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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-KSB





ANNUAL REPORT UNDER SECTION 13 or 15(d) of THE SECURITIES
EXCHANGE ACT of 1934



For the fiscal year
ended December 31, 2002

Commission File Number 0-25616



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FC BANC CORP.

(name of small business issuer
in its charter)



|Ohio                                                           |  | 34-1718070                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other Jurisdiction of incorporation or organization) |  | (IRS Employer Identification Number)



|Farmers Citizens Bank Building, Box 567, Bucyrus, Ohio |  | 44820     
|------------------------------------------------------ |  | ----------
|(Address of principal executive offices)               |  | (zip code)



Issuers telephone number (419) 562-7040



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Securities registered under Section 12(b) of the Exchange Act:

not applicable



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Securities registered under
Section 12(g) of the Exchange Act

Common Shares (No Par Value)



Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange
Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES x     NO ̈



Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in
this form, and no disclosure will be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.



Securities registered under Section 12(b) of the Exchange Act:



State issuers revenues
for the most recent fiscal year. $7,821,000.



State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, as
of a specified date within the past 60 days: As of February 21, 2003, 574,427 shares of common shares of the Registrant were outstanding. The aggregate market value of the voting stock held by non-affiliates was $15,078,709 based upon the trading
price of $26.25 per share.



Documents Incorporated by
References



Portions of the definitive Proxy
Statement for the 2003 Annual Meeting of Shareholders of FC Banc Corp filed on February 6, 2002 with the Securities and Exchange Commission are incorporated by reference into Part III of this Form 10-KSB. Transitional Small Business Disclosure
Format    YES ̈NO x



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PART I



ITEM 1.    Description of Business



Business



FC Banc Corp was established on February 1, 1994 as a bank holding company whose activities are primarily limited to holding the stock of
The Farmers Citizens Bank, Bucyrus, Ohio (Bank). Farmers Citizens Bank was chartered on October 1, 1907, and officially opened for business on January 6, 1908. Farmers Citizens Bank has provided continuous customer service to Crawford
County for more than 90 years. The Bank conducts a general banking business in north central Ohio that consists of attracting deposits from the general public and applying those funds to the origination of loans for residential, consumer and
non-residential purposes. The Banks principal types of lending are in commercial real estate, residential real estate, and consumer. In both the commercial and residential real estate the bank has minimal risk. The banks lending policies
specify loan to value ratios low enough to minimize the risk. Another factor that minimizes the risk is our knowledge of the market area. Farmers Citizens Bank is a community bank and this helps us in knowing our customers and market area. Also, the
bank is continuously reviewing its underwriting procedures and policies. In the consumer loan area, the bank specializes in home equity loans and loans for late model cars. Usually, the collateral held is sufficient to minimize risk. The Banks
profitability is significantly dependent on net interest income. That is the difference between interest income generated from interest-earning assets (i.e., loans and investments) and the interest expense paid on interest-bearing liabilities (i.e.,
customer deposits and borrowed funds). Net interest income is affected by the relative amount of interest-earning assets and interest-bearing liabilities and interest received or paid on these balances. The level of interest rates paid or received
by the Bank can be significantly influenced by a number of environmental factors, such as governmental monetary policy, that are outside of management control.



The Company is subject to regulation by the Board of Governors of the Federal Reserve System, which limits the activities in which the
Company and the Bank may engage. The Bank is supervised by the State of Ohio, Division of Financial Institutions and its deposits are insured up to applicable limits under the Bank Insurance Fund (BIF) of the Federal Deposit
Insurance Corporation (FDIC). The Bank is a member of the Federal Reserve System and is subject to its supervision. The Company and the Bank must file with the U.S. Securities and Exchange Commission, the Federal Reserve Board and Ohio
Division of Financial Institutions the prescribed periodic reports containing full and accurate statements of its affairs.



Fiscal and Monetary Policies



The Banks business and earnings are affected significantly by the fiscal and monetary policies of the federal government and its
agencies. The Bank is particularly affected by the policies of the Federal Reserve Board, which regulates the supply of money and credit in the United States. Among the instruments of monetary policy available to the Federal Reserve are (a)
conducting open market operations in United States government securities, (b) changing the discount rates of borrowings of depository institutions (c)imposing or changing reserve requirements against certain borrowings by banks and their affiliates.
These methods are used in varying degrees and combinations to directly affect the availability of bank loans and deposits, as well as the interest rates charged on loans and paid on deposits. For that reason alone, the policies of the Federal
Reserve Board have a material effect on the earnings of the Holding Company.



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Employees



As of December 31, 2002, the Bank had 54 full-time and 10
part-time employees. Currently the Holding Company has no paid employees.



Competition



The Bank has
four banking offices located in Crawford, Morrow and Knox Counties, Ohio. The primary market area of the Bank is North Central Ohio, which includes Crawford, Morrow, Knox and contiguous counties. The Banks main office is about 60 miles north of the
state capital, Columbus, Ohio. Our Bank has various competition in all of the markets we serve. In Bucyrus there are five other commercial banks. In both Cardington and Fredericktown there are one. All of our markets are within a short distance to
other markets that present another dozen or so competitors. In addition, there are no less than ten mortgages companies in each and every market we serve. In our direct markets, the Bank has a 21.49% market share of deposits. The economy of our
markets is driven by several major components: Manufacturing, retail trade, governmental service, general service, and agricultural. Census date indicates a positive trend in our Morrow and Knox counties areas and a steady trend in Crawford County.
The general economic conditions of all three of our markets is reflective of the State of Ohio and to a certain extent our national economy. Overall, the general outlook for the economy is cautiously optimistic. Moderate growth to stable conditions
is seen, but in general the economy has not shown positive signs of a robust economy.The financial services industry is highly competitive. The Bank competes with financial services providers, such as banks, savings associations, credit unions,
finance companies, mortgage banking companies, insurance companies, and money market and mutual fund companies. The Bank also faces increased competition from non-banking institutions such as brokerage houses and insurance companies, as well as from
financial service subsidiaries of commercial and manufacturing companies. Many of these competitors enjoy the benefits of advanced technology, fewer regulatory constraints and lower cost structures.



Prompt Corrective Regulatory Action



The federal banking agencies have established a system of
prompt corrective action to resolve certain problems of undercapitalized institutions. This system is based on five capital level categories for insured depository institutions: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically undercapitalized. The federal banking agencies may (or in some cases must) take certain supervisory actions depending upon a banks capital
level. For example, the banking agencies must appoint a receiver or conservator for a bank within 90 days after it become critically undercapitalized unless the banks primary regulator determines, with the concurrence of the FDIC,
that other action would better achieve regulatory purposes. Banking operations otherwise may be significantly affected depending on a banks capital category. For example, a bank that is not well capitalized generally is prohibited
from accepting brokered deposits and offering interest rates on deposits higher than the prevailing rate in its market, and the holding company of any undercapitalized depository institution must guarantee, in part, specific aspects of the
banks capital plan for the plan to be acceptable.



Under the final rules implementing the prompt corrective provisions:



| | · |  | A bank that has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 6% or greater and a leverage ratio of 5% or greater is
deemed to be well capitalized;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | · |  | A bank with a total risk-based capital ratio of 8% or greater, a Tier 1 risk-based capital ratio of 4% or greater and a leverage ratio of 4% or greater (or a
leverage ratio of 3% or greater and a capital adequacy, asset quality, management administration, earnings and liquidity (or CAMEL 1 rating), is considered to be adequately capitalized;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · |  | A bank that has a total risk-based capital of less than 8%, a Tier 1 risk-based capital ratio of less than 4%, and a leverage ratio that is less than 4% (or a
leverage ratio of less than 3% and a CAMEL 1 rating), is considered undercapitalized;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · |  | A bank that has a total risk-based capital ratio of less than 6%, a Tier 1 risk-based capital ratio of less than 3% or a leverage ratio that is less than 3% is
considered to be significantly undercapitalized; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · |  | A bank that has tangible equity (Tier 1 capital minus intangible assets other than purchased mortgage servicing rights) to total assets ratio equal to or less than
2% is deemed to be critically undercapitalized.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The Companys actual capital ratios are presented in the following table which shows
the Company met all regulatory capital requirements.



|                              |  | 2002   |        |       | 2001  |  
|----------------------------- |  | ------ | ------ | ----- | ----- | -
|                              |  | Amount |        | Ratio |       |  
|Total Capital                 |  |        |        |       |       |  
|(to Risk-weighted Assets)     |  |        |        |       |       |  
|                             
|Actual                        |  | $      | 13,304 |       | 16.00 | %
|For Capital Adequacy Purposes |  |        | 6,652  |       | 8.00  |  
|To Be Well Capitalized        |  |        | 8,315  |       | 10.00 |  
|                             
|Tier I Capital                |  |        |        |       |       |  
|(to Risk-weighted Assets)     |  |        |        |       |       |  
|Actual                        |  | $      | 12,263 |       | 14.75 | %
|For Capital Adequacy Purposes |  |        | 3,326  |       | 4.00  |  
|To Be Well Capitalized        |  |        | 4,988  |       | 6.00  |  
|                             
|Tier I Capital                |  |        |        |       |       |  
|(to Average Assets)           |  |        |        |       |       |  
|                             
|Actual                        |  | $      | 12,263 |       | 9.38  | %
|For Capital Adequacy Purposes |  |        | 5,229  |       | 4.00  |  
|To Be Well Capitalized        |  |        | 6,537  |       | 5.00  |  



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Limits on Dividends and Other Payments



There are various legal limitations on the extent to which
subsidiary banks may finance or otherwise supply funds to their parent holding companies. Under federal and Ohio law, subsidiary banks may not, subject to certain limited exceptions, make loans or extensions of credit to, or investments in the
securities of, their bank holding companies. Subsidiary banks are also subject to collateral security requirements for any loans or extension of credit permitted by such exceptions. The Holding Companys banking subsidiary may not pay dividends
out of its surplus if, after paying such dividends, it would fail to meet the required minimum levels under certain risk-based capital guidelines and minimum leverage ratio requirements established by the FDIC. In addition, the Bank must have the
approval of its regulatory authority if a dividend in any year would cause the total dividends for that year to exceed the sum of the banks current years net profits (or net income, less dividends declared during the period
based on regulatory accounting principles) and the retained net profits for the preceding two years, less required transfers to surplus. Payment of dividends by The Farmers Citizens Bank may be restricted at any time at the discretion of its
regulatory authorities, if such regulatory authorities deem such dividends to constitute unsafe and/or unsound banking practices or if necessary to maintain adequate capital. The ability of a bank holding company to obtain funds for the payment of
dividends and for other cash requirements is largely dependent on the amount of dividends which may be declared by their subsidiary bank. However, the Federal Reserve Board expects bank holding companies to serve as a source of strength to their
subsidiary bank(s), which may require them to retain capital for further investment in their subsidiary bank(s), rather than for dividends for shareholders of the bank holding company. As stated previously, the subsidiary bank may not pay dividends
to the Holding Company, if, after paying such dividends, the respective bank would fail to meet the required minimum levels under the risk-based capital guidelines and the minimum leverage ratio requirements. Payment of dividends by the Bank may be
restricted at any time at the discretion of its applicable regulatory authorities, if they deem such dividends to constitute an unsafe and/or unsound banking practice. These provisions could have the effect of limiting the Holding Companys
ability to pay dividends in future years.



Financial Services
Modernization Act of 2000



On November 12,
2000, President Clinton signed into law the Gramm-Leach-Bliley Act (better known as the Financial Services Modernization Act of 2000) which will, effective March 11, 2000, permit bank holding companies to become financial holding companies and
thereby affiliate with securities and insurance companies and engage in other activities that are financial in nature. A bank holding company may become a financial holding company if each of its subsidiary banks is well capitalized under the
Federal Deposit Insurance Corporation Act of 1991 (prompt corrective action provisions), is well managed, and has at least a satisfactory rating under the Community Reinvestment Act, by filing a declaration that the bank holding company wishes to
become a financial holding company. No regulatory approval will be required for a financial holding company to acquire a company, other than a bank or savings association, engaged in activities that are financial in nature or incidental to
activities that are financial in nature, as determined by the Federal Reserve Board.



The Financial Services Modernization Act defines financial in nature to include:



| | · |  | Securities underwriting, dealing and market making
| | - |  | --------------------------------------------------



| | · |  | Sponsoring mutual funds and investment companies
| | - |  | ------------------------------------------------



| | · |  | Insurance underwriting and agency
| | - |  | ---------------------------------



| | · |  | Merchant banking activities
| | - |  | ---------------------------



| | · |  | And activities that the Federal Reserve Board has determined to be closely related to banking
| | - |  | ---------------------------------------------------------------------------------------------



A national bank also may engage, subject to limitations or
investment, in activities that are financial in nature, other than insurance underwriting, insurance company portfolio investment, real estate development and real estate investment, through a financial subsidiary of the bank, if the bank is well
capitalized, well managed and has at least a satisfactory Community Reinvestment



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Act rating. Subsidiary banks of a financial holding company or national banks with financial subsidiaries
must continue to be well capitalized and well managed in order to continue to engage in activities that are financial in nature without regulatory actions or restrictions, which could include divestiture of the financial in nature subsidiary or
subsidiaries. In addition, a financial holding company or a bank may not acquire a company that is engaged in activities that are financial in nature unless each of the subsidiary banks of the financial holding company or the bank has a Community
Reinvestment Act rating of satisfactory or better.



Recent
Accounting Pronouncement



In August
2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (FAS) No. 143, Accounting for Asset RetirementObligations, which requires that the fair value of a
liability be recognized when incurred for the retirement of a long-lived asset and the value of the asset be increased by that amount. The statement also requires that the liability be maintained at its present value in subsequent periods and
outlines certain disclosures for such obligations. The adoption of this statement, which is effective January 1, 2003, is not expected to have a material effect on the Companys financial statements.



In October 2001, the FASB issued FAS No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets. FAS No. 144 supercedes FAS No. 121 and applies to all long-lived assets (including discontinued operations) and consequently amends APB Opinion No. 30, Reporting Results of
Operations  Reporting the Effects of Disposal of a Segment of a Business. FAS No. 144 requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or fair value less costs to sell. FAS
No. 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001 and, generally, its provisions are to be applied prospectively. The adoption of this statement is not expected to have a material effect on the
Company financial statements.



In April 2002, the
FASB issued FAS No. 145, Recission of FASB Statement No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections. FAS No. 145 rescinds FAS No. 4, which required all gains and losses from extinguishment of debt to be
aggregated and, if material, classified as an extraordinary item, net of related income tax effect. As a result, the criteria in APB Opinion No. 30 will now be used to classify those gains and losses. This statement also amends FAS No. 13 to require
that certain lease modifications that have economic effects similar to sale-leaseback transactions be accounted for in the same manner as sale-leaseback transactions. This statement also makes technical corrections to existing pronouncements, which
are not substantive but in some cases may change accounting practice. The provisions of this statement related to the rescission of FAS No. 4 shall be applied in fiscal years beginning after May 15, 2002. Any gain or loss on extinguishments of debt
that was classified as an extraordinary item in prior periods presented that does not meet the criteria in APB Opinion No. 30 for classification as an extraordinary item shall be reclassified. Early adoption of the provisions of this statement
related to FAS No. 13 shall be effective for transactions occurring after May 15, 2002. All other provisions of this statement shall be effective for financial statements issued on or after May 15, 2002. Early application of this statement is
encouraged. The adoption of the effective portions of this statement did not have an impact on the Companys financial position of results of operations. The adoption of the remaining portions of this statement is not expected to have an impact
on the Companys financial position or results of operations.



In July 2002, the FASB issued FAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, which requires companies to recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan. This statement replaces EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain
Costs Incurred in a Restructuring). The new statement will be effective for exit or disposal activities initiated after December 31, 2002, the adoption of which is not expected to have a material effect on the Companys financial
statements.



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On October 1,
2002, FASB issued FAS No. 147, Acquisitions of Certain Financial Institutions, effective for all business combinations initiated after October 1, 2002. This statement addresses the financial accounting and reporting for the acquisition of all
or part of a financial institution, except for a transaction between two or more mutual enterprises. This statement removes acquisitions of financial institutions, other than transactions between two or more mutual enterprises, from the scope of FAS
No. 72, Accounting for Certain Acquisitions of Banking or Thrift Institutions, and FASB Interpretation No. 9, Applying APB Opinions No. 16 and 17 When a Savings and Loan Association or a Similar Institution Is Acquired in a Business
Combination Accounted for by the Purchase Method. The acquisition of all or part of a financial institution that meets the definition of a business combination shall be accounted for by the purchase method in accordance with FAS No. 141,
Business Combinations, and FAS No. 142, Goodwill and Other Intangible Assets. This statement also provides guidance on the accounting for the impairment or disposal of acquired long-term customer-relationship intangible assets (such as
depositor- and borrower-relationship intangible assets and credit cardholder intangible assets), including those acquired in transactions between two or more mutual enterprises. The adoption of this statement is not expected to have a material
effect on the Companys financial statements.



