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|National
Bancshares
Corporation
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|2001 Annual Report             





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Financial Highlights

Financial Position

|                         |  |      |             |      |  |        |             |  |  |            |        |  
|------------------------ |  | ---- | ----------- | ---- |  | ------ | ----------- |  |  | ---------- | ------ | -
|                         |  |      |             |      |  |        |             |  |  | Percentage
|(Year End Balances)      |  | 2001 |             | 2000 |  | Change
|                        
|Total Assets             |  | $    | 197,763,446 |      |  | $      | 200,792,706 |  |  |            | -1.51  | %
|                        
|                        
|                        
|                        
|Deposits                 |  |      | 159,519,295 |      |  |        | 162,013,585 |  |  |            | -1.54  | %
|                        
|                        
|                        
|                        
|Loans-Net                |  |      | 116,880,804 |      |  |        | 107,551,674 |  |  |            | 8.67   | %
|                        
|                        
|                        
|                        
|Investment Securities    |  |      | 60,843,655  |      |  |        | 68,021,052  |  |  |            | -10.55 | %
|                        
|                        
|                        
|                        
|Shareholders Equity     |  |      | 30,922,188  |      |  |        | 28,939,329  |  |  |            | 6.85   | %
|                        
|                        
|                        
|                        
|Summary of Operations    |  |      |             |      |  |        |             |  |  |            |        |  
|                        
|                        
|                        
|                        
|Net Interest Income      |  | $    | 8,602,390   |      |  | $      | 8,804,313   |  |  |            | -2.29  | %
|                        
|                        
|                        
|                        
|Net Income               |  |      | 2,527,203   |      |  |        | 2,555,271   |  |  |            | -1.10  | %
|                        
|                        
|                        
|                        
|Regular Cash Dividends   |  |      | 1,158,687   |      |  |        | 1,119,697   |  |  |            | 3.48   | %
|                        
|                        
|                        
|                        
|Net Income Per Share     |  |      | 1.13        |      |  |        | 1.14        |  |  |            | -0.88  | %
|                        
|                        
|                        
|                        
|Cash Dividends Per Share |  |      | 0.52        |      |  |        | 0.50        |  |  |            | 4.00   | %
|                        
|                        
|                        
|                        
|Book Value Per Share     |  |      | 13.93       |      |  |        | 12.93       |  |  |            | 7.73   | %







National Bancshares Corporation is a one-bank holding company with assets of
$198 million. First National Bank, its subsidiary, is headquartered in Orrville,
Ohio. Serving Wayne County, southern Medina County, and parts of Stark and
Holmes Counties through eleven banking offices, First National Bank offers a
variety of personal and commercial deposit and lending services.





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|For more than 120 years, First National
Bank has been a locally-owned community bank.
In that time, we have never lost sight
of our goal: to provide safe and secure
financial services to our customers. |  | (PHOTO OF CHARLES J. DOLEZAL)

Dear Shareholders

This past year was very challenging for the financial services
industry. A slowing economy, floundering stock market and the Federal Reserve
lowering interest rates eleven times, all led to a rather interesting year.
Despite these challenges, the financial industry has survived quite well. Our
income was fairly level with last year, being up on a pre-tax basis by 1%. After
tax, however, net income was down by 1.1%. This modest decline in net income was
driven by declining net interest income. Interest income declined at a faster
rate than interest expense as the Federal Reserves interest rate reduction
impacted loan rates earlier than deposit rates. The high-rate, special
certificates of deposit which were issued during 2000 finally began maturing
during 2001. These maturing certificates allowed interest expense to decline,
thus relieving some pressure on net interest income.

Net loans increased over $9.3 million, or 8.7%, over the end of the
previous year. This increase was realized mainly in real estate mortgage loans.
Total assets declined by $3 million, or 1.5%, when compared to December 31,
2000. This decline occurred in investment securities and federal funds sold.
Deposits also declined from the end of the previous year, dropping by
approximately $2.5 million, or 1.5%. As most of the higher rate certificates of
deposit matured this past year, many of them moved into savings products. Core
deposits increased, but not at the same volume as rate-sensitive hot money
that moved elsewhere as interest rates declined. Total shareholders equity
reached almost $31 million, increasing by approximately $2 million, or 6.9%,
over December 31, 2000.

Total cash dividends declared in 2001 equaled 52¢ per share, a 4%
increase over the total cash dividends declared in the previous year. This has
continued a long-term trend of increasing cash dividends.

The market price of National Bancshares stock can be found daily on
many Internet financial sites. Our stock is traded on the Over The Counter (OTC)
market under the ticker symbol of NBOH. You can also access periodic press
releases regarding National Bancshares Corporation dividends and other corporate
matters on the Internet through PR Newswire (www.prnewswire.com). Press releases
are transmitted by PR Newswire to over 150,000 sites and portals worldwide,
within minutes. Press releases regarding corporate matters, products, services
and staff changes may be accessed on our web site at www.fnborrville.com. By
utilizing these two sites, you may access

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First National Bank and National Bancshares Corporation news in a timely manner.

Recent regulatory changes have opened new areas of related business
banks can enter. Taking advantage of these changes, First National Bank formed a
title insurance company in May of 2001 in conjunction with the law firm Kropf,
Wagner, Hohenberger and Lutz, L.L.P. This newly-formed company, First Kropf
Title, LLC, is a partially-owned subsidiary of First National Bank. First Kropf
Title will be used to initiate title insurance policies and close mortgage loans
originated by First National Bank. This service will generate additional
non-interest income for First National.

On October 2, 2001 we announced the signing of a Definitive Agreement
to purchase Peoples Financial Corporation, the holding company of Peoples
Federal Savings and Loan Association, located in Massillon, Ohio. Under the
terms of the agreement, National Bancshares will pay $12.25 in cash for each of
the 1,234,085 outstanding shares of Peoples Financial. The aggregate transaction
value will be approximately $15.1 million. The merger is expected to be
consummated in the early part of the second quarter of 2002, pending approval by
Peoples shareholders, regulatory approval and other customary conditions of
closing. Since this is a cash deal, it will not be dilutive to the shareholders
of National Bancshares. At December 31, 2001, Peoples Financial had total assets
of $106.1 million, deposits of $75.9 million and shareholders equity of $10.4
million. Peoples Financial operates three full-service offices in Massillon and
a loan production office in North Canton, Ohio. This transaction provides us
with an opportunity to expand into an adjacent and attractive market area.

In the fourth quarter we initiated a renovation project at our Seville
office, including a new drive-up ATM, new exterior signage, and redecorating the
interior. We anticipate this project to be completed shortly after the first of
the year.

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|We offer a wide variety of financial services including safe deposit boxes,
travelers checks, and checking and savings products designed to
benefit
individual needs.
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During the year 2000, First National established a scholarship fund
with the Greater Wayne County Foundation to benefit a deserving second year
student at The University of Akron Wayne College in Orrville. The first
scholarship was awarded for the fall semester of 2001. The recipient was
Courtney Welch, a 2000 graduate of Dalton High School. We congratulate Courtney
on her academic achievements and wish her the best in her future endeavors.

In looking ahead, we see many challenges and opportunities for us in
2002. We look forward to meeting them as we expand our markets with a growing
and profitable financial institution. We thank you as shareholders for your
confidence in us and encourage your use of our financial products and services.
We also hope you will encourage your friends and relatives to utilize our
services as well, which in turn supports your investment.

(-s- Charles J. Dolezal)
Charles J. Dolezal
President and Chairman

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Financial Review

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|Deposits at First National Bank are fully insured with
the FDIC to $100,000.00. Additionally, First National consistently earns a
prestigious Blue Ribbon rating for security and financial soundness.
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National Bancshares Corporation experienced slight declines in total
assets and net income in 2001. Total assets declined approximately $3.0 million,
ending 2001 at $197.8 million. This represents a 1.5% decrease compared to the
previous year. Average assets experienced growth in 2001, increasing to
approximately $199.7 million from $195.9 million in 2000, or an increase of $3.8
million. Net income in 2001 totaled $2.5 million, down approximately 1.1% from
2000.

Cash and due from banks amounted to $6.9 million and $7.1 million at
December 31, 2001 and 2000, respectively. This represents a decrease of $0.2
million, or 2.0%. Cash reserves are maintained at appropriate levels in order to
meet customer needs with consideration given to security. Excess cash is
invested in order to maximize a safe and profitable return on assets. A
significant portion of this account represents the normal processing of outgoing
cash letters, which represents checks deposited with us that were drawn on other
banks.

Federal funds sold were $3.3 million and $8.1 million as of December
31, 2001 and 2000, respectively. Average balances increased during the year with
2001 averaging $8.5 million compared to $5.5 million during 2000. Federal funds
sold are overnight investments with our correspondent banks. This is an
investment and liquidity tool that is used to maximize the earning assets of the
bank and help meet the needs of our customers.

Interest-bearing balances with banks were $2.0 million as of December
31, 2001 and 2000. Interest-bearing balances also averaged $2.0 million during
2001 and 2000.

Securities(Millions of Dollars)

(SECURITIES BAR CHART)

Total securities decreased approximately $7.2 million, ending 2001 at
$60.8 million compared to $68.0 million at the end of 2000. Strong loan demand
during 2001 required a shifting of funds from securities to the loan portfolio.
The average balance of taxable investment securities decreased from $49.5
million in 2000 to $47.5 million in 2001. The average balance of non-taxable
investment securities decreased from $20.7 million in 2000 to $18.3 million in
2001. The market or fair value of the total portfolio was $61.3 million and
$68.7 million as of December 31, 2001 and 2000, respectively.

U.S. treasury and agency obligations decreased approximately $8.2
million or 33.5% with balances of $16.6 million on December 31, 2001 compared to
$24.5 million on December 31, 2000. The net market appreciation of this category
was approximately $538 thousand as of December 31, 2001.

Obligations of states and political subdivisions ended 2001 at $15.7
million, which was 20.3% lower than the $19.7 million balance on December 31,
2000. The net market appreciation was approximately $528 thousand as of December
31, 2001. To assist in local development, the bank actively purchases bonds
issued by local municipalities, school systems and other public entities when
opportunities present themselves.

Other securities ended 2001 at $28.6 million, which was 21.7% higher
than the December 31, 2000 balance of $23.5 million. This group of securities is
primarily comprised of high quality corporate bonds and notes. The Corporation
also maintains a portfolio of approximately $2.3 million in equity securities.
The net market appreciation was approximately $595 thousand as of December 31,
2001.

Net loans increased by approximately $9.3 million, or 8.7% during 2001.
Net loan balances were $116.9 million and $107.6 million on December 31, 2001
and 2000, respectively. Average net loans posted an increase of $5.6 million
with a yearly average of $110.4 million for 2001.

Loans  Net(Millions of Dollars)

(LOANS - NET BAR CHART)

Loans collateralized by real estate totaled $91.7 million on December
31, 2001, as compared to $78.7 million as of December 31, 2000. All real estate
categories, except commercial, posted increases in 2001. There was a $3.1
million decrease in commercial mortgage loans and an $11.5 million increase in
residential mortgage loans. Home equity loans increased $0.8 million and
construction loans increased $3.8 million. Loan demand was strong in 2001 due to
lower interest rates.

Consumer loans, totaling $5.2 million on December 31, 2001, were 26.9%
below the 2000 year-end total of $7.2 million. Consumer loans, which include
automobile loans, faced strong competition during 2001 from auto manufacturers
special incentives. Commercial loans, which are inherently more risky than other
kinds of loans, were $18.1 million and $19.9 million as of December 31, 2001 and
2000, respectively. Credit card loans increased 3.3% during the year with
balances of $1.2 million on December 31, 2001. Other loans decreased $24
thousand during 2001 ending the year at $2.2 million.

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The allowance for loan losses was $1.3 million at both December 31,
2001 and 2000, respectively. The allowance for loan losses to total loans
percentages were 1.12% and 1.23% and net charge-offs to average loans
percentages were .06% and .03% for 2001 and 2000, respectively. As with any
charge-offs, the bank continues to attempt recovery where feasible. The ratio of
non-performing loans to total loans was .22% for 2001 compared to .13% in 2000.
The ratio of the allowance for loan losses to non-performing loans was 511% for
2001 compared to 932% for 2000. Non-performing loans consist of loans that have
been placed on nonaccrual status. Management reviews the allowance for loan
losses on a regular basis to determine the adequacy of the reserve. Management
reviews problem loans (loans past due 90 days or more and loans on non-accrual)
for unfavorable collectibility factors and assesses the requirement for specific
reserves on such credits. With a slowdown in the economy, specific reserves have
increased as of December 31, 2001. For those loans not subject to specific
reserves, management reviews previous loan loss experience, general economic
conditions and delinquent loan reports to establish appropriate reserves. A
significant portion of the Corporations loan portfolio consists of loans
secured by real estate, which carry less risk than other types of loans. In
addition, the majority of the loan growth during 2001 was in loans secured by
real estate.

The Corporation modified its methodology during 2001 of analyzing loans
not subject to specific reserves. Previously it used its peer group loan loss
experience in assessing this portion of the adequacy of the loan loss reserve.
This was due to the strong loan growth recently experienced by the Corporation
and the lack of loss experience during such periods. As the Corporation
developed its own loan loss experience during periods of strong loan growth,
management felt is was appropriate to start using its own loan loss experience
in assessing the adequacy of the loan loss reserve.

Premises and equipment totaled $3.0 million on December 31, 2001 as
compared to $2.6 million on December 31, 2000. During 2001 capital expenditures
amounted to $691 thousand and depreciation was $338 thousand. Improvements and
repairs to bank buildings and equipment are performed as needed to keep them in
good working order in an effort to provide convenient and pleasant banking
offices to meet our customers needs.

Deposits(Millions of Dollars)

(DEPOSITS BAR CHART)

Total deposits posted a $2.5 million or 1.5% decrease, ending 2001 at
$159.5 million, as compared to $162.0 million on December 31, 2000. Average
deposits increased from $158.1 million in 2000 to $160.3 million in 2001.

Demand deposits, which represent noninterest-bearing checking accounts,
ended 2001 at $27.0 million, which was a decrease of 4.3% from the December 31,
2000 balance of $28.2 million. Demand deposits fluctuate based on the needs of
our customers. The average demand deposit accounts for 2001 were $26.3 million
as compared to $26.5 million in 2000.

Interest-bearing checking accounts finished 2001 at $31.0 million
compared to $30.4 million a year earlier. This was an increase of $0.6 million,
or 1.9%. Average balances decreased by $0.7 million from $29.9 million in 2000
to $29.2 million in 2001. Interest-bearing checking accounts include our
Negotiable Order of Withdrawal accounts and Money Market Deposit Accounts.

Savings accounts totaled $49.9 million on December 31, 2001,
approximately $9.9 million higher than the end of the previous year. With
certificates of deposit rates declining during 2001, customers moved funds from
time deposits into savings accounts. Average savings accounts increased from
$41.3 million during 2000 to approximately $44.1 million in 2001. First National
offers passbook, statement and preferred savings accounts. Preferred savings
accounts, introduced in December 2000, are tiered to pay higher rates on higher
balances.

Time deposits of less than $100,000 amounted to $42.2 million and $49.3
million as of December 31, 2001 and 2000, respectively. This represents a
decrease of $7.1 million or 14.5%. High-rate, special certificates of deposit
that were issued during 2000 matured during 2001, with a significant portion of
the funds moving into savings products. Average time balances of less than
$100,000 increased approximately $1.4 million giving 2001 an average time
deposit balance of $48.1 million compared to approximately $46.7 million in
2000.

Time deposits of $100,000 and over decreased from $14.1 million on
December 31, 2000 to $9.5 million on December 31, 2001, as we experienced a
decline in large public deposits. Average time deposits of $100,000 and over
decreased by $1.1 million from 2000 giving 2001 an average of $12.6 million.

