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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-KSB



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



For the fiscal year ended December 31, 2004



Commission File Number 0-25616



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FC BANC CORP.

(name of small business issuer in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|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: N/A



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



Common Shares (No Par Value)



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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.  x



State issuers revenues for the most recent fiscal year. $8,267,000.



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 March 22, 2005, 579,040 shares of common shares of the Registrant were outstanding. The aggregate market value of the voting stock held
by non-affiliates was $17,950,240 based upon the trading price of $31.00 per share.



Documents Incorporated by References



Portions of the definitive Proxy
Statement for the 2005 Annual Meeting of Shareholders of FC Banc Corp filed on March 25, 2005 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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##### Table of Contents

FC Banc Corp.

Form 10-KSB

INDEX



|                                                                                                                                         |  |      
|---------------------------------------------------------------------------------------------------------------------------------------- |  | -----
|                                                                                                                                         |  | Page 
|PART I                                                                                                                                   |  |      
|                                                                                                                                         | 
|ITEM 1  DESCRIPTION OF BUSINESS                                                                                                         |  | 3-10 
|                                                                                                                                         | 
|ITEM 2  DESCRIPTION OF PROPERTY                                                                                                         |  | 11   
|                                                                                                                                         | 
|ITEM 3  LEGAL PROCEEDINGS                                                                                                               |  | 11   
|                                                                                                                                         | 
|ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS                                                                                 |  | 11   
|                                                                                                                                         | 
|PART II                                                                                                                                  |  |      
|                                                                                                                                         | 
|ITEM 5  MARKET FOR REGISTRANTS COMMON STOCK AND RELATED SHAREHOLDER MATTERS                                                            |  | 11-12
|                                                                                                                                         | 
|ITEM 6  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                           |  | 14-27
|                                                                                                                                         | 
|ITEM 7 - FINANCIAL STATEMENTS                                                                                                            |  | 28-56
|                                                                                                                                         | 
|ITEM 8  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                                            |  | 57   
|                                                                                                                                         | 
|ITEM 8A-CONTROLS AND PROCEDURES                                                                                                          |  | 57   
|                                                                                                                                         | 
|PART III                                                                                                                                 |  |      
|                                                                                                                                         | 
|ITEM 9  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                                                              |  | 57   
|                                                                                                                                         | 
|ITEM 10  EXECUTIVE COMPENSATION                                                                                                         |  | 57   
|                                                                                                                                         | 
|ITEM 11  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                                                                 |  | 58   
|                                                                                                                                         | 
|ITEM 12  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                                                 |  | 58   
|                                                                                                                                         | 
|ITEM 13  EXHIBITS                                                                                                                       |  | 59   
|                                                                                                                                         | 
|ITEM 14  PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                                         |  | 59   
|                                                                                                                                         | 
|SIGNATURES                                                                                                                               |  | 60   
|                                                                                                                                         | 
|EXHIBITS                                                                                                                                 |  |      
|                                                                                                                                         | 
|EXHIBIT 10.3  CHANGE OF CONTROL AGREEMENT-ANNE SPRENG FERRIS                                                                            |  | 61-62
|                                                                                                                                         | 
|EXHIBIT 10.4  CHANGE OF CONTROL AGREEMENT-BRADLEY K. BRINKERHOFF                                                                        |  | 63-64
|                                                                                                                                         | 
|EXHIBIT 10.5  CHANGE OF CONTROL AGREEMENT - MATTHEW C. EVANS                                                                            |  | 65-66
|                                                                                                                                         | 
|EXHIBIT 10.6  CHANGE OF CONTROL AGREEMENT - JEFFREY A. WISE                                                                             |  | 67-68
|                                                                                                                                         | 
|EXHIBIT 14  CODE OF ETHICS                                                                                                              |  | 69-76
|                                                                                                                                         | 
|EXHIBIT 21  SUBSIDIARIES OF REGISTRANT                                                                                                  |  | 77   
|                                                                                                                                         | 
|EXHIBIT 23  CONSENT OF THE INDEPENDENT AUDITOR                                                                                          |  | 78   
|                                                                                                                                         | 
|EXHIBIT 23.1  CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                                                                  |  | 79   
|                                                                                                                                         | 
|EXHIBIT 31.1-CEO CERTIFICATION PURSUANT TO RULE 13A-14(a)/15d-14(a) AS ENACTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 |  | 80   
|                                                                                                                                         | 
|EXHIBIT 31.2-CFO CERTIFICATION PURSUANT TO RULE 13A-14(a)/15d-14(a) AS ENACTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 |  | 81   
|                                                                                                                                         | 
|EXHIBIT 32.1-CEO CERTIFICATION PURSUANT TO U.S.C. SECTION 1350 AS ENACTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002      |  | 82   
|                                                                                                                                         | 
|EXHIBIT 32.2-CFO CERTIFICATION PURSUANT TO U.S.C. SECTION 1350 AS ENACTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002      |  | 83   



