##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended Dec. 31, 2002
Commission File Number 0-14773

NATIONAL BANCSHARES CORPORATION

|                       |  |                                   
|---------------------- |  | ----------------------------------
|Ohio                   |  | 34-1518564                        
|                      
|                      
|                      
|                      
|State of incorporation |  | I.R.S. Employer
Identification No.

112 West Market Street, Orrville, Ohio 44667
Address of principal executive offices

Registrants telephone number: (330) 682-1010

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

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

Common Stock, No Par Value
Title of Class

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

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes     No     X

State the aggregate market value of the voting stock held by non-affiliates of
the registrant as of June 28, 2002, the last business day of the registrants
most recently completed second fiscal quarter: $39,353,620.

Indicate the number of shares outstanding of each of the registrants classes
of common stock, as of March 7, 2003.

Common Stock, No Par Value: 2,234,488

Documents Incorporated by Reference:

     Portions of the registrants Proxy Statement dated March 21, 2003 and
previously filed March 20, 2003, are incorporated by reference into Part III.

     Portions of the registrants Annual Report to Shareholders, December 31, 2002
are incorporated by reference in Parts I, II, IV.

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|                                                          |           |                                                   |                                                                                                                                        |      |      |        |  |  | 
|--------------------------------------------------------- | --------- | ------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------- | ---- | ---- | ------ |  |  | 
|Form 10-K Cross Reference Index                           |           |                                                   |                                                                                                                                        | Page
|Part I                                                    |           |                                                   |                                                                                                                                        |      |      |        |  | 
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Item 1 -  |                                                   | Business                                                                                                                               |      |      |        | 
|                                                         
|                                                         
|                                                         
|                                                         
|Forward-looking Statements                                |           |                                                   | 4                                                                                                                                      |     
|                                                         
|                                                         
|                                                         
|                                                         
|Description of Business                                   |           |                                                   | 4-5                                                                                                                                    |     
|                                                         
|                                                         
|                                                         
|                                                         
|Financial Ratios  Note 1                                 |           |                                                   | A24                                                                                                                                    |     
|                                                         
|                                                         
|                                                         
|                                                         
|Daily Average Balance Sheets, Interest and Rates  Note 1 |           |                                                   | A23                                                                                                                                    |     
|                                                         
|                                                         
|                                                         
|                                                         
|Volume and Rate Variance Analysis                         |           |                                                   | 7                                                                                                                                      |     
|                                                         
|                                                         
|                                                         
|                                                         
|Investment Portfolio                                      |           |                                                   | 8                                                                                                                                      |     
|                                                         
|                                                         
|                                                         
|                                                         
|Loan Portfolio                                            |           |                                                   | 9                                                                                                                                      |     
|                                                         
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|                                                         
|                                                         
|Summary of Loan Loss Experience                           |           |                                                   | 10                                                                                                                                     |     
|                                                         
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|                                                         
|Deposits                                                  |           |                                                   | 11                                                                                                                                     |     
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|                                                          | Item 2 -  |                                                   | Properties                                                                                                                             |      |      | 6      | 
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Item 3 -  |                                                   | Legal Proceedings                                                                                                                      |      |      | 6      | 
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Item 4 -  |                                                   | Submission of Matters to a Vote of Security                                                                                            |      |      |        | 
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|                                                         
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|                                                          |           | Holders - None                                    |                                                                                                                                        |      |      |       
|                                                         
|                                                         
|                                                         
|                                                         
|Part II                                                   |           |                                                   |                                                                                                                                        |      |      |        |  | 
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|                                                          | Item 5 -  |                                                   | Market for the
Registrants Common Equity                                                                                              |      |      |        | 
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          |           | and Related Stockholder Matters  Note 1          |                                                                                                                                        |      | A9   |       
|                                                         
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|                                                         
|                                                          |           | (Also see inside back cover - 2002 Annual Report) |                                                                                                                                        |      |      |       
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|                                                          |           | Number of shareholders of common stock            |                                                                                                                                        |      | 6    |       
|                                                         
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|                                                          | Item 6 -  |                                                   | Selected Financial Data  Note 1                                                                                                       |      |      | A24    | 
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|                                                         
|                                                          | Item 7 -  |                                                   | Managements Discussion and Analysis of Financial                                                                                      |      |      |        | 
|                                                         
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|                                                         
|                                                          |           | Condition and Results of Operation  Note 1       |                                                                                                                                        |      | A4-9 |       
|                                                         
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|                                                         
|-                                                         |           | Liquidity Management                              |                                                                                                                                        |      |      | 6      | 
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Item 7A - |                                                   | Quantitative and
Qualitative Disclosures About
Market Risk (See
Asset and Liability Management)  Note 1                               |      |      | A7-8   | 
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Item 8 -  |                                                   | Financial Statements  Note 1                                                                                                          |      |      | A10-21 | 
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|                                                          | Item 9 -  |                                                   | Changes in and Disagreements with Accountants on                                                                                       |      |      |        | 
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|                                                         
|                                                          |           | Accounting and Financial Disclosure  None        |                                                                                                                                        |      |      |       
|                                                         
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|                                                         
|Part III                                                  |           |                                                   |                                                                                                                                        |      |      |        |  | 
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|                                                          | Item 10 - |                                                   | Directors of the Registrant  Note 2                                                                                                   |      |      | B3     | 
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|                                                         
|                                                          |           | Executive Officers of the Registrant              |                                                                                                                                        |      | 6-7  |       
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|                                                          | Item 11 - |                                                   | Executive Compensation  Note 2                                                                                                        |      |      | B6     | 
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|                                                          | Item 12 - |                                                   | Security Ownership of Certain Beneficial                                                                                               |      |      |        | 
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|                                                          |           | Owners and Management  Note 2                    |                                                                                                                                        |      | B3   |       
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|                                                          | Item 13 - |                                                   | Certain Relationships and Related Transactions                                                                                        |      |      |        | 
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|                                                          |           | Note 2                                            |                                                                                                                                        |      | B9   |       
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|                                                          | Item 14 - |                                                   | Controls and Procedures                                                                                                                |      |      | 7      | 
|                                                         
|Part IV                                                   |           |                                                   |                                                                                                                                        |      |      |        |  | 
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Item 15 - |                                                   | Exhibits, Financial Statement Schedules and Reports on
Form 8-K Report of Crowe, Chizek and Company LLP,
Independent Auditors  Note 1 |      |      | A22    | 

|                                                                    |  |                                                           |       |                                                                                                                |    |  |        | 
|------------------------------------------------------------------- |  | --------------------------------------------------------- | ----- | -------------------------------------------------------------------------------------------------------------- | -- |  | ------ | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |  | Financial Statements:  Note 1                            |       |                                                                                                                |    | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |  |                                                           |       | Consolidated Balance Sheets as of December 31, 2002 and 2001                                                   |    |  | A10    | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |  |                                                           |       | Consolidated Statements of Income for the Years Ended
December 31, 2002, 2001 and 2000                         |    |  | A11    | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |  |                                                           |       | Consolidated Statements of Cash Flows for the Years
Ended December 31, 2002, 2001 and 2000                     |    |  | A13    | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |  |                                                           |       | Consolidated Statements of Changes in Shareholders Equity
for the Years Ended December 31, 2002, 2001and 2000 |    |  | A12    | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |  |                                                           |       | Notes to Financial Statements  Note 1                                                                         |    |  | A14-21 | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |  | Reports on Form 8-K filed in fourth quarter of 2002: None |       |                                                                                                                |    | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |  | Exhibit Table                                             |       |                                                                                                                | 16 | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Signatures                                                          |  |                                                           | 12-13 |                                                                                                               
|                                                                   
|                                                                   
|                                                                   
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|Certification of President                                          |  |                                                           | 14    |                                                                                                               
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Certification of Treasurer                                          |  |                                                           | 15    |                                                                                                               
|Appendix A  National Bancshares 2002 Annual Report to Shareholders |  |                                                           | A     |                                                                                                               