Securities sold under agreements to repurchase were $3.4 million on
December 31, 2001, compared to $3.9 million at the end of 2000, or approximately
$0.5 million lower. The Federal Reserve note account balance was $0.1 million
and $0.6 million as of December 31, 2001 and 2000, respectively. This represents
treasury, tax and loan payments that are maintained for the Federal Reserve
until they request the funds. Federal Home Loan Bank advances were $2.2 million
and $3.4 million at December 31, 2001 and 2000, respectively. During 2001,
advances were paid down by $1.2 million. The average of other funds purchased
decreased in 2001 to $6.9 million form $8.6 million during 2000.

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|First National Bank has helped thousands
of local families purchase homes. For new homebuilders, we offer a
single loan product that encompasses the construction and repayment phases,
resulting in significant savings for our customers when building
a home.
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|Our Visa® Check Cards, ATMs and direct deposit services offer customers
convenience and safe,
immediate access to cash. Telephone Banking and Online Banking allow customers
to securely access their account
information
24-hours a day.
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Shareholders equity had an ending balance of $30.9 million on December
31, 2001. This is an increase of $2.0 million or 6.9% from the 2000 ending
balance of $28.9 million. The increase is due mainly to retained earnings and an
improvement in accumulated other comprehensive income. This growth translates to
a $1.00 increase in book value per share, raising the book value per share to
$13.93 on December 31, 2001, compared to $12.93 on December 31, 2000. Under the
federal risk-based capital regulations, the Banks total capital to risk-based
assets of 18.77% on December 31, 2001 was more than twice the 8% minimum
required. The Bank remains in a very favorable position when compared to its
peer group in the area of capitalization.

Shareholders equity reflects the change in accumulated other
comprehensive income. This represents the unrealized appreciation or
depreciation in the market value of investment securities (net of taxes) that
are available for sale. During 2001, accumulated other comprehensive income
increased by $0.9 million, resulting in an unrealized appreciation balance of
$0.8 million at December 31, 2001. A general improvement in the market value of
debt and equity investments owned, due to economic conditions and lower interest
rates, has increased the market value of securities in the available for sale
portfolio.

Shareholders Equity(Millions of Dollars)

(SHAREHOLDERS EQUITY BAR CHART)

In summary, the Corporation experienced balance sheet growth of
approximately 8.7% in loans and 6.9% in shareholders equity, offset by a
decline of 1.5% in deposits.

Liquidity

Liquidity is the consideration of the corporations ability to meet its
necessary outgoing cash flow needs. Cash equivalents for the cash flow statement
of $10.2 million is composed of $6.9 million in cash and due from banks and $3.3
million in federal funds sold. In addition, the Corporation has short-term
funding arrangements with its correspondent banks and the Federal Home Loan
Bank. Management considers the Corporation to be in a satisfactory liquidity
position with the ability to meet the demands of its customers and the local
economy.

Results of Operations

Net income for 2001 was $2.5 million, or approximately 1.1% below
2000s net income of $2.6 million. Net income for 2000 was approximately 1.5%
above 1999s net income of $2.5 million. This equates to net income per share of
$1.13 for 2001, $1.14 for 2000 and $1.12 for 1999. The primary source of income
continues to be interest on loans and other investments with additional revenues
generated from fees on non-interest related services.

Net Income(Thousands of Dollars)

(NET INCOME BAR CHART)

Interest and fees on loans of $9.0 million for 2001 was below 2000 by
2.6%, or approximately $243 thousand. Interest and fees on loans increased from
1999 to 2000, improving by 12.0%, or approximately $995 thousand. The decline in
2001 was due to a decrease in yields as interest rates declined throughout the
year. The improvement in 2000 was due to an increase in average loan volume and
average loan yields. Average interest yields on loans were 8.18%, 8.85% and
8.50% for 2001, 2000 and 1999, respectively.

Interest on federal funds sold was $354 thousand, $348 thousand and
$489 thousand for 2001, 2000 and 1999, respectively. The increase of $6 thousand
in 2001 was the result of higher volume as average rates declined from 6.32% to
4.18%. The decrease of $141 thousand in 2000 was the result of lower volume of
funds sold.

Interest on taxable investment securities, which includes
interest-bearing deposits with banks, decreased by approximately $259 thousand
ending 2001 at $3.2 million. This 7.6% decrease in interest income was due to a
decrease in the average investment balances. In 2000, interest on taxable
investment securities increased by approximately $25 thousand or 0.7% from 1999.
This increase was due primarily to an increase in average investment balances.

Interest on obligations of states and political subdivisions totaled
$1.0 million for 2001, which was $0.2 million or 13.8% below 2000. The average
balance of these investments decreased $2.4 million while the average taxable
equivalent yield decreased from 8.55% in 2000 to 8.37% in 2001. Interest on obligations of states and political subdivisions totaled
$1.2 million for 2000, which was $47 thousand or 3.9% below 1999. The average
balances decreased $0.9 million in 2000 while the average taxable equivalent
yield increased from 8.54% in 1999 to 8.55% in 2000.

Total interest and dividend income of $13.6 million for 2001 was $0.6
million lower than 2000s total of $14.2 million due primarily to lower yields
on earning assets. 2000s total interest income exceeded 1999s by $0.8 million
due to generally higher loan volumes and yields.

Interest on deposits totaled $4.7 million in 2001 as compared to $4.9
million in 2000. This $0.2 million or 4.5% decrease, was due principally to
lower average rates on deposits, declining from 3.72% to 3.49%. Comparing 2000
to 1999, interest

6



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on deposits increased $0.4 million or 9.6%. The increase was
due principally to higher average rates on deposits.

Interest expense on other funds purchased, which includes Federal Home
Loan Bank advances, was $277 thousand, $512 thousand and $278 thousand for 2001,
2000 and 1999, respectively. The decrease in 2001 was due to lower average
balance of funds purchased and lower rates. The increase in 2000 was primarily
the result of higher average balances of Federal Home Loan Bank advances.

Net interest income before provision for loan losses was $8.6 million,
$8.8 million and $8.6 million for 2001, 2000 and 1999 respectively. This
represents a decrease of 2.3% in 2001 and an increase of 2.3% in 2000. The net
interest margin, which is calculated on a tax equivalent basis, was 4.89% for
2001, 5.15% for 2000 and 5.14% for 1999.

The Bank provides for probable loan losses throughout the year. In 2001
the provision for loan losses was $40 thousand. In 2000 and 1999 the provision
for loan losses was $62 thousand and $120 thousand, respectively. The total
provision for loan losses for the last three years was $222 thousand, compared
to total net charge-offs of $198 thousand for the same three-year period. The
provision for loan losses is based on the Banks past loan loss experience,
current delinquencies, mix and various types of loans, general economic
conditions and trends, and an evaluation of the losses inherent in the current
loan portfolio.

Net interest income after provision for loan losses was $8.6 million,
$8.7 million and $8.5 million in 2001, 2000 and 1999, respectively. This
represents a decrease of 2.1% in 2001 and an increase of 2.7% in 2000.

Noninterest income totaled $1.1 million in 2001, and $0.8 million for
2000 and 1999. Noninterest income is primarily comprised of checking account
fees, which were $656 thousand in 2001, $560 thousand in 2000 and $544 thousand
in 1999. Checking account and other fees were increased effective February 1,
2001. During 2001, loans and securities were sold generating gains of $44
thousand and $97 thousand, respectively. Other noninterest income includes
safety deposit box rents and other miscellaneous fees and collections.

Noninterest expenses were $6.4 million for 2001, $6.3 million in 2000
and $6.2 million in 1999. This represents an $84 thousand or 1.3% increase in
2001 and a $119 thousand or 1.9% increase in 2000. The increase in 2001 was
primarily due to higher salaries and employee benefit costs. The increase in
2000 was also due to higher salaries and employee benefits plus higher
miscellaneous other expenses. The higher salaries and employee benefits each
year were mainly due to normal salary increases and increases in medical
insurance premiums.

The income tax provision amounted to $777 thousand, $717 thousand and
$634 thousand in 2001, 2000 and 1999, respectively. An increase in noninterest
income combined with a decrease in nontaxable interest income, were the major
factors resulting in a higher tax provision in 2001. An increase in net interest
income after provision for loan losses and lower nontaxable interest income,
offset by higher noninterest expenses resulted in a higher tax provision in
2000. The effective tax rate was 23.5%, 21.9% and 20.1% in 2001, 2000 and 1999,
respectively.

Cash dividends declared during 2001 were $0.52 per share, compared to
$0.50 per share in 2000 and $0.48 per share in 1999. The dividend payout
percentage was 45.85%, 43.82% and 42.84% in 2001, 2000 and 1999, respectively.
Return on average equity was 8.17%, 9.08% and 9.22% for 2001, 2000 and 1999,
respectively. Return on average assets was a respectable 1.27% in 2001 and 1.30%
in 2000 and 1999.

Cash Dividends Per Share(Dollars)

(CASH DIVIDENDS PER SHARE BAR CHART)

Asset and Liability Management

Management considers interest rate risk to be the Corporations most
significant market risk. Management focuses on maintaining consistent growth in
net interest income, while managing interest rate risk within Board-approved
policy limits. The Corporations Asset/Liability Management Committee, which
consists of the Banks Executive Officers and reports directly to the Board of
Directors, monitors and manages interest rate risk in order to maintain an
acceptable level of possible change in net interest income as a result of
changes in interest rates. The Asset/Liability Management Committee also
monitors the Corporations liquidity levels, which were within the Corporations
policy guidelines at December 31, 2001. The Corporation does own certain equity
securities, which have more price volatility compared to debt securities and
does subject the Corporation to some equity risk. The Corporation does not own
any trading assets and is not subject to foreign currency exchange or commodity
price risk.

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

|                                                                                                                                                                                                                                                                                                                                         
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                         
|First National offers a variety of loan products to help
customers achieve their dreams. Our personal service features a
rapid response to loan applications, locally-based credit decisions and
competitive fees. Our home equity line of credit gives homeowners the
opportunity to quickly meet financial needs with no closing costs.
|                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                         

7



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##### 



|                                                                                                                                                                                                                                                                                                
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                
|Many businesses envision expanding and updating their existing facilities. First
National has powerful capital resources and proven products and services to
offer businesses to help bring that vision to life. Our extensive knowledge of
business financing sets us apart from other lenders.
|                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                

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

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

At December 31, 2001 the Corporation had a negative one-year cumulative
gap of 1.9% of total assets, indicating a slightly higher balance of rate
sensitive liabilities than rate sensitive assets. The estimated impact on the
net interest margin from modestly rising or falling interest rates would be
relatively insignificant due to the short duration of mismatch within the first
12 months. The table below illustrates another tool used by management in
assessing its interest rate sensitivity. This indicates the change in net
interest income that could potentially occur in different hypothetical rate
environments based on assumed cash flows. As shown below for year-end 2001, were
interest rates to increase by 200 basis points, the estimated potential impact
to the Corporations net interest income would be a decrease of 1.3%, or $110
thousand. However, if rates were to decline by 200 basis points, net interest
income would decrease by only 0.4%, or $38 thousand. This analysis is based on
numerous assumptions, including relative levels of market interest rates, loan
prepayments and reactions of depositors to changes in interest rates, and should
not be relied upon as being indicative of actual results. Further, it does not
necessarily contemplate all actions management may undertake in response to
changes in interest rates. Management continues to seek non-interest income
opportunities and seeks to control expenses in an effort to offset these
possible fluctuations in net interest income.

|               |  |                                   |  |              
|-------------- |  | --------------------------------- |  | -------------
|Change in      |  | Percentage Change in Net Interest
|Interest Rates |  | Income Over 12 Months            
|(basis points) |  | Dec. 31, 2001                     |  | Dec. 31, 2000
|              
|+200
-200      |  | -1.3%
-0.4%                       |  | -2.6%
1.3%   

Pending Acquisition

As discussed in Note 17 to the consolidated financial statements, on
October 2, 2001, the Corporation entered into an Agreement and Plan of Merger to
acquire Peoples Financial Corporation, a financial institution holding company
located in Massillon, Ohio. While capital ratios are expected to decrease due to
the impact of goodwill and other intangibles related to the transaction, all
minimum capital standards will continue to be met. The Bank plans to sell
certain real estate mortgages and securities to assist in funding the
acquisition. This is not expected to have a material impact on the liquidity of
the Corporation.

Forward-Looking Statements

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

Impact of New Accounting Standards

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

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

A new accounting standard requires all business combinations to be
recorded using the purchase method of accounting for any transaction initiated
after June 30, 2001. Under the purchase method, all identifiable tangible and
intangible assets and liabilities of the acquired company are recorded at fair
value at the date of acquisition, and the excess of the purchase price over the
fair value of net assets is recorded as goodwill. Under the new standard,
identifiable intangible assets with finite lives will continue to be amortized,
whereas unidentifiable intangible assets arising from a business combination,
both amounts previously recorded and future amounts acquired, will cease being
amortized starting in 2002. Annual impairment testing will be required for
goodwill, with impairment being recorded if the carrying amount of goodwill
exceeds its implied fair value. Adoption of this standard on January 1, 2002
will not have a material effect on the Corporations financial statements.

8



---



##### 



Price Ranges of Common Stock

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

|               |  |      |       |     |  |                     |       |  |  |   |     | 
|-------------- |  | ---- | ----- | --- |  | ------------------- | ----- |  |  | - | --- | 
|              
|2001           |  | High |       | Low |  | Dividends Per Share
|First Quarter  |  | $    | 16.50 |     |  | $                   | 15.25 |  |  | $ | .13 | 
|              
|              
|              
|              
|Second Quarter |  |      | 17.00 |     |  |                     | 16.05 |  |  |   | .13 | 
|              
|              
|              
|              
|Third Quarter  |  |      | 16.05 |     |  |                     | 16.00 |  |  |   | .13 | 
|              
|              
|              
|              
|Fourth Quarter |  |      | 16.50 |     |  |                     | 15.00 |  |  |   | .13 | 
|              

|               |  |      |       |     |  |                     |       |  |  |   |     | 
|-------------- |  | ---- | ----- | --- |  | ------------------- | ----- |  |  | - | --- | 
|2000           |  | High |       | Low |  | Dividends Per Share
|First Quarter  |  | $    | 24.50 |     |  | $                   | 19.50 |  |  | $ | .12 | 
|              
|              
|              
|              
|Second Quarter |  |      | 20.00 |     |  |                     | 16.87 |  |  |   | .12 | 
|              
|              
|              
|              
|Third Quarter  |  |      | 17.25 |     |  |                     | 16.75 |  |  |   | .12 | 
|              
|              
|              
|              
|Fourth Quarter |  |      | 17.00 |     |  |                     | 14.50 |  |  |   | .14 | 
|              

Information regarding the limitations on dividends available to be paid is
located in Note 11 to the Consolidated Financial Statements included herein.

Shareholder Information

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

Stock Trading Information

The shares of common stock of National Bancshares Corporation are
traded on the local over-the-counter market primarily with brokers in the
Corporations service area. The ticker symbol for National Bancshares
Corporation is NBOH. The Corporation had 986 shareholders of record as of
December 31, 2001.

Form 10-K

A copy of the Corporations 2001 Annual Report on Form 10-K as filed
with the SEC will be furnished free of charge to shareholders upon written
request to the company.