On December 31, 2002, the FASB issued FAS No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure, which amends FAS No. 123, Accounting for Stock-Based Compensation. FAS No. 148 amends the
disclosure requirements of FAS No. 123 to require more prominent and more frequent disclosures in financial statements about the effects of stock-based compensation. Under the provisions of FAS No. 123, companies that adopted the preferable, fair
value based method were required to apply that method prospectively for new stock option awards. This contributed to a ramp-up effect on stock-based compensation expense in the first few years following adoption, which caused concern for
companies and investors because of the lack of consistency in reported results. To address that concern, FAS No. 148 provides two additional methods of transition that reflect an entitys full complement of stock-based compensation expense
immediately upon adoption, thereby eliminating the ramp-up effect. FAS No. 148 also improves the clarity and prominence of disclosures about the pro forma effects of using the fair value based method of accounting for stock-based compensation for
all companiesregardless of the accounting method usedby requiring that the data be presented more prominently and in a more user-friendly format in the footnotes to the financial statements. In addition, the statement improves the
timeliness of those disclosures by requiring that this information be included in interim as well as annual financial statements. The transition guidance and annual disclosure provisions of FAS No. 148 are effective for fiscal years ending after
December 15, 2002, with earlier application permitted in certain circumstances. The interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002.



In November, 2002, the FASB issued
Interpretation No. 45,Guarantors Accounting and Disclosure requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. This interpretation elaborates on the disclosures to be made by a guarantor in its interim
and annual financial statements about its obligations under certain guarantees that it has issued. This interpretation clarifies that a guarantor is required to disclose (a) the nature of the guarantee, including the approximate term of the
guarantee, how the guarantee arose, and the events or circumstances that would require the guarantor to perform under the guarantee; (b) the maximum potential amount of future payments under the guarantee; (c) the carrying amount of the liability,
if any, for the guarantorss obligations under the guarantee; and (d) the nature and extent of any recourse provisions or available collateral that would enable the guarantor to recover the amounts paid under the guarantee. This interpretation
also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the obligations it has undertaken in issuing the guarantee, including its ongoing obligation to stand ready to perform over the term of the
guarantee in the event that the specified triggering events or conditions occur. The objective of the initial measurement of that liability is the fair value of the guarantee at its inception. The initial recognition and initial measurement
provisions of this interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantors fiscal year-end. The disclosure requirements in this interpretation are effective
for financial statements of interim or annual periods ending after December 15, 2002.



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ITEM
2.    Properties



The
Banks principal office is located at 105 Washington Square, Bucyrus, Ohio 44820. The Banks three branches are located at 1605 Marion Road, Bucyrus, Ohio, 103 East Main Street, Cardington, Ohio, and 240 West Sandusky Street,
Fredericktown, Ohio. The Bank owns all of the properties. The Bank currently supplies the Holding Company minimal office space at no cost.



ITEM 3.    Legal Proceedings



The nature of the Banks business generates a certain amount of litigation involving matters arising in the ordinary course of
business. However, in the opinion of Management of the Bank, there are no proceedings pending to which the Bank is a party or to which its property is subject, which, if determined adversely to the Bank, would be material in relation to the
Banks undivided profits or financial condition, nor are there any proceedings pending other than ordinary routine litigation incident to the business of the Bank. In addition, no other material proceedings are pending or are known to be
threatened or contemplated against the bank by government authorities or others.



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



Not Applicable

PART II



ITEM
5.    Market for the Registrants Common Stock and Related Stockholder Matters



|                                                           |  | Number of securities to be issued upon exercise of outstanding options,
warrants and rights |  | Weighted-average exercise price of outstanding options,
warrants and rights |                 | Number of securities remaining available for future issuance under equity compensation
plans (excluding securities reflected in column (a))
|---------------------------------------------------------- |  | ------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------- | --------------- | -------------------------------------------------------------------------------------------------------------------------------------------
|                                                           |  | (a)                                                                                         |  | (b)                                                                         |                 | (c)                                                                                                                                        
|Equity compensation plans approved by security holders     |  | 26,060 shares                                                                               |  | $                                                                           | 23.63 per share |                                                                                                                                            
|Equity compensation plans not approved by security holders |  | 13,500 shares                                                                               |  | $                                                                           | 26.33 per share |                                                                                                                                            
|                                                           |  |                                                                                             |  |                                                                             |                 |                                                                                                                                            
|Total                                                      |  | 39,560 shares                                                                               |  | $                                                                           | 24.55 per share |                                                                                                                                            
|                                                           |  |                                                                                             |  |                                                                             |                 |                                                                                                                                            



The
Company has only one stock option plan, the 1997 Stock Option and Incentive Plan (the Plan), which allows options to be granted for a total of 65,004 common shares of the Companys stock. The terms of this Plan have been approved by
shareholders. However, because the number of options that the Company has agreed to issue to non-officer directors has exceeded certain percentage limitations contained in the Plan, such Excess Grants, totaling options for the purchase
of 13,500 common shares, could be deemed to have been issued under a plan not approved by shareholders. All options, including the Excess Grants, are subject to the terms and conditions of the Plan with respect to vesting and exercise.



Pursuant to the terms of the Plan, options vest and become
exercisable in five equal annual installments; the first 20% becoming exercisable at the conclusion of the first year following the date of grant, the second 20% becoming exercisable at the conclusion of the second year following the date of grant,
and so on. However, unexercised options become fully exercisable in the event that: (1) a qualifying tender offer is made for shares of the Companys common stock; (2) the Companys shareholders approve an agreement whereby the Company
will cease to be an independent, publicly owned company; or (3) the Company agrees to a sale of substantially all of its assets. Unless the terms of an individual grant provide that the options may not be exercised after termination of service, a
director has three months following the date of his or her termination to exercise all options vested as of the date of termination. All options not yet vested at the time of termination are forfeited. Options held by a director whose service
terminates as a result of death or disability become fully exercisable at the time of termination and remain exercisable for three months in the case of termination due to disability, and one year in the case of termination due to death. A director
whose service is terminated for cause forfeits all unexercised stock options, and in no event may any option be exercised more that 10 years following the date of grant.



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Market Prices and Dividends



At December 31, 2002, the Holding Company had approximately 600 shareholders of record. There is no
established public trading market for the outstanding shares of Holding Company Common Stock, although there have been a limited number of private transactions known to the management of the Holding Company. Based solely on information made
available to the Holding Company from a limited number of buyers and sellers, shares of the Holding Company Common Stock that have actually been traded in private transactions since December 31,1994 were all traded between $18.00 and $29.00. There
may, however, have been other transactions at other prices not known to management of the Holding Company.



Payment of dividends by the Bank is subject to regulatory limitations and Ohio banking law. Because cash available for dividend
distribution to shareholders of the Holding Company will initially only come from dividends paid by the Bank to the Holding Company, these regulatory limitations on dividends by the Bank will affect the amount of funds available for dividends by the
Holding Company.



Dividends by the Bank may be
declared by the Bank by its Board of Directors out of surplus. An Ohio bank must generally maintain surplus in an amount which is at least equal to the amount of its capital. In addition to other limitations under Ohio law with respect to the
payment of dividends, the approval of the Division of Financial Institutions is required for the declaration of dividends by an Ohio bank if the total of all dividends declared by such bank in any year exceeds the total of its net profits (as
defined in Section 1117.02 of the Ohio Revised Code) for that year combined with its retained net profits for the preceding two years, less any required transfers to surplus or a fund for the retirement of any preferred stock or capital securities.



In 2002 the Holding Company declared cash
dividends of $0.16 per share payable on February 15, 2002, May 15, 2002, and August 15, 2002, to shareholders of record on February 1, 2002, May 1, 2002, and August 1, 2002. A cash dividend of $0.18 per share was payable on November 15, 2002, to
shareholders of record November 1, 2002. In 2001, the Holding Company declared cash dividends of $0.16 per share payable on February 15, 2001, May 15, 2001, August 15, 2001, and on November 15, 2001 to shareholders of record on February 1, 2001, May
1, 2001, August 1, 2001, and November 1, 2001. In 2000, the Holding Company declared cash dividends of $0.16 per share payable on February 15, 2000, May 15, 2000, August 15, 2000, and on November 15, 2000 to shareholders of record on February 1,
2000, May 1, 2000, August 1, 2000, and November 1, 2000. In 1999, the Holding Company declared cash dividends of $0.30 per share payable on June 15,1999, $0.15 per share payable on August 16, 1999, and $0.16 per share payable on November 15, 1999 to
shareholders of record on June 1, 1999, August 2, 1999, and November 1, 1999. In 1998 the Holding Company declared cash dividends of $0.30 per share payable on June 15, 1998 and December 15, 1998 to shareholders of record on May 15, 1998 and
November 30, 1998. Also on July 24, 1998, the board of directors declared a one-for-one stock dividend in the form of a stock split to shareholders of record on August 14, 1998. In 1997 the Holding Company declared cash dividends of $0.60 per share
payable on December 15, 1997 to shareholders of record of December 9, 1997. In 1996 the Holding Company declared cash dividends of $0.60 per share on December 13, 1996 to shareholders of record on December 6, 1996.



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Dividends paid
by the Holding Company necessarily depend upon earnings, financial condition, appropriate legal restrictions and other factors relevant at the time the Board of Directors of the Holding Company considers dividend payment. Under the Ohio Revised
Code, the Holding Company is prohibited from paying dividends if either the Holding Company would be unable to pay its debts as they become due, or the Holding Companys total assets would be less than its total liabilities plus an amount
needed to satisfy any preferential rights of shareholders. The Holding Company may only pay dividends out of surplus. Surplus is defined as the excess of a corporations assets over its liabilities plus stated capital. Total assets and
liabilities are determined by the Board of Directors, which may base its determination on such factors as it considers relevant, including without limitation: (i) the book values of the assets and liabilities of the Holding Company, as reflected on
its books and records; and (ii) unrealized appreciation and depreciation of the assets of the Holding Company.



|                  |  | 03/31/02 |       | 6/30/02 |   | 09/30/02 |  | 12/31/02
|----------------- |  | -------- | ----- | ------- | - | -------- |  | --------
|High              |  | $        | 18.00 |         | $ | 23.50    |  | $       
|Low               |  | $        | 18.00 |         | $ | 18.00    |  | $       
|Dividend Declared |  | $        | 0.16  |         | $ | 0.16     |  | $       
|                  |  |          |       |         |   |          |  |         
|                 
|                  |  | 03/31/01 |       | 6/30/01 |   | 09/30/01 |  | 12/31/01
|High              |  | $        | 29.00 |         | $ | 27.00    |  | $       
|Low               |  | $        | 27.00 |         | $ | 21.75    |  | $       
|Dividend Declared |  | $        | 0.16  |         | $ | 0.16     |  | $       



If, in
the opinion of the applicable federal bank regulatory authority, a bank under its jurisdiction is engaged in or is about to engage in an unsafe or unsound practice (which, depending on the financial condition of the bank, could include the payment
of dividends), such authority may require, after notice and hearing, that such bank cease and desist from such practice. The Federal Reserve Board has similar authority with respect to bank holding companies. In addition, the Federal Reserve Bank
and the FDIC have issued policy statements which provide that insured banks and bank holding companies should generally only pay dividends out of current operating earnings.



Finally, the federal bank regulatory authorities have established guidelines with respect to the maintenance
of appropriate levels of capital by a bank or bank holding company under their jurisdiction. Compliance with the standards set forth in such policy statements and guidelines could limit the amounts which subsidiaries can pay as dividends and the
amount of dividends which the Holding Company and its subsidiaries may pay.



---

Five Year Consolidated Summary



|                                                    |  |                                                          |            
|--------------------------------------------------- |  | -------------------------------------------------------- | -----------
|                                                    |  | 2002                                                     |            
|                                                    |  | In thousands, except per common share amounts and ratios |            
|Years Ended December 31,                            |  |                                                          |            
|Statements of Income                                |  |                                                          |            
|Interest Income                                     |  | $                                                        | 6,978      
|Interest Expense                                    |  |                                                          | 2,332      
|                                                    |  |                                                          |            
|Net interest income                                 |  |                                                          | 4,646      
|Provision for loan losses                           |  |                                                          | (275       
|                                                    |  |                                                          |            
|Net interest income after provision for loan losses |  |                                                          | 4,921      
|Non-interest income (A)                             |  |                                                          | 912        
|Non-interest expenses                               |  |                                                          | 4,601      
|                                                    |  |                                                          |            
|Income before income taxes                          |  |                                                          | 1,232      
|Income tax expense                                  |  |                                                          | 180        
|                                                    |  |                                                          |            
|Net income                                          |  | $                                                        | 1,052      
|                                                    |  |                                                          |            
|                                                   
|Per Common Share                                    |  |                                                          |            
|Net Income                                          |  |                                                          |            
|Basic                                               |  | $                                                        | 1.82       
|Diluted                                             |  |                                                          | 1.81       
|Dividends declared                                  |  |                                                          | 0.66       
|Stockholders equity                                |  |                                                          | 22.47      
|Stock price range                                   |  |                                                          | 18.00-27.50
|Selected Consolidated Balance Sheet Data            |  |                                                          |            
|Assets                                              |  | $                                                        | 132,390    
|Investment securities                               |  |                                                          | 45,164     
|Loans (B)                                           |  |                                                          | 71,555     
|Deposits                                            |  |                                                          | 97,012     
|Borrowed funds                                      |  |                                                          | 21,246     
|Shareholders equity                                |  |                                                          | 12,908     
|                                                   
|Ratios (C)                                          |  |                                                          |            
|Per $100 of average assets                          |  |                                                          |            
|Net Interest Income (tax-equivalent basis)          |  | $                                                        | 3.86       
|Provision for loan losses                           |  |                                                          | (0.23      
|                                                    |  |                                                          |            
|                                                    |  |                                                          |            
|Net interest income after provision for loan losses |  |                                                          | 4.09       
|Non-interest income                                 |  |                                                          | .76        
|Non-interest expense                                |  |                                                          | 3.83       
|                                                    |  |                                                          |            
|                                                    |  |                                                          |            
|Income before income taxes                          |  |                                                          | 1.02       
|Income tax expense                                  |  |                                                          | .15        
|                                                    |  |                                                          |            
|Net income                                          |  | $                                                        | 0.87       
|                                                    |  |                                                          |            
|                                                   
|Leverage (D)                                        |  |                                                          | 9.82       
|Return on average shareholders equity              |  |                                                          | 8.59       
|Average shareholders equity to average assets      |  |                                                          | 10.16      
|Dividend payout ratio                               |  |                                                          | 38.59      
|Tier 1 capital ratio at December 31                 |  |                                                          | 14.75      
|Tier 1 and Tier 2 capital ratio at December 31      |  |                                                          | 16.00      
|Leverage ratio                                      |  |                                                          | 9.38       



|(A) |  | Includes gains (losses) from securities transactions of $37 in 2002, $40 in 2001, $19 in 2000, $(3) in 1999, and $11 in 1998.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------

|(B) |  | Net of unearned income.
|--- |  | -----------------------

|(C) |  | Based on average balances and net income for the periods.
|--- |  | ---------------------------------------------------------

|(D) |  | The ratio of average assets to average shareholders equity.
|--- |  | -----------------------------------------------------------



---

MANAGEMENTS DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS



General



FC Banc Corp. (the Holding Company or Corporation) is a bank holding company engaged in the business of commercial
and retail banking through its subsidiary The Farmers Citizens Bank (the Bank or Farmers Citizens), which accounts for substantially all of its revenues, operating income, and assets.



The following discussion is intended to focus on and highlight
certain financial information regarding FC Banc Corp. and should be read in conjunction with the financial statements and related notes which have been prepared by the management of FC Banc Corp., in accounting principles generally accepted in the
United States of America. The Audit Committee of the Board of Directors engaged S.R. Snodgrass AC, independent auditors, to audit the financial statements. The auditors report is included as a part of the 2002 Annual Report. To assist in
understanding and evaluating major changes in the Holding Companys financial position and results of operations, two, three and five year comparisons are provided in tabular form for ease of comparison.