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Note 1  Incorporated by reference from the registrants Annual Report     to
Shareholders for the year ended December 31, 2002 Appendix A

Note 2  Incorporated by reference from the registrants proxy     statement
dated March 21, 2003 previously filed with the SEC on March 20, 2003

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Item 1  Business:

Forward-looking Statements
This document contains forward-looking statements (as defined in the Private
Securities Litigation Reform Act of 1995) about National Bancshares Corporation
(the Company) and its subsidiary, First National Bank, Orrville, Ohio (the
Bank). Information incorporated in this document by reference, future
filings by the Company on Form 10-Q and Form 8-K, and future oral and written
statements by the Company and its management may also contain forward-looking
statements. Forward-looking statements include statements about anticipated
operating and financial performance, such as loan originations, operating
efficiencies, loan sales, charge-offs and loan loss provisions, growth
opportunities, interest rates and deposit growth. Words such as may,
could, should, would, believe, anticipate, estimate, expect,
intend, project, plan, and similar expressions are intended to identify
these forward-looking statements.

Forward-looking statements are necessarily subject to many risks and
uncertainties. A number of things could cause actual results to differ
materially from those indicated by the forward-looking statements. These
include the factors we discuss immediately below, those addressed under the
caption Financial Review, other factors discussed elsewhere in this document
or identified in our filings with the Securities and Exchange Commission, and
those presented elsewhere by our management from time to time. Many of the
risks and uncertainties are beyond our control. The following factors could
cause our operating and financial performance to differ materially from the
plans, objectives, assumptions, expectations, estimates, and intentions
expressed in the forward-looking statements:



| |  |  | the strength of the United States economy in general and the
strength of the local economies in which we conduct our operations;
general economic conditions, either nationally or regionally, may be
less favorable than we expect, resulting in a deterioration in the
credit quality of our loan assets, among other things
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the effects of, and changes in, trade, monetary and fiscal
policies and laws, including interest-rate policies of the Federal
Reserve Board                                                                                                                                                                                   
|
| |  |  | inflation, interest rate, market, and monetary fluctuations                                                                                                                                                                                                                                                                   
|
| |  |  | the development and acceptance of new products and services of
the Company and its subsidiary and the perceived overall value of
these products and services by users, including the features, pricing,
and quality compared to competitors products and services                                                            
|
| |  |  | the willingness of users to substitute our products and services
for those of competitors                                                                                                                                                                                                                                     
|
| |  |  | the impact of changes in financial services laws and regulations
(including laws concerning taxes, banking, securities, and insurance)                                                                                                                                                                                        
|
| |  |  | changes in consumer spending and saving habits                                                                                                                                                                                                                                                                                

Forward-looking statements are based on our beliefs, plans, objectives, goals,
assumptions, expectations, estimates, and intentions as of the date the
statements are made. Investors should exercise caution because the Company
cannot give any assurance that its beliefs, plans, objectives, goals,
assumptions, expectations, estimates, and intentions will be realized. The
Company disclaims any obligation to update or revise any forward-looking
statements based on the occurrence of future events, the receipt of new
information, or otherwise.

Description of Business
National Bancshares Corporation (the Company), incorporated in 1985, is a
one-bank holding company for First National Bank, Orrville, Ohio (the Bank).
The formation was approved by shareholders on April 24, 1986 and consummated on
June 2, 1986. The Bank offers a full line of services usually found in any
commercial bank operation, including checking accounts, savings accounts,
certificates of deposit, personal loans, loans to business and industry,
installment loans, safety deposit boxes and credit cards. While the Companys
chief decision-makers monitor the revenue streams of the various products and
services, operations are managed and financial performance is evaluated on a
Company-wide basis. Accordingly, all of the Companys banking operations are
considered by management to be aggregated in one reportable operating segment.
The Bank does not have trust powers and, therefore, does not offer trust
services. The Bank operates thirteen full service offices and one limited
service office in a market area comprising most of Wayne County, western Stark
County, northeastern Holmes County and southern Medina County. There are
approximately 17 other banking and thrift organizations in the immediate market
area. The Bank also competes with insurance companies, consumer finance
companies, credit unions, mortgage banking companies, and commercial finance
and leasing companies. In addition, money market mutual funds and brokerage
houses provide many of the financial services offered by the Bank. The
principal methods of

PAGE 4



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competition are the rates of interest charged and paid for
loans and deposits, fees charged for services, the quality of services provided
and the convenience of banking hours and branch locations. No major
elimination of services presently offered is anticipated in the immediate
future.

Lending policies of the Bank follow the guidelines set forth in the Banks
Credit Policy, which is approved by the Board of Directors on an annual basis.
The Credit Policy designates lending authority for the Chief Executive Officer,
Senior Vice President, Chief Loan Officer and all loan officers. The Credit
Policy also sets forth the maximum aggregate amount that may be loaned to any
one customer. Guidelines are established for credit types, loan mix,
concentration of credit and credit standards. Collateral is generally obtained
on loans and an appraisal is required to determine the value of the collateral.
For real estate loans, guidelines have been established for maximum
loan-to-value ratios. Guidelines are also established for the term of the
loan, which must coincide with the credit purpose and life of the collateral.
In addition to the Credit Policy, the Bank has established a series of control
procedures to monitor the overall credit quality of the loan portfolio. These
controls include checklists, loan diaries, annual loan reviews of all loans
over $75,000 (excluding first mortgage loans), monthly board reports of problem
loans, and a monthly review and determination of the adequacy of the allowance
for loan losses.

Management estimates the allowance for loan loss balance required using past
loss experience, risks in the nature and volume of the portfolio, information
about specific borrower situations and estimated collateral values, economic
conditions, and other factors.

The Bank is a member of the Federal Reserve System and its deposits are insured
by the Federal Deposit Insurance Corporation. It is subject to supervision,
examination and regulation by the Comptroller of the Currency. The Company is
also subject to supervision, examination and regulation by the Federal Reserve
System. Management is not currently aware of any regulatory recommendations
which, if they were to be implemented, would have a material effect on the
registrant.

On November 12, 1999, President Clinton signed into law the Gramm-Leach-Bliley
Act, which, effective March 11, 2000, permits bank holding companies to become
financial holding companies and thereby affiliate with securities firms and
insurance companies, and engage in other activities that are financial in
nature. A bank holding company may become a financial holding company if each
of its subsidiary banks is well capitalized under regulatory prompt corrective
action provisions, is well managed, and has at least a satisfactory rating
under the Community Reinvestment Act (CRA) by filing a declaration that the
bank holding company wishes to become a financial holding company. No
regulatory approval will be required for a financial holding company to acquire
a company, other than a bank or savings association, engaged in activities that
are financial in nature or incidental to activities that are financial in
nature, as determined by the Federal Reserve Board.