Shareholder Assistance and Transfer Agent

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

Dividend Reinvestment Plan

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

Dividend Direct Deposit Plan

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

|                                                                                                                                                                                                                       
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|First National offers businesses the convenience of electronic banking services,
payroll services and commercial lines of credit. Our corporate services may be
customized to fit the financial needs of each business.
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       

9



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##### 



Consolidated

Balance Sheets


December 31, 2001 and 2000


|                                                                                 |                                                                                  |                                 |                            |             |             |             |             |             |             |             |  | 
|-------------------------------------------------------------------------------- | -------------------------------------------------------------------------------- | ------------------------------- | -------------------------- | ----------- | ----------- | ----------- | ----------- | ----------- | ----------- | ----------- |  | 
|                                                                                 |                                                                                  |                                 |                            |             |             | 2001        |             | 2000       
|Assets                                                                           |                                                                                  |                                 |                            |             |             |             |             |            
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Cash and due from banks                                                          |                                                                                  | $                               | 6,935,082                  |             |             | $           | 7,077,797   |            
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Federal funds sold                                                               |                                                                                  |                                 | 3,325,000                  |             |             |             | 8,135,000   |            
|                                                                                 |                                                                                  |                                
|                                                                                 |                                                                                  | Total cash and cash equivalents |                            |             | 10,260,082  |             |             |             | 15,212,797  |            
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Interest-bearing time deposits with other banks                                  |                                                                                  |                                 | 1,994,011                  |             |             |             | 1,989,440   |            
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Securities available for sale                                                    |                                                                                  |                                 | 47,509,304                 |             |             |             | 20,168,513  |            
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Securities held to maturity (fair value: 2001  $13,806,578;
2000  $48,518,291) |                                                                                  |                                 | 13,334,351                 |             |             |             | 47,852,539  |            
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Federal bank stock                                                               |                                                                                  |                                 | 1,027,300                  |             |             |             | 975,800     |            
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Loans, net of allowance for loan losses: 2001  $1,321,152;
2000  $1,343,124    |                                                                                  |                                 | 116,880,804                |             |             |             | 107,551,674 |            
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Accrued interest receivable                                                      |                                                                                  |                                 | 1,219,110                  |             |             |             | 1,492,613   |            
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Premises and equipment, net                                                      |                                                                                  |                                 | 2,974,524                  |             |             |             | 2,621,483   |            
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Other assets                                                                     |                                                                                  |                                 | 2,563,960                  |             |             |             | 2,927,847   |            
|                                                                                 |                                                                                  |                                
|TOTAL                                                                            |                                                                                  | $                               | 197,763,446                |             |             | $           | 200,792,706 |            
|                                                                                 |                                                                                  |                                
|Liabilities and Shareholders Equity                                              |                                                                                  |                                 |                            |             |             |             |             |            
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Deposits                                                                         |                                                                                  |                                 |                            |             |             |             |             |            
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 |                                                                                  | Noninterest-bearing             |                            | $           | 27,024,824  |             |             | $           | 28,236,689  |            
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 |                                                                                  | Interest-bearing                |                            |             | 132,494,471 |             |             |             | 133,776,896 |            
|                                                                                 |                                                                                  |                                
|                                                                                 |                                                                                  |                                 | Total deposits             |             |             | 159,519,295 |             |             |             | 162,013,585 | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Repurchase agreements                                                            |                                                                                  |                                 | 3,422,657                  |             |             |             | 3,949,485   |            
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Federal Reserve note account                                                     |                                                                                  |                                 | 111,233                    |             |             |             | 615,298     |            
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Federal Home Loan Bank advances                                                  |                                                                                  |                                 | 2,207,807                  |             |             |             | 3,446,086   |            
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Accrued expenses and other liabilities                                           |                                                                                  |                                 | 1,580,266                  |             |             |             | 1,828,923   |            
|                                                                                 |                                                                                  |                                
|                                                                                 |                                                                                  |                                 | Total liabilities          |             |             | 166,841,258 |             |             |             | 171,853,377 | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Shareholders Equity:                                                            |                                                                                  |                                 |                            |             |             |             |             |            
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Common stock, no par value; 6,000,000 shares authorized;
2,289,528 shares issued |                                 |                            | 11,447,640  |             |             |             | 11,447,640  |            
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Additional paid-in-capital                                                       |                                 |                            | 4,689,800   |             |             |             | 4,689,800   |            
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Accumulated other comprehensive income (loss)                                    |                                 |                            | 784,297     |             |             |             | (127,139    | )          
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Retained earnings                                                                |                                 |                            | 15,620,935  |             |             |             | 14,292,805  |            
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Treasury stock, at cost (2001 - 69,335 shares;
2000 - 51,384 shares)             |                                 |                            | (1,620,484  | )           |             |             | (1,363,777  | )          
|                                                                                 |                                                                                  |                                
|                                                                                 |                                                                                  |                                 | Total shareholders equity |             |             | 30,922,188  |             |             |             | 28,939,329  | 
|                                                                                 |                                                                                  |                                
|                                                                                 | TOTAL                                                                            |                                 | $                          | 197,763,446 |             |             | $           | 200,792,706 |            
|                                                                                 |                                                                                  |                                

See accompanying notes to consolidated financial statements.

10



---



##### 



Consolidated

Statements of Income


Years Ended December 31, 2001, 2000 and 1999


|                                                    |                                       |            |                                    |           |           |            |           |           |           |            |           |           |           |            | 
|--------------------------------------------------- | ------------------------------------- | ---------- | ---------------------------------- | --------- | --------- | ---------- | --------- | --------- | --------- | ---------- | --------- | --------- | --------- | ---------- | 
|                                                    |                                       |            |                                    |           | 2001      |            | 2000      |           | 1999     
|INTEREST AND DIVIDEND INCOME:                       |                                       |            |                                    |           |           |            |           |           |           |            |           |          
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Loans, including fees                 |            | $                                  | 9,036,841 |           |            | $         | 9,280,026 |           |            | $         | 8,284,749 |          
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Federal funds sold                    |            |                                    | 353,756   |           |            |           | 348,202   |           |            |           | 488,523   |          
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Securities:                           |            |                                    |           |           |            |           |           |           |            |           |           |          
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                       | Taxable    |                                    |           | 3,160,784 |            |           |           | 3,419,441 |            |           |           | 3,394,822 |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                       | Nontaxable |                                    |           | 1,005,366 |            |           |           | 1,166,910 |            |           |           | 1,214,513 |           
|                                                    |                                       |           
|                                                    |                                       |            | Total interest and dividend income |           |           | 13,556,747 |           |           |           | 14,214,579 |           |           |           | 13,382,607 | 
|                                                   
|                                                   
|                                                   
|                                                   
|INTEREST EXPENSE:                                   |                                       |            |                                    |           |           |            |           |           |           |            |           |          
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Deposits                              |            |                                    | 4,677,652 |           |            |           | 4,898,207 |           |            |           | 4,470,562 |          
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Short-term borrowings                 |            |                                    | 98,275    |           |            |           | 181,576   |           |            |           | 176,391   |          
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Federal Home Loan Bank advances       |            |                                    | 178,430   |           |            |           | 330,483   |           |            |           | 101,656   |          
|                                                    |                                       |           
|                                                    |                                       |            | Total interest expense             |           |           | 4,954,357  |           |           |           | 5,410,266  |           |           |           | 4,748,609  | 
|                                                    |                                       |           
|NET INTEREST INCOME                                 |                                       |            | 8,602,390                          |           |           |            | 8,804,313 |           |           |            | 8,633,998 |          
|                                                   
|                                                   
|                                                   
|                                                   
|PROVISION FOR LOAN LOSSES                           |                                       |            | 40,000                             |           |           |            | 62,500    |           |           |            | 120,000   |          
|                                                    |                                       |           
|NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES |                                       |            | 8,562,390                          |           |           |            | 8,741,813 |           |           |            | 8,513,998 |          
|                                                   
|                                                   
|                                                   
|                                                   
|NONINTEREST
INCOME                                  |                                      
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Checking account fees                 |            |                                    | 656,441   |           |            |           | 559,750   |           |            |           | 543,631   |          
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Gain on sale of loans                 |            |                                    | 43,750    |           |            |           |          |           |            |           |          |          
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Securities gains                      |            |                                    | 97,003    |           |            |           |          |           |            |           |          |          
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Other                                 |            |                                    | 348,044   |           |            |           | 289,717   |           |            |           | 292,967   |          
|                                                    |                                       |           
|                                                    |                                       |            | Total noninterest income           |           |           | 1,145,238  |           |           |           | 849,467    |           |           |           | 836,598    | 
|                                                   
|                                                   
|                                                   
|                                                   
|NONINTEREST EXPENSE                                 |                                       |            |                                    |           |           |            |           |           |           |            |           |          
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Salaries and employee benefits        |            |                                    | 3,517,438 |           |            |           | 3,353,392 |           |            |           | 3,183,466 |          
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Data processing fees                  |            |                                    | 627,799   |           |            |           | 653,001   |           |            |           | 709,038   |          
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Net occupancy expense                 |            |                                    | 216,709   |           |            |           | 216,918   |           |            |           | 206,157   |          
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Depreciation  furniture and fixtures |            |                                    | 237,967   |           |            |           | 306,831   |           |            |           | 315,366   |          
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Franchise taxes                       |            |                                    | 314,869   |           |            |           | 302,164   |           |            |           | 318,316   |          
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Maintenance and repairs               |            |                                    | 197,234   |           |            |           | 173,445   |           |            |           | 203,534   |          
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Other                                 |            |                                    | 1,291,089 |           |            |           | 1,313,008 |           |            |           | 1,263,550 |          
|                                                    |                                       |           
|                                                    |                                       |            | Total noninterest expense          |           |           | 6,403,105  |           |           |           | 6,318,759  |           |           |           | 6,199,427  | 
|                                                    |                                       |           
|INCOME BEFORE INCOME TAXES                          |                                       |            | 3,304,523                          |           |           |            | 3,272,521 |           |           |            | 3,151,169 |          
|                                                   
|                                                   
|                                                   
|                                                   
|INCOME TAX EXPENSE                                  |                                       |            | 777,320                            |           |           |            | 717,250   |           |           |            | 634,183   |          
|                                                    |                                       |           
|NET INCOME                                          |                                       | $          | 2,527,203                          |           |           | $          | 2,555,271 |           |           | $          | 2,516,986 |          
|                                                    |                                       |           
|WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING          |                                       |            | 2,230,013                          |           |           |            | 2,240,534 |           |           |            | 2,253,650 |          
|                                                    |                                       |           
|BASIC AND DILUTED EARNINGS PER COMMON SHARE         |                                       | $          | 1.13                               |           |           | $          | 1.14      |           |           | $          | 1.12      |          
|                                                    |                                       |           

See accompanying notes to consolidated financial statements.

11



---



##### 



Consolidated

Statements of Changes in Shareholders Equity


Years Ended December 31, 2001, 2000 and 1999


|                                                               |                                   |                            |                            |                            |  |        |           |         |  |               |          |          |         |             |            |               |           |   |            |       |  |   |            |           |           |           |           | 
|-------------------------------------------------------------- | --------------------------------- | -------------------------- | -------------------------- | -------------------------- |  | ------ | --------- | ------- |  | ------------- | -------- | -------- | ------- | ----------- | ---------- | ------------- | --------- | - | ---------- | ----- |  | - | ---------- | --------- | --------- | --------- | --------- | 
|                                                               |                                   |                            |                            |                            |  |        |           |         |  |               |          |          |         | Accumulated |            |               |           |   |            |       |  |   |            |           |           |          
|                                                               |                                   |                            |                            |                            |  |        |           |         |  | Additional    |          | Other    |         |             |            |               |           |   |            | Total
|                                                               |                                   |                            |                            |                            |  | Common |           | Paid-in |  | Comprehensive |          | Retained |         | Treasury    |            | Shareholders'
|                                                               |                                   |                            |                            |                            |  | Stock  |           | Capital |  | Income (Loss) |          | Earnings |         | Stock       |            | Equity       
|                                                               |                                   |                            |                            |                            |  |        |           |         |  |               |          |          |         |             |            |               |           |   |            |       |  |   |            |          
|Balance, January 1, 1999                                       |                                   | $                          | 11,447,640                 |                            |  | $      | 4,689,800 |         |  | $             | (174,514 | )        |         | $           | 11,523,005 |               |           | $ | (293,049   | )     |  | $ | 27,192,882 |          
|                                                              
|                                                              
|                                                              
|                                                              
|Comprehensive income:                                          |                                   |                            |                            |                            |  |        |           |         |  |               |          |          |         |             |            |               |           |   |            |       |  |   |            |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Net income                        |                            |                            |                            |  |        |           |         |  |               |          |          |         |             |            | 2,516,986     |           |   |            |       |  |   |            | 2,516,986 |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Other comprehensive income (loss) |                            |                            |                            |  |        |           |         |  |               |          | (550,347 | )       |             |            |               |           |   |            |       |  |   |            | (550,347  | )        
|                                                               |                                   |                            |                            |                            |  |        |           |         |  |               |          |          |         |             |            |               |           |   |            |       |  |   |            |          
|                                                               |                                   |                            | Total comprehensive income |                            |  |        |           |         |  |               |          |          |         |             |            |               |           |   |            |       |  |   |            |           |           | 1,966,639 |          
|                                                              
|                                                              
|                                                              
|                                                              
|Cash dividends declared,
$.48 per share                        |                                   |                            |                            |                            |  |        |           |         |  |               |          |          |         |             | (1,078,202 | )             |           |   |            |       |  |   | (1,078,202 | )        
|                                                              
|                                                              
|                                                              
|                                                              
|Shares issued under dividend
reinvestment plan (5,144 shares)  |                                   |                            |                            |                            |  |        |           |         |  |               |          |          |         |             | 19,610     |               |           |   | 135,054    |       |  |   | 154,664    |          
|                                                              
|                                                              
|                                                              
|                                                              
|Purchase of 47,296 treasury shares                             |                                   |                            |                            |                            |  |        |           |         |  |               |          |          |         |             |            |               |           |   | (1,379,788 | )     |  |   | (1,379,788 | )        
|                                                               |                                   |                            |                            |                            |  |        |           |         |  |               |          |          |         |             |            |               |           |   |            |       |  |   |            |          
|                                                              
|                                                              
|                                                              
|                                                              
|Balance, December 31, 1999                                     |                                   |                            | 11,447,640                 |                            |  |        | 4,689,800 |         |  |               | (724,861 | )        |         |             | 12,981,399 |               |           |   | (1,537,783 | )     |  |   | 26,856,195 |          
|Comprehensive income:                                          |                                   |                            |                            |                            |  |        |           |         |  |               |          |          |         |             |            |               |           |   |            |       |  |   |            |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Net income                        |                            |                            |                            |  |        |           |         |  |               |          |          |         |             |            | 2,555,271     |           |   |            |       |  |   |            | 2,555,271 |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Other comprehensive income        |                            |                            |                            |  |        |           |         |  |               |          | 597,722  |         |             |            |               |           |   |            |       |  |   |            | 597,722   |          
|                                                               |                                   |                            |                            |                            |  |        |           |         |  |               |          |          |         |             |            |               |           |   |            |       |  |   |            |          
|                                                               |                                   |                            | Total comprehensive income |                            |  |        |           |         |  |               |          |          |         |             |            |               |           |   |            |       |  |   |            |           |           | 3,152,993 |          
|                                                              
|                                                              
|                                                              
|                                                              
|Cash dividends declared,
$.50 per share                        |                                   |                            |                            |                            |  |        |           |         |  |               |          |          |         |             | (1,119,697 | )             |           |   |            |       |  |   | (1,119,697 | )        
|                                                              
|                                                              
|                                                              
|                                                              
|Shares issued under dividend
reinvestment plan (11,694 shares) |                                   |                            |                            |                            |  |        |           |         |  |               |          |          |         |             | (124,168   | )             |           |   | 348,620    |       |  |   | 224,452    |          
|                                                              
|                                                              
|                                                              
|                                                              
|Purchase of 10,338 treasury shares                             |                                   |                            |                            |                            |  |        |           |         |  |               |          |          |         |             |            |               |           |   | (174,614   | )     |  |   | (174,614   | )        
|                                                               |                                   |                            |                            |                            |  |        |           |         |  |               |          |          |         |             |            |               |           |   |            |       |  |   |            |          
|Balance, December 31, 2000                                     |                                   |                            | 11,447,640                 |                            |  |        | 4,689,800 |         |  |               | (127,139 | )        |         |             | 14,292,805 |               |           |   | (1,363,777 | )     |  |   | 28,939,329 |          
|                                                              
|                                                              
|                                                              
|                                                              
|Comprehensive income:                                          |                                   |                            |                            |                            |  |        |           |         |  |               |          |          |         |             |            |               |           |   |            |       |  |   |            |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                   | Net income                 |                            |                            |  |        |           |         |  |               |          |          |         |             |            |               | 2,527,203 |   |            |       |  |   |            |           | 2,527,203 |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                   | Other comprehensive income |                            |                            |  |        |           |         |  |               |          |          | 911,436 |             |            |               |           |   |            |       |  |   |            |           | 911,436   |          
|                                                               |                                   |                            |                            |                            |  |        |           |         |  |               |          |          |         |             |            |               |           |   |            |       |  |   |            |          
|                                                               |                                   |                            |                            | Total comprehensive income |  |        |           |         |  |               |          |          |         |             |            |               |           |   |            |       |  |   |            |           |           |           | 3,438,639 | 
|                                                              
|                                                              
|                                                              
|                                                              
|Cash dividends declared,
$.52 per share                        |                                   |                            |                            |                            |  |        |           |         |  |               |          |          |         |             | (1,158,687 | )             |           |   |            |       |  |   | (1,158,687 | )        
|                                                              
|                                                              
|                                                              
|                                                              
|Shares issued under dividend
reinvestment plan (2,905 shares)  |                                   |                            |                            |                            |  |        |           |         |  |               |          |          |         |             | (40,386    | )             |           |   | 87,738     |       |  |   | 47,352     |          
|                                                              
|                                                              
|                                                              
|                                                              
|Purchase of 20,856 treasury shares                             |                                   |                            |                            |                            |  |        |           |         |  |               |          |          |         |             |            |               |           |   | (344,445   | )     |  |   | (344,445   | )        
|                                                               |                                   |                            |                            |                            |  |        |           |         |  |               |          |          |         |             |            |               |           |   |            |       |  |   |            |          
|Balance, December 31, 2001                                     |                                   | $                          | 11,447,640                 |                            |  | $      | 4,689,800 |         |  | $             | 784,297  |          |         | $           | 15,620,935 |               |           | $ | (1,620,484 | )     |  | $ | 30,922,188 |          
|                                                               |                                   |                            |                            |                            |  |        |           |         |  |               |          |          |         |             |            |               |           |   |            |       |  |   |            |          

See accompanying notes to consolidated financial statements.