Forward-Looking Statements



In addition to the historical information contained herein,
the following discussion contains forward-looking statements that involve risks and uncertainties. Economic circumstances, the operations of the Bank, and the Holding Companys actual results could differ significantly from those discussed in
the forward-looking statements. Some of the factors that could cause or contribute to such differences are discussed herein, but also include changes in economic conditions in the Corporations (or Banks) market area, changes in policies
by regulatory agencies, fluctuations in interest rates, demand for loans in Farmers Citizens market area and competition, that could cause actual results to differ materially from historical earnings and those presently anticipated or
projected.



| | 16. |  | Managements determination of the amount of the allowance for loan losses as set forth under the captions Financial Condition, Comparison of
Results of Operations for the Years Ended December 31, 2002 and 2001;
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 16. |  | Managements discussion of the liquidity of Farmers Citizens assets and regulatory capital of Farmers Citizens as set forth under Effects of
Inflation/Changing Prices and Liquidity and Interest Rate Sensitivity Management; and
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 16. |  | Managements analysis of the interest rate risk of Farmers Citizens as set forth under Effects of Inflation/Changing Prices and Liquidity and
Interest Rate Sensitivity Management.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Corporation does not undertake, and specifically disclaims any obligation, to publicly revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.



Financial Condition



The Corporations consolidated total
assets amounted to $132.4 million at December 31, 2002, an increase of $22.8 million or 20.8%, over the $109.6 million in total assets at December 31, 2001. Such increase in assets was funded by an increase of $11.2 million increase in deposits
and the $10.8 million net increase in borrowings.



---

LoanPortfolio    Loans, as a component of earning
assets, represent a significant portion of earning assets. At December 31, 2002, the Banks real estate loans secured by 1-to-4 family residential properties were $32,227,000. Loans secured by farmland and loans to finance agricultural
production and other loans to farmers were $11,053,000. As noted in Note 4, of the Notes to Consolidated Financial Statements, the Bank also was a creditor for $2,432,000 of loans to related parties.



Loan Information



|                                                 |  | 2002                        |        |    | 2001 |   |         | 2000 |  |   | 1999   |    |  | 1998 |       
|------------------------------------------------ |  | --------------------------- | ------ | -- | ---- | - | ------- | ---- |  | - | ------ | -- |  | ---- | ------
|                                                 |  | In thousands, except ratios |       
|Loans at December 31,                            |  |                             |        |    |      |   |         |      |  |   |        |    |  |      |       
|Loans secured by real estate:                    |  |                             |        |    |      |   |         |      |  |   |        |    |  |      |       
|Construction                                     |  | $                           | 558    |    |      | $ | 1,087   |      |  | $ | 841    |    |  | $    | 416   
|Commercial                                       |  |                             | 22,029 |    |      |   | 19,753  |      |  |   | 20,515 |    |  |      | 20,148
|Residential                                      |  |                             | 32,227 |    |      |   | 26,104  |      |  |   | 27,665 |    |  |      | 23,770
|Commercial, Financial, Agricultural              |  |                             | 7,802  |    |      |   | 5,940   |      |  |   | 5,781  |    |  |      | 6,720 
|Consumer                                         |  |                             | 8,939  |    |      |   | 8,154   |      |  |   | 7,877  |    |  |      | 4,921 
|                                                 |  |                             |        |    |      |   |         |      |  |   |        |    |  |      |       
|Total                                            |  | $                           | 71,555 |    |      | $ | 61,038  |      |  | $ | 62,679 |    |  | $    | 55,975
|                                                 |  |                             |        |    |      |   |         |      |  |   |        |    |  |      |       
|Allowance for Loan Losses                        |  |                             |        |    |      |   |         |      |  |   |        |    |  |      |       
|Balance at beginning of year                     |  | $                           | 1,499  |    |      | $ | 1,496   |      |  | $ | 1,732  |    |  | $    | 1,725 
|Provision for loan losses                        |  |                             | (275   | )  |      |   | 0       |      |  |   | (134   | )  |  |      | (130  
|Charge-offs                                      |  |                             |        |    |      |   |         |      |  |   |        |    |  |      |       
|Commercial and agricultural                      |  |                             | 2      |    |      |   | 35      |      |  |   | 64     |    |  |      | 20    
|Consumer                                         |  |                             | 23     |    |      |   | 56      |      |  |   | 51     |    |  |      | 48    
|Real estate                                      |  |                             | 0      |    |      |   | 0       |      |  |   | 68     |    |  |      | 0     
|                                                 |  |                             |        |    |      |   |         |      |  |   |        |    |  |      |       
|Total Charge-offs                                |  |                             | 25     |    |      |   | 91      |      |  |   | 183    |    |  |      | 68    
|                                                 |  |                             |        |    |      |   |         |      |  |   |        |    |  |      |       
|Recoveries                                       |  |                             |        |    |      |   |         |      |  |   |        |    |  |      |       
|Commercial and agricultural                      |  |                             | 1      |    |      |   | 32      |      |  |   | 39     |    |  |      | 183   
|Consumer                                         |  |                             | 13     |    |      |   | 18      |      |  |   | 42     |    |  |      | 22    
|Real estate                                      |  |                             | 0      |    |      |   | 44      |      |  |   | 0      |    |  |      | 0     
|                                                 |  |                             |        |    |      |   |         |      |  |   |        |    |  |      |       
|Total recoveries                                 |  |                             | 14     |    |      |   | 94      |      |  |   | 81     |    |  |      | 205   
|                                                 |  |                             |        |    |      |   |         |      |  |   |        |    |  |      |       
|Net charge-offs (recoveries)                     |  |                             | 11     |    |      |   | (3      | )    |  |   | 102    |    |  |      | (137  
|                                                 |  |                             |        |    |      |   |         |      |  |   |        |    |  |      |       
|Balance at end of year                           |  | $                           | 1,213  |    |      | $ | 1,499   |      |  | $ | 1,496  |    |  | $    | 1,732 
|                                                 |  |                             |        |    |      |   |         |      |  |   |        |    |  |      |       
|Allocation of Allowance for Loan Losses          |  |                             |        |    |      |   |         |      |  |   |        |    |  |      |       
|Commercial                                       |  | $                           | 861    |    |      | $ | 1,187   |      |  | $ | 1,044  |    |  | $    | 1,296 
|Consumer                                         |  |                             | 130    |    |      |   | 113     |      |  |   | 108    |    |  |      | 69    
|Real estate                                      |  |                             | 222    |    |      |   | 190     |      |  |   | 199    |    |  |      | 168   
|Unallocated                                      |  |                             | 0      |    |      |   | 9       |      |  |   | 145    |    |  |      | 199   
|                                                 |  |                             |        |    |      |   |         |      |  |   |        |    |  |      |       
|Total                                            |  | $                           | 1,213  |    |      | $ | 1,499   |      |  | $ | 1,496  |    |  | $    | 1,732 
|                                                 |  |                             |        |    |      |   |         |      |  |   |        |    |  |      |       
|Credit Quality Ratios                            |  |                             |        |    |      |   |         |      |  |   |        |    |  |      |       
|Net charge-offs as a percentage of average loans |  |                             | 0.01   | %  |      |   | (0.00   | %)   |  |   | 0.17   | %  |  |      | (.27  
|Allowance for loan losses to                     |  |                             |        |    |      |   |         |      |  |   |        |    |  |      |       
|Total loans at year-end                          |  |                             | 1.69   | %  |      |   | 2.45    | %    |  |   | 2.39   | %  |  |      | 3.09  
|Net charge-offs                                  |  |                             | 110.27 |    |      |   | 499.67  |      |  |   | 14.67  |    |  |      | (12.64
|Provision for loan losses to average loans       |  |                             | (0.41  | %) |      |   | 0.00    | %    |  |   | (0.23  | %) |  |      | (0.26 
|Earnings coverage of net charge-offs             |  |                             | 112.00 |    |      |   | (385.33 | )    |  |   | 11.68  |    |  |      | (10.47



---

Average loans increased 4.02% in 2002 to represent 61.02% of average earning assets
compared to 64.63% in 2001. Year-end total real estate loans of $54,814,000 represent approximately 76.60%of the total loans outstanding compared to 76.90% for the previous year-end. Consumer loans increased from $8,154,000 in 2001 to $8,939,000 in
2002. Commercial, financial, and agricultural loans increased 31.34%, from $5,940,000 on December 31, 2001, to $7,802,000 on December 31, 2002. The loan information table provides a five-year loan history.



In addition to the loans reported in the loan information
table, there are certain off-balance sheet products such as letters of credit and loan commitments that are offered under the same credit standards as the loan portfolio. Management closely monitors the financial condition of potential creditors
throughout the term of the instruments to assure that they maintain credit standards. Refer to Note 11 for additional information on off-balance sheet financial instruments.



Non-Performing Assets    Non-accrual loans as of December 31, 2002, were $174,000
compared to $0 as of the previous year end. Loans which are contractually past due 90 days more amounted to $11,000 as of December 31, 2002, which were also $0 as of the previous year end. Management believes that the Allowance for Loan Losses is
adequate to cover any potential losses in the loan portfolio at December 31, 2002. Refer to the section entitled Allowance for Loan Losses for additional detail.



A loan is placed on non-accrual when payment terms have been seriously violated (principal and/or interest
payments are 90 days or more past due, deterioration of the borrowers ability to repay, or significant decrease in value of the underlying loan collateral) and stays on non-accrual until the loan is brought current as to principal and
interest. The classification of a loan or other asset as non-accruing does not indicate that loan principal and interest will not be collectible. The Bank adheres to the policy of the Federal Reserve that banks may not accrue interest on any loan
when the principal or interest is past due and has remained unpaid for 90 days or more unless the loan is both well secured and in the process of collection.



A loan is considered restructured or renegotiated when either the rate is reduced below current market rate for that type of risk,
principal or interest is forgiven, or the term is extended beyond that which the Bank would accept for loans with comparable risk. Property obtained from foreclosing on loans secured by real estate is adjusted to market value prior to being
capitalized in an Other Real Estate account for possible resale. Regulatory provisions on other real estate are such that after five years, or ten years under special circumstances, property must be charged-off. This period gives the
Bank adequate time to make provisions for disposing of any real estate property.



Loans accounted for as non-performing (non-accrual, restructured, past due 90-days or more, and impaired) loans as of year-end 2002 amounted to $185,000. Please refer to the following section entitled
Allowance for Loan Losses for additional explanation.



Allowance for Loan Losses    The allowance for loan losses was established and is maintained by periodic charges to the provision for loan loss, an operating expense, in order to provide for
potential losses inherent in the Banks loan portfolio. Loan losses and recoveries are charged or credited respectively to the allowance for loan losses as they occur.



The allowance/provision for loan losses is determined by management by considering such factors as the size
and character of the loan portfolio, loan loss experience, problem loans, and economic conditions in the market area of the Bank. The risk associated with the lending operation can be minimized by evaluating each loan independently based on criteria
which includes, but is not limited to, (a) the purpose of the loan, (b) the credit history of the borrower, (c) the borrowers financial standing and trends, (d) the market value of the collateral involved, and (e) the down payment
received.



Management utilizes an internal loan
review procedure to provide for analysis of operating data, tax returns and financial statement performance ratios for all significant loans, regulatory classified loans, past



---

due loans and internally identified watch loans. The Banks examiners and independent
auditors will periodically perform independent credit reviews of the Banks borrowers and evaluate the adequacy of the allowance for loan losses account based upon the results of their review and other factors. Management and the Board of
Directors, in determining the adequacy of the allowance for loan loss account on a quarterly basis, use the results of the quarterly credit reviews in conjunction with independent collateral evaluations.



During 2002 management thoroughly reviewed the reserve for
loan losses and determined that a $275,000 negative provision was warranted and appropriate. In addition to the internal analysis, external reviews also indicated that the resulting reserve for loan losses was adequate as well as comparison to both
peer groups and industry standards. As of December 31, 2002, the reserve for loan losses was $1,213,000, which represents 1.69% of outstanding loans. This reserve, which is significantly higher than peer groups, was increased in 1994 and 1995
specifically due to loan concerns of the regulators. Current evaluations of our portfolio, both internally and through independent sources, indicate that that risk no longer exists. The negative provision was based upon our ongoing loan reviews, and
composites of the loan portfolio. With a high concentration of loans secured by one to four family residential properties and other forms of collateral which are considered to have less risk. Current analysis indicated that this level of reserve is
adequate give the current economic trends, delinquency patterns and loan quality within the various portfolios.



Investments    The investment portfolio represents the second largest use of financial resources. The
investment portfolio of the Bank includes United States securities, state and municipal obligations, corporate securities, and mortgage backed securities. securities categorized as available-for-sale can and will be sold prior to
maturity to meet liquidity or other funding needs. It is managements intent to hold those securities categorized as held-to-maturity until their maturity unless they are subject to an earlier redemption via a call
feature. At December 31, 2002 and 2001, the entire investment portfolio of the Bank was classified as available-for-sale. Average investments increased by $11,717,000 during 2002 from an average of $29,089,000 during 2001 to $40,806,000 during
2002, an increase of 40.28%. During the same period, the average balance of the federal funds sold decreased from $5,421,000 in 2001 to $1,211,000 in 2002. Federal funds sold are consistently maintained at levels that will cover the short-term
liquidity needs of the Bank. Because of changes in interest rates, and the increases of borrowings, portions of the excess available funds were invested in investments. Average cash and due from bank balances increased slightly from $3,045,000 in
2001 to $3,271,000 in 2002. The Bank utilizes a number of outside sources to analyze, evaluate, and obtain advice relative to the management of its investment portfolio. The Bank does not invest in any one type of security over another. Funds
allocated to the investment portfolio are constantly monitored by management to ensure that a proper ratio of liquidity and earnings is maintained.



---

The amortized cost and estimated market values of securities available for sale are as
follows:



|                                                |  | 2002          
|----------------------------------------------- |  | --------------
|                                                |  | Amortized Cost
|U.S. Government agency Securities               |  | $             
|Obligations of state and Political subdivisions |  |               
|Mortgage-backed securities                      |  |               
|                                                |  |               
|Total debt securities                           |  |               
|Equity securities                               |  |               
|                                                |  |               
|Total                                           |  | $             
|                                                |  |               

|                                               
|-----------------------------------------------
|                                               
|                                               
|U.S. Government agency Securities              
|Obligations of state and Political subdivisions
|Corporate securities                           
|Mortgage-backed securities                     
|                                               
|Total debt securities                          
|Equity securities                              
|                                               
|Total                                          
|                                               



The
amortized cost and estimated market value of debt securities at December 31, 2002, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.



|                                       |  | Amortized Cost |        | Estimated Market Value
|-------------------------------------- |  | -------------- | ------ | ----------------------
|Due in one year or less                |  | $              | 1,243  |                       
|Due after one year through five years  |  |                | 4,892  |                       
|Due after five years through ten years |  |                | 6,815  |                       
|Due after ten years                    |  |                | 31,343 |                       
|                                       |  |                |        |                       
|Total                                  |  | $              | 44,293 |                       
|                                       |  |                |        |                       



Investment securities with a carrying value of $18,792 and $17,908 at December 31, 2002 and 2001, respectively, were pledged to secure deposits and other purposes as required by law.



---

The following is a summary of proceeds received, gross gains, and gross losses realized on
the sale of investment securities available for sale for the years ended December 31, 2002, 2001, and 2000.

|                    |  | 2002 |        |   | 2001 |   | 2000
|------------------- |  | ---- | ------ | - | ---- | - | ----
|Proceeds from sales |  | $    | 10,045 |   |      | $ | 130 
|Gross gains         |  |      | 63     |   |      |   | 40  
|Gross losses        |  |      | (26    | ) |      |   |    



Deposits     The Consolidated Average Balance Sheets and Related Yields and Rates table highlights average deposits and interest rates during the last three years. Average deposits in 2002 have increased by
approximately $5,408,000, or 7.50% from 2001 averages, which had decreased $ 1,733,000, or 2.02% compared to 2000. The average cost of deposits for the Bank was approximately 2.34% for the year-ended December 31, 2002 compared to 3.52% and 3.84% for
2001 and 2000, respectively.



Time deposits at
December 31, 2002 mature $29,045, $8,770, $8,035, $2,729, $1,603, and $0 during 2003, 2004, 2005, 2006, 2007, and beyond 2007, respectively.



Time deposits include certificates of deposit in denominations of $100,000 or more. Such deposits aggregated $13,895 and $7,469 at
December 31, 2002 and 2001, respectively.