The Gramm-Leach-Bliley Act defines financial in nature to include securities
underwriting, dealing and market making; sponsoring mutual funds and investment
companies; insurance underwriting and agency; merchant banking activities; and
activities that the Board has determined to be closely related to banking.
Subsidiary banks of a financial holding company must continue to be well
capitalized and well managed in order to continue to engage in activities that
are financial in nature without regulatory actions or restrictions, which could
include divestiture of the financial in nature subsidiary or subsidiaries. In
addition, a financial holding company or a bank may not acquire a company that
is engaged in activities that are financial in nature unless each of the
subsidiary banks of the financial holding company or the bank has a CRA rating
of satisfactory or better. The Company elected to become a financial holding
company in November 2002.

On July 30, 2002, Congress enacted the Sarbanes-Oxley Act of 2002, a law that
addresses, among other issues, corporate governance, auditing and accounting,
executive compensation, and enhanced and timely disclosure of corporate
information. Effective August 29, 2002, per Section 302(a) of the Act, the
Companys President and Treasurer are each required to certify that the
Companys Quarterly and Annual Reports do not contain any untrue statement of a
material fact. These officers must certify that: they are responsible for
establishing, maintaining and regularly evaluating the effectiveness of the
Companys internal controls; they have made certain disclosures to the
Companys auditors and the audit committee of the Board of Directors about the
Companys internal controls; and they have included information in the
Companys Quarterly and Annual Report about their evaluation and whether there
have been significant changes in the Companys internal controls or in other
factors that could significantly affect internal controls subsequent to the
evaluation.

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Item 2  Properties:
The headquarters of the Company and the Bank are located in Orrville, Ohio.
The Bank has a total of fourteen banking office buildings, which are located in
Orrville, Dalton, Kidron, Smithville, Mt. Eaton, Apple Creek, Lodi, Wooster,
Seville and Massillon, Ohio. All buildings are owned by the Bank with the
exception of the Seville and Massillon Marketplace Office, which are leased
facilities.

Item 3  Legal Proceedings
There were no legal proceedings during 2002, other than ordinary routine
litigation which was incidental to business and which was not material.

Item 5  Number of shareholders of common stock
The Company had 961 shareholders of common stock as of February 28, 2003.
Price ranges of the Companys common stock for 2002 and 2001 are reported in
the Annual Report to Shareholders (Appendix A). A local broker that deals in
the Companys stock supplied the stock prices.

Item 7  Liquidity Management
Additional information regarding liquidity can be found in the Annual Report to
Shareholders, (Appendix A, Page 6). Effective liquidity management ensures the
cash flow requirements of depositors and borrowers, as well as the operating
cash needs of the Corporation, are met.

Funds are available from a number of sources, including the securities
portfolio, the core deposit base, the ability to acquire large deposits,
short-term funding arrangements with correspondent banks and the Federal Home
Loan Bank, and the capability to package loans for sale. On December 31, 2002,
the Corporation had $17.2 million in advances from the Federal Home Loan Bank.
No borrowings have occurred under the short-term funding arrangements with
correspondent banks.

The Corporations major source of funding to meet its liquidity requirements is
dividends and return of investment from its subsidiary, First National Bank.
Information regarding dividends paid by the Bank to the Corporation and
dividend restrictions is located in the consolidated financial statements and
note 12 of the Annual Report to Shareholders. As discussed in note 2 of the
Annual Report to Shareholders, on April 3, 2002 the Corporation acquired
Peoples Financial Corporation, a financial institution holding company located
in Massillon, Ohio. To facilitate the funding of the acquisition, the
Corporation received approval from the regulators of a special dividend from
the Bank to the Corporation.

Item 10  Executive Officers
The Executive Officers of the Company are as follows:

|                          |  |     |    |          |  |                                                                              
|------------------------- |  | --- | -- | -------- |  | -----------------------------------------------------------------------------
|Name                      |  | Age |    | Position
|                          |  |     |    |         
|Charles J. Dolezal        |  |     | 49 |          |  | President
President of First National Bank                                   
|                         
|                         
|                         
|                         
|                          |  |     |    |          |  |                                                                              
|                         
|                         
|                         
|                         
|Kenneth R. VanSickle      |  |     | 55 |          |  | Senior V.P., Secretary
Senior V.P., Chief Loan Officer of
First National Bank
|                         
|                         
|                         
|                         
|                          |  |     |    |          |  |                                                                              
|                         
|                         
|                         
|                         
|Lawrence M. Cardinal, Jr. |  |     | 51 |          |  | Vice President, Treasurer
Vice President & Controller of
First National Bank 
|                         
|                         
|                         
|                         
|                          |  |     |    |          |  |                                                                              
|                         
|                         
|                         
|                         
|Harold D. Berkey          |  |     | 50 |          |  | Vice President of Customer Services of
First National Bank                   
|                         
|                         
|                         
|                         
|                          |  |     |    |          |  |                                                                              
|                         
|                         
|                         
|                         
|Robert Woodruff           |  |     | 56 |          |  | Vice President and Cashier of
First National Bank                            

There is no family relationship between any of the above executive officers.
Mr. Dolezal has been an executive officer of the Company since its formation in
1986 and the President of the Bank since 1982. Mr. VanSickle was appointed
Senior V.P., Secretary of the Company on April 24, 1997 and has been a senior
loan officer of the Bank since 1986. Mr. Cardinal was appointed Vice
President, Treasurer of the Company and Vice President & Controller

PAGE 6



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of the Bank on April 24, 1997. Mr. Berkey was appointed Vice President of Customer
Services of the Bank in 1995 and Mr. Woodruff was appointed Vice President and
Cashier of the Bank in 1993.

Item 14  Controls and Procedures

Within 90 days prior to the date of this Annual Report, the Company carried out
an evaluation, under the supervision and with the participation of the
Companys management, including the Companys President and Treasurer
(Principal Financial Officer), of the effectiveness of the design and operation
of the Companys disclosure controls and procedures. Based upon that
evaluation, the President and Treasurer concluded that the Companys disclosure
controls and procedures were effective as of the date of their evaluation in
timely alerting them to material information relating to the Company (including
its consolidated subsidiaries) required to be included in this Annual Report.

There have been no significant changes in the Companys internal controls
or in other factors that could significantly affect the internal controls
subsequent to the date the Company completed its evaluation.

VOLUME AND RATE VARIANCE ANALYSIS

The following table represents a summary analysis of changes in interest
income, interest expense and the resulting net interest income on a tax
equivalent basis for the periods presented. Volume is based on daily average
balances. Changes not associated with either rate or volume are reflected as a
rate change.