12



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##### 



Consolidated

Statements of Cash Flows


Years Ended December 31, 2001, 2000 and 1999


|                                        |  |                                    |                                                                           |                                          |            |             |             |      |            |            |            |   |             |            |            |  
|--------------------------------------- |  | ---------------------------------- | ------------------------------------------------------------------------- | ---------------------------------------- | ---------- | ----------- | ----------- | ---- | ---------- | ---------- | ---------- | - | ----------- | ---------- | ---------- | -
|                                        |  |                                    |                                                                           |                                          |            | 2001        |             | 2000 |            | 1999      
|CASH FLOWS FROM OPERATING ACTIVITIES    |  |                                    |                                                                           |                                          |            |             |             |      |            |            |            |  
|                                       
|                                       
|                                       
|                                       
|                                        |  |                                    | Net income                                                                |                                          | $          | 2,527,203   |             |      | $          | 2,555,271  |            |   | $           | 2,516,986  |           
|                                       
|                                       
|                                       
|                                       
|                                        |  |                                    | Adjustments to reconcile net income
to net cash from operating activities |                                          |            |             |             |      |            |            |            |   |             |            |           
|                                       
|                                       
|                                       
|                                       
|                                        |  |                                    |                                                                           | Provision for loan losses                |            |             | 40,000      |      |            |            | 62,500     |   |             |            | 120,000    |  
|                                       
|                                       
|                                       
|                                       
|                                        |  |                                    |                                                                           | Depreciation, amortization and accretion |            |             | 160,688     |      |            |            | 352,948    |   |             |            | 492,404    |  
|                                       
|                                       
|                                       
|                                       
|                                        |  |                                    |                                                                           | Federal Home Loan Bank stock dividend    |            |             | (51,500     | )    |            |            | (47,800    | ) |             |            | (43,500    | )
|                                       
|                                       
|                                       
|                                       
|                                        |  |                                    |                                                                           | Gain on sale of loans                    |            |             | (43,750     | )    |            |            |           |   |             |            |           |  
|                                       
|                                       
|                                       
|                                       
|                                        |  |                                    |                                                                           | Change in deferred taxes                 |            |             | 16,570      |      |            |            | (12,888    | ) |             |            | 16,089     |  
|                                       
|                                       
|                                       
|                                       
|                                        |  |                                    |                                                                           | Net security gains                       |            |             | (97,003     | )    |            |            |           |   |             |            |           |  
|                                       
|                                       
|                                       
|                                       
|                                        |  |                                    |                                                                           | Change in other assets and liabilities   |            |             | (124,980    | )    |            |            | 215,686    |   |             |            | (207,856   | )
|                                        |  |                                   
|                                        |  | Net cash from operating activities |                                                                           |                                          | 2,427,228  |             |             |      | 3,125,717  |            |            |   | 2,894,123   |           
|                                       
|                                       
|                                       
|                                       
|CASH FLOWS FROM INVESTING ACTIVITIES    |  |                                    |                                                                           |                                          |            |             |             |      |            |            |            |  
|                                       
|                                       
|                                       
|                                       
|                                        |  |                                    | Net change in interest-bearing deposits with banks                        |                                          |            | (4,571      | )           |      |            | (4,318     | )          |   |             | (1,985,122 | )         
|                                       
|                                       
|                                       
|                                       
|                                        |  |                                    | Securities
held to maturity                                              
|                                        |  |                                    |                                                                           | Proceeds from maturities and repayments  |            |             | 4,581,349   |      |            |            | 6,321,926  |   |             |            | 13,128,950 |  
|                                       
|                                       
|                                       
|                                       
|                                        |  |                                    |                                                                           | Purchases                                |            |             | (504,500    | )    |            |            | (3,410,530 | ) |             |            | (7,019,241 | )
|                                       
|                                       
|                                       
|                                       
|                                        |  |                                    | Securities available for sale                                            
|                                       
|                                       
|                                       
|                                       
|                                        |  |                                    |                                                                           | Proceeds from maturities and repayments  |            |             | 17,576,405  |      |            |            | 3,310,000  |   |             |            | 2,090,000  |  
|                                       
|                                       
|                                       
|                                       
|                                        |  |                                    |                                                                           | Proceeds from sales                      |            |             | 134,171     |      |            |            |           |   |             |            |           |  
|                                       
|                                       
|                                       
|                                       
|                                        |  |                                    |                                                                           | Purchases                                |            |             | (12,902,383 | )    |            |            | (3,010,892 | ) |             |            | (9,447,626 | )
|                                       
|                                       
|                                       
|                                       
|                                        |  |                                    | Capital expenditures                                                      |                                          |            | (691,077    | )           |      |            | (110,789   | )          |   |             | (681,203   | )         
|                                       
|                                       
|                                       
|                                       
|                                        |  |                                    | Proceeds from sale of loans                                               |                                          |            | 1,598,277   |             |      |            |           |            |   |             |           |           
|                                       
|                                       
|                                       
|                                       
|                                        |  |                                    | Net increase in loans to customers                                        |                                          |            | (10,923,657 | )           |      |            | (8,082,951 | )          |   |             | (7,614,148 | )         
|                                        |  |                                   
|                                        |  | Net cash from investing activities |                                                                           |                                          | (1,135,986 | )           |             |      | (4,987,554 | )          |            |   | (11,528,390 | )         
|                                       
|                                       
|                                       
|                                       
|CASH FLOWS FROM FINANCING ACTIVITIES    |  |                                    |                                                                           |                                          |            |             |             |      |            |            |            |  
|                                       
|                                       
|                                       
|                                       
|                                        |  |                                    | Net change in deposits                                                    |                                          |            | (2,494,290  | )           |      |            | 1,578,237  |            |   |             | 2,720,797  |           
|                                       
|                                       
|                                       
|                                       
|                                        |  |                                    | Net change in short-term borrowings                                       |                                          |            | (1,030,893  | )           |      |            | 1,507,742  |            |   |             | (986,818   | )         
|                                       
|                                       
|                                       
|                                       
|                                        |  |                                    | Federal Home Loan Bank advances:                                          |                                          |            |             |             |      |            |            |            |   |             |            |           
|                                       
|                                       
|                                       
|                                       
|                                        |  |                                    |                                                                           | Proceeds from borrowings                 |            |             |            |      |            |            | 1,000,000  |   |             |            | 6,700,000  |  
|                                       
|                                       
|                                       
|                                       
|                                        |  |                                    |                                                                           | Repayments                               |            |             | (1,238,279  | )    |            |            | (3,160,555 | ) |             |            | (1,093,359 | )
|                                       
|                                       
|                                       
|                                       
|                                        |  |                                    | Dividends paid                                                            |                                          |            | (1,183,402  | )           |      |            | (1,208,979 | )          |   |             | (1,063,000 | )         
|                                       
|                                       
|                                       
|                                       
|                                        |  |                                    | Dividends reinvested                                                      |                                          |            | 47,352      |             |      |            | 224,452    |            |   |             | 154,664    |           
|                                       
|                                       
|                                       
|                                       
|                                        |  |                                    | Purchase of treasury shares                                               |                                          |            | (344,445    | )           |      |            | (174,614   | )          |   |             | (1,379,788 | )         
|                                        |  |                                   
|                                        |  | Net cash from financing activities |                                                                           |                                          | (6,243,957 | )           |             |      | (233,717   | )          |            |   | 5,052,496   |           
|                                        |  |                                   
|NET CHANGE IN CASH
AND CASH EQUIVALENTS |  |                                    | (4,952,715                                                                | )                                        |            |             | (2,095,554  | )    |            |            | (3,581,771 | )
|                                       
|                                       
|                                       
|                                       
|BEGINNING CASH AND CASH EQUIVALENTS     |  |                                    | 15,212,797                                                                |                                          |            |             | 17,308,351  |      |            |            | 20,890,122 |  
|                                        |  |                                   
|ENDING CASH AND CASH EQUIVALENTS        |  | $                                  | 10,260,082                                                                |                                          |            | $           | 15,212,797  |      |            | $          | 17,308,351 |  
|                                        |  |                                   
|SUPPLEMENTAL DISCLOSURES                |  |                                    |                                                                           |                                          |            |             |             |      |            |            |            |  
|                                       
|                                       
|                                       
|                                       
|                                        |  | Cash paid for interest             |                                                                           | $                                        | 5,329,612  |             |             | $    | 5,105,860  |            |            | $ | 4,758,088   |           
|                                       
|                                       
|                                       
|                                       
|                                        |  | Cash paid for income taxes         |                                                                           |                                          | 770,000    |             |             |      | 625,000    |            |            |   | 690,000     |           
|                                       
|                                       
|                                       
|                                       
|                                        |  | Non-cash items:                    |                                                                           |                                          |            |             |             |      |            |            |            |   |             |           
|                                       
|                                       
|                                       
|                                       
|                                        |  |                                    | Securities transferred from held to
maturity to available for sale        |                                          | $          | 30,661,985  |             |      |            |           |            |   |             |           |           

See accompanying notes to consolidated financial statements.

13



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##### 



Notes to Consolidated Financial Statements

December 31, 2001, 2000 and 1999


1. Summary of Significant Accounting Policies

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

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

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

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

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

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

Federal bank stock in the consolidated financial statements consists of
Federal Reserve Bank and Federal Home Loan Bank stock. These securities are
carried at cost.

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

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

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

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

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

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

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

Intangibles:Purchased intangibles arising from prior branch
acquisitions, including unidentified

14



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##### 



intangibles of $232,000 and core deposit
value of $51,000 at year-end 2001, are recorded at cost and amortized over the
estimated life. Unidentified intangibles amortization is straight-line and core
deposit amortization is accelerated.

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

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

Benefit Plans:Retirement plan expense is the amount of required
matching contributions plus any discretionary contributions to the Corporations
401(k) plan as determined by Board decision. Deferred compensation plan expense
allocates the benefits over the estimated years of service.

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

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

Earnings Per Common Share:Earnings per common share are calculated
based on the weighted average number of shares outstanding during the period.
There are no potentially dilutive instruments.

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

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

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

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

Derivative Instruments and Hedging Activities:On January 1, 2001, the
Corporation adopted a new accounting standard for derivative instruments and
hedging activities. The standard requires companies to record derivative
instruments on the balance sheet as assets or liabilities, measured at fair
value. Unless designated as hedges, gains or losses resulting from changes in
the values of derivative instruments are reflected in the income statement. If
derivative instruments are designated as hedges of fair values, both the change
in the fair value of the hedge and the hedged item are included in current
earnings. Fair value adjustments related to cash flow hedges are recorded in
other comprehensive income and reclassified to earnings when the hedged
transaction is reflected in earnings.

The standard does not allow hedging of a security that is classified as
held to maturity. Accordingly, companies may reclassify any security from held
to maturity to available for sale upon adoption of the standard if they wish to
be able to hedge the security in the future. Upon adoption of the new standard,
the Corporation transferred $30,458,397 of securities from held to maturity to
available for sale. The $203,588 unrealized gain on the securities transferred
($134,368 after tax) is reflected as an increase in other comprehensive income.
The adoption of the new standard did not have any other impact on the Companys
financial statements, as it holds no derivative financial instruments.

New Accounting Pronouncements:A new accounting standard requires all
business combinations to be recorded using the purchase method of accounting for
any transaction initiated after June 30, 2001. Under the purchase method, all
identifiable tangible and intangible assets and liabilities of the acquired
company are recorded at fair value at the date of acquisition, and the excess of
the purchase price over the fair value of net assets is recorded as goodwill.
Under the new standard, identifiable intangible assets with finite useful lives
will continue to be amortized, whereas unidentifiable intangible assets arising
from a business combination, both amounts previously recorded and future amounts
acquired, will cease being amortized starting in 2002. Annual impairment testing
will be required for goodwill, with impairment being recorded if the carrying
amount of goodwill exceeds its implied fair value. Adoption of this standard on
January 1, 2002 will not have a material effect on the Corporations financial
statements.

Reclassifications:Certain items in the prior year financial statements were
reclassified to conform to the current presentation.

15



---



##### 



2. Securities

Year-end securities are as follows:



|                                   |                       |       |            |                   |            |            |         |            |           |            |          |          |          |   |            |            |            | 
|---------------------------------- | --------------------- | ----- | ---------- | ----------------- | ---------- | ---------- | ------- | ---------- | --------- | ---------- | -------- | -------- | -------- | - | ---------- | ---------- | ---------- | 
|                                   |                       |       |            | December 31, 2001
|                                   |                       |       |            |                  
|                                   |                       |       |            |                   |            |            |         | Gross      |           | Gross      |          |          |          |  
|                                   |                       |       |            | Amortized         |            | Unrealized |         | Unrealized |           |            |          |         
|                                   |                       |       |            | Cost              |            | Gains      |         | Losses     |           | Fair Value
|                                   |                       |       |            |                   |            |            |         |            |           |           
|Available for Sale:                |                       |       |            |                   |            |            |         |            |           |            |          |          |          |   |            |           
|                                  
|                                  
|                                  
|                                  
|U.S. Government and
federal agency |                       |       |            |                   |            | $          | 540,133 |            |           | $          | (2,616   | )        |          | $ | 16,567,812 |           
|                                  
|                                  
|                                  
|                                  
|State and Municipal                |                       |       |            |                   |            |            | 55,614  |            |           |            |         |          |          |   | 2,341,209  |           
|                                  
|                                  
|                                  
|                                  
|Corporate bonds and notes          |                       |       |            |                   |            |            | 864,259 |            |           |            | (186,053 | )        |          |   | 26,326,912 |           
|                                   |                       |       |            |                   |            |            |         |            |           |            |          |          |          |   |            |           
|                                   | Total debt securities |       |            |                   |            |            |         | 1,460,006  |           |            |          | (188,669 | )        |   |            | 45,235,933 |           
|                                  
|                                  
|                                  
|                                  
|Equity securities                  |                       |       |            |                   |            |            | 144,125 |            |           |            | (227,133 | )        |          |   | 2,273,371  |           
|                                   |                       |       |            |                   |            |            |         |            |           |            |          |          |          |   |            |           
|                                   |                       | Total |            |                   |            |            |         | $          | 1,604,131 |            |          | $        | (415,802 | ) |            | $          | 47,509,304 | 
|                                   |                       |       |            |                   |            |            |         |            |           |            |          |          |          |   |            |           
|Held to Maturity:                  |                       |       |            |                   |            |            |         |            |           |            |          |          |          |   |            |           
|                                  
|                                  
|                                  
|                                  
|U.S. Government and
federal agency |                       | $     |           |                   |            | $          |        |            |           | $          |         |          |          | $ |           |           
|                                  
|                                  
|                                  
|                                  
|State and Municipal                |                       |       | 13,334,351 |                   |            |            | 479,921 |            |           |            | (7,694   | )        |          |   | 13,806,578 |           
|                                  
|                                  
|                                  
|                                  
|Mortgage-backed                    |                       |       |           |                   |            |            |        |            |           |            |         |          |          |   |           |           
|                                  
|                                  
|                                  
|                                  
|Corporate bonds and notes          |                       |       |           |                   |            |            |        |            |           |            |         |          |          |   |           |           
|                                   |                       |       |            |                   |            |            |         |            |           |            |          |          |          |   |            |           
|                                   |                       | Total |            | $                 | 13,334,351 |            |         | $          | 479,921   |            |          | $        | (7,694   | ) |            | $          | 13,806,578 | 
|                                   |                       |       |            |                   |            |            |         |            |           |            |          |          |          |   |            |           

[Additional columns below]

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

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

Proceeds from sales of securities classified as available for sale was
$134,171 for the year ended December 31, 2001. There were no sales of
securities in 2000 or 1999. There were no losses on securities sales in 2001.