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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.



SUPERVISION AND REGULATION



General



Financial institutions and their holding companies are extensively regulated under federal and state law. As a result, the growth and
earnings performance of the Company can be affected not only by management decisions and general economic conditions, but also by the requirements of applicable state and federal statutes and regulations and the policies of various governmental
regulatory authorities including, but not limited to, the Board of Governors of the Federal Reserve System (the FRB), the Federal Deposit Insurance Corporation (the FDIC), the Ohio Division of Financial Institutions (the
Division), the Internal Revenue Service (the IRS), the state taxing authorities and the Securities and Exchange Commission (the SEC). The effect of such statutes, regulations and policies can be significant, and
cannot be predicted with a high degree of certainty.



Federal and state laws
and regulations generally applicable to financial institutions such as the Company and the Bank regulate, among other things, the scope of business, investments, reserves against deposits, capital levels relative to operations, the nature and amount
of collateral for loans, the establishment of branches, mergers, consolidations and dividends. The system of supervision and regulation applicable to the Company and the Bank establishes a comprehensive framework for their respective operations and
is intended primarily for the protection of the FDICs deposit insurance funds and the depositors, rather than the shareholders, of financial institutions.



The following references to material statutes and regulations affecting the Company and the Bank are brief summaries thereof and do not
purport to be complete. As such, they are qualified in their entirety by reference to such statutes and regulations. Any change in applicable law or regulations may have a material effect on the business of the Company and the Bank.



The Company



General. The Company, as the sole stockholder of the Bank, is a bank holding company. As a bank holding company, the Company is
registered with, and is subject to regulation by, the FRB under the Bank Holding Company Act of 1956 (the BHCA) as amended. In accordance with FRB policy, the Company is expected to act as a source of financial strength to the Bank and



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to commit resources to support the Bank. Under the BHCA, the Company is subject to periodic examination by the FRB and is required to file with the FRB
periodic reports of its operations and such additional information as the FRB may require. The Company is also subject to regulation by the Division under Ohio law.



Investments and Activities.Under the BHCA, a bank holding company must obtain FRB approval before acquiring substantially all
the assets of any bank or bank holding company or ownership or control of any voting shares of any bank or bank holding company if, after such acquisition, it would own or control, directly or indirectly, more than five percent (5%) of the voting
shares of such bank or bank holding company. The BHCA also prohibits the Company, with certain limited exceptions, from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company which is not a bank or bank
holding company, and from engaging in any business other than that of banking, managing and controlling banks or furnishing services to banks and their subsidiaries. The principal exception to this prohibition allows bank holding companies to engage
in, and to own shares of companies engaged in, certain businesses found by the FRB to be so closely related to banking as to be a proper incident thereto.