|                                                       |                           |                                               |       |                      |       |        |        |        |        |      |       |        |       |   |      |      |     |   |      |      |        |   |      |      |      |  
|------------------------------------------------------ | ------------------------- | --------------------------------------------- | ----- | -------------------- | ----- | ------ | ------ | ------ | ------ | ---- | ----- | ------ | ----- | - | ---- | ---- | --- | - | ---- | ---- | ------ | - | ---- | ---- | ---- | -
|(Dollars in thousands)                                 |                           | 2002 versus 2001                              |       | 2001 versus 2000    
|                                                       |                           | Increase (Decreases)                          |       | Increase (Decreases)
|                                                       |                           | Due to Changes In                             |       | Due to Changes In   
|                                                       |                           |                                               |       |                     
|                                                       |                           |                                               |       |                      |       |        |        |        |        | Net  |       |        |       |   |      |      |     |   |      | Net 
|                                                       |                           | Volume                                        |       | Rate                 |       | Change |        | Volume |        | Rate |       | Change
|                                                       |                           |                                               |       |                      |       |        |        |        |        |      |       |       
|Interest Income                                        |                           |                                               |       |                      |       |        |        |        |        |      |       |        |       |   |      |      |     |   |      |      |        |   |      |     
|                                                      
|                                                      
|                                                      
|                                                      
|Investment securities:                                 |                           |                                               |       |                      |       |        |        |        |        |      |       |        |       |   |      |      |     |   |      |      |        |   |      |     
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Taxable                   |                                               | $     | (93                  | )     |        | $      | (53    | )      |      | $     | (146   | )     |   | $    | (130 | )   |   | $    | (128 | )      |   | $    | (258 | )   
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Nontaxable                |                                               |       | (203                 | )     |        |        | (32    | )      |      |       | (235   | )     |   |      | (206 | )   |   |      | (40  | )      |   |      | (246 | )   
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | (tax equivalent basis)*   |                                               |       |                      |       |        |        |        |        |      |       |        |       |   |      |      |     |   |      |      |        |   |      |      |     
|                                                      
|                                                      
|                                                      
|                                                      
|Federal funds sold                                     |                           |                                               | 6     |                      |       |        | (224   | )      |        |      | (218  | )      |       |   | 187  |      |     |   | (181 | )    |        |   | 6    |     
|                                                      
|                                                      
|                                                      
|                                                      
|Interest bearing deposits                              |                           |                                               | (34   | )                    |       |        |        |        |        |      | (34   | )      |       |   |      |      |     |   |      |      |        |   |      |     
|                                                      
|                                                      
|                                                      
|                                                      
|Loans (including
Nonaccrual loans)                     |                           |                                               | 5,053 |                      |       |        | (2,116 | )      |        |      | 2,937 |        |       |   | 492  |      |     |   | (735 | )    |        |   | (243 | )   
|                                                       |                           |                                               |       |                      |       |        |        |        |        |      |       |        |       |   |      |      |     |   |      |      |        |   |      |     
|                                                       |                           | Total interest Income
(tax equivalent basis)* |       | $                    | 4,729 |        |        | $      | (2,425 | )    |       | $      | 2,304 |   |      | $    | 343 |   |      | $    | (1,084 | ) |      | $    | (741 | )
|                                                       |                           |                                               |       |                      |       |        |        |        |        |      |       |        |       |   |      |      |     |   |      |      |        |   |      |     
|Interest Expense                                       |                           |                                               |       |                      |       |        |        |        |        |      |       |        |       |   |      |      |     |   |      |      |        |   |      |     
|                                                      
|                                                      
|                                                      
|                                                      
|Deposits                                               |                           |                                               |       |                      |       |        |        |        |        |      |       |        |       |   |      |      |     |   |      |      |        |   |      |     
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Interest bearing checking |                                               | $     | 48                   |       |        | $      | (109   | )      |      | $     | (61    | )     |   | $    | (13  | )   |   | $    | (90  | )      |   | $    | (103 | )   
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Savings                   |                                               |       | 621                  |       |        |        | (297   | )      |      |       | 324    |       |   |      | 73   |     |   |      | (26  | )      |   |      | 47   |     
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Time, $100,000
and over   |                                               |       | 16                   |       |        |        | (206   | )      |      |       | (190   | )     |   |      | (70  | )   |   |      | (111 | )      |   |      | (181 | )   
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Time, other               |                                               |       | 1,032                |       |        |        | (1,302 | )      |      |       | (270   | )     |   |      | 73   |     |   |      | (57  | )      |   |      | 16   |     
|                                                      
|                                                      
|                                                      
|                                                      
|Other borrowed funds                                   |                           |                                               | 421   |                      |       |        | (155   | )      |        |      | 266   |        |       |   | (102 | )    |     |   | (133 | )    |        |   | (235 | )   
|                                                       |                           |                                               |       |                      |       |        |        |        |        |      |       |        |       |   |      |      |     |   |      |      |        |   |      |     
|                                                       |                           | Total interest
Expense                        |       | $                    | 2,138 |        |        | $      | (2,069 | )    |       | $      | 69    |   |      | $    | (39 | ) |      | $    | (417   | ) |      | $    | (456 | )
|                                                       |                           |                                               |       |                      |       |        |        |        |        |      |       |        |       |   |      |      |     |   |      |      |        |   |      |     
|Changes in net
Interest income (tax
equivalent basis)* |                           | $                                             | 2,591 |                      |       | $      | (356   | )      |        | $    | 2,235 |        |       | $ | 382  |      |     | $ | (667 | )    |        | $ | (285 | )   
|                                                       |                           |                                               |       |                      |       |        |        |        |        |      |       |        |       |   |      |      |     |   |      |      |        |   |      |     

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

PAGE 7



---



##### 



INVESTMENT PORTFOLIO

The carrying amounts and distribution of the Companys securities held at
year-end 2002 and 2001 are summarized in the Annual Report to Shareholders
(Appendix A, Page 17, Note 3). The carrying amount, maturities and approximate
weighted average yields (on a tax equivalent basis) of debt securities at
December 31, 2002 and the carrying amounts and fair values as of December 31,
2000 are as follows:

INVESTMENT PORTFOLIO
December 31, 2002
(Dollars in thousands)

|                                   |  |        |        |             |  |              |     |               |  |               |       |       |  |        |     |       |  |        |        |       |  |  |     |   |  |   |        |  |  |  |     |   |  |   |        |  |  |  |     |  
|---------------------------------- |  | ------ | ------ | ----------- |  | ------------ | --- | ------------- |  | ------------- | ----- | ----- |  | ------ | --- | ----- |  | ------ | ------ | ----- |  |  | --- | - |  | - | ------ |  |  |  | --- | - |  | - | ------ |  |  |  | --- | -
|                                   |  | Total  |        | 0 to 1 Year |  | 1 to 5 Years |     | 5 to 10 Years |  | Over 10 years
|                                   |  |        |        |             |  |              |     |               |  |              
|                                   |  | Amount |        | Yield       |  | Amount       |     | Yield         |  | Amount        |       | Yield |  | Amount |     | Yield |  | Amount |        | Yield
|                                   |  |        |        |             |  |              |     |               |  |               |       |       |  |        |     |       |  |        |        |      
|Available for Sale:                |  |        |        |             |  |              |     |               |  |               |       |       |  |        |     |       |  |        |        |       |  |  |     |   |  |   |        |  |  |  |     |   |  |   |        |  |  |  |     |  
|                                  
|                                  
|                                  
|                                  
|U.S. Government
and federal agency |  | $      | 21,019 |             |  |              | 6.4 | %             |  |               |       |       |  |        |     |       |  | $      | 3,230  |       |  |  | 7.0 | % |  | $ | 12,150 |  |  |  | 5.9 | % |  | $ | 5,639  |  |  |  | 7.2 | %
|                                  
|                                  
|                                  
|                                  
|State & political
Subdivisions     |  |        | 2,421  |             |  |              | 7.8 | %             |  |               |       |       |  |        |     |       |  |        |        |       |  |  |     |   |  |   | 231    |  |  |  | 7.5 | % |  |   | 2,190  |  |  |  | 7.8 | %
|                                  
|                                  
|                                  
|                                  
|Other securities                   |  |        | 26,902 |             |  |              | 6.7 | %             |  | $             | 4,504 |       |  |        | 6.7 | %     |  |        | 12,518 |       |  |  | 6.5 | % |  |   | 8,975  |  |  |  | 6.9 | % |  |   | 905    |  |  |  | 7.0 | %
|                                   |  |        |        |             |  |              |     |               |  |               |       |       |  |        |     |       |  |        |        |       |  |  |     |   |  |   |        |  |  |  |     |   |  |   |        |  |  |  |     |  
|Total                              |  | $      | 50,342 |             |  |              | 6.6 | %             |  | $             | 4,504 |       |  |        | 6.7 | %     |  | $      | 15,748 |       |  |  | 6.6 | % |  | $ | 21,356 |  |  |  | 6.3 | % |  | $ | 8,734  |  |  |  | 7.3 | %
|                                   |  |        |        |             |  |              |     |               |  |               |       |       |  |        |     |       |  |        |        |       |  |  |     |   |  |   |        |  |  |  |     |   |  |   |        |  |  |  |     |  
|Held to Maturity:                  |  |        |        |             |  |              |     |               |  |               |       |       |  |        |     |       |  |        |        |       |  |  |     |   |  |   |        |  |  |  |     |   |  |   |        |  |  |  |     |  
|                                  
|                                  
|                                  
|                                  
|State & political
Subdivisions     |  | $      | 18,442 |             |  |              | 7.4 | %             |  | $             | 1,304 |       |  |        | 9.8 | %     |  | $      | 2,725  |       |  |  | 8.4 | % |  | $ | 4,316  |  |  |  | 7.5 | % |  | $ | 10,097 |  |  |  | 6.7 | %
|                                   |  |        |        |             |  |              |     |               |  |               |       |       |  |        |     |       |  |        |        |       |  |  |     |   |  |   |        |  |  |  |     |   |  |   |        |  |  |  |     |  