---

Contractual maturities of debt securities at year-end 2001 were as follows:

|                           |       |   |                    |            |                  |   |           |            |  |   |           |            | 
|-------------------------- | ----- | - | ------------------ | ---------- | ---------------- | - | --------- | ---------- |  | - | --------- | ---------- | 
|                           |       |   | Available for Sale |            | Held to Maturity
|                           |       |   | Fair               |            | Carrying         |   | Fair     
|                           |       |   | Value              |            | Value            |   | Value    
|Due in one year or less    |       | $ | 4,655,269          |            |                  | $ | 1,628,937 |            |  | $ | 1,665,573 |           
|                          
|                          
|                          
|                          
|Due from one
to five years |       |   | 17,743,507         |            |                  |   | 3,971,570 |            |  |   | 4,193,186 |           
|                          
|                          
|                          
|                          
|Due from five
to ten years |       |   | 18,464,748         |            |                  |   | 2,792,610 |            |  |   | 2,873,696 |           
|                          
|                          
|                          
|                          
|Due after ten years        |       |   | 4,372,409          |            |                  |   | 4,941,234 |            |  |   | 5,074,123 |           
|                           |       |  
|                           | Total |   | $                  | 45,235,933 |                  |   | $         | 13,334,351 |  |   | $         | 13,806,578 | 
|                           |       |  

Securities pledged at year-end 2001 and 2000 had carrying values of
$28,832,000 and $33,104,000, and were pledged to secure public deposits and
repurchase agreements.

3. Loans

Loans at year-end were as follows:

|                               |                                         |       |             |            |             |      |             |            |             | 
|------------------------------ | --------------------------------------- | ----- | ----------- | ---------- | ----------- | ---- | ----------- | ---------- | ----------- | 
|                               |                                         |       |             | 2001       |             | 2000
|Collateralized by real estate: |                                         |       |             |            |             |      |             |           
|                              
|                              
|                              
|                              
|                               | Commercial                              |       | $           | 23,933,475 |             |      | $           | 27,005,236 |            
|                              
|                              
|                              
|                              
|                               | Residential                             |       |             | 53,522,228 |             |      |             | 42,063,386 |            
|                              
|                              
|                              
|                              
|                               | Home equity                             |       |             | 9,426,924  |             |      |             | 8,612,004  |            
|                              
|                              
|                              
|                              
|                               | Construction                            |       |             | 4,769,337  |             |      |             | 1,011,188  |            
|                               |                                         |      
|                               |                                         |       | 91,651,964  |            |             |      | 78,691,814  |           
|                              
|                              
|                              
|                              
|Other:                         |                                         |       |             |            |             |      |             |           
|                              
|                              
|                              
|                              
|                               | Consumer                                |       |             | 5,224,468  |             |      |             | 7,151,394  |            
|                              
|                              
|                              
|                              
|                               | Commercial                              |       |             | 18,050,801 |             |      |             | 19,850,559 |            
|                              
|                              
|                              
|                              
|                               | Credit cards  unsecured                |       |             | 1,227,172  |             |      |             | 1,188,297  |            
|                              
|                              
|                              
|                              
|                               | Other                                   |       |             | 2,249,271  |             |      |             | 2,273,180  |            
|                               |                                         |      
|                               |                                         |       | 118,403,676 |            |             |      | 109,155,244 |           
|                              
|                              
|                              
|                              
|                               | Unearned and
deferred income            |       |             | (197,046   | )           |      |             | (153,114   | )          
|                              
|                              
|                              
|                              
|                               | Unamortized discount
on purchased loans |       |             | (4,674     | )           |      |             | (107,332   | )          
|                              
|                              
|                              
|                              
|                               | Allowance for loan losses               |       |             | (1,321,152 | )           |      |             | (1,343,124 | )          
|                               |                                         |      
|                               |                                         | Total |             | $          | 116,880,804 |      |             | $          | 107,551,674 | 
|                               |                                         |      

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

|                          |  |      |           |      |  |      |           |   |  |   |           |  
|------------------------- |  | ---- | --------- | ---- |  | ---- | --------- | - |  | - | --------- | -
|                          |  | 2001 |           | 2000 |  | 1999
|Beginning balance         |  | $    | 1,343,124 |      |  | $    | 1,308,630 |   |  | $ | 1,296,513 |  
|                         
|                         
|                         
|                         
|Provision for
loan losses |  |      | 40,000    |      |  |      | 62,500    |   |  |   | 120,000   |  
|                         
|                         
|                         
|                         
|Loans charged-off         |  |      | (86,182   | )    |  |      | (56,737   | ) |  |   | (145,959  | )
|                         
|                         
|                         
|                         
|Recoveries                |  |      | 24,210    |      |  |      | 28,731    |   |  |   | 38,076    |  
|                          |  |     
|Ending balance            |  | $    | 1,321,152 |      |  | $    | 1,343,124 |   |  | $ | 1,308,630 |  
|                          |  |     

Impaired loans were as follows:

|                                                           |  |      |        |      |  |   |        | 
|---------------------------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | 
|                                                           |  | 2001 |        | 2000
|Year-end loans with no allocated
allowance for loan losses |  | $    | 58,749 |      |  | $ |       | 
|                                                          
|                                                          
|                                                          
|                                                          
|Year-end loans with allocated
allowance for loan losses    |  |      | 5,000  |      |  |   | 14,863 | 
|                                                          
|                                                          
|                                                          
|                                                          
|Amount of the allowance
for loan losses allocated          |  |      | 5,000  |      |  |   | 14,863 | 
|                                                          
|                                                          
|                                                          
|                                                          
|Average of impaired loans
during the year                  |  | $    | 33,132 |      |  | $ | 21,178 | 
|                                                          
|                                                          
|                                                          
|                                                          
|Interest income recognized
during impairment               |  |      | 1,283  |      |  |   | 4,315  | 
|                                                          
|                                                          
|                                                          
|                                                          
|Cash-basis interest
income recognized                      |  |      | 1,283  |      |  |   | 4,315  | 

Loans past due over 90 days and still accruing interest at year-end 2001
and 2000 were $147,935 and $112,094. Nonaccrual loans for the same periods were
$258,778 and $144,130. Non-performing loans consist primarily of residential
real-estate and consumer loans. They do not include impaired loan balances.

4. Premises and Equipment

Year-end premises and equipment were as follows:

|                                  |  |      |           |      |  |   |           | 
|--------------------------------- |  | ---- | --------- | ---- |  | - | --------- | 
|                                  |  | 2001 |           | 2000
|Land                              |  | $    | 781,156   |      |  | $ | 446,070   | 
|                                 
|                                 
|                                 
|                                 
|Buildings                         |  |      | 3,733,650 |      |  |   | 3,558,760 | 
|                                 
|                                 
|                                 
|                                 
|Furniture, fixtures and equipment |  |      | 3,485,231 |      |  |   | 3,311,697 | 
|                                  |  |     
|                                  |  |      | 8,000,037 |      |  |   | 7,316,527 | 
|                                 
|                                 
|                                 
|                                 
|Less: Accumulated depreciation    |  |      | 5,025,513 |      |  |   | 4,695,044 | 
|                                  |  |     
|                                  |  | $    | 2,974,524 |      |  | $ | 2,621,483 | 
|                                  |  |     

16



---



##### 



Depreciation included in noninterest expense was $338,036, $409,174, and
$411,440 in 2001, 2000 and 1999.

5. Deposits

Year-end deposits were as follows:

|                            |  |      |             |      |  |   |             | 
|--------------------------- |  | ---- | ----------- | ---- |  | - | ----------- | 
|                            |  | 2001 |             | 2000
|Demand, noninterest-bearing |  | $    | 27,024,824  |      |  | $ | 28,236,689  | 
|                           
|                           
|                           
|                           
|Demand, interest-bearing    |  |      | 30,978,492  |      |  |   | 30,414,962  | 
|                           
|                           
|                           
|                           
|Savings                     |  |      | 49,899,072  |      |  |   | 39,985,914  | 
|                           
|                           
|                           
|                           
|Time, $100,000 and over     |  |      | 9,451,079   |      |  |   | 14,058,111  | 
|                           
|                           
|                           
|                           
|Time, other                 |  |      | 42,165,828  |      |  |   | 49,317,909  | 
|                            |  |     
|                            |  | $    | 159,519,295 |      |  | $ | 162,013,585 | 
|                            |  |     

A summary of time deposits at year-end 2001 by maturity follows:

|     |  |   |            | 
|---- |  | - | ---------- | 
|2002 |  | $ | 37,847,767 | 
|    
|    
|    
|    
|2003 |  |   | 9,296,930  | 
|    
|    
|    
|    
|2004 |  |   | 3,375,682  | 
|    
|    
|    
|    
|2005 |  |   | 1,076,960  | 
|    
|    
|    
|    
|2006 |  |   | 19,568     | 
|     |  |   |            | 
|     |  | $ | 51,616,907 | 
|     |  |   |            | 

6. Federal Home Loan Bank Advances

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

|                                                                                                                           |  |      |           |      |  |   |           | 
|-------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ---- |  | - | --------- | 
|                                                                                                                           |  | 2001 |           | 2000
|Maturities through 2002,
fixed rate at 6.5%                                                                                |  | $    | 1,207,807 |      |  | $ | 2,446,086 | 
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Maturity in 2010 fixed rate
at 6.26% convertible
to variable rate if
3-month LIBOR is at or above
predetermined conversion |  |      | 1,000,000 |      |  |   | 1,000,000 | 
|                                                                                                                           |  |     
|Total                                                                                                                      |  | $    | 2,207,807 |      |  | $ | 3,446,086 | 
|                                                                                                                           |  |     

Each advance is payable at its maturity date; advances may be paid prior
to maturity with a prepayment penalty. The Bank has $41,157,000 of first
mortgage loans available under a blanket lien arrangement at year-end 2001.

Minimum required principal payments are:

|     |  |      |      |   |  |   |           | 
|---- |  | ---- | ---- | - |  | - | --------- | 
|     |  | Rate |      |   |  |  
|2002 |  |      | 6.50 | % |  | $ | 1,207,807 | 
|    
|    
|    
|    
|2010 |  |      | 6.26 | % |  |   | 1,000,000 | 
|     |  |      |      |   |  |   |           | 
|     |  |      |      |   |  | $ | 2,207,807 | 
|     |  |      |      |   |  |   |           | 

7. Repurchase Agreements

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

|                                          |  |      |            |      |  |  |            |  
|----------------------------------------- |  | ---- | ---------- | ---- |  |  | ---------- | -
|                                          |  | 2001 |            | 2000
|Average balance during the year           |  |      | $3,649,427 |      |  |  | $3,090,913 |  
|                                         
|                                         
|                                         
|                                         
|Average interest rate
during the year     |  |      | 2.22       | %    |  |  | 4.87       | %
|                                         
|                                         
|                                         
|                                         
|Maximum month-end
balance during the year |  |      | 4,700,114  |      |  |  | 4,558,650  |  

8. Benefit Plans

The Corporation has a 401(k) retirement plan that covers substantially
all employees. The plan allows employees to contribute up to 15% of their pay
with the Corporation matching 50% of contributions up to 6% of an employees
pay. Discretionary contributions may also be made to the plan. Total matching
and discretionary contributions made by the Corporation during 2001, 2000 and
1999 amounted to $111,636, $112,011 and $106,711.

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

The Corporation has a director retirement and death benefit plan for
the benefit of all members of the Board of Directors. The plan is designed to
provide an annual retirement benefit to be paid to each director upon retirement
from the Board and attaining age 70. The retirement benefit provided to each
director is an annual benefit equal to $1,000 for each year of service on the
Board from and after August 24, 1994. In addition, each director has the option
of deferring any portion of directors fees to a maximum of $1,000 per month
until retirement. Expense recognized in 2001, 2000 and 1999 for the director
retirement and death benefit plan was $36,804, $48,232 and $32,127.

9. Income Taxes

The components of deferred taxes were as follows:

|                                     |                                        |   |         |         |      |   |         |         | 
|------------------------------------ | -------------------------------------- | - | ------- | ------- | ---- | - | ------- | ------- | 
|                                     |                                        |   | 2001    |         | 2000
|Deferred tax assets:                 |                                        |   |         |         |      |   |         |        
|                                    
|                                    
|                                    
|                                    
|                                     | Bad debts                              |   | $       | 289,062 |      |   | $       | 296,532 | 
|                                    
|                                    
|                                    
|                                    
|                                     | Deferred loan fees                     |   |         | 64,695  |      |   |         | 49,552  | 
|                                    
|                                    
|                                    
|                                    
|                                     | Core deposit intangibles               |   |         | 39,839  |      |   |         | 39,258  | 
|                                    
|                                    
|                                    
|                                    
|                                     | Deferred compensation                  |   |         | 150,602 |      |   |         | 126,892 | 
|                                    
|                                    
|                                    
|                                    
|                                     | Capital loss carryforward              |   |         | 9,204   |      |   |         | 67,694  | 
|                                    
|                                    
|                                    
|                                    
|                                     | Unrealized securities losses           |   |         |        |      |   |         | 65,496  | 
|                                     |                                        |  
|                                     | Total                                  |   |         | 553,402 |      |   |         | 645,424 | 
|                                     |                                        |  
|Deferred tax liabilities:            |                                        |   |         |         |      |   |         |        
|                                    
|                                    
|                                    
|                                    
|                                     | Securities accretion                   |   |         | 54,696  |      |   |         | 33,800  | 
|                                    
|                                    
|                                    
|                                    
|                                     | Depreciation                           |   |         | 65,316  |      |   |         | 70,448  | 
|                                    
|                                    
|                                    
|                                    
|                                     | Federal Home Loan Bank
stock dividends |   |         | 67,575  |      |   |         | 43,724  | 
|                                    
|                                    
|                                    
|                                    
|                                     | Investment in financial stock fund     |   |         | 54,622  |      |   |         | 104,193 | 
|                                    
|                                    
|                                    
|                                    
|                                     | Unrealized securities gains            |   |         | 404,032 |      |   |         |        | 
|                                     |                                        |  
|                                     | Total                                  |   |         | 646,241 |      |   |         | 252,165 | 
|                                     |                                        |  
|Net deferred tax asset (liabilities) |                                        | $ | (92,839 | )       |      | $ | 393,259 |        
|                                     |                                        |  

The capital loss carryforward expires in 2003.

