1,848,170 |          
|                                     
|                                     
|                                     
|                                     
|Cash, beginning of year               |                                                                                   |                                    | 1,350,817                      |                                    |            |                          | 1,877,605 |            |            |          | 29,435    |          
|                                      |                                                                                   |                                    |                                |                                    |            |                          |           |            |            |         
|Cash, end of year                     |                                                                                   | $                                  | 2,462,067                      |                                    |            | $                        | 1,350,817 |            |            | $        | 1,877,605 |          
|                                      |                                                                                   |                                    |                                |                                    |            |                          |           |            |            |         

20



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##### Table of Contents









CROWE CHIZEK

Report of Independent Auditors

Board of Directors and Shareholders
National Bancshares Corporation
Orrville, Ohio

We have audited the accompanying consolidated balance sheets of National
Bancshares Corporation as of December 31, 2000 and 1999, and the related
consolidated statements of income, changes in shareholders equity and cash
flows for each of the three years in the period ended December 31, 2000. These
financial statements are the responsibility of the Corporations management.
Our responsibility is to express an opinion on these 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 financial position of National
Bancshares Corporation as of December 31, 2000 and 1999, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2000 in conformity with generally accepted accounting principles.



/s/ Crowe, Chizek and Company LLP
Crowe, Chizek and Company LLP

Columbus, Ohio
January 26, 2001

21



---



##### Table of Contents









Analysis of Net Interest Earnings

Rate spread and effective rate differential (on a tax equivalent basis).
The following table presents an analysis of net interest earning assets and
interest bearing liabilities.