Maturities on time deposits of $100,000 or more at December 31, 2002 are as follows:



|Within three months                 |  | $  2,769
|----------------------------------- |  | --------
|Beyond three but within six months  |  | 5,743   
|Beyond six but within twelve months |  | 2,015   
|Beyond one year                     |  | 3,368   
|                                    |  |         
|Total                               |  | $13,895 
|                                    |  |         



---

Consolidated Average Balance Sheets and Related Yields and Rates*

|                                               | 
|---------------------------------------------- | 
|                                               | 
|                                               | 
|                                               | 
|Assets                                         | 
|Cash and due from banks                        | 
|Federal Funds sold                             | 
|Investment securities                          | 
|Taxable securities                             | 
|Tax-exempt securities                          | 
|                                               | 
|Total Investment securities                    | 
|Loans                                          | 
|Real Estate                                    | 
|Consumer                                       | 
|Commercial (includes real estate)              | 
|                                               | 
|Total loans                                    | 
|Total earning assets                           | 
|Allowance for loan losses                      | 
|Other assets                                   | 
|                                               | 
|Total assets                                   | 
|                                               | 
|Liabilities and Shareholders Equity           | 
|Non-interest-bearing deposits                  | 
|Interest-bearing deposits                      | 
|NOW accounts                                   | 
|Money market accounts                          | 
|Savings accounts                               | 
|Time deposits                                  | 
|                                               | 
|Total interest-bearing deposits                | 
|Borrowed funds                                 | 
|                                               | 
|Total interest-bearing liabilities             | 
|Other liabilities                              | 
|Shareholders equity                           | 
|                                               | 
|Total liabilities and shareholders equity     | 
|                                               | 
|Net interest income (tax-equivalent basis)     | 
|                                               | 
|Yield spread                                   | 
|Net interest income to earnings assets         | 
|Interest-bearing liabilities to earning assets | 



|* |  | Interest income/expense and yield/rates are calculated on a tax-equivalent basis utilizing a federal incremental tax rate of 35% in 2002, 2001 and 2000. Non-accrual
loans and the related negative income effect have been included in the calculation of average rates.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

SHORT-TERM BORROWINGS



The outstanding balances and related information of short-term borrowings which includes securities sold
under agreements to repurchase, are summarized as follows:



|                                      |  | 2002 |       |   | 2001 |  
|------------------------------------- |  | ---- | ----- | - | ---- | -
|Balance at year-end                   |  | $    | 4,477 |   |      | $
|Average balance outstanding           |  |      | 5,136 |   |      |  
|Maximum month-end balance             |  |      | 6,697 |   |      |  
|Weighted-average rate at year-end     |  |      | 1.41  | % |      |  
|Weighted-average rate during the year |  |      | 1.71  | % |      |  



Average
balances outstanding during the year represent daily average balances, and average interest rates represent interest expense divided by the related average balance.



Investment securities with a carrying value of $4,892 and $8,072 at December 31, 2002 and 2001, respectively,
were pledged as collateral for these borrowings.



OTHER
BORROWINGS



Other borrowings are summarized
as follows:



|                            |  | Maturity Date |  | Amount |         | Rate |      
|--------------------------- |  | ------------- |  | ------ | ------- | ---- | -----
|FHLB fixed-rate advance     |  | 02/22/04      |  | $      | 1,000   |      | 5.47 
|FHLB fixed-rate advance     |  | 03/21/06      |  |        | 1,000   |      | 5.35 
|FHLB mortgage matched       |  | 11/01/11      |  |        | 914     |      | 4.99 
|FHLB convertible 10/5       |  | 10/04/11      |  |        | 1,000   |      | 4.32 
|FHLB convertible 10/5       |  | 11/09/11      |  |        | 2,000   |      | 3.97 
|FHLB convertible 5 year     |  | 04/23/07      |  |        | 5,000   |      | 4.57 
|FHLB cmp advance            |  | 07/26/07      |  |        | 2,347   |      | 3.48 
|FHLB convertible 10/5 4.03% |  | 07/26/12      |  |        | 2,500   |      | 2,500
|FHLB fixed-rate advance     |  | 12/11/07      |  |        | 1,000   |      | 3.68 
|                            |  |               |  |        |         |      |      
|                            |  |               |  |        | 16,761  |      |      
|Note payable                |  |               |  |        | 8       |      |      
|                            |  |               |  |        |         |      |      
|                            |  |               |  |        | $16,769 |      |      
|                            |  |               |  |        |         |      |      



Borrowing capacity consists of credit arrangements with the FHLB of Cincinnati. FHLB borrowings are subject to annual renewal, incur no service charges, and are secured by a blanket security agreement on certain investment and
mortgage-backed securities, outstanding residential mortgages, and the Banks investment in FHLB stock. As of December 31, 2002, the Banks maximum borrowing capacity with the FHLB was approximately $59,381.



---

Shareholders Equity Maintaining a strong capital position in order to absorb
inherent risk is one of managements top priorities. Selected capital ratios for the last five years, presented in the five-year Consolidated Financial Summary, reveals that the Bank has been able to maintain an average equity to average asset
ratio of greater than 10% for the past five years. It should be noted that this ratio has decreased by 88 basis points in 2002 to 10.16% and decreased by 48 basis points in 2001. It should also be noted that the return on average assets declined by
3 basis points in 2002, from 0.90% in 2001 to 0.87% in 2002.



Banking regulations in 1989 established minimum capital ratios for banks. The primary purpose of these requirements is to assess the risk of a financial institutions balance sheet and off balance sheet financial instruments in
relation to adjusted capital. A minimum total qualifying capital ratio of at least 8% with at least 4% of capital composed of Tier I (core) capital had to be maintained. Tier I capital includes common equity, non-cumulative perpetual preferred
stock, and minority interest less goodwill and other disallowed intangibles. Tier II (supplementary) capital includes subordinate debt, intermediate term preferred stock, the allowance for loan losses and preferred stock not qualifying for Tier I
capital. Tier II capital is limited to 100% of Tier I capital. At December 31, 2002 the Companys risk-based capital ratio for Tier I and Tier II capital is 14.75% and 16.00%, respectively, thus meeting the required 4% and 8% for Tier I and
Tier II capital. The five-year Consolidated Financial Summary table and Note 13 to the Consolidated Financial Statements summarizes the risk-based capital of the Bank, leverage components and ratios.



---

Comparison of Results of Operations for the Years Ended December 31, 2002 and 2001



General Net income for the year-ended
December 31, 2002, was $1,052,000, an increase of $89,000, or 9.24%, over the $963,000 net income in 2001. The increase in net income resulted primarily from increases of $648,000 in net interest income and $134,000 in non-interest income, and a
decrease in the provision for loan losses of $275,000 and income tax expense of $13,000. These were offset by an increase in non-interest expenses of $981,000.



Net Interest Income Interest income totaled $6.978 million for the year-ended December 31, 2002, an increase of $97,000 or 1.41% from the
$6.881 million recorded in 2001. The average rate earned on earning assets decreased from 7.27% in 2001 to 6.75% in 2002. Interest income on investment securities increased by $413,000, or 27.61%, due to the increase in the size of the investment
portfolio coupled with a decrease of 43 basis points in the weighted-average yield year-to-year, from 5.74% in 2001 to 5.31% in 2002. Interest income on federal funds sold decreased by $174,000 for the year-ended December 31, 2002. The average
balance invested in federal funds sold decreased by $4,210,000 compared to 2001. The yield on federal funds sold decreased from 3.58%in 2001 to 1.57% in 2002.



Interest expense decreased by $551,000, or 19.11%, during 2002, due primarily to the reduction of interest rates. The average cost of
deposits decreased from 3.52% in 2001 to 2.34% in 2002. Interest expense on borrowings increased by $297,000 due to the increase in average balance outstanding from $9,094,000 in 2001 to $16,777,000 in 2002. The yield on borrowed funds also
decreased from 3.82% in 2001 to 3.08% in 2002.



As a result of the forgoing changes in interest income and interest expense, net interest income increased by $648,000 or 16.21%, during 2002, as compared to 2001. This increase was due mostly to overall growth of the bank and the
reduction in cost of funds. The interest rate spread increased by 57 basis points to 4.28% for 2002 as compared to 3.71% for 2001, while the net interest margin increased by 27 basis points to 4.58% for year 2002 compared to 4.31% in 2001.



Provision for Loan Losses Farmers Citizens
maintains an allowance for loan losses in an amount, which, in managements judgement, is adequate to absorb reasonably foreseeable losses inherent in the loan portfolio. The provision for loan losses is determined by management as the amount
to be added to the allowance for loan losses, after net charge-offs have been deducted, to bring the allowance to a level which is considered adequate to absorb potential losses inherent in the loan portfolio in accordance with generally accepted
accounting principles (GAAP). The amount of the provision is based on managements regular review of the loan portfolio and consideration of such factors as historical loss experience, generally prevailing economic conditions,
changes in size and composition of the loan portfolio and considerations relating to specific loans, including the ability of the borrower to repay the loan and the estimated value of the underlying collateral. Although a variety of factors,
including the performance of Farmers Citizens loan portfolio, the economy, changes in real estate values, interest rates and regulatory requirements regarding asset classifications. As a result of its analysis, management concluded that the
allowance was adequate as of December 31, 2002. There can be no assurance that the allowance will be adequate to cover future losses on non-performing assets.



The Bank experienced net charge-offs of $11,000 in 2002 compared to net recoveries of $3,000 in 2001. Farmers Citizens charge-off
history is a product of a variety of factors, including Farmers Citizens underwriting guidelines and the composition of its loan portfolio. An analysis of the Allowance for Loan Losses is presented in the Loan Information table.



There was a negative provision of $275,000 for possible loan
losses in 2002. There was no provision for possible loan losses during 2001, and a negative provision of $134,000 in 2000. The negative provision in 2002 was based upon the results of managements quarterly reviews of the loan portfolio to
identify problem and potential problem loans and to determine appropriate courses of action on a loan-by-loan basis. Collection procedures are activated when a loan becomes past due.



---

The entire allowance for loan losses is available to absorb any particular loan loss. For
analytical purposes, the allowance could be allocated based upon net historical charge-offs of each type of loan for the last five years. However, the primary criteria used to determine the percentage allocation is based upon the losses experienced,
the type and market value of the collateral securing the loan portfolio, and the financial standing of certain borrowers due to economic trends in their related businesses or farming operations. Please refer to the Loan Information table for the
allocation of the allowance.



Management believes
significant factors affecting the allowance are being reviewed regularly and that the allowance is adequate to cover potentially uncollectible loans as of December 31, 2002. The Bank has no exposure from troubled debt to lesser-developed countries.



The allowance for loan losses to total
loans at year-end ratio decreased to 1.69% in 2002 from 2.45% in 2001, and decreased from 2.39% in 2000. The decrease was due primarily to the increase in the loan portfolio and the negative provision for loan losses. An analysis of the
Allowance for Loan Losses is presented in the Loan Information table.



Non-Interest Income    Non-interest income increased from $778,000 in 2001 to $912,000 in 2002. This increase was due to increases in service charge income, loan fees, and gain on sale of
investments. Non-interest income is comprised of service fee income from deposit accounts, loan fees, and increases in the cash surrender values of life insurance policies.



Non-Interest Expense    Non-interest expense increased from $3,620,000 in 2001 to
$ 4,601,000 in 2002. Salaries and employee benefits increased by 38.25% or $647,000 in 2002. $291,000 or 44.98% of the increase in salaries and employee benefits is attributable to the termination of the employment contract of the former President
of the Company. The balance of the increase is represented by an increase in bonus wages, employee benefits and levels of staff. Professional fees also increased by 28.35% or $55,000 and other expense increased by $216,000 or 28.45% as a result of
increased legal and professional costs. Net occupancy increased slightly in 2002 to $670,000 from $659,000 in 2001. Non-interest expense is comprised of operating expense attributed to staffing (personnel costs), operation and maintenance of bank
buildings and equipment, banking service promotion, state franchise taxes and assessments, and other operating expenses.



Income Taxes    The provision for federal income taxes totaled $180,000 for the fiscal year-ended December 31,
2002, a decrease of $13,000, or 6.74%, over the provision in 2001. The effective tax rates were 14.6% and 16.7% for the years ended December 31, 2002 and 2001.



Impacting the tax provisions for the five years covered in the five-year consolidated financial summary is the level of net income of the
bank and holding company, and the level of tax-exempt income on securities, which was $498,000; $291,000; $269,000, $318,000; and $349,000 for the years 2002, 2001, 2000, 1999, and 1998, respectively.



The Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (SFAS) No. 109, Accounting for Income Taxes requiring a liability approach to accounting for income taxes as opposed to a deferred approach. The liability approach places emphasis on the accuracy of the
balance sheet while the deferred approach emphasizes the income statement. Under the liability approach, deferred taxes are computed based on the tax rates in effect for the periods in which temporary differences are expected to reverse. An annual
adjustment of the deferred tax liability or asset is made for any subsequent change in tax rates.



Effects of Inflation/Changing Prices    The effects of inflation on operations of the Bank occurs through
increased operating costs which can be recovered through increased prices for services. Virtually all of the Banks assets and liabilities are monetary in nature and can be re-priced on a more frequent basis than in other industries. Every
effort is being made through interest sensitivity management to monitor products and interest rates and their impact on future earnings.



---

Liquidity and Interest Rate Sensitivity Management Management utilizes several tools
currently available to monitor and ensure that liquid funds are available to satisfy the normal loan and deposit needs of its customers while taking advantage of investment opportunities as they arise in order to maintain consistent growth and
interest income. Cash and due from banks, marketable investment securities with maximum one-year maturities, and federal funds sold are the principal components of asset liquidity. The Interest Rate Sensitivity table, indicates that the
Bank is in a liability sensitive position which is more beneficial in a period of declining interest rates since liabilities can be re-priced at lower rates. In periods of rising interest rates, interest sensitive assets are more favorable since
they allow adjustment of interest sensitive assets prior to maturing interest sensitive liabilities.



Interest Rate Sensitivity

|                                            |  | December 31, 2002           |        |    | Repricing or Maturing  
|------------------------------------------- |  | --------------------------- | ------ | -- | -----------------------
|                                            |  | Within 3 Months             |        |    | Over 3 Months to 1 Year
|                                            |  | In thousands, except ratios
|                                           
|Loans                                       |  | $                           | 8,792  |    |                        
|Investment securities                       |  |                             | 4,080  |    |                        
|Other earning assets                        |  |                             |       |    |                        
|Other assets                                |  |                             |       |    |                        
|Total assets                                |  | $                           | 12,878 |    |                        
|Noninterest-bearing deposits                |  |                             |        |    |                        
|Interest-bearing deposits                   |  | $                           | 14,539 |    |                        
|Borrowed funds                              |  |                             | 4,477  |    |                        
|Other liabilities and equity                |  |                             |       |    |                        
|Total liabilities and equity                |  | $                           | 19,016 |    |                        
|Gap*                                        |  | $                           | (6,144 | )  |                        
|Cumulative gap                              |  |                             | (6,144 | )  |                        
|Cumulative gap as a percent of total        |  |                             | (4.63  | %) |                        
|                                           
|                                            |  | December 31, 2001           |        |    | Repricing or Maturing  
|                                            |  | Within 3 Months             |        |    | Over 3 Months to 1 Year
|                                            |  | In thousands, except ratios
|                                           
|Loans                                       |  | $                           | 6,282  |    |                        
|Investment securities                       |  |                             | 5,316  |    |                        
|Other earning assets                        |  |                             |       |    |                        
|Other assets                                |  |                             |        |    |                        
|Total assets                                |  | $                           | 11,598 |    |                        
|Noninterest-bearing deposits                |  |                             |        |    |                        
|Interest-bearing deposits                   |  | $                           | 15,484 |    |                        
|Borrowed funds                              |  |                             | 4,085  |    |                        
|Other liabilities and equity                |  |                             |        |    |                        
|Total liabilities and equity                |  | $                           | 19,569 |    |                        
|Gap*                                        |  | $                           | (7,971 | )  |                        
|Cumulative gap                              |  |                             | (7,971 | )  |                        
|Cumulative gap as a percent of total assets |  |                             | (7.27  | %) |                        



---

S R Snodgrass

1000 Stonewood Drive

Suite 200



REPORT OF INDEPENDENT AUDITORS



Board of Directors and Stockholders

FC Banc Corp.



We have
audited the accompanying consolidated balance sheet of FC Banc Corp. and subsidiary as of December 31, 2002 and 2001, and the related consolidated statements of income, changes in stockholders equity, and cash flows for the years then ended.
These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits. The consolidated statements of income, changes in stockholders
equity, and cash flows for the year ended December 31, 2000, were audited by other auditors whose report dated January 17, 2001 expressed an unqualified opinion on those statements.



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 audit 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 FC Banc Corp. and subsidiary as of December 31, 2002 and 2001 and the results of their
operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.



/s/ S.R. Snodgrass, A.C.



Wexford, PA

January 10, 2003



---

FC BANC CORP.