The components of income tax expense are as follows:

|                  |  |      |         |      |  |      |         |   |  |   |         | 
|----------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | 
|                  |  | 2001 |         | 2000 |  | 1999
|Currently payable |  | $    | 760,750 |      |  | $    | 730,138 |   |  | $ | 618,094 | 
|                 
|                 
|                 
|                 
|Deferred          |  |      | 16,570  |      |  |      | (12,888 | ) |  |   | 16,089  | 
|                  |  |     
|Total             |  | $    | 777,320 |      |  | $    | 717,250 |   |  | $ | 634,183 | 
|                  |  |     

17



---



##### 



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

|                              |  |                          |     |        |  |      |           |        |  |      |     |        |  |   |           |   |  |  |     |   |  |   |           |  
|----------------------------- |  | ------------------------ | --- | ------ |  | ---- | --------- | ------ |  | ---- | --- | ------ |  | - | --------- | - |  |  | --- | - |  | - | --------- | -
|                              |  | Years Ended December 31,
|                              |  |                         
|                              |  | 2001                     |     | 2000   |  | 1999
|                              |  |                          |     |        |  |     
|                              |  | Rate                     |     | Amount |  | Rate |           | Amount |  | Rate |     | Amount
|                              |  |                         
|Tax at federal
statutory rate |  |                          | 34  | %      |  | $    | 1,123,538 |        |  |      | 34  | %      |  | $ | 1,112,657 |   |  |  | 34  | % |  | $ | 1,071,397 |  
|                             
|                             
|                             
|                             
|Tax-exempt
income             |  |                          | (10 | )      |  |      | (339,366  | )      |  |      | (12 | )      |  |   | (384,858  | ) |  |  | (13 | ) |  |   | (406,658  | )
|                             
|                             
|                             
|                             
|Other                         |  |                          |    |        |  |      | (6,852    | )      |  |      |    |        |  |   | (10,549   | ) |  |  | (1  | ) |  |   | (30,556   | )
|                              |  |                         
|Income tax
expense            |  |                          | 24  | %      |  | $    | 777,320   |        |  |      | 22  | %      |  | $ | 717,250   |   |  |  | 20  | % |  | $ | 634,183   |  
|                              |  |                         

10. Related Party Transactions

Loans to principal officers, directors, and their affiliates in 2001 were
as follows:

|                  |  |   |            |  
|----------------- |  | - | ---------- | -
|Beginning balance |  | $ | 4,381,311  |  
|                 
|                 
|                 
|                 
|New loans         |  |   | 2,561,590  |  
|                 
|                 
|                 
|                 
|Repayments        |  |   | (2,616,478 | )
|                  |  |   |            |  
|Ending balance    |  | $ | 4,326,423  |  
|                  |  |   |            |  

Unused commitments to these related parties totaled $1,614,427 at year-end
2001. Related party deposits totaled $5,212,000 at year-end 2001.

11. Regulatory Matters

The Bank is restricted by regulation in the amount of dividends it may
pay to the holding company. Under the most restrictive dividend limitations,
approximately $63,000 is available for the Bank to pay dividends to the holding
company at year-end 2001.

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

Prompt corrective action regulations provide five classifications: well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized, although these terms are not
used to represent overall financial condition. If adequately capitalized,
regulatory approval is required to accept brokered deposits. If
undercapitalized, capital distributions, asset growth and expansion are limited
and capital restoration plans are required. The Corporation and the Bank are
considered well capitalized for regulatory purposes. Management is not aware of
any matters after December 31, 2001 that would cause its capital category to
change.



---

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

|                                       |              |        |        |        |                   |        |                   |       |   |        |             |        |                         |  |  |      |   |  |                        |        |  |  |  |       |  
|-------------------------------------- | ------------ | ------ | ------ | ------ | ----------------- | ------ | ----------------- | ----- | - | ------ | ----------- | ------ | ----------------------- |  |  | ---- | - |  | ---------------------- | ------ |  |  |  | ----- | -
|                                       |              |        |        |        |                   |        |                   |       |   |        |             |        |                         |  |  |      |   |  | To Be Well Capitalized
|                                       |              |        |        |        |                   |        |                   |       |   |        | For Capital |        | Under Prompt Corrective
|                                       |              |        | Actual |        | Adequacy Purposes |        | Action Provisions
|                                       |              |        |        |        |                   |        |                  
|(Dollars in thousands)                 |              | Amount |        | Ratio  |                   | Amount |                   | Ratio |   | Amount |             | Ratio 
|                                       |              |       
|2001                                   |              |        |        |        |                   |        |                   |       |   |        |             |        |                         |  |  |      |   |  |                        |        |  |  |  |      
|                                      
|                                      
|                                      
|                                      
|Total capital to risk-weighted assets  |              |        |        |        |                   |        |                   |       |   |        |             |        |                         |  |  |      |   |  |                        |        |  |  |  |      
|                                      
|                                      
|                                      
|                                      
|                                       | Consolidated |        | $      | 31,120 |                   |        |                   | 22.71 | % |        | $           | 10,964 |                         |  |  | 8.00 | % |  | $                      | 13,705 |  |  |  | 10.00 | %
|                                      
|                                      
|                                      
|                                      
|                                       | Bank         |        |        | 25,258 |                   |        |                   | 18.77 |   |        |             | 10,765 |                         |  |  | 8.00 |   |  |                        | 13,456 |  |  |  | 10.00 |  
|                                      
|                                      
|                                      
|                                      
|Tier 1 capital to risk-weighted assets |              |        |        |        |                   |        |                   |       |   |        |             |        |                         |  |  |      |   |  |                        |        |  |  |  |      
|                                      
|                                      
|                                      
|                                      
|                                       | Consolidated |        |        | 29,799 |                   |        |                   | 21.74 |   |        |             | 5,482  |                         |  |  | 4.00 |   |  |                        | 8,223  |  |  |  | 6.00  |  
|                                      
|                                      
|                                      
|                                      
|                                       | Bank         |        |        | 23,937 |                   |        |                   | 17.79 |   |        |             | 5,382  |                         |  |  | 4.00 |   |  |                        | 8,073  |  |  |  | 6.00  |  
|                                      
|                                      
|                                      
|                                      
|Tier 1 capital to average assets       |              |        |        |        |                   |        |                   |       |   |        |             |        |                         |  |  |      |   |  |                        |        |  |  |  |      
|                                      
|                                      
|                                      
|                                      
|                                       | Consolidated |        |        | 29,799 |                   |        |                   | 14.98 |   |        |             | 7,956  |                         |  |  | 4.00 |   |  |                        | 9,945  |  |  |  | 5.00  |  
|                                      
|                                      
|                                      
|                                      
|                                       | Bank         |        |        | 23,937 |                   |        |                   | 12.17 |   |        |             | 7,867  |                         |  |  | 4.00 |   |  |                        | 9,834  |  |  |  | 5.00  |  
|                                      
|                                      
|                                      
|                                      
|2000                                   |              |        |        |        |                   |        |                   |       |   |        |             |        |                         |  |  |      |   |  |                        |        |  |  |  |      
|                                      
|                                      
|                                      
|                                      
|Total capital to risk-weighted assets  |              |        |        |        |                   |        |                   |       |   |        |             |        |                         |  |  |      |   |  |                        |        |  |  |  |      
|                                      
|                                      
|                                      
|                                      
|                                       | Consolidated |        | $      | 29,817 |                   |        |                   | 22.22 | % |        | $           | 10,735 |                         |  |  | 8.00 | % |  | $                      | 13,419 |  |  |  | 10.00 | %
|                                      
|                                      
|                                      
|                                      
|                                       | Bank         |        |        | 25,644 |                   |        |                   | 19.40 |   |        |             | 10,573 |                         |  |  | 8.00 |   |  |                        | 13,217 |  |  |  | 10.00 |  
|                                      
|                                      
|                                      
|                                      
|Tier 1 capital to risk-weighted assets |              |        |        |        |                   |        |                   |       |   |        |             |        |                         |  |  |      |   |  |                        |        |  |  |  |      
|                                      
|                                      
|                                      
|                                      
|                                       | Consolidated |        |        | 28,474 |                   |        |                   | 21.22 |   |        |             | 5,368  |                         |  |  | 4.00 |   |  |                        | 8,051  |  |  |  | 6.00  |  
|                                      
|                                      
|                                      
|                                      
|                                       | Bank         |        |        | 24,301 |                   |        |                   | 18.39 |   |        |             | 5,287  |                         |  |  | 4.00 |   |  |                        | 7,930  |  |  |  | 6.00  |  
|                                      
|                                      
|                                      
|                                      
|Tier 1 capital to average assets       |              |        |        |        |                   |        |                   |       |   |        |             |        |                         |  |  |      |   |  |                        |        |  |  |  |      
|                                      
|                                      
|                                      
|                                      
|                                       | Consolidated |        |        | 28,474 |                   |        |                   | 14.53 |   |        |             | 7,836  |                         |  |  | 4.00 |   |  |                        | 9,795  |  |  |  | 5.00  |  
|                                      
|                                      
|                                      
|                                      
|                                       | Bank         |        |        | 24,301 |                   |        |                   | 12.52 |   |        |             | 7,762  |                         |  |  | 4.00 |   |  |                        | 9,703  |  |  |  | 5.00  |  



---

18



---



##### 



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

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

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

|                       |  |      |            |      |  |   |            | 
|---------------------- |  | ---- | ---------- | ---- |  | - | ---------- | 
|                       |  | 2001 |            | 2000
|Unused lines of credit |  | $    | 25,871,000 |      |  | $ | 24,113,000 | 
|                      
|                      
|                      
|                      
|Letters of credit      |  |      | 980,000    |      |  |   | 1,012,000  | 

Of the above unused lines of credit, approximately $5,365,000 pertains to
fixed-rate commitments, and variable-rate commitments account for approximately
$20,506,000. In addition, rates on unused lines of credit range from 4.25% to
16.9%.

The Corporation was required to have approximately $2,257,000 and
$2,060,000 of cash on hand or on deposit with the Federal Reserve Bank at
year-end 2001 and 2000. These balances do not earn interest.

13. Fair Values of Financial Instruments

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

|                      |                                 |                       |   |             |              |       |   |             |              |       |   |             |              |   |   |             |              |  
|--------------------- | ------------------------------- | --------------------- | - | ----------- | ------------ | ----- | - | ----------- | ------------ | ----- | - | ----------- | ------------ | - | - | ----------- | ------------ | -
|                      |                                 |                       |   | 2001        |              | 2000 
|                      |                                 |                       |   |             |              |      
|                      |                                 |                       |   | Carrying    |              | Fair  |   | Carrying    |              | Fair 
|                      |                                 |                       |   | Amount      |              | Value |   | Amount      |              | Value
|                      |                                 |                      
|Financial assets      |                                 |                       |   |             |              |       |   |             |              |       |   |             |              |   |   |            
|                     
|                     
|                     
|                     
|                      | Cash and cash
equivalents       |                       | $ | 10,260,082  |              |       | $ | 10,260,000  |              |       | $ | 15,212,797  |              |   | $ | 15,213,000  |             
|                     
|                     
|                     
|                     
|                      | Interest-bearing
deposits       |                       |   | 1,994,011   |              |       |   | 2,000,000   |              |       |   | 1,989,440   |              |   |   | 1,992,000   |             
|                     
|                     
|                     
|                     
|                      | Securities
available
for sale   |                       |   | 47,509,304  |              |       |   | 47,509,000  |              |       |   | 20,168,513  |              |   |   | 20,169,000  |             
|                     
|                     
|                     
|                     
|                      | Securities held
to maturity     |                       |   | 13,334,351  |              |       |   | 13,807,000  |              |       |   | 47,852,539  |              |   |   | 48,518,000  |             
|                     
|                     
|                     
|                     
|                      | Federal bank
stock              |                       |   | 1,027,300   |              |       |   | 1,027,000   |              |       |   | 975,800     |              |   |   | 976,000     |             
|                     
|                     
|                     
|                     
|                      | Loans, net                      |                       |   | 116,880,804 |              |       |   | 118,702,000 |              |       |   | 107,551,674 |              |   |   | 106,753,000 |             
|                     
|                     
|                     
|                     
|                      | Accrued
interest
receivable     |                       |   | 1,219,110   |              |       |   | 1,219,000   |              |       |   | 1,492,613   |              |   |   | 1,493,000   |             
|                     
|                     
|                     
|                     
|Financial liabilities |                                 |                       |   |             |              |       |   |             |              |       |   |             |              |   |   |            
|                     
|                     
|                     
|                     
|                      |                                 | Deposits              |   | $           | (159,519,295 | )     |   | $           | (159,107,000 | )     |   | $           | (162,013,585 | ) |   | $           | (161,809,000 | )
|                     
|                     
|                     
|                     
|                      |                                 | Short-term
borrowings |   |             | (3,533,890   | )     |   |             | (3,534,000   | )     |   |             | (4,564,783   | ) |   |             | (4,565,000   | )
|                     
|                     
|                     
|                     
|                      | Federal Home
Loan Bank
advances |                       |   | (2,207,807  | )            |       |   | (2,170,000  | )            |       |   | (3,446,086  | )            |   |   | (3,443,000  | )           
|                     
|                     
|                     
|                     
|                      | Accrued interest
payable        |                       |   | (465,049    | )            |       |   | (465,000    | )            |       |   | (840,304    | )            |   |   | (840,000    | )           

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

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

14. Other Comprehensive Income

Other comprehensive income (loss) components and related taxes were as follows:

|                                                                                 |  |      |           |      |  |      |          |   |  |   |          |  
|-------------------------------------------------------------------------------- |  | ---- | --------- | ---- |  | ---- | -------- | - |  | - | -------- | -
|                                                                                 |  | 2001 |           | 2000 |  | 1999
|Unrealized holding
gains and losses on
available-for-sale
securities             |  | $    | 1,343,599 |      |  | $    | 905,639  |   |  | $ | (833,859 | )
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Cumulative effect
of adopting
new accounting
standard                            |  |      | 134,368   |      |  |      |         |   |  |   |         |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Less reclassification
adjustment for gains
and losses later
recognized in income |  |      | (97,003   | )    |  |      |         |   |  |   |         |  
|                                                                                 |  |      |          
|Net unrealized gains
and losses                                                  |  |      | 1,380,964 |      |  |      | 905,639  |   |  |   | (833,859 | )
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Tax effect                                                                       |  |      | (469,528  | )    |  |      | (307,917 | ) |  |   | 283,512  |  
|                                                                                 |  |      |          
|Other comprehensive
income (loss)                                                |  | $    | 911,436   |      |  | $    | 597,722  |   |  | $ | (550,347 | )
|                                                                                 |  |      |          

19



---



##### 



15. Quarterly Financial Data (unaudited)

|     |                |  |          |           |              |  |        |           |                    |  |   |         |  |  |   |     |  |  |  |  | 
|---- | -------------- |  | -------- | --------- | ------------ |  | ------ | --------- | ------------------ |  | - | ------- |  |  | - | --- |  |  |  |  | 
|     |                |  | Interest |           | Net Interest |  | Net    |           | Earnings per Share |  |   |         | 
|     |                |  | Income   |           | Income       |  | Income |           | Basic and Diluted  |  |   |         | 
|     |                | 
|2001 |                |  |          |           |              |  |        |           |                    |  |   |         |  |  |   |     |  |  |  | 
|    
|    
|    
|    
|     | First quarter  |  | $        | 3,624,712 |              |  | $      | 2,195,316 |                    |  | $ | 626,179 |  |  | $ | .28 |  |  |  |  | 
|     | Second quarter |  |          | 3,420,568 |              |  |        | 2,066,414 |                    |  |   | 595,145 |  |  |   | .27 |  |  |  |  | 
|     | Third quarter  |  |          | 3,356,060 |              |  |        | 2,160,135 |                    |  |   | 627,589 |  |  |   | .28 |  |  |  |  | 
|     | Fourth quarter |  |          | 3,155,407 |              |  |        | 2,180,525 |                    |  |   | 678,290 |  |  |   | .30 |  |  |  |  | 
|    
|    
|    
|    
|2000 |                |  |          |           |              |  |        |           |                    |  |   |         |  |  |   |     |  |  |  | 
|    
|    
|    
|    
|     | First quarter  |  | $        | 3,356,065 |              |  | $      | 2,138,497 |                    |  | $ | 571,436 |  |  | $ | .26 |  |  |  |  | 
|     | Second quarter |  |          | 3,503,382 |              |  |        | 2,223,594 |                    |  |   | 600,917 |  |  |   | .27 |  |  |  |  | 
|     | Third quarter  |  |          | 3,658,595 |              |  |        | 2,200,604 |                    |  |   | 660,791 |  |  |   | .29 |  |  |  |  | 
|     | Fourth quarter |  |          | 3,696,537 |              |  |        | 2,241,618 |                    |  |   | 722,127 |  |  |   | .32 |  |  |  |  | 