|                                            |                                    |                           |         |        |          |   |        |       |       |  |         |         |      |          |         |        |        |   |        |       |       |         |      |      |      |   |  |  | 
|------------------------------------------- | ---------------------------------- | ------------------------- | ------- | ------ | -------- | - | ------ | ----- | ----- |  | ------- | ------- | ---- | -------- | ------- | ------ | ------ | - | ------ | ----- | ----- | ------- | ---- | ---- | ---- | - |  |  | 
|                                            |                                    |                           |         |        | 2000     |   |        | 1999  |      
|                                            |                                    |                           |         |        |          |   |        |       |      
|                                            |                                    |                           |         |        | Daily    |   |        |       |       |  |         |         |      |          |         | Daily  |       
|                                            |                                    |                           |         |        | Average  |   |        |       |       |  |         | Average |      |          | Average |        |        |   |        |       |       | Average |     
|(Dollars in
Thousands)                      |                                    | Balance                   |         |        | Interest |   |        | Rate  |       |  | Balance |         |      | Interest |         |        | Rate   |  
|                                            |                                    |                           |         |        |          |   |        |       |       |  |         |         |      |          |         |        |        |   |       
|Assets                                     
|                                           
|                                           
|                                           
|                                           
|Interest earning assets:                   
|                                           
|                                           
|                                           
|                                           
|Investment securities:                     
|                                           
|                                           
|                                           
|                                           
|                                            | Taxable                            |                           | $       | 49,488 |          |   | $      | 3,297 |       |  |         | 6.53    | %    |          | $       | 50,052 |        |   | $      | 3,327 |       |         |      | 6.56 | %   
|                                           
|                                           
|                                           
|                                           
|                                            | Nontaxable (tax
equivalent basis)* |                           |         | 20,658 |          |   |        | 1,769 |       |  |         | 8.55    | %    |          |         | 21,542 |        |   |        | 1,840 |       |         |      | 8.54 | %   
|                                           
|                                           
|                                           
|                                           
|Federal funds sold                          |                                    |                           | 5,506   |        |          |   | 348    |       |       |  | 6.32    | %       |      |          | 10,002  |        |        |   | 488    |       |       |         | 4.88 | %   
|                                           
|                                           
|                                           
|                                           
|Interest-bearing deposits                   |                                    |                           | 1,987   |        |          |   | 122    |       |       |  | 6.14    | %       |      |          | 1,119   |        |        |   | 68     |       |       |         | 6.08 | %   
|                                           
|                                           
|                                           
|                                           
|Net loans (including
nonaccrual loans)      |                                    |                           | 104,856 |        |          |   | 9,280  |       |       |  | 8.85    | %       |      |          | 97,438  |        |        |   | 8,285  |       |       |         | 8.50 | %   
|                                            |                                    |                           |         |        |          |   |        |       |       |  |         |         |      |          |         |        |        |   |        |       |      
|Total interest
earning assets               |                                    |                           | 182,495 |        |          |   | 14,816 |       |       |  | 8.12    | %       |      |          | 180,153 |        |        |   | 14,008 |       |       |         | 7.78 | %   
|                                            |                                    |                           |         |        |          |   |        |       |       |  |         |         |      |          |         |        |        |   |        |       |      
|All other assets                            |                                    |                           | 13,413  |        |          |   |        |       |       |  |         |         |      |          | 13,505  |        |        |   |        |       |       |         |      |     
|                                            |                                    |                           |         |        |          |   |        |       |       |  |         |         |      |          |         |        |        |   |        |       |      
|Total Assets                                |                                    | $                         | 195,908 |        |          |   |        |       |       |  |         |         |      | $        | 193,658 |        |        |   |        |       |       |         |      |     
|                                            |                                    |                           |         |        |          |   |        |       |       |  |         |         |      |          |         |        |        |   |        |       |      
|Liabilities and Shareholders Equity       
|                                           
|                                           
|                                           
|                                           
|Interest bearing liabilities:              
|                                           
|                                           
|                                           
|                                           
|                                            | Deposits:                         
|                                           
|                                           
|                                           
|                                           
|                                            |                                    | Interest bearing
checking |         | $      | 29,914   |   |        | $     | 530   |  |         |         | 1.77 | %        |         | $      | 30,837 |   |        | $     | 568   |         |      |      | 1.84 | %
|                                           
|                                           
|                                           
|                                           
|                                            |                                    | Savings                   |         |        | 41,306   |   |        |       | 1,072 |  |         |         | 2.60 | %        |         |        | 43,630 |   |        |       | 1,130 |         |      |      | 2.59 | %
|                                           
|                                           
|                                           
|                                           
|                                            |                                    | Time, $100,000
and over   |         |        | 13,726   |   |        |       | 835   |  |         |         | 6.08 | %        |         |        | 15,125 |   |        |       | 680   |         |      |      | 4.50 | %
|                                           
|                                           
|                                           
|                                           
|                                            |                                    | Time, other               |         |        | 46,700   |   |        |       | 2,461 |  |         |         | 5.27 | %        |         |        | 42,385 |   |        |       | 2,093 |         |      |      | 4.94 | %
|                                           
|                                           
|                                           
|                                           
|                                            | Other funds purchased              |                           |         | 8,637  |          |   |        | 512   |       |  |         | 5.93    | %    |          |         | 6,335  |        |   |        | 278   |       |         |      | 4.39 | %   
|                                            |                                    |                           |         |        |          |   |        |       |       |  |         |         |      |          |         |        |        |   |        |       |      
|Total interest
bearing liabilities          |                                    |                           | 140,283 |        |          |   | 5,410  |       |       |  | 3.86    | %       |      |          | 138,312 |        |        |   | 4,749  |       |       |         | 3.43 | %   
|                                            |                                    |                           |         |        |          |   |        |       |       |  |         |         |      |          |         |        |        |   |        |       |      
|Demand deposits                             |                                    |                           | 26,470  |        |          |   |        |       |       |  |         |         |      |          | 27,132  |        |        |   |        |       |       |         |      |     
|                                           
|                                           
|                                           
|                                           
|Other liabilities                           |                                    |                           | 1,020   |        |          |   |        |       |       |  |         |         |      |          | 910     |        |        |   |        |       |       |         |      |     
|                                           
|                                           
|                                           
|                                           
|Shareholders equity                        |                                    |                           | 28,135  |        |          |   |        |       |       |  |         |         |      |          | 27,304  |        |        |   |        |       |       |         |      |     
|                                            |                                    |                           |         |        |          |   |        |       |       |  |         |         |      |          |         |        |        |   |        |       |      
|Total Liabilities and
Shareholders Equity  |                                    | $                         | 195,908 |        |          |   |        |       |       |  |         |         |      | $        | 193,658 |        |        |   |        |       |       |         |      |     
|                                            |                                    |                           |         |        |          |   |        |       |       |  |         |         |      |          |         |        |        |   |        |       |      
|Net interest income
(tax equivalent basis)* |                                    |                           |         |        |          | $ | 9,406  |       |       |  |         |         |      |          |         |        |        | $ | 9,259  |       |       |         |      |     
|                                            |                                    |                           |         |        |          |   |        |       |       |  |         |         |      |          |         |        |        |   |        |       |      
|Net interest spread                         |                                    |                           |         |        |          |   |        |       |       |  | 4.26    | %       |      |          |         |        |        |   |        |       |       |         | 4.35 | %   
|                                            |                                    |                           |         |        |          |   |        |       |       |  |         |         |      |          |         |        |        |   |        |       |      
|Net yield on total
earning assets*          |                                    |                           |         |        |          |   |        |       |       |  | 5.15    | %       |      |          |         |        |        |   |        |       |       |         | 5.14 | %   
|                                            |                                    |                           |         |        |          |   |        |       |       |  |         |         |      |          |         |        |        |   |        |       |      