CONSOLIDATED BALANCE SHEET



|                                                                                          |  | December 31,           |        
|----------------------------------------------------------------------------------------- |  | ---------------------- | -------
|                                                                                          |  | 2002                   |        
|                                                                                          |  | (Dollars in thousands) |        
|ASSETS                                                                                    |  |                        |        
|Cash and due from banks                                                                   |  | $                      | 4,825  
|Federal funds sold                                                                        |  |                        |       
|                                                                                          |  |                        |        
|Cash and cash equivalents                                                                 |  |                        | 4,825  
|Investment securities available for sale                                                  |  |                        | 45,164 
|Loans                                                                                     |  |                        | 71,555 
|Less allowance for loan losses                                                            |  |                        | 1,213  
|                                                                                          |  |                        |        
|Net loans                                                                                 |  |                        | 70,342 
|Premises and equipment                                                                    |  |                        | 7,023  
|Bank owned life insurance                                                                 |  |                        | 2,757  
|Accrued interest and other assets                                                         |  |                        | 2,279  
|                                                                                          |  |                        |        
|TOTAL ASSETS                                                                              |  | $                      | 132,390
|                                                                                          |  |                        |        
|LIABILITIES                                                                               |  |                        |        
|Deposits:                                                                                 |  |                        |        
|Noninterest-bearing                                                                       |  | $                      | 13,403 
|Interest-bearing                                                                          |  |                        | 83,609 
|                                                                                          |  |                        |        
|Total deposits                                                                            |  |                        | 97,012 
|                                                                                         
|Short-term borrowings                                                                     |  |                        | 4,477  
|Other borrowings                                                                          |  |                        | 16,769 
|Accrued interest and other liabilities                                                    |  |                        | 1,224  
|                                                                                          |  |                        |        
|TOTAL LIABILITIES                                                                         |  |                        | 119,482
|                                                                                          |  |                        |        
|STOCKHOLDERS EQUITY                                                                      |  |                        |        
|Preferred stock of $25 par value; 750 shares authorized, no shares issued and
outstanding |  |                        |       
|Common stock, no par value; 4,000,000 shares authorized, 665,632 shares
issued            |  |                        | 832    
|Additional paid-in capital                                                                |  |                        | 1,364  
|Retained earnings                                                                         |  |                        | 12,463 
|Accumulated other comprehensive income                                                    |  |                        | 536    
|Treasury stock, at cost (91,205 and 75,478 shares)                                        |  |                        | (2,287 
|                                                                                          |  |                        |        
|TOTAL STOCKHOLDERS EQUITY                                                                |  |                        | 12,908 
|                                                                                          |  |                        |        
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                |  | $                      | 132,390
|                                                                                          |  |                        |        



See accompanying notes to consolidated financial statements.



---

FC BANC CORP.

CONSOLIDATED STATEMENT OF INCOME



|                                                    |  | Year Ended December 31, |      
|--------------------------------------------------- |  | ----------------------- | -----
|                                                    |  | 2002                    |      
|                                                    |  | (Dollars in thousands)  |      
|INTEREST INCOME                                     |  |                         |      
|Interest and fees on loans                          |  | $                       | 5,050
|Federal funds sold                                  |  |                         | 19   
|Investment securities:                              |  |                         |      
|Taxable                                             |  |                         | 1,411
|Exempt from federal income tax                      |  |                         | 498  
|                                                    |  |                         |      
|Total interest income                               |  |                         | 6,978
|                                                    |  |                         |      
|INTEREST EXPENSE                                    |  |                         |      
|Deposits                                            |  |                         | 1,815
|Short-term borrowings                               |  |                         | 76   
|Other borrowings                                    |  |                         | 441  
|                                                    |  |                         |      
|Total interest expense                              |  |                         | 2,332
|                                                    |  |                         |      
|NET INTEREST INCOME                                 |  |                         | 4,646
|Provision for loan losses                           |  |                         | (275 
|                                                    |  |                         |      
|NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES |  |                         | 4,921
|                                                    |  |                         |      
|NONINTEREST INCOME                                  |  |                         |      
|Service charges on deposit accounts                 |  |                         | 541  
|Investment securities gains, net                    |  |                         | 37   
|Bank-owned life insurance earnings                  |  |                         | 161  
|Other income                                        |  |                         | 173  
|                                                    |  |                         |      
|Total noninterest income                            |  |                         | 912  
|                                                    |  |                         |      
|NONINTEREST EXPENSE                                 |  |                         |      
|Salaries and employee benefits                      |  |                         | 2,338
|Net occupancy and equipment expenses                |  |                         | 670  
|Professional fees                                   |  |                         | 249  
|State franchise tax                                 |  |                         | 155  
|Loss on disposal of premises and equipment          |  |                         |     
|Data processing                                     |  |                         | 214  
|Other expense                                       |  |                         | 975  
|                                                    |  |                         |      
|Total noninterest expense                           |  |                         | 4,601
|                                                    |  |                         |      
|Income before income taxes                          |  |                         | 1,232
|Income taxes                                        |  |                         | 180  
|                                                    |  |                         |      
|NET INCOME                                          |  | $                       | 1,052
|                                                    |  |                         |      
|EARNINGS PER SHARE                                  |  |                         |      
|Basic                                               |  | $                       | 1.82 
|Diluted                                             |  |                         | 1.81 
|.                                                   |  |                         |      



See
accompanying notes to consolidated financial statements



---



FC BANC CORP



CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS EQUITY



|                                                                        |  | Common Stock           |     | Additional Paid-in Capital |   |       | Retained Earnings |   |   | Accumulated Other Comprehensive Income |     |   | Treasury Stock |      |     | Total Stockholders Equity |   |        | Comprehensive Income | 
|----------------------------------------------------------------------- |  | ---------------------- | --- | -------------------------- | - | ----- | ----------------- | - | - | -------------------------------------- | --- | - | -------------- | ---- | --- | -------------------------- | - | ------ | -------------------- | 
|                                                                        |  | (Dollars in thousands) |    
|Balance, December 31, 1999                                              |  | $                      | 832 |                            | $ | 1,371 |                   |   | $ | 10,720                                 |     |   | $              | (523 | )   |                            | $ | (1,047 | )                    | 
|Net income                                                              |  |                        |     |                            |   |       |                   |   |   | 886                                    |     |   |                |      |     |                            |   |        |                      | 
|Other comprehensive income:                                             |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                |      |     |                            |   |        |                      | 
|Unrealized gain on available for sale                                   |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                |      |     |                            |   |        |                      | 
|securities, net of reclassification                                     |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                |      |     |                            |   |        |                      | 
|Adjustment, net of taxes of $225                                        |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                | 449  |     |                            |   |        |                      | 
|Comprehensive income                                                    |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                |      |     |                            |   |        |                      | 
|                                                                        |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                |      |     |                            |   |        |                      | 
|Cash dividends ($.64 per share)                                         |  |                        |     |                            |   |       |                   |   |   | (394                                   | )   |   |                |      |     |                            |   |        |                      | 
|Purchase of treasury stock                                              |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                |      |     |                            |   | (570   | )                    | 
|Exercise of stock options (2,360 shares)                                |  |                        |     |                            |   | (5    | )                 |   |   |                                        |     |   |                |      |     |                            |   | 57     |                      | 
|                                                                        |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                |      |     |                            |   |        |                      | 
|Balance, December 31, 2000                                              |  |                        | 832 |                            |   | 1,366 |                   |   |   | 11,212                                 |     |   |                | (74  | )   |                            |   | (1,560 | )                    | 
|Net income                                                              |  |                        |     |                            |   |       |                   |   |   | 963                                    |     |   |                |      |     |                            |   |        |                      | 
|Other comprehensive income:                                             |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                |      |     |                            |   |        |                      | 
|Unrealized gain on available for sale                                   |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                |      |     |                            |   |        |                      | 
|securities, net of reclassification                                     |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                |      |     |                            |   |        |                      | 
|adjustment, net of taxes of $95                                         |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                | 183  |     |                            |   |        |                      | 
|Comprehensive income                                                    |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                |      |     |                            |   |        |                      | 
|                                                                        |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                |      |     |                            |   |        |                      | 
|Cash dividends ($.64 per share)                                         |  |                        |     |                            |   |       |                   |   |   | (382                                   | )   |   |                |      |     |                            |   |        |                      | 
|Purchase of treasury stock                                              |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                |      |     |                            |   | (361   | )                    | 
|                                                                        |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                |      |     |                            |   |        |                      | 
|Balance, December 31, 2001                                              |  |                        | 832 |                            |   | 1,366 |                   |   |   | 11,793                                 |     |   |                | 109  |     |                            |   | (1,921 | )                    | 
|Net income                                                              |  |                        |     |                            |   |       |                   |   |   | 1,052                                  |     |   |                |      |     |                            |   |        |                      | 
|Other comprehensive income:                                             |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                |      |     |                            |   |        |                      | 
|Unrealized gain on available for sale                                   |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                |      |     |                            |   |        |                      | 
|securities, net of reclassification                                     |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                |      |     |                            |   |        |                      | 
|Adjustment, net of taxes of $220                                        |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                | 427  |     |                            |   |        |                      | 
|Comprehensive income                                                    |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                |      |     |                            |   |        |                      | 
|                                                                        |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                |      |     |                            |   |        |                      | 
|Cash dividends ($.66 per share)                                         |  |                        |     |                            |   |       |                   |   |   | (382                                   | )   |   |                |      |     |                            |   |        |                      | 
|Purchase of treasury stock                                              |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                |      |     |                            |   | (406   | )                    | 
|Exercise of stock options (1,600 shares)                                |  |                        | (2  | )                          |   |       |                   |   |   |                                        |     |   |                |      | 40  |                            |   |        | 38                   | 
|                                                                        |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                |      |     |                            |   |        |                      | 
|Balance, December 31, 2002                                              |  | $                      | 832 |                            | $ | 1,364 |                   |   | $ | 12,463                                 |     |   | $              | 536  |     |                            | $ | (2,287 | )                    | 
|                                                                        |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                |      |     |                            |   |        |                      | 
|                                                                        |  |                        |     |                            |   |       |                   |   |   |                                        |     |   | 2002           |      |     | 2001                       |   |        | 2000                 | 
|Components of comprehensive income:                                     |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                |      |     |                            |   |        |                      | 
|Change in net unrealized gain on investments available for
sale         |  |                        |     |                            |   | $     | 451               |   |   | $                                      | 209 |   |                | $    | 462 |                           
|Realized gains included in net income, net of taxes of $13, $14, and
$6 |  |                        |     |                            |   |       | (24               | ) |   |                                        | (26 | ) |                |      | (13 | )                         
|                                                                        |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                |      |     |                            |   |        |                      | 
|Total                                                                   |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                | $    | 427 |                            |   | $      | 183                  | 
|                                                                        |  |                        |     |                            |   |       |                   |   |   |                                        |     |   |                |      |     |                            |   |        |                      | 



See
accompanying notes to consolidated financial statements.



---

FC BANC CORP.

CONSOLIDATED STATEMENT OF CASH FLOWS



|                                                                                  |  | Year Ended December 31, |        
|--------------------------------------------------------------------------------- |  | ----------------------- | -------
|                                                                                  |  | 2002                    |        
|                                                                                  |  | (Dollars in thousands)  |        
|OPERATING ACTIVITIES                                                              |  |                         |        
|Net income                                                                        |  | $                       | 1,052  
|Adjustments to reconcile net income to net cash provided by operating
activities: |  |                         |        
|Provision for loan losses                                                         |  |                         | (275   
|Investment securities gain, net                                                   |  |                         | (37    
|Loss from disposal of premises and equipment                                      |  |                         |       
|Depreciation, amortization and accretion                                          |  |                         | 477    
|Deferred income taxes                                                             |  |                         | 63     
|Decrease (increase) in accrued interest receivable                                |  |                         | 5      
|Increase (decrease) in accrued interest payable                                   |  |                         | 3      
|Other, net                                                                        |  |                         | (379   
|                                                                                  |  |                         |        
|Net cash provided by operating activities                                         |  |                         | 909    
|                                                                                  |  |                         |        
|INVESTING ACTIVITIES                                                              |  |                         |        
|Investment securities available for sale:                                         |  |                         |        
|Proceeds from repayments and maturities                                           |  |                         | 16,177 
|Purchases                                                                         |  |                         | (36,749
|Proceeds from sales                                                               |  |                         | 10,045 
|Decrease (increase) in loans, net                                                 |  |                         | (10,660
|Purchases of premises and equipment                                               |  |                         | (2,755 
|Purchase of regulatory stock                                                      |  |                         | (462   
|                                                                                  |  |                         |        
|Net cash provided by (used for) investing activities                              |  |                         | (24,404
|                                                                                  |  |                         |        
|FINANCING ACTIVITIES                                                              |  |                         |        
|Increase (decrease) in deposits, net                                              |  |                         | 11,259 
|Increase in short-term borrowings, net                                            |  |                         | 392    
|Proceeds from other borrowings                                                    |  |                         | 10,847 
|Repayments of other borrowings                                                    |  |                         | (87    
|Purchases of treasury stock                                                       |  |                         | (406   
|Proceeds from stock option exercises                                              |  |                         | 38     
|Cash dividends                                                                    |  |                         | (382   
|                                                                                  |  |                         |        
|Net cash provided by (used for) financing activities                              |  |                         | 21,661 
|                                                                                  |  |                         |        
|Increase (decrease) in cash and cash equivalents                                  |  |                         | (1,834 
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                    |  |                         | 6,659  
|                                                                                  |  |                         |        
|CASH AND CASH EQUIVALENTS AT END OF YEAR                                          |  | $                       | 4,825  
|                                                                                  |  |                         |        
|SUPPLEMENTAL INFORMATION                                                          |  |                         |        
|Cash paid during the year for:                                                    |  |                         |        
|Interest on deposits and borrowings                                               |  | $                       | 2,329  
|Income taxes                                                                      |  |                         | 184    



See accompanying notes to consolidated financial statements.



---

1.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



A summary of the significant accounting and reporting
policies applied in the presentation of the accompanying financial statements follows:



Nature of Operations and Basis of Presentation



FC Banc Corp. (the Company) is a bank holding company whose principal activity is the ownership and management of its wholly-owned subsidiary, Farmers Citizens Bank (the Bank).
The Bank generates commercial (including agricultural), mortgage and consumer loans and receives deposits from customers located primarily in Crawford, Knox, and Morrow counties in Ohio and the surrounding areas. The Bank operates under a state bank
charter and provides full banking services. As a state bank, the Bank is subject to regulations by the State of Ohio Division of Financial Institutions and the Federal Reserve System through the Federal Reserve Bank of Cleveland.



The consolidated financial statements include the accounts of
FC Banc Corp., and its wholly-owned subsidiary, Farmers Citizens Bank, after elimination of all material intercompany transactions and balances.



The accounting principles followed by the Company and the methods of applying these principles conform with accounting principles
generally accepted in the United States of America and with general practice within the banking industry. Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the balance sheet date and revenues and expenses for that period. Actual results could differ from those estimates.



Investment Securities



Currently, the Companys investment securities portfolio is classified as available for sale. The portfolio serves principally as a
source of liquidity and is carried at fair value with unrealized holding gains and losses for available for sale securities reported as a separate component of stockholders equity, net of tax, until realized. Debt securities acquired with the
intent to hold to maturity would be classified as held to maturity and carried at cost adjusted for amortization of premium and accretion of discount, which are computed using the interest method, and recognized as adjustments of interest income.
Realized security gains and losses are computed using the specific identification method. Interest and dividends on investment securities are recognized as income when earned.



Common stock of the Federal Home Loan Bank (the FHLB), Federal Reserve Bank, and Great Lakes
Bankers Bank represents ownership in institutions which are wholly-owned by other financial institutions. These equity securities are accounted for at cost and are included in other assets.



---

1.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Loans



Loans are reported at their principal amount net of the
allowance for loan losses. Interest income is recognized as income when earned on the accrual method. The accrual of interest is discontinued on a loan when management believes, after considering economic and business conditions, the borrowers
financial condition is such that collection of interest is doubtful. Loans are returned to accrual status when past due interest is collected and the collection of principal probable.



Loan origination fees and certain direct loan origination costs are being differed and the net amount
amortized as an adjustment of the related loans yield. Management is amortizing these amounts over the contractual life of the related loans.



Allowance for Loan Losses



The allowance for loan losses represents the amount which management estimates is adequate to provide for probable losses inherent in its
loan portfolio. The allowance method is used in providing for loan losses. Accordingly, all loan losses are charged to the allowance, and all recoveries are credited to it. The allowance for loan losses is established through a provision for loan
losses which is charged to operations. The provision is based on managements periodic evaluation of the adequacy of the allowance for loan losses which encompasses the overall risk characteristics of the various portfolio segments, past
experience with losses, the impact of economic conditions on borrowers, and other relevant factors. The estimates used in determining the adequacy of the allowance for loan losses, including the amounts and timing of future cash flows expected on
impaired loans, are particularly susceptible to significant change in the near term.