16. Parent Company Only Condensed Financial Information

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

BALANCE SHEETS

|                                     |                                            |  |              |            |      |  |   |            | 
|------------------------------------ | ------------------------------------------ |  | ------------ | ---------- | ---- |  | - | ---------- | 
|                                     |                                            |  | December 31,
|                                     |                                            |  | 2001         |            | 2000
|Assets                               |                                            |  |              |            |      |  |   |           
|                                    
|                                    
|                                    
|                                    
|                                     | Cash                                       |  | $            | 3,709,064  |      |  | $ | 2,462,067  | 
|                                    
|                                    
|                                    
|                                    
|                                     | Investment in Bank subsidiary              |  |              | 25,058,964 |      |  |   | 24,766,285 | 
|                                    
|                                    
|                                    
|                                    
|                                     | Securities available for sale              |  |              | 2,273,371  |      |  |   | 1,892,062  | 
|                                    
|                                    
|                                    
|                                    
|                                     | Other assets                               |  |              | 169,414    |      |  |   | 132,255    | 
|                                     |                                            | 
|                                     | Total assets                               |  | $            | 31,210,813 |      |  | $ | 29,252,669 | 
|                                     |                                            | 
|Liabilities and shareholders equity |                                            |  |              |            |      |  |   |           
|                                    
|                                    
|                                    
|                                    
|                                     | Dividends payable                          |  | $            | 288,625    |      |  | $ | 313,340    | 
|                                    
|                                    
|                                    
|                                    
|                                     | Shareholders equity                       |  |              | 30,922,188 |      |  |   | 28,939,329 | 
|                                     |                                            | 
|                                     | Total liabilities and
shareholders equity |  | $            | 31,210,813 |      |  | $ | 29,252,669 | 
|                                     |                                            | 

STATEMENTS OF INCOME

|         |                                            |  |                          |           |      |  |      |           |   |  |   |           |  
|-------- | ------------------------------------------ |  | ------------------------ | --------- | ---- |  | ---- | --------- | - |  | - | --------- | -
|         |                                            |  | Years Ended December 31,
|         |                                            |  | 2001                     |           | 2000 |  | 1999
|Income   |                                            |  |                          |           |      |  |      |           |   |  |   |          
|        
|        
|        
|        
|         | Dividends from
Bank subsidiary             |  | $                        | 2,851,398 |      |  | $    | 2,265,174 |   |  | $ | 2,255,794 |  
|        
|        
|        
|        
|         | Other dividends                            |  |                          | 28,715    |      |  |      | 30,000    |   |  |   | 92,300    |  
|        
|        
|        
|        
|         | Securities gains                           |  |                          | 97,003    |      |  |      |          |   |  |   |          |  
|         |                                            | 
|         | Total income                               |  |                          | 2,977,116 |      |  |      | 2,295,174 |   |  |   | 2,348,094 |  
|        
|        
|        
|        
|Expenses |                                            |  |                          |           |      |  |      |           |   |  |   |          
|        
|        
|        
|        
|         | Miscellaneous
expense                      |  |                          | (33,100   | )    |  |      | (24,783   | ) |  |   | (25,508   | )
|        
|        
|        
|        
|         | Undistributed equity
in net income
of Bank |  |                          | (416,813  | )    |  |      | 284,880   |   |  |   | 194,400   |  
|         |                                            | 
|         | Net income                                 |  | $                        | 2,527,203 |      |  | $    | 2,555,271 |   |  | $ | 2,516,986 |  
|         |                                            | 

STATEMENTS OF CASH FLOWS

|                                     |                                                                                   |                                    |                                        |                                    |            |                          |           |            |            |          |           |            |            |          |           | 
|------------------------------------ | --------------------------------------------------------------------------------- | ---------------------------------- | -------------------------------------- | ---------------------------------- | ---------- | ------------------------ | --------- | ---------- | ---------- | -------- | --------- | ---------- | ---------- | -------- | --------- | 
|                                     |                                                                                   |                                    |                                        |                                    |            | Years Ended December 31,
|                                     |                                                                                   |                                    |                                        |                                    |            | 2001                     |           | 2000       |            | 1999    
|Cash flows from
operating activities |                                                                                   |                                    |                                        |                                    |            |                          |           |            |            |          |           |           
|                                    
|                                    
|                                    
|                                    
|                                     | Net income                                                                        |                                    | $                                      | 2,527,203                          |            |                          | $         | 2,555,271  |            |          | $         | 2,516,986  |           
|                                    
|                                    
|                                    
|                                    
|                                     | Adjustments to
reconcile net income
to net cash provided
by operating activities: |                                    |                                        |                                    |            |                          |           |            |            |          |           |            |           
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                                   |                                    | Undistributed
earnings of Bank         |                                    |            | 416,813                  |           |            |            | (284,880 | )         |            |            | (194,400 | )        
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                                   |                                    | Securities gains                       |                                    |            | (97,003                  | )         |            |            |         |           |            |            |         |          
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                                   |                                    | Change in other
assets and
liabilities |                                    |            | (141,192                 | )         |            |            |         |           |            |            |         |          
|                                     |                                                                                   |                                   
|                                     |                                                                                   |                                    |                                        | Net cash from
operating
activities |            |                          | 2,705,821 |            |            |          | 2,270,391 |            |            |          | 2,322,586 | 
|                                    
|                                    
|                                    
|                                    
|Cash flows from
investing activities |                                                                                   |                                    |                                        |                                    |            |                          |           |            |            |          |           |           
|                                    
|                                    
|                                    
|                                    
|                                     | Purchase of securities                                                            |                                    |                                        | (112,500                           | )          |                          |           |           |            |          |           | (651,250   | )         
|                                    
|                                    
|                                    
|                                    
|                                     | Sales of securities                                                               |                                    |                                        | 134,171                            |            |                          |           |           |            |          |           |           |           
|                                    
|                                    
|                                    
|                                    
|                                     | Return of capital                                                                 |                                    |                                        |                                   |            |                          |           |           |            |          |           | 90,000     |           
|                                     |                                                                                   |                                   
|                                     |                                                                                   | Net cash from
investing activities |                                        |                                    | 21,671     |                          |           |            |           |          |           |            | (561,250   | )       
|                                    
|                                    
|                                    
|                                    
|Cash flows from
financing activities |                                                                                   |                                    |                                        |                                    |            |                          |           |            |            |          |           |           
|                                    
|                                    
|                                    
|                                    
|                                     | Dividends paid                                                                    |                                    |                                        | (1,183,402                         | )          |                          |           | (1,208,979 | )          |          |           | (1,063,000 | )         
|                                    
|                                    
|                                    
|                                    
|                                     | Dividends reinvested                                                              |                                    |                                        | 47,352                             |            |                          |           | 224,452    |            |          |           | 154,664    |           
|                                    
|                                    
|                                    
|                                    
|                                     | Purchase of
treasury shares                                                       |                                    |                                        | (344,445                           | )          |                          |           | (174,614   | )          |          |           | (1,379,788 | )         
|                                     |                                                                                   |                                   
|                                     |                                                                                   | Net cash from
financing activities |                                        |                                    | (1,480,495 | )                        |           |            | (1,159,141 | )        |           |            | (2,288,124 | )       
|                                     |                                                                                   |                                   
|Net increase (decrease)
in cash      |                                                                                   |                                    | 1,246,997                              |                                    |            |                          | 1,111,250 |            |            |          | (526,788  | )         
|                                    
|                                    
|                                    
|                                    
|Cash, beginning of year              |                                                                                   |                                    | 2,462,067                              |                                    |            |                          | 1,350,817 |            |            |          | 1,877,605 |           
|                                     |                                                                                   |                                   
|Cash, end of year                    |                                                                                   | $                                  | 3,709,064                              |                                    |            | $                        | 2,462,067 |            |            | $        | 1,350,817 |           
|                                     |                                                                                   |                                   

20



---



##### 



17. Pending Acquisition

On October 2, 2001, the Boards of Directors of the Corporation and
Peoples Financial Corporation (Peoples Financial), the holding company of
Peoples Federal Savings and Loan Association of Massillon, Ohio, announced the
signing of a definitive agreement for the Corporation to acquire Peoples
Financial. At December 31, 2001, Peoples Financial had (unaudited) assets of
$106 million, deposits of $76 million and operated three full-service branches
in Massillon and a loan production office in North Canton, Ohio. The agreement
provides for shareholders of Peoples Financial to receive $12.25 in cash for
each of the 1,234,085 Peoples Financial Corporation common shares. The
acquisition, valued at $15.1 million, is expected to close in the second quarter
of 2002. The transaction has been approved by the Boards of Directors of both
companies and is subject to approval by the regulators and Peoples Financials
shareholders.

The Corporation will account for the acquisition as a purchase and
will include Peoples Financials results of operations from the effective date
of the acquisition in its 2002 financial statements.

To raise a portion of the cash needed to effect the merger transaction,
management anticipates selling approximately $8 million in fixed rate mortgage
loans. These assets have not yet been specifically identified by management. No
material loss is anticipated on the sale.

(CROWE CHIZEK LOGO)

Report of Independent Auditors

Board of Directors and Shareholders
National Bancshares Corporation
Orrville, Ohio

We have audited the accompanying consolidated balance sheets of
National Bancshares Corporation as of December 31, 2001 and 2000, and the
related consolidated statements of income, changes in shareholders equity and
cash flows for each of the three years in the period ended December 31, 2001.
These financial statements are the responsibility of the Corporations
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of National
Bancshares Corporation as of December 31, 2001 and 2000, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles generally accepted in
the United States of America.

As disclosed in Note 1, during 2001 the Company adopted new accounting
guidance on derivatives.



(-s- Crowe, Chizek and Company LLP)

Crowe, Chizek and Company LLP




Columbus, Ohio
January 22, 2002

21



---



##### 



Analysis of Net Interest Earnings

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

|                                            |  |                        |                                    |          |         |        |        |         |      |          |         |      |         |         |         |          |       |        |         |  |         |       |      |   |       |      |         |  |       |        |        |  |     |       |      |   |      |      |  
|------------------------------------------- |  | ---------------------- | ---------------------------------- | -------- | ------- | ------ | ------ | ------- | ---- | -------- | ------- | ---- | ------- | ------- | ------- | -------- | ----- | ------ | ------- |  | ------- | ----- | ---- | - | ----- | ---- | ------- |  | ----- | ------ | ------ |  | --- | ----- | ---- | - | ---- | ---- | -
|                                            |  |                        |                                    |          | 2001    |        | 2000   |         | 1999
|                                            |  |                        |                                    |          |         |        |        |         |     
|                                            |  |                        |                                    |          | Daily   |        |        |         |      |          |         |      |         |         | Daily   |          |       |        |         |  |         |       |      |   | Daily |      |         |  |       |        |        |  |    
|                                            |  |                        |                                    |          | Average |        |        |         |      |          | Average |      | Average |         |         |          |       |        | Average |  | Average |       |      |   |       |      | Average
|(Dollars in Thousands)                      |  | Balance                |                                    | Interest |         | Rate   |        | Balance |      | Interest |         | Rate |         | Balance |         | Interest |       | Rate  
|                                            |  |                       
|Assets                                      |  |                        |                                    |          |         |        |        |         |      |          |         |      |         |         |         |          |       |        |         |  |         |       |      |   |       |      |         |  |       |        |        |  |     |       |      |  
|                                           
|                                           
|                                           
|                                           
|Interest earning assets:                    |  |                        |                                    |          |         |        |        |         |      |          |         |      |         |         |         |          |       |        |         |  |         |       |      |   |       |      |         |  |       |        |        |  |     |       |      |  
|                                           
|                                           
|                                           
|                                           
|                                            |  | Investment securities: |                                    |          |         |        |        |         |      |          |         |      |         |         |         |          |       |        |         |  |         |       |      |   |       |      |         |  |       |        |        |  |     |       |      |   |      |     
|                                           
|                                           
|                                           
|                                           
|                                            |  |                        | Taxable                            |          | $       | 47,532 |        |         | $    | 3,039    |         |      |         | 6.53    | %       |          | $     | 49,488 |         |  | $       | 3,297 |      |   |       | 6.53 | %       |  | $     | 50,052 |        |  | $   | 3,327 |      |   |      | 6.56 | %
|                                           
|                                           
|                                           
|                                           
|                                            |  |                        | Nontaxable (tax
equivalent basis)* |          |         | 18,253 |        |         |      | 1,523    |         |      |         | 8.37    | %       |          |       | 20,658 |         |  |         | 1,769 |      |   |       | 8.55 | %       |  |       | 21,542 |        |  |     | 1,840 |      |   |      | 8.54 | %
|                                           
|                                           
|                                           
|                                           
|Federal funds sold                          |  |                        | 8,469                              |          |         |        | 354    |         |      |          | 4.18    | %    |         |         | 5,506   |          |       |        | 348     |  |         |       | 6.32 | % |       |      | 10,002  |  |       |        | 488    |  |     |       | 4.88 | %
|                                           
|                                           
|                                           
|                                           
|Interest-bearing deposits                   |  |                        | 1,991                              |          |         |        | 122    |         |      |          | 6.13    | %    |         |         | 1,987   |          |       |        | 122     |  |         |       | 6.14 | % |       |      | 1,119   |  |       |        | 68     |  |     |       | 6.08 | %
|                                           
|                                           
|                                           
|                                           
|Net loans (including
nonaccrual loans)      |  |                        | 110,418                            |          |         |        | 9,037  |         |      |          | 8.18    | %    |         |         | 104,856 |          |       |        | 9,280   |  |         |       | 8.85 | % |       |      | 97,438  |  |       |        | 8,285  |  |     |       | 8.50 | %
|                                            |  |                       
|Total interest
earning assets               |  |                        | 186,663                            |          |         |        | 14,075 |         |      |          | 7.54    | %    |         |         | 182,495 |          |       |        | 14,816  |  |         |       | 8.12 | % |       |      | 180,153 |  |       |        | 14,008 |  |     |       | 7.78 | %
|                                            |  |                       
|All other assets                            |  |                        | 13,037                             |          |         |        |        |         |      |          |         |      |         |         | 13,413  |          |       |        |         |  |         |       |      |   |       |      | 13,505  |  |       |        |        |  |     |       |      |  
|                                            |  |                       
|Total Assets                                |  | $                      | 199,700                            |          |         |        |        |         |      |          |         |      |         | $       | 195,908 |          |       |        |         |  |         |       |      |   |       | $    | 193,658 |  |       |        |        |  |     |       |      |  
|                                            |  |                       
|Liabilities and
Shareholders Equity        |  |                        |                                    |          |         |        |        |         |      |          |         |      |         |         |         |          |       |        |         |  |         |       |      |   |       |      |         |  |       |        |        |  |     |       |      |  
|                                           
|                                           
|                                           
|                                           
|Interest bearing
liabilities:               |  |                        |                                    |          |         |        |        |         |      |          |         |      |         |         |         |          |       |        |         |  |         |       |      |   |       |      |         |  |       |        |        |  |     |       |      |  
|                                           
|                                           
|                                           
|                                           
|                                            |  | Deposits:              |                                    |          |         |        |        |         |      |          |         |      |         |         |         |          |       |        |         |  |         |       |      |   |       |      |         |  |       |        |        |  |     |       |      |   |      |     
|                                           
|                                           
|                                           
|                                           
|                                            |  |                        | Interest bearing
checking          |          | $       | 29,163 |        |         | $    | 427      |         |      |         | 1.46    | %       |          | $     | 29,914 |         |  | $       | 530   |      |   |       | 1.77 | %       |  | $     | 30,837 |        |  | $   | 568   |      |   |      | 1.84 | %
|                                           
|                                           
|                                           
|                                           
|                                            |  |                        | Savings                            |          |         | 44,117 |        |         |      | 1,119    |         |      |         | 2.54    | %       |          |       | 41,306 |         |  |         | 1,072 |      |   |       | 2.60 | %       |  |       | 43,630 |        |  |     | 1,130 |      |   |      | 2.59 | %
|                                           
|                                           
|                                           
|                                           
|                                            |  |                        | Time, $100,000
and over            |          |         | 12,581 |        |         |      | 654      |         |      |         | 5.20    | %       |          |       | 13,726 |         |  |         | 835   |      |   |       | 6.08 | %       |  |       | 15,125 |        |  |     | 680   |      |   |      | 4.50 | %
|                                           
|                                           
|                                           
|                                           
|                                            |  |                        | Time, other                        |          |         | 48,092 |        |         |      | 2,477    |         |      |         | 5.15    | %       |          |       | 46,700 |         |  |         | 2,461 |      |   |       | 5.27 | %       |  |       | 42,385 |        |  |     | 2,093 |      |   |      | 4.94 | %
|                                           
|                                           
|                                           
|                                           
|                                            |  | Other funds purchased  |                                    |          | 6,917   |        |        |         | 277  |          |         |      | 4.00    | %       |         |          | 8,637 |        |         |  | 512     |       |      |   | 5.93  | %    |         |  | 6,335 |        |        |  | 278 |       |      |   | 4.39 | %   
|                                            |  |                       
|Total interest
bearing liabilities          |  |                        | 140,870                            |          |         |        | 4,954  |         |      |          | 3.52    | %    |         |         | 140,283 |          |       |        | 5,410   |  |         |       | 3.86 | % |       |      | 138,312 |  |       |        | 4,749  |  |     |       | 3.43 | %
|                                            |  |                       
|Demand deposits                             |  |                        | 26,344                             |          |         |        |        |         |      |          |         |      |         |         | 26,470  |          |       |        |         |  |         |       |      |   |       |      | 27,132  |  |       |        |        |  |     |       |      |  
|                                           
|                                           
|                                           
|                                           
|Other liabilities                           |  |                        | 1,543                              |          |         |        |        |         |      |          |         |      |         |         | 1,020   |          |       |        |         |  |         |       |      |   |       |      | 910     |  |       |        |        |  |     |       |      |  
|                                           
|                                           
|                                           
|                                           
|Shareholders equity                        |  |                        | 30,943                             |          |         |        |        |         |      |          |         |      |         |         | 28,135  |          |       |        |         |  |         |       |      |   |       |      | 27,304  |  |       |        |        |  |     |       |      |  
|                                            |  |                       
|Total Liabilities and
Shareholders Equity  |  | $                      | 199,700                            |          |         |        |        |         |      |          |         |      |         | $       | 195,908 |          |       |        |         |  |         |       |      |   |       | $    | 193,658 |  |       |        |        |  |     |       |      |  
|                                            |  |                       
|Net interest income
(tax equivalent basis)* |  |                        |                                    |          |         | $      | 9,121  |         |      |          |         |      |         |         |         |          |       | $      | 9,406   |  |         |       |      |   |       |      |         |  |       | $      | 9,259  |  |     |       |      |  
|                                            |  |                       
|Net interest spread                         |  |                        |                                    |          |         |        |        |         |      |          | 4.02    | %    |         |         |         |          |       |        |         |  |         |       | 4.26 | % |       |      |         |  |       |        |        |  |     |       | 4.35 | %
|                                            |  |                       
|Net yield on total
earning assets*          |  |                        |                                    |          |         |        |        |         |      |          | 4.89    | %    |         |         |         |          |       |        |         |  |         |       | 5.15 | % |       |      |         |  |       |        |        |  |     |       | 5.14 | %
|                                            |  |                       