[Additional columns below]







[Continued from above table, first column(s) repeated]

|                                            |                                    |                           |         |        |          |   |        |       |       |  |      |         |      |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|------------------------------------------- | ---------------------------------- | ------------------------- | ------- | ------ | -------- | - | ------ | ----- | ----- |  | ---- | ------- | ---- | - |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                                            |                                    |                           |         |        | 1998     |  
|                                            |                                    |                           |         |        |         
|                                            |                                    |                           |         |        | Daily   
|                                            |                                    |                           |         |        | Average  |   |        |       |       |  |      | Average
|(Dollars in
Thousands)                      |                                    | Balance                   |         |        | Interest |   |        | Rate 
|                                            |                                    |                           |         |        |          |   |        |       |      
|Assets                                     
|                                           
|                                           
|                                           
|                                           
|Interest earning assets:                   
|                                           
|                                           
|                                           
|                                           
|Investment securities:                     
|                                           
|                                           
|                                           
|                                           
|                                            | Taxable                            |                           | $       | 54,565 |          |   | $      | 3,570 |       |  |      | 6.54    | %   
|                                           
|                                           
|                                           
|                                           
|                                            | Nontaxable (tax
equivalent basis)* |                           |         | 21,493 |          |   |        | 1,848 |       |  |      | 8.60    | %   
|                                           
|                                           
|                                           
|                                           
|Federal funds sold                          |                                    |                           | 11,692  |        |          |   | 622    |       |       |  | 5.32 | %      
|                                           
|                                           
|                                           
|                                           
|Interest-bearing deposits                   |                                    |                           |         |       
|                                           
|                                           
|                                           
|                                           
|Net loans (including
nonaccrual loans)      |                                    |                           | 84,610  |        |          |   | 7,823  |       |       |  | 9.25 | %      
|                                            |                                    |                           |         |        |          |   |        |       |       |  |      |        
|Total interest
earning assets               |                                    |                           | 172,360 |        |          |   | 13,863 |       |       |  | 8.04 | %      
|                                            |                                    |                           |         |        |          |   |        |       |       |  |      |        
|All other assets                            |                                    |                           | 12,389  |       
|                                            |                                    |                           |         |        |          |   |        |       |       |  |      |        
|Total Assets                                |                                    | $                         | 184,749 |       
|                                            |                                    |                           |         |        |          |   |        |       |       |  |      |        
|Liabilities and Shareholders Equity       
|                                           
|                                           
|                                           
|                                           
|Interest bearing liabilities:              
|                                           
|                                           
|                                           
|                                           
|                                            | Deposits:                         
|                                           
|                                           
|                                           
|                                           
|                                            |                                    | Interest bearing
checking |         | $      | 29,376   |   |        | $     | 676   |  |      |         | 2.30 | %
|                                           
|                                           
|                                           
|                                           
|                                            |                                    | Savings                   |         |        | 41,657   |   |        |       | 1,245 |  |      |         | 2.99 | %
|                                           
|                                           
|                                           
|                                           
|                                            |                                    | Time, $100,000
and over   |         |        | 14,082   |   |        |       | 768   |  |      |         | 5.45 | %
|                                           
|                                           
|                                           
|                                           
|                                            |                                    | Time, other               |         |        | 40,196   |   |        |       | 2,119 |  |      |         | 5.27 | %
|                                           
|                                           
|                                           
|                                           
|                                            | Other funds purchased              |                           |         | 4,350  |          |   |        | 191   |       |  |      | 4.39    | %   
|                                            |                                    |                           |         |        |          |   |        |       |       |  |      |        
|Total interest
bearing liabilities          |                                    |                           | 129,661 |        |          |   | 4,999  |       |       |  | 3.86 | %      
|                                            |                                    |                           |         |        |          |   |        |       |       |  |      |        
|Demand deposits                             |                                    |                           | 27,030  |       
|                                           
|                                           
|                                           
|                                           
|Other liabilities                           |                                    |                           | 1,132   |       
|                                           
|                                           
|                                           
|                                           
|Shareholders equity                        |                                    |                           | 26,926  |       
|                                            |                                    |                           |         |        |          |   |        |       |       |  |      |        
|Total Liabilities and
Shareholders Equity  |                                    | $                         | 184,749 |       
|                                            |                                    |                           |         |        |          |   |        |       |       |  |      |        
|Net interest income
(tax equivalent basis)* |                                    |                           |         |        |          | $ | 8,864  |      
|                                            |                                    |                           |         |        |          |   |        |       |       |  |      |        
|Net interest spread                         |                                    |                           |         |        |          |   |        |       |       |  | 4.18 | %      
|                                            |                                    |                           |         |        |          |   |        |       |       |  |      |        
|Net yield on total
earning assets*          |                                    |                           |         |        |          |   |        |       |       |  | 5.14 | %      
|                                            |                                    |                           |         |        |          |   |        |       |       |  |      |        