A loan is considered impaired when it is probable the borrower will not repay the loan according to the original contractual terms of the loan agreement. Management has determined that first mortgage
loans on one-to-four family properties and all consumer loans represent large groups of smaller-balance homogeneous loans that are to be collectively evaluated. Loans that experience insignificant payment delays, which are defined as 90 days or
less, generally are not classified as impaired. A loan is not impaired during a period of delay in payment if the Company expects to collect all amounts due including interest accrued at the contractual interest rate for the period of delay. All
loans identified as impaired are evaluated independently by management. The Company estimates credit losses on impaired loans based on the present value of expected cash flows or the fair value of the underlying collateral if the loan repayment is
expected to come from the sale or operation of such collateral.



Impaired loans, or portions thereof, are charged off when it is determined a realized loss has occurred. Until such time, an allowance for loan losses is maintained for estimated losses. Cash receipts on impaired loans are applied
first to accrued interest receivable unless otherwise required by the loan terms, except when an impaired loan is also a nonaccrual loan. Payments received on nonaccrual loans is recorded as income or applied against principal according to
managements judgment as to the collectibility of such principal.



---

1.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Premises and Equipment



Premises and equipment are stated at cost, less accumulated
depreciation. Depreciation is principally computed on the straight-line method over the estimated useful lives of the related assets, which range from three to ten years for furniture, fixtures, and equipment and 25 to 50 years for building
premises. Leasehold improvements are amortized over the shorter of their estimated useful lives or their respective lease terms, which range from seven to fifteen years. Expenditures for maintenance and repairs are charged against income as
incurred. Costs of major additions and improvements are capitalized.



Postretirement Benefits



The Company maintains a non-contributory defined post-retirement plan covering all employees. The plan provides a level of life and health insurance to retirees which is based on their annual compensation prior to retirement.



Income Taxes



The Company and the Bank file a consolidated federal income
tax return. Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are
enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.



Earnings Per Share



The Company provides dual presentation of basic and diluted earnings per share. Basic earnings per share is calculated utilizing net income as reported in the numerator and average shares outstanding
in the denominator. The computation of diluted earnings per share differs in that the dilutive effects of any stock options, warrants, and convertible securities are adjusted in the denominator.



Stock Options



The Company maintains a stock option plan for key officers,
employees, and non-employee directors.



The
Company accounts for the Plan under provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. Under this Opinion, no compensation expense has been recognized with respect to the Plan
because the exercise price of the Companys employee stock options equals the market price of the underlying stock on the grant date.



---

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Stock Options (Continued)



Had compensation expense for the stock option plans been
recognized in accordance with the fair value accounting provisions of FAS No. 123, Accounting for Stock-based Compensation, net income applicable to common stock, basic and diluted net income per common share for the year ended
December 31, would have been as follows:



|                                         |  | 2002 |       | 2001 |   | 2000
|---------------------------------------- |  | ---- | ----- | ---- | - | ----
|Net income as reported                   |  | $    | 1,052 |      | $ | 963 
|Less pro forma expense related to option |  |      | 39    |      |   | 52  
|                                         |  |      |       |      |   |     
|Pro forma net income                     |  |      | 1,013 |      |   | 911 
|                                         |  |      |       |      |   |     
|Basic net income per common share:       |  |      |       |      |   |     
|As reported                              |  | $    | 1.82  |      | $ | 1.62
|Pro forma                                |  |      | 1.75  |      |   | 1.53
|Diluted net income per common share:     |  |      |       |      |   |     
|As reported                              |  | $    | 1.81  |      | $ | 1.60
|Pro forma                                |  |      | 1.75  |      |   | 1.52



For
purposes of computing pro forma results, the Company estimated the fair values of stock options using the Black-Scholes option pricing model. The model requires the use of subjective assumptions which can materially affect fair value estimates.
Therefore, the pro forma results are estimates of results of operations as if compensation expense had been recognized for the stock option plans. The fair value of each stock option granted was estimated using the following weighted-average
assumptions:



|Grant Year |  | Expected Dividend Yield |  | Risk-free Interest Rate |  | Expected Volatility |  | Remaining Expected Life (in years)
|---------- |  | ----------------------- |  | ----------------------- |  | ------------------- |  | ----------------------------------
|1997       |  | 1.03%                   |  | 6.89%                   |  | 16.60%              |  | 4.31                              
|1998       |  | 1.03%                   |  | 5.77%                   |  | 16.60%              |  | 5.17                              
|1999       |  | 1.03%                   |  | 5.17%                   |  | 16.60%              |  | 6.22                              
|2000       |  | 1.03%                   |  | 6.75%                   |  | 16.60%              |  | 7.05                              
|2001       |  | 1.03%                   |  | 5.37%                   |  | 16.60%              |  | 8.50                              
|2002       |  | 1.03%                   |  | 4.05%                   |  | 16.60%              |  | 9.88                              



Cash Flow
Information



The Company has defined
cash and cash equivalents as those amounts included in the balance sheet captions cash and due from banks and Federal funds sold.



---

1.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Recent Accounting Pronouncements



In August 2001, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards (FAS) No. 143, Accounting for Asset RetirementObligations, which requires that the fair value of a liability be recognized when incurred for the
retirement of a long-lived asset and the value of the asset be increased by that amount. The statement also requires that the liability be maintained at its present value in subsequent periods and outlines certain disclosures for such obligations.
The adoption of this statement, which is effective January 1, 2003, is not expected to have a material effect on the Companys financial statements.



In October 2001, the FASB issued FAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. FAS No. 144
supercedes FAS No. 121 and applies to all long-lived assets (including discontinued operations) and consequently amends APB Opinion No. 30, Reporting Results of Operations-Reporting the Effects of Disposal of a Segment of a Business. FAS No.
144 requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or fair value less costs to sell. FAS No. 144 is effective for financial statements issued for fiscal years beginning after December 15,
2001 and, generally, its provisions are to be applied prospectively. The adoption of this statement is not expected to have a material effect on the Company financial statements.



In April 2002, the FASB issued FAS No. 145, Recission of FASB Statement No. 4, 44 and 64, Amendment
of FASB Statement No. 13, and Technical Corrections. FAS No. 145 rescinds FAS No. 4, which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income
tax effect. As a result, the criteria in APB Opinion No. 30 will now be used to classify those gains and losses. This statement also amends FAS No. 13 to require that certain lease modifications that have economic effects similar to sale-leaseback
transactions be accounted for in the same manner as sale-leaseback transactions. This statement also makes technical corrections to existing pronouncements, which are not substantive but in some cases may change accounting practice. The provisions
of this statement related to the rescission of FAS No. 4 shall be applied in fiscal years beginning after May 15, 2002. Any gain or loss on extinguishments of debt that was classified as an extraordinary item in prior periods presented that does not
meet the criteria in APB Opinion No. 30 for classification as an extraordinary item shall be reclassified. Early adoption of the provisions of this statement related to FAS No. 13 shall be effective for transactions occurring after May 15, 2002. All
other provisions of this statement shall be effective for financial statements issued on or after May 15, 2002. Early application of this statement is encouraged. The adoption of the effective portions of this statement did not have an impact on the
Companys financial position of results of operations. The adoption of the remaining portions of this statement is not expected to have an impact on the Companys financial position or results of operations.



In July 2002, the FASB issued FAS No. 146, Accounting for
Costs Associated and Exit or Disposal Activities, which requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. This statement
replaces EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring). The new statement will be effective for exit or disposal
activities initiated after December 31, 2002, the adoption of which is not expected to have a material effect on the Companys financial statements.



---

1.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Recent Accounting Pronouncements(Continued)



On October 1, 2002, FASB issued FAS No. 147, Acquisitions
of Certain Financial Institutions, effective for all business combinations initiated after October 1, 2002. This statement addresses the financial accounting and reporting for the acquisition of all or part of a financial institution, except for
a transaction between two or more mutual enterprises. This statement removes acquisitions of financial institutions, other than transactions between two or more mutual enterprises, from the scope of FAS No. 72, Accounting for Certain Acquisitions
of Banking or Thrift Institutions, and FASB Interpretation No. 9, Applying APB Opinions No. 16 and 17 When a Savings and Loan Association or a Similar Institution Is Acquired in a Business Combination Accounted for by the Purchase Method.
The acquisition of all or part of a financial institution that meets the definition of a business combination shall be accounted for by the purchase method in accordance with FAS No. 141, Business Combinations, and FAS No. 142, Goodwill
and Other Intangible Assets. This statement also provides guidance on the accounting for the impairment or disposal of acquired long-term customer-relationship intangible assets (such as depositor- and borrower-relationship intangible assets and
credit cardholder intangible assets), including those acquired in transactions between two or more mutual enterprises. The adoption of this statement is not expected to have a material effect on the Companys financial statements.



On December 31, 2002, the FASB issued FAS No. 148,
Accounting for Stock-Based Compensation  Transition and Disclosure, which amends FAS No. 123, Accounting for Stock-Based Compensation. FAS No. 148 amends the disclosure requirements of FAS No. 123 to require more prominent and
more frequent disclosures in financial statements about the effects of stock-based compensation. Under the provisions of FAS No. 123, companies that adopted the preferable, fair value based method were required to apply that method prospectively for
new stock option awards. This contributed to a ramp-up effect on stock-based compensation expense in the first few years following adoption, which caused concern for companies and investors because of the lack of consistency in reported
results. To address that concern, FAS No. 148 provides two additional methods of transition that reflect an entitys full complement of stock-based compensation expense immediately upon adoption, thereby eliminating the ramp-up effect. FAS No.
148 also improves the clarity and prominence of disclosures about the pro forma effects of using the fair value based method of accounting for stock-based compensation for all companiesregardless of the accounting method usedby requiring
that the data be presented more prominently and in a more user-friendly format in the footnotes to the financial statements. In addition, the statement improves the timeliness of those disclosures by requiring that this information be included in
interim as well as annual financial statements. The transition guidance and annual disclosure provisions of FAS No. 148 are effective for fiscal years ending after December 15, 2002, with earlier application permitted in certain circumstances. The
interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002.



In November, 2002, the FASB issued Interpretation No.45, Guarantors Accounting and Disclosure requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others. This interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has
issued. This interpretation clarifies that a guarantor is required to disclose (a) the nature of the guarantee, including the approximate term of the guarantee, how the guarantee arose, and the events or circumstances that would require the
guarantor to perform under the guarantee; (b) the maximum potential amount of future payments under the guarantee,



---

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Recent Accounting Pronouncements(Continued)



(c) the carrying amount of the liability, if any, for the guarantors
obligations under the guarantee; and (d) the nature and extent of any recourse provisions or available collateral that would enable the guarantor to recover the amounts paid under the guarantee. This interpretation also clarifies that a guarantor is
required to recognize, at the inception of a guarantee, a liability for the obligations it has undertaken in issuing the guarantee, including its ongoing obligation to stand ready to perform over the term of the guarantee in the event that the
specified triggering events or conditions occur. The objective of the initial measurement of that liability is the fair value of the guarantee at its inception. The initial recognition and initial measurement provisions of this interpretation are
applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantors fiscal year-end. The disclosure requirements in this interpretation are effective for financial statements of interim or
annual periods ending after December 15, 2002.



Reclassification of Comparative Amounts



Certain items previously reported have been reclassified to conform with the current years format. Such reclassifications did not affect net income or stockholders equity.



2.     EARNINGS PER SHARE



There are no convertible securities which would affect the
numerator in calculating basic and diluted earnings per share; therefore, net income as presented on the Consolidated Statement of Income will be used as the numerator. The following table sets forth the composition of the weighted-average common
shares (denominator) used in the basic and diluted earnings per share computation.



|                                                                                                         |  | 2002    |  | 2001    |  | 2000   
|-------------------------------------------------------------------------------------------------------- |  | ------- |  | ------- |  | -------
|Weighted-average common shares and common stock equivalents used to calculate basic
earnings per share   |  | 579,444 |  | 596,213 |  | 614,754
|Additional common stock equivalents (stock options) used to calculate diluted earnings
per share         |  | 871     |  | 3,658   |  | 10,112 
|                                                                                                         |  |         |  |         |  |        
|Weighted-average common shares and common stock equivalents used to calculate diluted
earnings per share |  | 580,315 |  | 599,871 |  | 624,866
|                                                                                                         |  |         |  |         |  |        



Options
to purchase 14,500 and 16,400 shares of common stock as of December 31, 2002 and 2001, respectively were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive.



---

3.     INVESTMENT SECURITIES AVAILABLE FOR SALE



The amortized cost and estimated market values of securities
available for sale are as follows:



|                                                |  | 2002           
|----------------------------------------------- |  | ---------------
|                                                |  | Amortized Costs
|                                                |  |                
|U.S. Government agency securities               |  | $              
|Obligations of state and political subdivisions |  |                
|Mortgage-backed securities                      |  |                
|                                                |  |                
|Total debt securities                           |  |                
|Equity securities                               |  |                
|                                                |  |                
|Total                                           |  | $              
|                                                |  |                
|                                               
|                                                |  | 2001           
|                                                |  | Amortized Costs
|U.S. Government agency securities               |  | $              
|Obligations of state and political subdivisions |  |                
|Corporate securities                            |  |                
|Mortgage-backed securities                      |  |                
|                                                |  |                
|Total debt securities                           |  |                
|Equity securities                               |  |                
|                                                |  |                
|Total                                           |  | $              
|                                                |  |                



The
amortized cost and estimated market value of debt securities at December 31, 2002, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.

|                                       |  | Amortized Costs |        | Estimated Market Value
|-------------------------------------- |  | --------------- | ------ | ----------------------
|Due in one year or less                |  | $               | 1,243  |                       
|Due after one year through five years  |  |                 | 4,892  |                       
|Due after five years through ten years |  |                 | 6,815  |                       
|Due after ten years                    |  |                 | 31,343 |                       
|                                       |  |                 |        |                       
|Total                                  |  | $               | 44,293 |                       
|                                       |  |                 |        |                       



---

3.     INVESTMENT SECURITIES AVAILABLE FOR SALE (Continued)



Investment securities with a carrying value of $18,792 and
$17,908 at December 31, 2002 and 2001, respectively, were pledged to secure deposits and other purposes as required by law.



The following is a summary of proceeds received, gross gains, and gross losses realized on the sale of investment securities available for
sale for the years ended December 31, 2002, 2001, and 2000.



|                    |  | 2002 |        | 2001 |   | 2000
|------------------- |  | ---- | ------ | ---- | - | ----
|Proceeds from sales |  | $    | 10,045 |      | $ | 130 
|Gross gains         |  |      | 63     |      |   | 40  
|Gross losses        |  |      | 26     |      |   |    



4.    LOANS



Major classifications of loans are summarized as follows:



|                                        |  | 2002 |        | 2001
|--------------------------------------- |  | ---- | ------ | ----
|Loans secured by real estate:           |  |      |        |     
|Construction                            |  | $    | 558    |     
|Commercial                              |  |      | 22,029 |     
|Residential                             |  |      | 32,227 |     
|Commercial, financial, and agricultural |  |      | 7,802  |     
|Consumer                                |  |      | 8,939  |     
|                                        |  |      |        |     
|                                        |  |      | 71,555 |     
|Less allowance for loan losses          |  |      | 1,213  |     
|                                        |  |      |        |     
|Net loans                               |  | $    | 70,342 |     
|                                        |  |      |        |     



Changes
in the allowance for loan losses for the years ended December 31, are as follows:



|                                 |  | 2002 |       |   | 2001 |   |       | 2000 | 
|-------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- | 
|Balance, January 1               |  | $    | 1,499 |   |      | $ | 1,496 |      | 
|Add:                             |  |      |       |   |      |   |       |      | 
|Provisions charged to operations |  |      | (275  | ) |      |   |      |      | 
|Recoveries                       |  |      | 14    |   |      |   | 94    |      | 
|Less loans charged off           |  |      | (25   | ) |      |   | (91   | )    | 
|                                 |  |      |       |   |      |   |       |      | 
|Balance, December 31             |  | $    | 1,213 |   |      | $ | 1,499 |      | 
|                                 |  |      |       |   |      |   |       |      | 



The
Company grants residential, commercial, and consumer loans to customers throughout its trade area which is concentrated in Crawford, Knox, and Morrow counties in Ohio. Although the Company has a diversified loan portfolio at December 31, 2002 and
2001, a substantial portion of its debtors ability to honor their loan agreements is dependent upon the economic stability of its immediate trade area.