Affiliate Transactions. Various governmental requirements, including Sections 23A and 23B of the Federal Reserve Act, limit borrowings by holding companies and
other non-bank subsidiaries from affiliated insured depository institutions, and also limit other transactions between holding companies and their non-bank subsidiaries and their affiliated insured depository institutions. Section 23A of the Federal
Reserve Act generally requires that an insured depository institutions loan to its non-bank affiliates be secured, and Section 23B of the Federal Reserve Act generally requires that an insured depository institutions transactions with
its non-bank affiliates be on arms-length terms.



Control Acquisitions.
The Change in Bank Control Act prohibits a person or group of persons from acquiring control of a bank holding company unless the FRB has been notified and has not objected to the transaction. Under the rebuttable presumption established
by the FRB, the acquisition of 10% or more of a class of voting stock of a bank holding company with a class of securities registered under Section 12 of the Exchange Act, such as the Company, would, under the circumstances set forth in the
presumption, constitute acquisition of control of the bank holding company.



Gramm-Leach-Bliley Act. The Financial Services Modernization Act of 1999, better known as the Gramm-Leach-Bliley Act (the GLB), permits bank holding companies to become financial holding companies and thereby
affiliate with securities firms and insurance companies and engage in other activities that are financial in nature. A bank holding company may become a financial holding company if each of its subsidiary banks is well capitalized, well managed, and
has at least a satisfactory rating under the Community Reinvestment Act. 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 FRB. The GLB 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 FRB has determined to be closely related to banking. The Company has not elected to become a financial holding company under this new regulatory
framework.



The Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act of
2002 contains important new requirements for public companies in the area of financial disclosure and corporate governance. In accordance with section 302(a) of the Sarbanes-Oxley Act, written certifications by the Companys chief executive
officer and chief financial officer are now required which attest that the Companys quarterly and annual reports filed with the SEC do not contain any untrue statement of a material fact. Additionally, the Chief Executive Officer and Chief
Financial Officer are now required to certify that the Company has effective disclosure controls and procedures, and, in accordance with Section 404 of the Sarbanes-Oxley Act, the Company is also in the process of implementing a new program designed
to monitor the Companys internal control over financial reporting. This new program will include the identification of significant processes and accounts, documentation of the design of control effectiveness over process and entity level
controls, and testing of the operating effectiveness of key controls over financial reporting. This program must be fully implemented for the preparation of the Companys annual report for its fiscal year ended December 31, 2006. See Item 8A of
the Companys annual report on Form 10-KSB for more information regarding managements evaluation of the Companys disclosure controls and procedures, and the Companys internal control over financial reporting.



Also in response to the Sarbanes-Oxley Act, the Company adopted a series of policies and
procedures to improve its corporate governance practices, including the adoption of charters



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for the Audit Committee, the Compensation Committee and the newly created Nominating and Governance Committee. The charters for these three committees are
designed to help the committees function more efficiently and with greater independence from the Board of Directors, which was one of the primary goals in the adoption of Sarbanes-Oxley. The members of each of these three committees are currently
and, under the terms of the respective charters, will continue to be independent pursuant to standards adopted by NASDAQ. Further, the Board of Directors has determined that under the NASDAQ independence standards, a majority
of the members of the Board of Directors is currently independent. The Board of Directors also has adopted a Code of Business Conduct and Ethics (the Code) which applies to all officers, directors and employees of the Company and the
Bank. The Code addresses topics such as compliance with laws and regulations, honest and ethical conduct, conflicts of interest, confidentiality and protection of Company assets, fair dealing and accurate and timely periodic reports, and also
provides for enforcement mechanisms. The administration of the Code has been delegated to the Nominating and Governance Committee of the Board of Directors.



The Bank



General. The Bank is an Ohio-chartered bank and member of the Federal Reserve System. The Bank is therefore regulated by the Division as well as the FRB. The regulatory agencies have the authority to regularly
examine the Bank, which is subject to all applicable rules and regulations promulgated by its supervisory agencies. In addition, the deposits of the Bank are insured by the FDIC to the fullest extent permitted by law and, therefore, the Bank is
subject to FDIC regulations.