* Tax equivalence based on highest statutory tax rate of 34%.

22



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##### Table of Contents









Historical Financial Summary

|                                                    |  |      |             |   |      |   |             |      |  |   |             |   |  |       |             |   |  |   |             |  
|--------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | ---- |  | - | ----------- | - |  | ----- | ----------- | - |  | - | ----------- | -
|Financial Position                                 
|(Year End Balances)                                 |  | 2000 |             |   | 1999 |   |             | 1998 |  |   | 1997*       |   |  | 1996* |            
|                                                    |  |      |             |   |      |   |             |      | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                   
|Total Assets                                        |  | $    | 200,792,706 |   |      | $ | 197,402,543 |      |  | $ | 190,203,604 |   |  | $     | 182,982,332 |   |  | $ | 180,631,014 |  
|                                                   
|                                                   
|                                                   
|                                                   
|Cash and Due from Banks                             |  |      | 7,077,797   |   |      |   | 8,538,351   |      |  |   | 7,675,122   |   |  |       | 8,068,623   |   |  |   | 8,194,813   |  
|                                                   
|                                                   
|                                                   
|                                                   
|Investment Securities                               |  |      | 68,021,052  |   |      |   | 70,214,050  |      |  |   | 69,808,933  |   |  |       | 80,940,781  |   |  |   | 76,719,305  |  
|                                                   
|                                                   
|                                                   
|                                                   
|Loans-Net                                           |  |      | 107,551,674 |   |      |   | 99,531,223  |      |  |   | 92,037,075  |   |  |       | 78,257,778  |   |  |   | 78,149,995  |  
|                                                   
|                                                   
|                                                   
|                                                   
|Deposits                                            |  |      | 162,013,585 |   |      |   | 160,435,348 |      |  |   | 157,714,551 |   |  |       | 151,081,856 |   |  |   | 149,824,321 |  
|                                                   
|                                                   
|                                                   
|                                                   
|Borrowings                                          |  |      | 8,010,869   |   |      |   | 8,663,682   |      |  |   | 4,043,859   |   |  |       | 4,576,966   |   |  |   | 4,910,436   |  
|                                                   
|                                                   
|                                                   
|                                                   
|Shareholders Equity                                |  |      | 28,939,329  |   |      |   | 26,856,195  |      |  |   | 27,192,882  |   |  |       | 26,177,793  |   |  |   | 24,804,248  |  
|                                                   
|                                                   
|                                                   
|                                                   
|Book Value Per Share                                |  | $    | 12.93       |   |      | $ | 12.01       |      |  | $ | 11.93       |   |  | $     | 11.48       |   |  | $ | 10.86       |  
|                                                    |  |      |             |   |      |   |             |      |  |   |             |   |  |       |            
|Summary of Operations                              
|                                                   
|                                                   
|                                                   
|                                                   
|Total Interest Income                               |  | $    | 14,214,579  |   |      | $ | 13,382,607  |      |  | $ | 13,235,138  |   |  | $     | 13,157,905  |   |  | $ | 12,730,539  |  
|                                                   
|                                                   
|                                                   
|                                                   
|Total Interest Expense                              |  |      | 5,410,266   |   |      |   | 4,748,609   |      |  |   | 4,999,452   |   |  |       | 5,071,870   |   |  |   | 4,860,197   |  
|                                                    |  |      |             |   |      |   |             |      |  |   |             |   |  |       |            
|Net Interest Income                                 |  |      | 8,804,313   |   |      |   | 8,633,998   |      |  |   | 8,235,686   |   |  |       | 8,086,035   |   |  |   | 7,870,342   |  
|                                                   
|                                                   
|                                                   
|                                                   
|Provision for Loan Losses                           |  |      | 62,500      |   |      |   | 120,000     |      |  |   | 120,000     |   |  |       | 120,000     |   |  |   | 180,000     |  
|                                                    |  |      |             |   |      |   |             |      |  |   |             |   |  |       |            
|Net Interest Income After
Provision for Loan Losses |  |      | 8,741,813   |   |      |   | 8,513,998   |      |  |   | 8,115,686   |   |  |       | 7,966,035   |   |  |   | 7,690,342   |  
|                                                   
|                                                   
|                                                   
|                                                   