There was no single issuer of securities where the total book value of such
securities exceeded 10% of shareholders equity except for US government and
agency obligations in any periods presented.

|                                   |                       |           |                   |            |  |            |       |       |       |   |      |      |   |   |        |        | 
|---------------------------------- | --------------------- | --------- | ----------------- | ---------- |  | ---------- | ----- | ----- | ----- | - | ---- | ---- | - | - | ------ | ------ | 
|                                   |                       |           | December 31, 2000
|                                   |                       |           |                  
|                                   |                       |           |                   |            |  |            | Gross |       | Gross |   |      |      |  
|(Dollars in thousands)             |                       | Amortized |                   | Unrealized |  | Unrealized |       | Fair 
|                                   |                       | Cost      |                   | Gains      |  | Losses     |       | Value
|                                   |                       |           |                   |            |  |            |       |       |      
|Available for Sale:                |                       |           |                   |            |  |            |       |       |       |   |      |      |   |   |        |       
|                                  
|                                  
|                                  
|                                  
|U.S. Government and federal agency |                       | $         | 4,967             |            |  | $          | 68    |       |       | $ | (5   | )    |   | $ | 5,030  |       
|                                  
|                                  
|                                  
|                                  
|State and municipal                |                       |           | 2,297             |            |  |            | 44    |       |       |   |     |      |   |   | 2,341  |       
|                                  
|                                  
|                                  
|                                  
|Corporate bond and notes           |                       |           | 10,816            |            |  |            | 170   |       |       |   | (81  | )    |   |   | 10,905 |       
|                                   |                       |           |                   |            |  |            |       |       |       |   |      |      |   |   |        |       
|                                   | Total debt securities |           |                   | 18,080     |  |            |       | 282   |       |   |      | (86  | ) |   |        | 18,276 | 
|                                  
|                                  
|                                  
|                                  
|Equity securities                  |                       |           | 2,281             |            |  |            | 132   |       |       |   | (521 | )    |   |   | 1,892  |       
|                                   |                       |           |                   |            |  |            |       |       |       |   |      |      |   |   |        |       
|                                   | Total                 |           | $                 | 20,361     |  |            | $     | 414   |       |   | $    | (607 | ) |   | $      | 20,168 | 
|                                   |                       |           |                   |            |  |            |       |       |       |   |      |      |   |   |        |       
|Held to Maturity:                  |                       |           |                   |            |  |            |       |       |       |   |      |      |   |   |        |       
|                                  
|                                  
|                                  
|                                  
|U.S. Government and federal agency |                       | $         | 19,429            |            |  | $          | 258   |       |       | $ | (36  | )    |   | $ | 19,651 |       
|                                  
|                                  
|                                  
|                                  
|State and municipal                |                       |           | 17,394            |            |  |            | 476   |       |       |   | (14  | )    |   |   | 17,856 |       
|                                  
|                                  
|                                  
|                                  
|Mortgage-backed                    |                       |           | 331               |            |  |            | 22    |       |       |   |     |      |   |   | 353    |       
|                                  
|                                  
|                                  
|                                  
|Corporate bond and notes           |                       |           | 10,698            |            |  |            | 56    |       |       |   | (96  | )    |   |   | 10,658 |       
|                                   |                       |           |                   |            |  |            |       |       |       |   |      |      |   |   |        |       
|                                   | Total                 |           | $                 | 47,852     |  |            | $     | 812   |       |   | $    | (146 | ) |   | $      | 48,518 | 
|                                   |                       |           |                   |            |  |            |       |       |       |   |      |      |   |   |        |       

PAGE 8



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##### 



LOAN PORTFOLIO

The detail of the loan portfolio balances for year-end 2002 and 2001 is
included in the Annual Report to Shareholders (Appendix A, Page 17, Note 4).
The detail of the loan portfolio balances for year-end 2000, 1999 and 1998 is
as follows:

|                                        |              |      |         |        |  |      |         |        |  |   |        |        | 
|--------------------------------------- | ------------ | ---- | ------- | ------ |  | ---- | ------- | ------ |  | - | ------ | ------ | 
|(Dollars in thousands)                  |              | 2000 |         | 1999   |  | 1998
|Collateralized by real estate:          |              |      |         |        |  |      |         |        |  |   |        |       
|                                       
|                                       
|                                       
|                                       
|                                        | Commercial   |      | $       | 27,005 |  |      | $       | 25,031 |  |   | $      | 25,173 | 
|                                       
|                                       
|                                       
|                                       
|                                        | Residential  |      |         | 42,064 |  |      |         | 39,207 |  |   |        | 33,045 | 
|                                       
|                                       
|                                       
|                                       
|                                        | Home equity  |      |         | 8,612  |  |      |         | 6,334  |  |   |        | 5,284  | 
|                                       
|                                       
|                                       
|                                       
|                                        | Construction |      |         | 1,011  |  |      |         | 1,225  |  |   |        | 1,212  | 
|                                        |              |      |         |        |  |      |         |        |  |   |        |       
|                                        |              |      | 78,692  |        |  |      | 71,797  |        |  |   | 64,714 |       
|                                       
|                                       
|                                       
|                                       
|Consumer                                |              |      | 7,151   |        |  |      | 7,847   |        |  |   | 8,843  |       
|                                       
|                                       
|                                       
|                                       
|Commercial                              |              |      | 19,851  |        |  |      | 17,852  |        |  |   | 16,577 |       
|                                       
|                                       
|                                       
|                                       
|Credit cards                            |              |      | 1,188   |        |  |      | 1,207   |        |  |   | 1,130  |       
|                                       
|                                       
|                                       
|                                       
|Other                                   |              |      | 2,273   |        |  |      | 2,453   |        |  |   | 2,402  |       
|                                        |              |      |         |        |  |      |         |        |  |   |        |       
|                                        |              |      | 109,155 |        |  |      | 101,156 |        |  |   | 93,666 |       
|                                       
|                                       
|                                       
|                                       
|Unearned and deferred income            |              |      | (153    | )      |  |      | (163    | )      |  |   | (161   | )     
|                                       
|                                       
|                                       
|                                       
|Unamortized discount on purchased loans |              |      | (107    | )      |  |      | (153    | )      |  |   | (171   | )     
|                                        |              |      |         |        |  |      |         |        |  |   |        |       
|                                        |              |      | 108,895 |        |  |      | 100,840 |        |  |   | 93,334 |       
|                                       
|                                       
|                                       
|                                       
|Allowance for loan losses               |              |      | (1,343  | )      |  |      | (1,309  | )      |  |   | (1,297 | )     
|                                        |              |      |         |        |  |      |         |        |  |   |        |       
|                                        |              | $    | 107,552 |        |  | $    | 99,531  |        |  | $ | 92,037 |       
|                                        |              |      |         |        |  |      |         |        |  |   |        |       

MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES

The following are approximate maturities and sensitivity to changes in interest
rates of certain loans exclusive of real estate mortgages and consumer loans as
of December 31, 2002.

|                                    |  |             |       |              |  |                  |       |       |  |   |        |  |  |   |        | 
|----------------------------------- |  | ----------- | ----- | ------------ |  | ---------------- | ----- | ----- |  | - | ------ |  |  | - | ------ | 
|Types of Loans                      |  | 0 to 1 Year |       | 1 to 5 Years |  | 5 and Over Years |       | Total
|(Dollars in thousands)              |  |             |       |              |  |                  |       |       |  |   |        |  |  |   |        | 
|                                   
|                                   
|                                   
|                                   
|Commercial                          |  | $           | 6,423 |              |  | $                | 4,006 |       |  | $ | 11,203 |  |  | $ | 21,632 | 
|                                   
|                                   
|                                   
|                                   
|Real Estate Construction            |  | $           | 221   |              |  | $                | 809   |       |  | $ | 1,036  |  |  | $ | 2,066  | 
|                                   
|                                   
|                                   
|                                   
|Above loans due beyond 1
year with: |  |             |       |              |  |                  |       |       |  |   |        |  |  |   |        | 
|                                   
|                                   
|                                   
|                                   
|Predetermined interest rates        |  |             |       |              |  |                  |       |       |  |   |        |  |  | $ | 5,281  | 
|                                   
|                                   
|                                   
|                                   
|Adjustable interest rates           |  |             |       |              |  |                  |       |       |  |   |        |  |  | $ | 11,773 | 

NONACCRUAL AND PAST DUE LOANS

Generally, recognition of interest income is discontinued where reasonable
doubt exists as to the collectability of the interest. Income from non-accrual
loans is recorded when received. The difference between interest income
recognized on such loans and income that would have been recognized at original
contractual rates is immaterial. The bank generally places loans on a
non-accrual status when a default of principal or interest has existed for 90
days or more. The bank generally does not renegotiate loans due to
deterioration in the financial position of the borrower. The amounts of
renegotiated loans are not considered material and are not considered impaired.

|                              |  |          |       |          |  |          |     |          |  |   |          |  |  |   |     |  |  |   |     | 
|----------------------------- |  | -------- | ----- | -------- |  | -------- | --- | -------- |  | - | -------- |  |  | - | --- |  |  | - | --- | 
|(Dollars in thousands)        |  | 12/31/02 |       | 12/31/01 |  | 12/31/00 |     | 12/31/99 |  |   | 12/31/98 | 
|90 Days Past Due and Accruing |  | $        | 335   |          |  | $        | 148 |          |  | $ | 112      |  |  | $ | 225 |  |  | $ | 141 | 
|                             
|                             
|                             
|                             
|Nonaccruing Loans             |  | $        | 1,613 |          |  | $        | 259 |          |  | $ | 144      |  |  | $ | 250 |  |  | $ | 168 | 

PAGE 9



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##### 



POTENTIAL PROBLEM LOANS

Management reviews the loan portfolio for potential problem loans on a monthly
basis. The following loans were classified by management, which excludes the
above non-accrual loan totals. The amount shown below is the outstanding loan
balance, which has not been reduced by collateral values. There were no other
assets which management believes should be reported in the table above or the
items below.

|                       |  |          |       | 
|---------------------- |  | -------- | ----- | 
|(Dollars in thousands) |  | 12/31/02
|Loss                   |  | $        | 6     | 
|                      
|                      
|                      
|                      
|Doubtful               |  |          | 5     | 
|                      
|                      
|                      
|                      
|Substandard            |  |          | 1,544 | 
|                      
|                      
|                      
|                      
|Special Mention        |  |          | 1,215 | 
|                       |  |          |       | 
|Total                  |  | $        | 2,770 | 
|                       |  |          |       | 

FOREIGN LOANS

There were no foreign loans in any periods presented.

LOAN CONCENTRATIONS

Due to the nature of our market area, there are no significant loan
concentrations of 10% of total loans to borrowers engaged in similar activities
other than noted in the loan categories disclosed in the Annual Report to
Shareholders (Appendix A, Page 17, Note 4).

SUMMARY OF LOAN LOSS EXPERIENCE

The determination of the balance of the allowance for loan losses historically
has been based on an overall analysis of the loan portfolio and reflects an
amount, which, in managements judgment, is adequate to provide for probable
loan losses. This analysis considers, among other things, the Companys loan
loss experience, present risks of the loan portfolio and general economic
conditions. In addition, management considers the examinations of the loan
portfolio by federal regulatory agencies and internal reviews and evaluations.
The Companys allocation of the allowance for loan losses by category
represents only an estimate for each category of loans based upon a detailed
review of the loan portfolio by management.

Transactions in the allowance for loan losses are maintained by three major
loan categories and the summary of such transactions for the periods indicated
follows:

CHANGES IN ALLOWANCE
FOR LOAN LOSSES

|                                       |                         |      |        |        |   |      |       |      |   |      |       |     |   |   |       |     |   |   |       |     |  
|-------------------------------------- | ----------------------- | ---- | ------ | ------ | - | ---- | ----- | ---- | - | ---- | ----- | --- | - | - | ----- | --- | - | - | ----- | --- | -
|(Dollars in thousands)                 |                         | 2002 |        | 2001   |   | 2000 |       | 1999 |   | 1998
|                                       |                         |      |        |        |   |      |       |      |   |     
|Balance at the beginning of period     |                         | $    | 1,321  |        |   | $    | 1,343 |      |   | $    | 1,309 |     |   | $ | 1,297 |     |   | $ | 1,232 |    
|                                      
|                                      
|                                      
|                                      
|Loans charged off:                     |                         |      |        |        |   |      |       |      |   |      |       |     |   |   |       |     |   |   |       |    
|                                      
|                                      
|                                      
|                                      
|                                       | Commercial & industrial |      |        | (1,499 | ) |      |       | (39  | ) |      |       | (9  | ) |   |       | (58 | ) |   |       | (34 | )
|                                      
|                                      
|                                      
|                                      
|                                       | Real estate mortgages   |      |        |       |   |      |       | (20  | ) |      |       |    |   |   |       |    |   |   |       | (11 | )
|                                      
|                                      
|                                      
|                                      
|                                       | Consumer                |      |        | (47    | ) |      |       | (27  | ) |      |       | (48 | ) |   |       | (88 | ) |   |       | (90 | )
|                                       |                         |      |        |        |   |      |       |      |   |      |       |     |   |   |       |     |   |   |       |    
|Total loans charged off                |                         |      | (1,546 | )      |   |      | (86   | )    |   |      | (57   | )   |   |   | (146  | )   |   |   | (135  | )  
|                                       |                         |      |        |        |   |      |       |      |   |      |       |     |   |   |       |     |   |   |       |    
|Recoveries of loans charged off:       |                         |      |        |        |   |      |       |      |   |      |       |     |   |   |       |     |   |   |       |    
|                                      
|                                      
|                                      
|                                      
|                                       | Commercial & industrial |      |        | 2      |   |      |       | 1    |   |      |       | 2   |   |   |       | 13  |   |   |       | 7   |  
|                                      
|                                      
|                                      
|                                      
|                                       | Real estate mortgages   |      |        |       |   |      |       | 1    |   |      |       | 1   |   |   |       | 6   |   |   |       | 45  |  
|                                      
|                                      
|                                      
|                                      
|                                       | Consumer                |      |        | 13     |   |      |       | 22   |   |      |       | 26  |   |   |       | 19  |   |   |       | 28  |  
|                                       |                         |      |        |        |   |      |       |      |   |      |       |     |   |   |       |     |   |   |       |    
|Total recoveries                       |                         |      | 15     |        |   |      | 24    |      |   |      | 29    |     |   |   | 38    |     |   |   | 80    |    
|                                       |                         |      |        |        |   |      |       |      |   |      |       |     |   |   |       |     |   |   |       |    
|Net loans charged off                  |                         |      | (1,531 | )      |   |      | (62   | )    |   |      | (28   | )   |   |   | (108  | )   |   |   | (55   | )  
|                                       |                         |      |        |        |   |      |       |      |   |      |       |     |   |   |       |     |   |   |       |    
|Provision charged to
operating expense |                         |      | 1,569  |        |   |      | 40    |      |   |      | 62    |     |   |   | 120   |     |   |   | 120   |    
|                                      
|                                      
|                                      
|                                      
|Allowance of acquired institution      |                         |      | 245    |        |   |      |      |      |   |      |      |     |   |   |      |     |   |   |      |    
|                                       |                         |      |        |        |   |      |       |      |   |      |       |     |   |   |       |     |   |   |       |    
|Balance at end of period               |                         | $    | 1,604  |        |   | $    | 1,321 |      |   | $    | 1,343 |     |   | $ | 1,309 |     |   | $ | 1,297 |    
|                                       |                         |      |        |        |   |      |       |      |   |      |       |     |   |   |       |     |   |   |       |    
|Net charge-offs to average loans       |                         |      | 0.88   | %      |   |      | 0.06  | %    |   |      | 0.03  | %   |   |   | 0.11  | %   |   |   | .07   | %  
|                                       |                         |      |        |        |   |      |       |      |   |      |       |     |   |   |       |     |   |   |       |    

PAGE 10



---



##### 



DISTRIBUTION OF ALLOWANCE FOR
LOAN LOSSES BY CATEGORY

|                         |       |                   |        |                   |             |                   |        |     |             |   |        |       |             |  |     |     |   |   |      |       |  |  |     |     |  
|------------------------ | ----- | ----------------- | ------ | ----------------- | ----------- | ----------------- | ------ | --- | ----------- | - | ------ | ----- | ----------- |  | --- | --- | - | - | ---- | ----- |  |  | --- | --- | -
|(Dollars in thousands)   |       | December 31, 2002 |        | December 31, 2001 |             | December 31, 2000
|                         |       |                   |        |                   |             |                   |       
|                         |       |                   |        |                   |             |                   | % of   |     |             |   |        |       | % of        |  |     |     |   |   | % of
|                         |       |                   | Amount |                   | Total Loans |                   | Amount |     | Total Loans |   | Amount |       | Total Loans
|                         |       |                   |        |                   |             |                   |        |     |             |   |        |       |            
|Commercial & industrial  |       | $                 | 1,234  |                   |             |                   | 13     | %   |             | $ | 963    |       |             |  | 17  | %   |   | $ | 409  |       |  |  | 20  | %  
|                        
|                        
|                        
|                        
|Real estate construction |       |                   | 23     |                   |             |                   | 1      | %   |             |   | 7      |       |             |  | 4   | %   |   |   | 3    |       |  |  | 1   | %  
|                        
|                        
|                        
|                        
|Real estate mortgages    |       |                   | 302    |                   |             |                   | 83     | %   |             |   | 220    |       |             |  | 73  | %   |   |   | 355  |       |  |  | 71  | %  
|                        
|                        
|                        
|                        
|Consumer loans           |       |                   | 45     |                   |             |                   | 3      | %   |             |   | 121    |       |             |  | 6   | %   |   |   | 258  |       |  |  | 8   | %  
|                        
|                        
|                        
|                        
|Unallocated              |       |                   |       |                   |             |                   | N/A    |     |             |   | 10     |       |             |  | N/A |     |   |   | 318  |       |  |  | N/A |    
|                         |       |                   |        |                   |             |                   |        |     |             |   |        |       |             |  |     |     |   |   |      |       |  |  |     |    
|                         | TOTAL |                   | $      | 1,604             |             |                   |        | 100 | %           |   | $      | 1,321 |             |  |     | 100 | % |   | $    | 1,343 |  |  |     | 100 | %
|                         |       |                   |        |                   |             |                   |        |     |             |   |        |       |             |  |     |     |   |   |      |       |  |  |     |    

|                         |  |                   |       |                   |  |        |     |             |  |   |       |      |  |  |     |  
|------------------------ |  | ----------------- | ----- | ----------------- |  | ------ | --- | ----------- |  | - | ----- | ---- |  |  | --- | -
|                         |  | December 31, 1999 |       | December 31, 1998
|                         |  |                   |       |                  
|                         |  |                   |       |                   |  | % of   |     |             |  |   |       | % of
|                         |  | Amount            |       | Total Loans       |  | Amount |     | Total Loans
|                         |  |                   |       |                   |  |        |     |            
|Commercial & industrial  |  | $                 | 305   |                   |  |        | 20  | %           |  | $ | 345   |      |  |  | 20  | %
|                        
|                        
|                        
|                        
|Real estate construction |  |                   | 12    |                   |  |        | 1   | %           |  |   | 12    |      |  |  | 1   | %
|                        
|                        
|                        
|                        
|Real estate mortgages    |  |                   | 398   |                   |  |        | 70  | %           |  |   | 222   |      |  |  | 68  | %
|                        
|                        
|                        
|                        
|Consumer loans           |  |                   | 140   |                   |  |        | 9   | %           |  |   | 152   |      |  |  | 11  | %
|                        
|                        
|                        
|                        
|Unallocated              |  |                   | 454   |                   |  |        | N/A |             |  |   | 566   |      |  |  | N/A |  
|                         |  |                   |       |                   |  |        |     |             |  |   |       |      |  |  |     |  
|TOTAL                    |  | $                 | 1,309 |                   |  |        | 100 | %           |  | $ | 1,297 |      |  |  | 100 | %
|                         |  |                   |       |                   |  |        |     |             |  |   |       |      |  |  |     |  

DEPOSITS

The classification of average deposits and the average rate paid on such
deposits for periods ending December 31, 2002, 2001 and 2000 is included in
Analysis of Net Interest Earnings included in the Annual Report to Shareholders
(Appendix A, Page 23).