Deposit Insurance.As an
FDIC-insured institution, the Bank is required to pay deposit insurance premium assessments to the FDIC. The FDIC has adopted a risk-based assessment system under which all insured depository institutions are placed into one of nine categories and
assessed insurance premiums based upon their respective levels of capital and results of supervisory evaluations. Institutions classified as well-capitalized (as defined by the FDIC) and considered healthy pay the lowest premium while institutions
that are less than adequately capitalized (as defined by the FDIC) and considered of substantial supervisory concern pay the highest premium. Risk classification of all insured institutions is made by the FDIC for each semi-annual assessment period.
Because the bank is well capitalized for purposes of its deposit insurance premiums, it expects its FDIC BIF premium to continue to be the statutory minimum.



Since 1987, a portion of the deposit insurance assessments paid by Savings Association Insurance Fund (SAIF) members has been
used to cover interest payments due on the outstanding obligations of the Financing Corporation (FICO), the entity created to finance the recapitalization of the Federal Savings and Loan Insurance Corporation, the SAIFs predecessor
insurance fund. Pursuant to federal legislation enacted September 30, 1996, commencing January 1, 1997, both SAIF members and BIF members became subject to assessments to cover the interest payments on outstanding FICO obligations. Such FICO
assessments are in addition to amounts assessed by the FDIC for deposit insurance. Management expects the amounts paid for FICO assessments will increase as the Banks deposits continue to increase.



Capital Requirements. The FRB, Division and FDIC require banks and holding
companies to maintain minimum capital ratios. The risk-adjusted capital guidelines for the Bank and the Company involve a mathematical process of assigning various risk weights to different classes of assets, then evaluating the sum of
the risk-weighted balance sheet structure against the Banks and Companys capital base. The rules set the minimum guidelines for the ratio of capital to risk-weighted assets (including certain off-balance sheet activities, such as standby
letters of credit) at 8%. Tier 1 Capital is comprised of common equity, retained earnings, and a limited amount of perpetual preferred stock less certain intangible items. At least half of the total capital is to be Tier 1 Capital. The remainder may
consist of a limited amount of subordinated debt, other preferred stock, and a portion of the loan loss reserves (not to exceed 1.25% of risk-weighted assets). The Bank anticipates maintaining capital at a level sufficient to be classified as
well capitalized pursuant to the Federal Reserve guidelines.



In
addition, the federal banking regulatory agencies have adopted leverage capital guidelines for banks and bank holding companies. Under these guidelines, banks and bank holding companies must maintain a minimum ratio of three percent (3%) Tier 1
Capital to total assets. However, most banking organizations are expected to maintain capital ratios well in excess of the minimum level and generally must keep their Tier 1 ratio at or above 5%. The Bank intends to maintain capital well above the
regulatory minimum.



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The capital requirements described above are minimum requirements. Higher capital levels will be required if warranted by
the particular circumstances or risk profiles of individual institutions. For example, the regulations provide that additional capital may be required to take adequate account of, among other things, interest rate risk or the risks posed by
concentrations of credit, nontraditional activities or securities trading activities.



As of December 31, 2004, the Bank exceeded its minimum regulatory capital requirements with a total risk-based capital ratio of 15.83%, a Tier 1 risk-based capital ratio of 14.75% and a leverage ratio of 8.81%.