---

4.     LOANS (Continued)

|
|

Certain directors and executive officers of the Company, members of their
immediate families and companies in which they are principal owners (i.e., at least 10%), were indebted to the Company at December 31, 2002 and 2001. A summary of the activity on the related party loans to certain directors and executive officers
and their related companies and immediate families, consists of the following:



|2001   |  | Advances |  | Repayments |  | 2002  
|------ |  | -------- |  | ---------- |  | ------
|$2,650 |  | $263     |  | $481       |  | $2,432



5.     PREMISES AND EQUIPMENT



Major classifications of premises and equipment are summarized as follows:



|                                    |  | 2002 |       | 2001
|----------------------------------- |  | ---- | ----- | ----
|Land and land improvements          |  | $    | 834   |     
|Building and leasehold improvements |  |      | 5,797 |     
|Furniture, fixtures, and equipment  |  |      | 1,806 |     
|Construction in-progress            |  |      |      |     
|                                    |  |      |       |     
|                                    |  |      | 8,437 |     
|Less accumulated depreciation       |  |      | 1,414 |     
|                                    |  |      |       |     
|Total                               |  | $    | 7,023 |     
|                                    |  |      |       |     



Depreciation charged to operations was $308 in 2002, $301 in 2001, and $336 in 2000.



6.    DEPOSITS



Time deposits at December 31, 2002 mature $29,045, $8,770, $8,035, $2,729, $1,603, and $0 during 2003, 2004, 2005, 2006, 2007, and beyond 2007, respectively.



Time deposits include certificates of deposit in denominations
of $100,000 or more. Such deposits aggregated $13,895 and $7,469 at December 31, 2002 and 2001, respectively.



Maturities on time deposits of $100,000 or more at December 31, 2002 are as follows:



|Within three months                 |  | $ | 2,769 
|----------------------------------- |  | - | ------
|Beyond three but within six months  |  |   | 5,743 
|Beyond six but within twelve months |  |   | 2,015 
|Beyond one year                     |  |   | 3,368 
|                                    |  |   |       
|Total                               |  | $ | 13,895
|                                    |  |   |       



---

7.    SHORT-TERM BORROWINGS



The outstanding balances and related information of
short-term borrowings which includes securities sold under agreements to repurchase, are summarized as follows:



|                                      |  | 2002 |       |   | 2001 |  
|------------------------------------- |  | ---- | ----- | - | ---- | -
|Balance at year-end                   |  | $    | 4,477 |   |      | $
|Average balance outstanding           |  |      | 5,136 |   |      |  
|Maximum month-end balance             |  |      | 6,697 |   |      |  
|Weighted-average rate at year-end     |  |      | 1.41  | % |      |  
|Weighted-average rate during the year |  |      | 1.71  | % |      |  



Average
balances outstanding during the year represent daily average balances, and average interest rates represent interest expense divided by the related average balance.



Investment securities with a carrying value of $4,892 and $8,072 at December 31, 2002 and 2001, respectively,
were pledged as collateral for these borrowings.



8.    OTHER BORROWINGS



Other borrowings are summarized as follows:



|                        |  | Maturity | 
|----------------------- |  | -------- | 
|Description             |  | Date     | 
|FHLB fixed-rate advance |  | 02/22/04 | 
|FHLB fixed-rate advance |  | 03/21/06 | 
|FHLB mortgage matched   |  | 11/01/11 | 
|FHLB convertible 10/5   |  | 10/04/11 | 
|FHLB convertible 10/5   |  | 11/09/11 | 
|FHLB convertible 5 year |  | 04/23/07 | 
|FHLB cmp advance        |  | 07/26/07 | 
|FHLB convertible 10/5   |  | 07/26/12 | 
|FHLB fixed-rate advance |  | 12/11/07 | 
|                        |  |          | 
|                        |  |          | 
|Note payable            |  |          | 
|                        |  |          | 
|                        |  |          | 
|                        |  |          | 



Borrowing capacity consists of credit arrangements with the FHLB of Cincinnati. FHLB borrowings are subject to annual renewal, incur no service charges, and are secured by a blanket security agreement on certain investment and
mortgage-backed securities, outstanding residential mortgages, and the Banks investment in FHLB stock. As of December 31, 2002, the Banks maximum borrowing capacity with the FHLB was approximately $59,381.



9.    INCOME TAXES



The provision for federal income taxes consists of:

|                |  | 2002 |     | 2001 |   | 2000
|--------------- |  | ---- | --- | ---- | - | ----
|Current payable |  | $    | 117 |      | $ | 162 
|Deferred        |  |      | 63  |      |   | 31  
|                |  |      |     |      |   |     
|Total provision |  | $    | 180 |      | $ | 193 
|                |  |      |     |      |   |     



---

9.    INCOME TAXES (Continued)



The tax effects of deductible and taxable temporary
differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:



|                                                 |  | 2002 |     |   | 2001
|------------------------------------------------ |  | ---- | --- | - | ----
|Deferred tax assets                              |  |      |     |   |     
|Allowance for loan losses                        |  | $    | 88  |   |     
|Accrued expenses and employee benefits           |  |      | 310 |   |     
|Deferred tax assets                              |  |      | 398 |   |     
|                                                 |  |      |     |   |     
|Deferred tax liabilities:                        |  |      |     |   |     
|Unrealized gain on available for sale securities |  |      | 276 |   |     
|Premises and equipment                           |  |      | 106 |   |     
|Investment discounts accretion                  |  |      | 1   |   |     
|Other                                            |  |      | 45  |   |     
|Deferred tax liabilities                         |  |      | 428 |   |     
|                                                 |  |      |     |   |     
|Net deferred tax assets (liabilities)            |  | $    | (30 | ) |     
|                                                 |  |      |     |   |     



The
reconciliation between the federal statutory rate and the Companys effective consolidated income tax rate is as follows:



|                                      |  | 2002   |      |   | 2001                |       |   | 2000   |     
|------------------------------------- |  | ------ | ---- | - | ------------------- | ----- | - | ------ | ----
|                                      |  | Amount |      |   | % of Pre-tax Income |       |   | Amount |     
|Provision at statutory rate           |  | $      | 419  |   |                     | 34.0  | % |        | 393 
|Tax exempt interest                   |  |        | (172 | ) |                     | (13.9 | ) |        | (106
|Life insurance income                 |  |        | (55  | ) |                     | (4.5  | ) |        | (43 
|Other                                 |  |        | (12  | ) |                     | (1.0  | ) |        | (51 
|                                      |  |        |      |   |                     |       |   |        |     
|Actual tax expense and effective rate |  | $      | 180  |   |                     | 14.6  | % |        | 193 
|                                      |  |        |      |   |                     |       |   |        |     



10.    EMPLOYEE BENEFITS



Savings Plan



The
Bank maintains a 401(k) retirement savings plan, with all employees eligible for inclusion in the plan. Participants may make salary savings contributions up to 15 percent of their compensation, a portion of which will be matched by the Bank.
Additional contributions to the plan may be made at the discretion of the Board of Directors based upon earnings of the Bank. Contributions by the Bank charged to operations were $41, $68, and $65 for the years ended December 31, 2002, 2001, and
2000, respectively.



---

10.    EMPLOYEE BENEFITS (Continued)



Directors Retirement



The Company maintains a directors retirement plan which
provides that any director with 15 years of continuous service will receive an annual retirement benefit equal to that directors board fees in the year before retirement. The annual retirement benefit will be paid for 15 years. The plan has
been amended to provide for pro rata benefits for any director who is unable to satisfy the 15 years of continuous service requirement due to the mandatory directors retirement provision upon reaching 70 years of age. The Bank has purchased
individual life insurance contracts with respect to this program. The Bank is the owner and beneficiary of the insurance contracts. The expense charged to operations was $30 in 2002, $30 in 2001, and $23 in 2000.



Executive Compensation



The Company and the Bank entered into an Amended and Restated
Salary Continuation Agreement dated July 10, 2001 (the Agreement) with the former president. The former president was dismissed on February 19, 2002. The Agreement provides that a benefit be paid for fifteen years once he reaches normal
retirement age of 65, if his employment was terminated before he attains the age of 65. The former president is entitled to an early termination retirement benefit of $47,000 per year when he attains normal retirement age. The Company has purchased
an individual life insurance contract with respect to the retirement portion of this program. The Company is the owner and beneficiary of the insurance contract. The former president is a general creditor of the Company with respect to this
retirement benefit. The expense charged to operations was $51 in 2002, $56 in 2001, and $40 in 2000.

Additionally, the
Agreement provided a benefit to be paid upon the early termination of the former president. During 2002, the Company paid $291 to the former president under the terms of this agreement.



Postretirement Benefits



The Bank sponsors a non-contributory postretirement plan providing health care coverage. The Banks
funding policy is to contribute as billed with their normal health care plan. For 2002, 2001, and 2000, the aggregate contributions were $28, $28, and $25, respectively.



The following table sets forth the plans funded status at December 31, 2002 and 2001:



|                                                                                                                        |  | 2002 |      |   | 2001 |  
|----------------------------------------------------------------------------------------------------------------------- |  | ---- | ---- | - | ---- | -
|Accumulated postretirement benefit obligation:                                                                          |  |      |      |   |      |  
|Retirees                                                                                                                |  | $    | 511  |   |      | $
|Other active plan participants                                                                                          |  |      | 47   |   |      |  
|                                                                                                                        |  |      |      |   |      |  
|Total                                                                                                                   |  |      | 558  |   |      |  
|Plan assets at fair value                                                                                               |  |      |     |   |      |  
|                                                                                                                        |  |      |      |   |      |  
|                                                                                                                        |  |      |      |   |      |  
|Accumulated postretirement benefit obligation in excess of plan assets                                                  |  |      | 558  |   |      |  
|                                                                                                                        |  |      |      |   |      |  
|Prior service cost not yet recognized in net periodic postretirement benefit
cost                                       |  |      | (237 | ) |      |  
|Unrecognized net gain (loss) from past experience different from that assumed and
effects of any changes in assumptions |  |      | (30  | ) |      |  
|                                                                                                                        |  |      |      |   |      |  
|Unrecognized transition obligation, net of amortization                                                                 |  |      | (105 | ) |      |  
|                                                                                                                        |  |      |      |   |      |  
|Accrued postretirement cost                                                                                             |  | $    | 186  |   |      | $
|                                                                                                                        |  |      |      |   |      |  



---

10.    EMPLOYEE BENEFITS (Continued)



Postretirement Benefits (Continued)



Postretirement expense for 2002, 2001, and 2000 includes the
following components:



|                                      |  | 2002 |    | 2001 |   | 2000
|------------------------------------- |  | ---- | -- | ---- | - | ----
|Service cost                          |  | $    | 6  |      | $ | 6   
|Interest cost                         |  |      | 19 |      |   | 19  
|Amortization of transition obligation |  |      | 9  |      |   | 9   
|                                      |  |      |    |      |   |     
|Total                                 |  | $    | 34 |      | $ | 34  
|                                      |  |      |    |      |   |     



For
measurement purposes a 10 percent annual rate of increase in the per capita of covered health care benefits for those under and over 65, respectively, was assumed for 2002 and 2001. The rate was assumed to decrease gradually to 6 percent at 2013 and
remain at that level thereafter.



The
weighted-average discount rate used in determining the accumulated postretirement benefit obligation was 7.0 percent in 2002 and 7.5 percent in 2001.



Stock Option Plan



The Company has a fixed director and employee stock-based compensation plan. Under the plan, the Company may grant options for up to
65,004 shares of common stock. The exercise price for the purchase of shares subject to a stock option may not be less than 100 percent of the fair market value of the shares covered by the option on the date of the grant. The term of stock options
will not exceed 10 years from the date of grant.



The following table presents share data related to the outstanding options:



|                         |  | 2002    |   |  | Weighted- average Exercise Price |       | 2001 |        |   | Weighted- average Exercise Price
|------------------------ |  | ------- | - |  | -------------------------------- | ----- | ---- | ------ | - | --------------------------------
|Outstanding, January 1   |  | 58,710  |   |  | $                                | 23.69 |      | 56,850 |   |                                 
|Granted                  |  | 2,860   |   |  |                                  | 26.25 |      | 2,500  |   |                                 
|Exercised                |  | (1,600  | ) |  |                                  | 22.00 |      |       |   |                                 
|Forfeited                |  | (20,410 | ) |  |                                  | 22.54 |      | (640   | ) |                                 
|                         |  |         |   |  |                                  |       |      |        |   |                                 
|Outstanding, December 31 |  | 39,560  |   |  | $                                | 24.55 |      | 58,710 |   |                                 
|                         |  |         |   |  |                                  |       |      |        |   |                                 
|Exercisable at year-end  |  | 26,228  |   |  | $                                | 23.93 |      | 35,296 |   |                                 
|                         |  |         |   |  |                                  |       |      |        |   |                                 



---

10.    EMPLOYEE BENEFITS (Continued)



Stock Option Plan (Continued)



The following table summarizes the characteristics of stock
options at December 31, 2002:



|           |  | Outstanding    |       | Exercisable
|---------- |  | -------------- | ----- | -----------
|Grant Date |  | Exercise Price |       | Shares     
|04/23/97   |  | $              | 22.00 |            
|03/03/98   |  |                | 22.00 |            
|03/24/99   |  |                | 28.00 |            
|01/18/00   |  |                | 28.50 |            
|07/01/01   |  |                | 22.40 |            
|11/19/02   |  |                | 26.25 |            



11.
    COMMITMENTS



In the
normal course of business, there are various outstanding commitments and certain contingent liabilities which are not reflected in the accompanying consolidated financial statements. These commitments and contingent liabilities represent financial
instruments with off-balance sheet risk. The contract or notional amounts of those instruments reflect the extent of involvement in particular types of financial instruments which were comprised of the following:



|                             |  | 2002 |       | 2001
|---------------------------- |  | ---- | ----- | ----
|Commitments to extend credit |  | $    | 3,608 |     
|Standby letters of credit    |  |      | 100   |     
|                             |  |      |       |     
|Total                        |  | $    | 3,708 |     
|                             |  |      |       |     



The
instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheet. The same credit policies are used in making commitments and conditional obligations as for
on-balance sheet instruments. Generally, collateral is not required to support financial instruments with credit risk. The terms are typically for a one-year period with an annual renewal option subject to prior approval by management.



Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition established in the loan agreement. These commitments are comprised primarily of available commercial and personal lines of credit. Standby letters of credit are conditional commitments
issued to guarantee the performance of a customer to a third party.



---

11.    COMMITMENTS (Continued)



The exposure to loss under these commitments is limited by
subjecting them to credit approval and monitoring procedures. Substantially all commitments to extend credit are contingent upon customers maintaining specific credit standards at the time of the loan funding. Management assesses the credit risk
associated with certain commitments to extend credit in determining the level of the allowance for loan losses. Since many of the commitments are expected to expire without being drawn upon, the contractual amounts do not necessarily represent
future funding requirements.



12.    REGULATORY RESTRICTIONS



Restriction on Cash and Due From Banks



The Bank is required to maintain reserve funds in cash or on deposit with the Federal Reserve Bank. The required reserve at December 31, 2002 and 2001, was $728 and $686, respectively.



Loans



Federal law prevents the Company from borrowing from the Bank
unless the loans are secured by specific obligations. Further, such secured loans are limited in amount of ten percent of the Banks common stock and capital surplus.



Dividends



The Bank is subject to a dividend restriction which generally limits the amount of dividends that can be paid by an Ohio state-chartered
bank. Under the Ohio Banking Code, cash dividends may not exceed net profits as defined for that year combined with retained net profits for the two preceding years less any required transfers to surplus. Under this formula, the amount available for
payment of dividends in 2003 is $624 plus 2003 profits retained up to the date of the dividend declaration.



13.    REGULATORY CAPITAL



Federal regulations require the Company and the Bank to maintain minimum amounts of capital. Specifically, each is required to maintain
certain minimum dollar amounts and ratios of Total and Tier I capital to risk-weighted assets and of Tier I capital to average total assets.



In addition to the capital requirements, the Federal Deposit Insurance Corporation Improvement Act (FDICIA) established five
capital categories ranging from well capitalized to critically undercapitalized. Should any institution fail to meet the requirements to be considered adequately capitalized, it would become subject to a series of
increasingly restrictive regulatory actions.



As
of December 31, 2002 and 2001, the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be classified as a well capitalized financial institution, Total risk-based, Tier 1 risk-based, and Tier
1 Leverage capital ratios must be at least ten percent, six percent, and five percent, respectively.