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

22



---



##### 



Historical Financial Summary

|                                                    |  |      |             |      |  |      |             |      |  |       |             |   |  |   |             |   |  |   |             |  
|--------------------------------------------------- |  | ---- | ----------- | ---- |  | ---- | ----------- | ---- |  | ----- | ----------- | - |  | - | ----------- | - |  | - | ----------- | -
|Financial Position                                  |  |      |             |      |  |      |             |      |  |       |             |   |  |   |             |   |  |   |             |  
|(Year End Balances)                                 |  | 2001 |             | 2000 |  | 1999 |             | 1998 |  | 1997*
|Total Assets                                        |  | $    | 197,763,446 |      |  | $    | 200,792,706 |      |  | $     | 197,402,543 |   |  | $ | 190,203,604 |   |  | $ | 182,982,332 |  
|                                                   
|                                                   
|                                                   
|                                                   
|Cash and Due from Banks                             |  |      | 6,935,082   |      |  |      | 7,077,797   |      |  |       | 8,538,351   |   |  |   | 7,675,122   |   |  |   | 8,068,623   |  
|                                                   
|                                                   
|                                                   
|                                                   
|Investment Securities                               |  |      | 60,843,655  |      |  |      | 68,021,052  |      |  |       | 70,214,050  |   |  |   | 69,808,933  |   |  |   | 80,940,781  |  
|                                                   
|                                                   
|                                                   
|                                                   
|Loans-Net                                           |  |      | 116,880,804 |      |  |      | 107,551,674 |      |  |       | 99,531,223  |   |  |   | 92,037,075  |   |  |   | 78,257,778  |  
|                                                   
|                                                   
|                                                   
|                                                   
|Deposits                                            |  |      | 159,519,295 |      |  |      | 162,013,585 |      |  |       | 160,435,348 |   |  |   | 157,714,551 |   |  |   | 151,081,856 |  
|                                                   
|                                                   
|                                                   
|                                                   
|Borrowings                                          |  |      | 5,741,697   |      |  |      | 8,010,869   |      |  |       | 8,663,682   |   |  |   | 4,043,859   |   |  |   | 4,576,966   |  
|                                                   
|                                                   
|                                                   
|                                                   
|Shareholders Equity                                |  |      | 30,922,188  |      |  |      | 28,939,329  |      |  |       | 26,856,195  |   |  |   | 27,192,882  |   |  |   | 26,177,793  |  
|                                                   
|                                                   
|                                                   
|                                                   
|Book Value Per Share                                |  | $    | 13.93       |      |  | $    | 12.93       |      |  | $     | 12.01       |   |  | $ | 11.93       |   |  | $ | 11.48       |  
|                                                    |  |     
|Summary
of Operations                              
|Total Interest Income                               |  | $    | 13,556,747  |      |  | $    | 14,214,579  |      |  | $     | 13,382,607  |   |  | $ | 13,235,138  |   |  | $ | 13,157,905  |  
|                                                   
|                                                   
|                                                   
|                                                   
|Total Interest Expense                              |  |      | 4,954,357   |      |  |      | 5,410,266   |      |  |       | 4,748,609   |   |  |   | 4,999,452   |   |  |   | 5,071,870   |  
|                                                    |  |     
|Net Interest Income                                 |  |      | 8,602,390   |      |  |      | 8,804,313   |      |  |       | 8,633,998   |   |  |   | 8,235,686   |   |  |   | 8,086,035   |  
|                                                   
|                                                   
|                                                   
|                                                   
|Provision for Loan Losses                           |  |      | 40,000      |      |  |      | 62,500      |      |  |       | 120,000     |   |  |   | 120,000     |   |  |   | 120,000     |  
|                                                    |  |     
|Net Interest Income After
Provision for Loan Losses |  |      | 8,562,390   |      |  |      | 8,741,813   |      |  |       | 8,513,998   |   |  |   | 8,115,686   |   |  |   | 7,966,035   |  
|                                                   
|                                                   
|                                                   
|                                                   
|Total Noninterest Income                            |  |      | 1,145,238   |      |  |      | 849,467     |      |  |       | 836,598     |   |  |   | 874,699     |   |  |   | 745,380     |  
|                                                   
|                                                   
|                                                   
|                                                   
|Total Noninterest Expense                           |  |      | 6,403,105   |      |  |      | 6,318,759   |      |  |       | 6,199,427   |   |  |   | 6,051,569   |   |  |   | 5,680,885   |  
|                                                    |  |     
|Income Before Income Taxes                          |  |      | 3,304,523   |      |  |      | 3,272,521   |      |  |       | 3,151,169   |   |  |   | 2,938,816   |   |  |   | 3,030,530   |  
|                                                   
|                                                   
|                                                   
|                                                   
|Income Taxes Expense                                |  |      | 777,320     |      |  |      | 717,250     |      |  |       | 634,183     |   |  |   | 594,171     |   |  |   | 680,943     |  
|                                                    |  |     
|Net Income                                          |  | $    | 2,527,203   |      |  | $    | 2,555,271   |      |  | $     | 2,516,986   |   |  | $ | 2,344,645   |   |  | $ | 2,349,587   |  
|                                                    |  |     
|Net Income Per Share                                |  | $    | 1.13        |      |  | $    | 1.14        |      |  | $     | 1.12        |   |  | $ | 1.03        |   |  | $ | 1.03        |  
|                                                   
|                                                   
|                                                   
|                                                   
|Cash Dividends                                      |  | $    | 1,158,687   |      |  | $    | 1,119,697   |      |  | $     | 1,078,202   |   |  | $ | 1,001,743   |   |  | $ | 948,651     |  
|                                                   
|                                                   
|                                                   
|                                                   
|Cash Dividends Per Share                            |  | $    | 0.52        |      |  | $    | 0.50        |      |  | $     | 0.48        |   |  | $ | 0.44        |   |  | $ | 0.42        |  
|                                                   
|                                                   
|                                                   
|                                                   
|Dividend Payout Percentage                          |  |      | 45.85       | %    |  |      | 43.82       | %    |  |       | 42.84       | % |  |   | 42.72       | % |  |   | 40.38       | %
|                                                   
|                                                   
|                                                   
|                                                   
|Weighted Average Number
of Shares Outstanding       |  |      | 2,230,013   |      |  |      | 2,240,534   |      |  |       | 2,253,650   |   |  |   | 2,281,166   |   |  |   | 2,285,812   |  
|                                                   
|                                                   
|                                                   
|                                                   
|Return on Average Assets                            |  |      | 1.27        | %    |  |      | 1.30        | %    |  |       | 1.30        | % |  |   | 1.27        | % |  |   | 1.31        | %
|                                                   
|                                                   
|                                                   
|                                                   
|Return on Average Equity                            |  |      | 8.17        | %    |  |      | 9.08        | %    |  |       | 9.22        | % |  |   | 8.71        | % |  |   | 9.23        | %
|                                                   
|                                                   
|                                                   
|                                                   
|Average Equity to
Average Assets                    |  |      | 15.49       | %    |  |      | 14.36       | %    |  |       | 14.10       | % |  |   | 14.57       | % |  |   | 14.21       | %
|                                                   
|                                                   
|                                                   
|                                                   
|Risk-Based Capital
Percentage                       |  |      | 22.71       | %    |  |      | 22.22       | %    |  |       | 21.81       | % |  |   | 23.80       | % |  |   | 23.75       | %
|                                                   
|                                                   
|                                                   
|                                                   
|Full Time Equivalent Staff                          |  |      | 103         |      |  |      | 103         |      |  |       | 101         |   |  |   | 96          |   |  |   | 96          |  
|                                                   
|                                                   
|                                                   
|                                                   
|Average Total Assets to
Full Time Equivalent Staff  |  | $    | 1,938,835   |      |  | $    | 1,902,022   |      |  | $     | 1,917,411   |   |  | $ | 1,924,474   |   |  | $ | 1,866,035   |  
|                                                    |  |     



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

23



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|Directors                                                                                       
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|Charles J. DolezalChairman, President, Chief Executive Officer                                  
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|Sara BalzariniMember of Management Committee Contours, Ltd.                                     
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|Bobbi DouglasExecutive Director
STEPS at Liberty Center Every Womans House                     
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|John W. KropfAttorney
Kropf, Wagner, Hohenberger & Lutz, L.L.P.                                 
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|Steve SchmidPresident
Smith Dairy Products, Inc.                                                
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|John E. SprungerPresident
Kidron Auction, Inc.                                                  
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|Howard J. WengerPresident
Wenger Excavating, Inc.
Lake Region Oil, Inc.
Northstar Asphalt, Inc. 
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|James F. WoolleyChief Executive Officer
R.W. Screw Products, Inc.                               
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|Albert YeagleyPlant Manager
J.M. Smucker Company                                                
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|Robert F. GumzDirector Emeritus                                                                 
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|Officers                                                                                        
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|National Bancshares Corporation                                                                 
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|Charles J. DolezalPresident                                                                     
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|Kenneth R. VanSickleSenior Vice President, Secretary                                            
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|Lawrence Cardinal, Jr.Vice President, Treasurer                                                 
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|First National Bank                                                                             
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|Charles J. DolezalPresident                                                                     
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|Control
Lawrence Cardinal, Jr.Vice President & Controller                                       
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|Angela SmithAssistant Controller                                                                
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|Lending
Kenneth R. VanSickleSenior Vice President, Chief Loan Officer                           
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|Scott HolmesAssistant Vice President, Manager of Loan Department                                
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|Dean KarhanAssistant Vice President, Commercial Loan Officer                                    
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|Sara MartinLoan Officer                                                                         
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|Carol YoderLoan Officer                                                                         
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|Operations
Robert WoodruffVice President & Cashier                                              
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|Jackie SamsaAssistant Vice President, Manager of Human Resources                                
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|Jan ZachariasOperations Officer                                                                 
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|Sales and Business Development
Harold BerkeyVice President of Customer Services                 
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|Security/Compliance
Ron ArmentroutAssistant Vice President, Security Officer, Compliance Officer
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|Audit
Jim HuntsbergerAuditor                                                                    
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|Branch Administration                                                                           
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|Carolyn ForrerAdministrative Officer,
Manager Main Office Lobby                                 
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|Karen HaueterAssistant Vice President,
Manager Smithville Office                                
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|Michelle KieffaberLoan Officer,
Dalton Office                                                   
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|James KuschmeaderAssistant Vice President,
Manager Seville Office                               
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|Susan KutzAdministrative Officer,
Manager West High Office                                      
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|Larry KyttaAssistant Vice President,
Manager Lodi Office                                        
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|Betty LyonAssistant Vice President,
Manager Midway Office                                       
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|Matthew MillerAssistant Vice President,
Manager Mt. Eaton Office                                
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|Steve RiddickAssistant Vice President,
Manager Cleveland Road Office                            
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|Valerie SteinAssistant Vice President,
Manager Kidron Office                                    
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|Rita TyrrellAdministrative Officer,
Dalton Office                                               
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|Offices                                                                                         
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|Main Office112 West Market St.
Orrville
(330)682-1010                                           
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|Cleveland Road Office1725 Cleveland Rd.
Wooster
(330)263-1725                                   
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|Dalton Office12 West Main St.
Dalton
(330)828-2227                                              
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|Kidron Office4934 Kidron Rd.
Kidron
(330)857-3101                                               
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|Lodi Office106 Ainsworth St.
Lodi
(330)948-1414                                                 
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|Midway OfficeU.S. Rt. 30 at Co. Rd. 44
Apple Creek
(330)264-8070                                
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|Mt. Eaton Office15974 East Main St.
Mt. Eaton
(330)857-4301 or (330)359-5476                    
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|Northside Office1720 North Main St.
Orrville
(330)682-2342                                      
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|Seville Office121 Greenwich Rd.
Seville
(330)769-3105                                           
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|Smithville Office153 East Main St.
Smithville
(330)669-2611                                     
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|West High Office1320 West High St.
Orrville
(330)682-2881                                       





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|       |  |                                                                                                                                               |  |                                       
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------
|(LOGO) |  | National
Bancshares
Corporation112 West Market Street
Orrville, Ohio 44667
(330) 682-1010
www.fnborrville.comMember FDIC
Equal Housing Lender |  | © 2002 National Bancshares Corporation