In addition to the minimum regulatory capital requirements discussed above, provisions
contained in the Federal Deposit Insurance Corporation Improvement Act (FDICIA) expressly provide for certain supervisory actions which are directly keyed to the capital levels of an insured depository institution. These prompt
corrective action provisions impose progressively more restrictive constraints on operations, management and capital distributions of a particular institution as its regulatory capital decreases. Using Tier 1 risk-based, total risk-based, and
Tier 1 leverage capital ratios as the relevant measures, FDIC insured depository institutions are grouped into one of the following five prompt corrective action capital categories: well capitalized, adequately capitalized; undercapitalized;
significantly undercapitalized; and critically undercapitalized. An institution is considered well capitalized if it has a total risk-based capital ratio of at least 10%, a Tier 1 risk-based capital ratio of at least 6% and a Tier 1 leverage capital
ratio of at least 5%, provided, however, such institution is not subject to a written advisement, order or capital directive to meet and maintain a specific capital level for any particular capital measure. An adequately capitalized institution must
have a total risk-based capital ratio of at least 8%, a Tier 1 risk-based capital ratio of at least 4% and a Tier 1 leverage capital ratio of at least 4% (3% if the institution has achieved the highest composite rating in its most recent
examination). At December 31, 2004, the Bank satisfied all requirements for inclusion in the well capitalized category.



Dividends. Ohio law and FRB provisions prohibit the Bank, without the prior approval of both the Division and the FRB, from paying dividends in an amount greater
than the lesser of its undivided profits or the total of its net income for that year, combined with its retained net income from the preceding two years. The payment of dividends by any financial institution or its holding company is also affected
by the requirement to maintain adequate capital pursuant to applicable capital adequacy guidelines and regulations, and a financial institution generally is prohibited from paying any dividends if, following payment thereof, the institution would be
under-capitalized. As described above, the Bank exceeded its minimum capital requirements under applicable guidelines as of December 31, 2004.



Branching Authority. Ohio chartered banks have the authority under Ohio law to establish branches anywhere in the State of Ohio, subject to receipt of all required
regulatory approvals. Additionally, in May 1997 Ohio adopted legislation opting in to the provisions of Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the Interstate Act) which allows banks to establish
interstate branch networks through acquisitions of other banks, subject to certain conditions, including certain limitations on the aggregate amount of deposits that may be held by the surviving bank and all of its insured depository institution
affiliates. The establishment of de novo interstate branches or the acquisition of individual branches of a bank in another state (rather than the acquisition of an out-of-state bank in its entirety) is also allowed by the Riegle-Neal Act and
authorized by Ohio law.



Depositor Preference. The Federal Deposit
Insurance Act provides that, in the event of the liquidation or other resolution of an insured depository institution, the claims of depositors of the institution, including the claims of the FDIC as subrogee of insured depositors, and
certain claims for administrative expenses of the FDIC as a receiver, will have priority over other general unsecured claims against the institution. If an insured depository institution fails, insured and uninsured depositors, along with the FDIC,
will have priority in payment ahead of unsecured, non deposit creditors and shareholders of the institution.



Privacy Provisions of Gramm-Leach-Bliley Act. Under GLB, federal banking regulators adopted rules that limit the ability of banks and other financial institutions to disclose non-public information about
consumers to non-affiliated third parties. These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to non-affiliated third parties. The
privacy provisions of GLB affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors.



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Federal Home Loan Bank. The Federal Home Loan Banks (FHLBs) provide credit to their members in the
form of advances. As a member of an FHLB, the Bank must maintain an investment in the capital stock of an FHLB in an amount equal to the greater of 1% of the aggregate outstanding principal amount of the Banks residential mortgage loans, home
purchase contracts and similar obligations at the beginning of each year, or 5% of its advances from the FHLB.



Upon the origination or renewal of a loan or advance, each FHLB is required by law to obtain and maintain a security interest in collateral in one or more of the following categories: fully-disbursed, whole first
mortgage loans on improved residential property not more than 90 days delinquent or securities representing a whole interest in such loans; securities issued, insured or guaranteed by the United States Government or an agency thereof; deposits in
any FHLB; or other real estate-related collateral acceptable to he applicable FHLB, if such collateral has a readily ascertainable value and the FHLB can perfect its security interest in the collateral.