A summary of maturities of time deposits of $100,000 or more is as
follows:

|                                |  |          |        | 
|------------------------------- |  | -------- | ------ | 
|(Dollars in thousands)          |  | 12/31/02
|Three months or less            |  | $        | 3,152  | 
|                               
|                               
|                               
|                               
|Over 3 months through 6 months  |  |          | 1,898  | 
|                               
|                               
|                               
|                               
|Over 6 months through 12 months |  |          | 2,159  | 
|                               
|                               
|                               
|                               
|Over 12 months                  |  |          | 4,551  | 
|                                |  |          |        | 
|                                |  | $        | 11,760 | 
|                                |  |          |        | 

PAGE 11



---



##### 



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

NATIONAL BANCSHARES CORPORATION

|      |  |         |  |                                                                                                       
|----- |  | ------- |  | ------------------------------------------------------------------------------------------------------
|DATE: |  | 3-18-03 |  | /s/ Charles J. Dolezal
Charles J. Dolezal, President                                                  
|     
|     
|DATE: |  | 3-18-03 |  | /s/ Lawrence M. Cardinal, Jr.
Lawrence M. Cardinal, Jr., V.P., Treasurer
(Principal Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

|      |  |         |  |                                                    
|----- |  | ------- |  | ---------------------------------------------------
|     
|DATE: |  | 3-18-03 |  | /s/ Charles J. Dolezal
Charles J. Dolezal, Chairman
|     
|     
|DATE: |  | 3-18-03 |  | /s/ Sara Balzarini
Sara Balzarini, Director        
|     
|     
|DATE: |  | 3-18-03 |  | /s/ Bobbi Douglas
Bobbi Douglas, Director          
|     
|     
|DATE: |  | 3-18-03 |  | /s/ John W. Kropf
John W. Kropf, Director          
|     
|     
|     
|     
|DATE: |  |         |  | Steve Schmid, Director                             
|     
|     
|DATE: |  | 3-18-03 |  | /s/ John E. Sprunger
John E. Sprunger, Director    

PAGE 12



---



##### 



|      |  |         |  |                                                
|----- |  | ------- |  | -----------------------------------------------
|DATE: |  | 3-18-03 |  | /s/ Howard J. Wenger
Howard J. Wenger, Director
|     
|DATE: |  | 3-18-03 |  | /s/ James F. Woolley
James F. Woolley, Director
|     
|DATE: |  | 3-18-03 |  | /s/ Albert Yeagley
/s/ Albert Yeagley, Director

PAGE 13



---



##### 



CERTIFICATION OF PRESIDENT

I, Charles J. Dolezal, certify that:



| | 1. |  | I have reviewed this annual report on Form 10-K of National Bancshares Corporation;                                                                                                                                                                                                                                     
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this annual
report;
|
| | 3. |  | Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the
periods presented in this annual report;                   
|
| | 4. |  | The registrants other certifying officers and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and have:                                                                                                  

| |  |    |  |                                                                                                                                                                                                                                                                                             
| |  | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a) |  | designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
|
|
|
|
| |  |    |  |                                                                                                                                                                                                                                                                                             
|
|
|
|
| |  | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the Evaluation Date);
and                                                                                                  
|
|
|
|
| |  |    |  |                                                                                                                                                                                                                                                                                             
|
|
|
|
| |  | c) |  | presented in this annual report our conclusion about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;                                                                                                                         



| | 5. |  | The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors
and the audit committee of the registrants Board of Directors (or
persons performing the equivalent functions):
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |    |  |                                                                                                                                                                                                                                                                                               
| |  | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrants ability to record, process, summarize and report
financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and
|
|
|
|
| |  |    |  |                                                                                                                                                                                                                                                                                               
|
|
|
|
| |  | b) |  | any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        



| | 6. |  | The registrants other certifying officers and I have indicated in
this annual report whether there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                     |  |                              
|-------------------- |  | -----------------------------
|Date: March 26, 2003 |  |                              
|                    
|                    
|                    
|                    
|                     |  | /s/ Charles J. Dolezal       
|                     |  |                              
|                     |  | Charles J. Dolezal, President

PAGE 14



---



##### 



CERTIFICATION OF TREASURER

I, Lawrence M. Cardinal, Jr., certify that:



| | 1. |  | I have reviewed this annual report on Form 10-K of National Bancshares Corporation;                                                                                                                                                                                                                                     
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this annual
report;
|
| | 3. |  | Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the
periods presented in this annual report;                   
|
| | 4. |  | The registrants other certifying officers and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and have:                                                                                                  

| |  |    |  |                                                                                                                                                                                                                                                                                             
| |  | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a. |  | designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
|
|
|
|
| |  |    |  |                                                                                                                                                                                                                                                                                             
|
|
|
|
| |  | b. |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the Evaluation Date);
and                                                                                                  
|
|
|
|
| |  |    |  |                                                                                                                                                                                                                                                                                             
|
|
|
|
| |  | c. |  | presented in this annual report our conclusion about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;                                                                                                                         



| | 5. |  | The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors
and the audit committee of the registrants Board of Directors (or
persons performing the equivalent functions):
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |    |  |                                                                                                                                                                                                                                                                                               
| |  | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a. |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrants ability to record, process, summarize and report
financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and
|
|
|
|
| |  |    |  |                                                                                                                                                                                                                                                                                               
|
|
|
|
| |  | b. |  | any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        



| | 6. |  | The registrants other certifying officers and I have indicated in
this annual report whether there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: March 26, 2003

| |                                                                                                
| | -----------------------------------------------------------------------------------------------
| | /s/ Lawrence M. Cardinal, Jr.Lawrence M. Cardinal, Jr., Treasurer
(Principal Financial Officer)

PAGE 15



---



##### 



EXHIBIT INDEX

|              |  |             |  |                                                                                                                                      |  |                                                           
|------------- |  | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------------------------------------------
|Exhibit No.   |  |             |  |                                                                                                                                      |  | If incorporated by Reference,                             
|Under Reg.    |  | Form 10-K   |  |                                                                                                                                      |  | Documents with Which Exhibit                              
|S-K, Item 601 |  | Exhibit No. |  | Description of Exhibits                                                                                                              |  | was Previously Filed with SEC                             
|              |  |             |  |                                                                                                                                      |  |                                                           
|(3)(i)        |  |             |  | Amended Articles of Incorporation                                                                                                    |  | Registration Statement S-4
filed 3/31/86 File No.
33-03711
|             
|             
|             
|             
|(3)(ii)       |  |             |  | Code of Regulations                                                                                                                  |  | Registration Statement S-4
filed 3/31/86 File No.
33-03711
|             
|             
|             
|             
|(10.1)        |  |             |  | Directors Defined Benefit Plan
Agreement                                                                                             |  | Annual Report 10-K filed
3/29/01 File No. 000-14773       
|             
|             
|             
|             
|(10.2)        |  |             |  | Special Separation Agreement                                                                                                         |  | Annual Report 10-K filed
3/29/01 File No. 000-14773       
|             
|             
|             
|             
|(10.3)        |  |             |  | Agreement and Plan of Merger, dated
as of October 2, 2001, between
National Bancshares Corporation and
Peoples Financial Corporation |  | Form 8-K filed 10/3/01
File No. 000-14773                 
|             
|             
|             
|             
|(11)          |  | A24         |  | Computation of Earnings per Share                                                                                                    |  | Incorporated by reference                                 
|             
|             
|             
|             
|(12)          |  | A24         |  | Computation of Ratios                                                                                                                |  | Incorporated by reference                                 
|             
|             
|             
|             
|(13)          |  | A           |  | 2002 Annual Report to Shareholders                                                                                                   |  | Incorporated by reference                                 
|             
|             
|             
|             
|(21)          |  | A1          |  | Subsidiaries of the registrant                                                                                                       |  | Incorporated by reference                                 
|             
|             
|             
|             
|(23)          |  |             |  | Consent of Crowe, Chizek and Co. LLP                                                                                                 |  |                                                           
|             
|             
|             
|             
|(99.01)       |  |             |  | Certification                                                                                                                        |  |                                                           

No other exhibits are required to be filed herewith pursuant to Item 601 of
Regulation S-K.

PAGE 16