---

13.    REGULATORY CAPITAL (Continued)



The Companys actual capital ratios are presented in the
following table which shows the Company met all regulatory capital requirements. The capital position of the Bank does not differ significantly from the Companys.

|                              |  | 2002   |        |       | 2001  |  
|----------------------------- |  | ------ | ------ | ----- | ----- | -
|                              |  | Amount |        | Ratio |       |  
|Total Capital                 |  |        |        |       |       |  
|(to Risk-weighted Assets)     |  |        |        |       |       |  
|                             
|Actual                        |  | $      | 13,304 |       | 16.00 | %
|For Capital Adequacy Purposes |  |        | 6,652  |       | 8.00  |  
|To Be Well Capitalized        |  |        | 8,315  |       | 10.00 |  
|                             
|Tier I Capital                |  |        |        |       |       |  
|(to Risk-weighted Assets)     |  |        |        |       |       |  
|                             
|Actual                        |  | $      | 12,263 |       | 14.75 | %
|For Capital Adequacy Purposes |  |        | 3,326  |       | 4.00  |  
|To Be Well Capitalized        |  |        | 4,988  |       | 6.00  |  
|                             
|Tier I Capital                |  |        |        |       |       |  
|(to Average Assets)           |  |        |        |       |       |  
|                             
|Actual                        |  | $      | 12,263 |       | 9.38  | %
|For Capital Adequacy Purposes |  |        | 5,229  |       | 4.00  |  
|To Be Well Capitalized        |  |        | 6,537  |       | 5.00  |  



---

14.    FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS



The estimated fair value of the Companys financial
instruments at December 31, are as follows:



|                                        |  | 2002           |         | 2001      
|--------------------------------------- |  | -------------- | ------- | ----------
|                                        |  | Carrying Value |         | Fair Value
|Financial assets:                       |  |                |         |           
|Cash and due from banks                 |  | $              | 4,825   |           
|Federal funds sold                      |  |                |        |           
|Investment securitiesavailable for sale |  |                | 45,164  |           
|Net loans                               |  |                | 70,342  |           
|Regulatory stock                        |  |                | 914     |           
|Bank-owned life insurance               |  |                | 2,757   |           
|Accrued interest receivable             |  |                | 796     |           
|                                        |  |                |         |           
|Total                                   |  | $              | 124,798 |           
|                                        |  |                |         |           
|Financial liabilities:                  |  |                |         |           
|Deposits                                |  | $              | 97,012  |           
|Short-term borrowings                   |  |                | 4,477   |           
|Other borrowings                        |  |                | 16,769  |           
|Accrued interest payable                |  |                | 134     |           
|                                        |  |                |         |           
|Total                                   |  | $              | 118,392 |           
|                                        |  |                |         |           



Financial instruments are defined as cash, evidence of ownership interest in an entity, or a contract which creates an obligation or right to receive or deliver cash or another financial instrument from/to a second entity on
potentially favorable or unfavorable terms.



Fair
value is defined as the amount at which a financial instrument could be exchanged in a current transaction between willing parties other than in a forced liquidation sale. If a quoted market price is available for a financial instrument, the
estimated fair value would be calculated based upon the market price per trading unit of the instrument.



If no readily available market exists, the fair value estimates for financial instruments should be based upon managements judgment
regarding current economic conditions, interest rate risk, expected cash flows, future estimated losses, and other factors as determined through various option pricing formulas or simulation modeling. As many of these assumptions result from
judgments made by management based upon estimates which are inherently uncertain, the resulting estimated fair values may not be indicative of the amount realizable in the sale of a particular financial instrument. In addition, changes in
assumptions on which the estimated fair values are based may have a significant impact on the resulting estimated fair values.



As certain assets such as deferred tax assets and premises and equipment are not considered financial instruments, the estimated fair
value of financial instruments would not represent the full value of the Company.



---

14.    FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS (Continued)



The Company employed simulation modeling in determining the
estimated fair value of financial instruments for which quoted market prices were not available based upon the following assumptions:



Cash and Due from Banks, Federal Funds Sold, Regulatory Stock, Accrued Interest Receivable, Accrued Interest Payable, and Short-term Borrowings



The fair value is equal to the current
carrying value.



Bank-owned Life Insurance



The fair value is equal to the cash
surrender value of the life insurance policies.



Investment
Securities



The fair value of investment
securities available for sale and held to maturity is equal to the available quoted market price. If no quoted market price is available, fair value is estimated using the quoted market price for similar securities.



Loans, Deposits, and Other Borrowing



The fair value of loans, certificates of deposit, and other
borrowings is estimated by discounting the future cash flows using a simulation model which estimates future cash flows and constructs discount rates that consider reinvestment opportunities, operating expenses, noninterest income, credit quality,
and prepayment risk. Demand, savings, and money market deposit accounts are valued at the amount payable on demand as of year-end.



Commitments to Extend Credit



These financial instruments are generally not subject to sale, and estimated fair values are not readily available. The carrying value,
represented by the net deferred fee arising from the unrecognized commitment or letter of credit, and the fair value, determined by discounting the remaining contractual fee over the term of the commitment using fees currently charged to enter into
similar agreements with similar credit risk, are not considered material for disclosure. The contractual amounts of unfunded commitments and letters of credit are presented in Note 11.

|
|



---

15.    PARENT COMPANY



Following are condensed financial statements for the Company.



CONDENSED BALANCE SHEET





|                                          |  | December 31,
|----------------------------------------- |  | ------------
|                                          |  | 2002        
|ASSETS                                    |  |             
|Cash and due from banks                   |  | $           
|Investment securities available for sale  |  |             
|Investment in subsidiary bank             |  |             
|Other assets                              |  |             
|                                          |  |             
|TOTAL ASSETS                              |  | $           
|                                          |  |             
|TOTAL LIABILITIES                         |  | $           
|                                         
|STOCKHOLDERS EQUITY                      |  |             
|                                          |  |             
|TOTAL LIABILITES AND STOCKHOLDERS EQUITY |  | $           
|                                          |  |             



CONDENSED STATEMENT OF INCOME



|                                                                               |  | Year Ended December 31, |      
|------------------------------------------------------------------------------ |  | ----------------------- | -----
|                                                                               |  | 2002                    |      
|INCOME                                                                         |  |                         |      
|Dividends from subsidiary bank                                                 |  | $                       | 771  
|Dividend income                                                                |  |                         | 3    
|Investment securities gains, net                                               |  |                         | 7    
|Other income                                                                   |  |                         | 2    
|                                                                               |  |                         |      
|Total income                                                                   |  |                         | 783  
|                                                                              
|EXPENSES                                                                       |  |                         |      
|Professional fees                                                              |  |                         | 78   
|Other                                                                          |  |                         | 15   
|                                                                               |  |                         |      
|Total expenses                                                                 |  |                         | 93   
|Income before tax benefit and equity in undistributed net income of
subsidiary |  |                         | 690  
|Income tax benefit                                                             |  |                         | 23   
|Equity in undistributed net income of subsidiary                               |  |                         | 339  
|                                                                               |  |                         |      
|NET INCOME                                                                     |  | $                       | 1,052
|                                                                               |  |                         |      



---

15.    PARENT COMPANY (Continued)



CONDENSED STATEMENT OF CASH FLOWS



|                                                                                  |  | Year Ended December 31, |      
|--------------------------------------------------------------------------------- |  | ----------------------- | -----
|                                                                                  |  | 2002                    |      
|OPERATING ACTIVITIES                                                              |  |                         |      
|Net income                                                                        |  | $                       | 1,052
|Adjustments to reconcile net income to net cash provided by operating
activities: |  |                         |      
|Equity in undistributed net income of subsidiary                                  |  |                         | (339 
|Investment securities gains, net                                                  |  |                         | (7   
|Other                                                                             |  |                         | 45   
|                                                                                  |  |                         |      
|Net cash provided by operating activities                                         |  |                         | 751  
|                                                                                  |  |                         |      
|INVESTING ACTIVITIES                                                              |  |                         |      
|Investment securities available for sale:                                         |  |                         |      
|Proceeds from sales                                                               |  |                         | 22   
|Purchases                                                                         |  |                         |     
|                                                                                  |  |                         |      
|Net cash provided by (used for) investing activities                              |  |                         | 22   
|                                                                                  |  |                         |      
|FINANCING ACTIVITIES                                                              |  |                         |      
|Purchase of treasury stock                                                        |  |                         | (406 
|Proceeds from stock option exercise                                               |  |                         | 38   
|Cash dividends                                                                    |  |                         | (382 
|                                                                                  |  |                         |      
|Net cash used for financing activities                                            |  |                         | (750 
|                                                                                  |  |                         |      
|Increase in cash                                                                  |  |                         | 23   
|CASH AT BEGINNING OF YEAR                                                         |  |                         | 32   
|                                                                                  |  |                         |      
|CASH AT END OF YEAR                                                               |  | $                       | 55   
|                                                                                  |  |                         |      



---

16.    QUARTERLY DATA

|                                                    |  | Three Months Ended |          
|--------------------------------------------------- |  | ------------------ | ---------
|                                                    |  |                    |          
|                                                    |  |                    | March 31,
|                                                    |  |                    | 2002     
|                                                    |  |                    |          
|Total interest income                               |  | $                  | 1,647    
|Total interest expense                              |  |                    | 538      
|                                                    |  |                    |          
|Net interest income                                 |  |                    | 1,109    
|Provision for loan losses                           |  |                    |         
|                                                    |  |                    |          
|                                                    |  |                    |          
|Net interest income after provision for loan losses |  |                    | 1,109    
|Total noninterest income                            |  |                    | 173      
|Total noninterest expense                           |  |                    | 1,238    
|                                                    |  |                    |          
|Income before income taxes                          |  |                    | 44       
|Income taxes                                        |  |                    | (21      
|                                                    |  |                    |          
|Net income                                          |  | $                  | 65       
|                                                    |  |                    |          
|Per share data:                                     |  |                    |          
|Net income                                          |  |                    |          
|Basic                                               |  | $                  | 0.11     
|Diluted                                             |  |                    | 0.11     
|Average shares outstanding                          |  |                    |          
|Basic                                               |  |                    | 583,089  
|Diluted                                             |  |                    | 583,089  

|
|



---

16.    QUARTERLY DATA (Continued)

|                                                    |  | Three Months Ended
|--------------------------------------------------- |  | ------------------
|                                                    |  |                   
|                                                    |  |                   
|                                                    |  |                   
|Total interest income                               |  | $                 
|Total interest expense                              |  |                   
|                                                    |  |                   
|Net interest income                                 |  |                   
|Provision for loan losses                           |  |                   
|                                                    |  |                   
|Net interest income after provision for loan losses |  |                   
|Total noninterest income                            |  |                   
|Total noninterest expense                           |  |                   
|                                                    |  |                   
|Income before income taxes                          |  |                   
|Income taxes                                        |  |                   
|                                                    |  |                   
|Net income                                          |  | $                 
|                                                    |  |                   
|Per share data:                                     |  |                   
|Net income                                          |  |                   
|Basic                                               |  | $                 
|Diluted                                             |  |                   
|Average shares outstanding                          |  |                   
|Basic                                               |  |                   
|Diluted                                             |  |                   



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PART III



ITEM 9.    Directors and Executive Officers of the Registrant



The information set forth under the caption FIRST
PROPOSAL- ELECTION OFDIRECTORS, pages 2 and 3, of the Proxy Statement of the Holding Company and the information under the caption SECTION 16(a) Beneficial Ownership Reporting Compliance on page 14 of the Proxy Statement filed
February 6, 2003, with the United States Securities and Exchange Commission are incorporated by reference herein.



ITEM 10.    Executive Compensation



The information set forth under the captions DIRECTOR COMPENSATION, pages7 through 8 and EXECUTIVE COMPENSATION,
pages 10 through 12, of the Proxy Statement of the Holding Company filed February 6, 2003, with the United States Securities and Exchange Commission is incorporated by reference herein.



ITEM 11.    Security Ownership of Certain Beneficial Owners and Management



The information set forth under the caption VOTING
SECURITIES AND PRINCIPAL HOLDERS THEREOF on pages 2 and 3 of the Proxy Statement of the Holding Company filed February 6, 2003, with the United States Securities and Exchange Commission is incorporated by reference herein.



ITEM 12.    Certain Relationships and Related
Transactions



The information required by
this item is incorporated herein by reference to the section captioned CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS on page 15 in the Proxy Statement of the Holding Company filed February 6, 2003, with the United States
Securities and Exchange Commission is incorporated by reference herein.



ITEM 13.    Exhibits and Reports on Form 8-K



Exhibit 3.1    Amended and Restated Articles of Incorporation of FC Banc Corp., filed as Exhibit 3 to Form 10-KSB for the fiscal year ended December 31, 2000 and incorporated
herein by reference.



Exhibit
3.2    Code of regulations of FC Banc Corp., filed as Exhibit 3 to Form 10-KSB for the fiscal year ended December 31, 2000 and incorporated herein by reference.



Exhibit 4    For definition of rights of security holders please refer to Exhibit
3 on Form 10-KSB for the fiscal year ended December 31, 2000 and incorporated herein by reference.



Exhibit 10    Employment Agreement dated November 19,2002, for John R. Christman, President of Company and
Chief Executive Officer of Bank.



Exhibit
99.1-    CEO Certification Pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



Exhibit 99.2-    CFO Certification Pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.



Exhibit
99.3-    Report of Independent Auditors.



(b) 11/26/02    Current Event-Press Release announcing appointment of John R. Christman as Chief Executive Officer of the Farmers Citizens Bank, and Coleman Clougherty as Executive Vice President and Chief
Operating Officer also of the Bank.



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ITEM
14.    Disclosure Control and Procedures



The Companys Principal Executive and Financial Officers have evaluated the Companys disclosure controls and procedures within 90 days of the filing of this report. That evaluation concluded that the disclosure
controls and procedures are effective as of the filing of this Annual Report on Form 10-KSB for the year ended December 31, 2002.



There were no significant changes in the Companys internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, including any significant deficiencies or material weaknesses of internal controls that would require corrective action.



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SIGNATURES



In accordance with Section 13 or 15 (d) of the Exchange Act, the registrant has caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.



FC BANC CORP.



|   
|---
|By:
|   
|   



|                                                                                                
|------------------------------------------------------------------------------------------------
|By:                                                                                             
|The following persons on behalf of this registrant and in the capacities on the dates
indicated.



|                     
|---------------------
|/s/    ROBERT D.
HORD
|Robert D. Hord       
|Chairman             
|                     
|February 28, 2003    
|Date                 



|                           
|---------------------------
|/s/    CHARLES W.
KIMERLINE
|Charles W. Kimerline       
|Director                   
|                           
|February 28, 2003          
|Date                       



|                       
|-----------------------
|/s/    TERRY L.
GERNERT
|Terry L. Gernert       
|Director               
|                       
|February 28, 2003      
|Date                   



|                       
|-----------------------
|/s/    SAMUEL J.
HARVEY
|Samuel J. Harvey       
|Director               
|                       
|February 28, 2003      
|Date                   



|                                                        
|--------------------------------------------------------
|/s/    COLEMAN
CLOUGHERTY                               
|Coleman Clougherty                                      
|Principal Financial and Accounting Officer and Treasurer
|                                                        
|February 28, 2003                                       
|Date                                                    



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CERTIFICATIONS

I, John R. Christman, certify that:



1.    I have reviewed this annual report on Form 10-KSB of FC Banc Corp.;



2.    Based on my knowledge, this annual
report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this annual report;



3.    Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this annual report;



4.    The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and we have:



a).    Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being prepared;



b)    Evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the
Evaluation Date); and



c)    Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;



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



a)    All significant deficiencies in the
design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal
controls; and



b)    Any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and



6.    The registrants other certifying officers and I have indicated in this annual report whether or not there
were significant changes in internal controls or in other factors that could



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significantly affect internal controls subsequent to the date or our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material weaknesses.



Date February 21, 2003





By     /s/     John R. Christman



John R. Christman, President and Principal Executive Officer



---

I, Coleman Clougherty, certify that:



1.    I have reviewed this annual report
on Form 10-KSB of FC Banc Corp.;



2.    Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this annual report;



3.    Based on my knowledge, the financial statements, and other financial information included in this annual report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;



4.    The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



a)    Designed such disclosure controls and procedures to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;



b)    Evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual report (the Evaluation Date); and



c)    Presented in this annual report our conclusions about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;



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



a)    All significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in internal controls; and



b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and

|
|



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6.    The registrants other certifying officers and I have
indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date or our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.



Date February 21, 2003



By        /s/     Coleman J. Clougherty



Coleman Clougherty, Principal Financial and Accounting Officer and Treasurer