Anti-Money Laundering Provisions of the USA Patriot Act of 2001. On October 26, 2001,
the USA Patriot Act of 2001 (the Patriot Act) was signed into law. The Patriot Act is intended to strengthen U.S. law enforcements and the intelligence communitys ability to work cohesively to combat terrorism on a variety of
fronts. The potential impact of the Patriot Act on financial institutions of all kinds is significant and wide-ranging. The Patriot Act contains sweeping anti-money laundering and financial transparency laws and requires various regulations,
including: (a) due diligence requirements for financial institutions that administer, maintain, or manage private bank accounts or correspondent accounts for non-U.S. persons; (b) standards for verifying customer identification at account opening;
and (c) rules to promote cooperation among financial institutions, regulators and law enforcement entities in identifying parties that may be involved in terrorism or money laundering.



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 FRB, 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 depository institutions deposits, and
(d) imposing or changing reserve requirements against certain borrowing by banks and their affiliates. These methods are used in varying degrees and combinations to affect directly 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 FRB have a material effect on the earnings of the Bank.



Additional and Pending Regulation. The Bank is also subject to federal regulation as to such matters as the maintenance of required reserves against deposits,
limitations in connection with affiliate transactions, limitations as to the nature and amount of its loans and investments, regulatory approval of any merger or consolidation, issuance or retirement by the Bank of its own securities and other
aspects of banking operations. In addition, the activities and operations of the Bank are subject to a number of additional detailed, complex and sometimes overlapping laws and regulations. These include state usury and consumer credit laws, state
laws relating to fiduciaries, the Federal Truth-in-Lending Act and Regulation Z, the Federal Equal Credit Opportunity Act and Regulation B, the Fair Credit Reporting Act, the Truth in Savings Act, the Community Reinvestment Act, anti-redlining
legislation and antitrust laws.



Congress regularly considers legislation that
may have an impact upon the operation of the Company and the Bank. At this time, the Company is unable to predict whether any proposed legislation will be enacted and, therefore, is unable to predict the impact such legislation may have on the
operations of the Company and the Bank.



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, and (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



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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.



Employees



As of December 31, 2004, the Bank had 47 full-time and 17
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 approximately 20% 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;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | 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.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|                                         |  |        |        |       |       |   |               |   |        |  |       |  
|---------------------------------------- |  | ------ | ------ | ----- | ----- | - | ------------- | - | ------ |  | ----- | -
|                                         |  | 2004   |        |       | 2003  |  
|                                         |  | Amount |        | Ratio |       |   | Amount        |   | Ratio  | 
|                                         |  |        |        |       |       |   | (as restated) |  
|Total Capital (to Risk-weighted Assets)  |  |        |        |       |       |   |               |   |        |  |       |  
|                                         |  |        |        |      
|Actual                                   |  | $      | 14,222 |       | 15.89 | % |               | $ | 14,142 |  | 14.82 | %
|For Capital Adequacy Purposes            |  |        | 7,159  |       | 8.00  |   |               |   | 7,636  |  | 8.00  |  
|To Be Well Capitalized                   |  |        | 8,949  |       | 10.00 |   |               |   | 9,545  |  | 10.00 |  
|Tier I Capital (to Risk-weighted Assets) |  |        |        |       |       |   |               |   |        |  |       |  
|Actual                                   |  | $      | 13,256 |       | 14.81 | % |               | $ | 12,948 |  | 13.57 | %
|For Capital Adequacy Purposes            |  |        | 3,579  |       | 4.00  |   |               |   | 3,818  |  | 4.00  |  
|To Be Well Capitalized                   |  |        | 5,369  |       | 6.00  |   |               |   | 5,727  |  | 6.00  |  
|Tier I Capital (to Average Assets)       |  |        |        |       |       |   |               |   |        |  |       |  
|Actual                                   |  | $      | 13,256 |       | 8.85  | % |               | $ | 12,948 |  | 8.51  | %
|For Capital Adequacy Purposes            |  |        | 5,992  |       | 4.00  |   |               |   | 6,087  |  | 4.00  |  
|To Be Well Capitalized                   |  |        | 7,490  |       | 5.00  |   |               |   | 7,609  |  | 5.00  |  