|Total Noninterest Income                            |  |      | 849,467     |   |      |   | 836,598     |      |  |   | 874,699     |   |  |       | 745,380     |   |  |   | 795,444     |  
|                                                   
|                                                   
|                                                   
|                                                   
|Total Noninterest Expense                           |  |      | 6,318,759   |   |      |   | 6,199,427   |      |  |   | 6,051,569   |   |  |       | 5,680,885   |   |  |   | 5,620,865   |  
|                                                    |  |      |             |   |      |   |             |      |  |   |             |   |  |       |            
|Income Before Income Taxes                          |  |      | 3,272,521   |   |      |   | 3,151,169   |      |  |   | 2,938,816   |   |  |       | 3,030,530   |   |  |   | 2,864,921   |  
|                                                   
|                                                   
|                                                   
|                                                   
|Income Taxes Expense                                |  |      | 717,250     |   |      |   | 634,183     |      |  |   | 594,171     |   |  |       | 680,943     |   |  |   | 628,469     |  
|                                                    |  |      |             |   |      |   |             |      |  |   |             |   |  |       |            
|Net Income                                          |  | $    | 2,555,271   |   |      | $ | 2,516,986   |      |  | $ | 2,344,645   |   |  | $     | 2,349,587   |   |  | $ | 2,236,452   |  
|                                                    |  |      |             |   |      |   |             |      |  |   |             |   |  |       |            
|Net Income Per Share                                |  | $    | 1.14        |   |      | $ | 1.12        |      |  | $ | 1.03        |   |  | $     | 1.03        |   |  | $ | 0.98        |  
|                                                   
|                                                   
|                                                   
|                                                   
|Cash Dividends                                      |  | $    | 1,119,697   |   |      | $ | 1,078,202   |      |  | $ | 1,001,743   |   |  | $     | 948,651     |   |  | $ | 900,103     |  
|                                                   
|                                                   
|                                                   
|                                                   
|Cash Dividends Per Share                            |  | $    | 0.50        |   |      | $ | 0.48        |      |  | $ | 0.44        |   |  | $     | 0.42        |   |  | $ | 0.40        |  
|                                                   
|                                                   
|                                                   
|                                                   
|Dividend Payout Percentage                          |  |      | 43.82       | % |      |   | 42.84       | %    |  |   | 42.72       | % |  |       | 40.38       | % |  |   | 40.25       | %
|                                                   
|                                                   
|                                                   
|                                                   
|Weighted Average Number
of Shares Outstanding       |  |      | 2,240,534   |   |      |   | 2,253,650   |      |  |   | 2,281,166   |   |  |       | 2,285,812   |   |  |   | 2,280,686   |  
|                                                   
|                                                   
|                                                   
|                                                   
|Return on Average Assets                            |  |      | 1.30        | % |      |   | 1.30        | %    |  |   | 1.27        | % |  |       | 1.31        | % |  |   | 1.30        | %
|                                                   
|                                                   
|                                                   
|                                                   
|Return on Average Equity                            |  |      | 9.08        | % |      |   | 9.22        | %    |  |   | 8.71        | % |  |       | 9.23        | % |  |   | 9.24        | %
|                                                   
|                                                   
|                                                   
|                                                   
|Average Equity to
Average Assets                    |  |      | 14.36       | % |      |   | 14.10       | %    |  |   | 14.57       | % |  |       | 14.21       | % |  |   | 14.08       | %
|                                                   
|                                                   
|                                                   
|                                                   
|Risk-Based Capital
Percentage                       |  |      | 22.22       | % |      |   | 21.81       | %    |  |   | 23.80       | % |  |       | 23.75       | % |  |   | 22.30       | %
|                                                   
|                                                   
|                                                   
|                                                   
|Full Time Equivalent Staff                          |  |      | 103         |   |      |   | 101         |      |  |   | 96          |   |  |       | 96          |   |  |   | 95          |  
|                                                   
|                                                   
|                                                   
|                                                   
|Average Total Assets to
Full Time Equivalent Staff  |  | $    | 1,902,022   |   |      | $ | 1,917,411   |      |  | $ | 1,924,474   |   |  | $     | 1,866,035   |   |  | $ | 1,810,186   |  
|                                                    |  |      |             |   |      |   |             |      |  |   |             |   |  |       |            