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



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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



The Gramm-Leach-Bliley Act (better known as the Financial Services Modernization Act of 2000) permits 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 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 Pronouncements



In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (FAS) No. 123 (Revised 2004),
Share-Based Payment. The statement requires that compensation cost relating to share-based payment transactions be recognized in financial statements and that this cost be measured based on the fair value of the equity or liability
instruments issued. FAS No. 123 (Revised 2004) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. The
Company will adopt FAS No. 123 (Revised 2004) on January 1, 2006, and is currently evaluating the impact the adoption of the standard will have on the Companys results of operations.



In October 2003, the American Institute of Certified Public Accountants issued SOP 03-3,
Accounting for Loans or Certain Debt Securities Acquired in a Transfer.SOP 03-3 applies to a loan that is acquired where it is probable, at acquisition, that a transferee will be unable to collect all contractually required payments
receivable. SOP 03-3 requires the recognition, as accretable yield, the excess of all cash flows expected at acquisition over the investors initial investment in the loan as interest income on a level-yield basis over the life of the loan. The
amount by which the loans contractually required payments exceed



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##### Table of Contents

the amount of its expected cash flows at acquisition may not be recognized as an adjustment to yield, a loss accrual, or a valuation allowance for credit
risk. SOP 03-3 is effective for loans acquired in fiscal years beginning after December 31, 2004. Early adoption is permitted. The adoption of SOP 03-3 is not expected to have a material impact on the consolidated financial statements.



ITEM 2. Description of Property



The Banks
principal office is located at 105 Washington Square, Bucyrus, Ohio The Banks three branches are located at 1605 Marion Road, Bucyrus, Ohio, 123 East Main Street, Cardington, Ohio, and 250 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
Company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 Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities.



Market Prices and Dividends



At December 31, 2004, the Company had approximately 600 shareholders of record. There is no established public trading market for the outstanding shares of the Companys Common Stock, although there have been a
limited number of private transactions known to the management of the Company. Based solely on information made available to the Company from a limited number of buyers and sellers, shares of the Companys Common Stock that have actually been
traded in private transactions since December 31,1994 were all traded between $18.00 and $31.00. There may, however, have been other transactions at other prices not known to management of the 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 Company will initially only come from dividends paid by the Bank to the Company, these regulatory limitations on dividends by the Bank will affect the amount of funds available
for dividends by the 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.



Dividends paid by the Company necessarily depend upon earnings, financial condition,
appropriate legal restrictions and other factors relevant at the time the Board of Directors of the Company considers dividend payment. Under the Ohio Revised Code, the Company is



11



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##### Table of Contents

prohibited from paying dividends if either the Company would be unable to pay its debts as they become due, or the Companys total assets would be less
than its total liabilities plus an amount needed to satisfy any preferential rights of shareholders. The 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. The following table discloses relevant stock information by quarter for 2004 and 2003.



|                  |  |          |       |         |   |          |  |          |       |  |   |      
|----------------- |  | -------- | ----- | ------- | - | -------- |  | -------- | ----- |  | - | -----
|                  |  | 03/31/04 |       | 6/30/04 |   | 09/30/04 |  | 12/31/04
|High              |  | $        | 29.00 |         | $ | 31.00    |  | $        | 31.00 |  | $ | 31.00
|Low               |  | $        | 29.00 |         | $ | 29.00    |  | $        | 31.00 |  | $ | 31.00
|Dividend Declared |  | $        | 0.19  |         | $ | 0.19     |  | $        | 0.19  |  | $ | 0.19 
|                  |  |          |       |        
|                  |  | 03/31/03 |       | 6/30/03 |   | 09/30/03 |  | 12/31/03
|High              |  | $        | 26.25 |         | $ | 27.00    |  | $        | 29.00 |  | $ | 30.98
|Low               |  | $        | 26.25 |         | $ | 26.25    |  | $        | 27.00 |  | $ | 29.00
|Dividend Declared |  | $        | 0.18  |         | $ | 0.18     |  | $        | 0.18  |  | $ | 0.19 



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 Company and its subsidiaries may pay.