*All share and per share data restated for 100% stock dividend on May 29, 1998.

23



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##### Table of Contents



Directors

Charles J. DolezalChairman, President,
Chief Executive Officer

Sara BalzariniMember of Management
Committee, Contours, Ltd.

Bobbi DouglasExecutive Director
STEPS at Liberty Center
Every Womans House

John W. KropfAttorney
Kropf, Wagner, Hohenberger & Lutz, L.L.P.

Steve SchmidPresident
Smith Dairy Products, Inc.

John E. SprungerPresident
Kidron Auction, Inc.

Howard J. WengerPresident
Wenger Excavating, Inc.
Lake Region Oil, Inc.
Northstar Asphalt, Inc.

James F. WoolleyChief Executive Officer
R.W. Screw Products, Inc.

Albert YeagleyPlant Manager
J.M. Smucker Company

Robert F. GumzDirector Emeritus

Officers
National Bancshares Corporation

Charles J. DolezalPresident

Kenneth R. VanSickleSenior Vice President, Secretary

Lawrence Cardinal, Jr.Vice President, Treasurer

First National Bank

Charles J. DolezalPresident

Control
Lawrence Cardinal, Jr.Vice President & Controller

Angela SmithAssistant Controller

Lending
Kenneth R. VanSickleSenior Vice President,
Chief Loan Officer

Scott HolmesAssistant Vice President,
Manager of Loan Department

Dean KarhanAssistant Vice President,
Commercial Loan Officer

Sara MartinLoan Officer

Matthew MillerLoan Officer

Carol YoderLoan Officer

Operations
Robert WoodruffVice President & Cashier

Jackie SamsaAssistant Vice President,
Manager of Human Resources

Jan ZachariasOperations Officer

Sales and Business Development
Harold BerkeyVice President of Customer Services

Security/Compliance
Ron ArmentroutAssistant Vice President,
Security Officer, Compliance Officer

Audit
Jim HuntsbergerAuditor

Branch Administration

David ChapmanAssistant Vice President,
Manager Mt. Eaton Office

Carolyn ForrerAdministrative Officer,
Manager Main Office Lobby

Karen HicksAssistant Vice President, Manager Smithville Office

Michelle KieffaberLoan Officer,
Dalton Office

James KuschmeaderAssistant Vice President,
Manager Dalton Office

Susan KutzAdministrative Officer,
Manager West High Office

Larry KyttaAssistant Vice President,
Manager Lodi Office

Steve RiddickAssistant Vice President,
Manager Cleveland Road Office

Valerie SteinAssistant Vice President,
Manager Kidron Office

Rita TyrrellAdministrative Officer,
Dalton Office

Betty WyantAssistant Vice President,
Manager Midway Office





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Offices

Main Office112 West Market St., Orrville
(330)682-1010

Cleveland Road Office1725 Cleveland Rd., Wooster
(330)263-1725

Dalton Office12 West Main St., Dalton
(330)828-2227

Kidron Office4934 Kidron Rd., Kidron
(330)857-3101

Lodi Office106 Ainsworth St., Lodi
(330)948-1414

Midway OfficeU.S. Route 30 at County Rd. 44, Apple Creek
(330)264-8070

Mt. Eaton Office15974 East Main St., Mt. Eaton
(330)857-4301 or (330)359-5476

Northside Office1720 North Main St., Orrville
(330)682-2342

Seville Office121 Greenwich Rd., Seville
(330)769-3105

Smithville Office153 East Main St., Smithville
(330)669-2611

West High Office1320 West High St., Orrville
(330)682-2881



| | ©2001 National Bancshares
Corporation
| | -------------------------------------





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| | National
Bancshares
Corporation
| | -------------------------------



| | 112 West Market Street
Orrville, Ohio 44667
(330) 682-1010
www.fnborrville.com
| | ------------------------------------------------------------------------------