Stock Options



The Company maintains a stock option plan for
key officers, employees, and nonemployee directors. The Company accounts for the plan under provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. There were no stock options issued for 2004.



Stock Repurchases



The Company will sometimes repurchase shares of stock from shareholders who desire. During
the fourth quarter of 2004, the Company repurchased 84 shares.



12



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##### Table of Contents

Five Year Consolidated Summary



|                                                         |  |             |    |  |               |    |  |               |    |  |               |    |  |             |   
|-------------------------------------------------------- |  | ----------- | -- |  | ------------- | -- |  | ------------- | -- |  | ------------- | -- |  | ----------- | --
|In thousands, except per common share amounts and ratios |  | 2004        |    |  | 2003          |    |  | 2002          |    |  | 2001          |    |  | 2000        |   
|                                                         |  |             |    |  | (as restated) |    |  | (as restated) |    |  | (as restated) |    |  |             |   
|Years Ended December 31,                                 |  |             |    |  |               |    |  |               |    |  |               |    |  |             |   
|Statements of Income                                     |  |             |    |  |               |    |  |               |    |  |               |    |  |             |   
|Interest Income                                          |  | $7,062      |    |  | $7,181        |    |  | $7,006        |    |  | $6,881        |    |  | $6,908      |   
|Interest Expense                                         |  | 2,726       |    |  | 2,846         |    |  | 2,435         |    |  | 2,889         |    |  | 2,943       |   
|                                                         |  |             |    |  |               |    |  |               |    |  |               |    |  |             |   
|Net interest income                                      |  | 4,336       |    |  | 4,335         |    |  | 4,571         |    |  | 3,992         |    |  | 3,965       |   
|Provision for loan losses                                |  | 90          |    |  | 50            |    |  | (275          | )  |  | 0             |    |  | (134        | ) 
|                                                         |  |             |    |  |               |    |  |               |    |  |               |    |  |             |   
|Net interest income after provision for loan losses      |  | 4,246       |    |  | 4,285         |    |  | 4,846         |    |  | 3,992         |    |  | 4,099       |   
|Non-interest income (A)                                  |  | 1,205       |    |  | 1,608         |    |  | 884           |    |  | 778           |    |  | 686         |   
|Non-interest expenses                                    |  | 4,720       |    |  | 4,590         |    |  | 4,601         |    |  | 3,620         |    |  | 3,594       |   
|                                                         |  |             |    |  |               |    |  |               |    |  |               |    |  |             |   
|Income before income taxes                               |  | 731         |    |  | 1,303         |    |  | 1,129         |    |  | 1,150         |    |  | 1,191       |   
|Income tax expense                                       |  | 48          |    |  | 166           |    |  | 145           |    |  | 191           |    |  | 305         |   
|                                                         |  |             |    |  |               |    |  |               |    |  |               |    |  |             |   
|Net income                                               |  | $683        |    |  | $1,137        |    |  | $984          |    |  | $959          |    |  | $886        |   
|                                                         |  |             |    |  |               |    |  |               |    |  |               |    |  |             |   
|Net Income                                               |  |             |    |  |               |    |  |               |    |  |               |    |  |             |   
|Basic                                                    |  | $1.18       |    |  | $1.98         |    |  | $1.70         |    |  | $1.61         |    |  | $1.44       |   
|Diluted                                                  |  | 1.17        |    |  | 1.97          |    |  | 1.70          |    |  | 1.59          |    |  | 1.42        |   
|Dividends declared                                       |  | 0.76        |    |  | 0.73          |    |  | 0.66          |    |  | 0.64          |    |  | 0.64        |   
|Stockholders equity                                     |  | 22.91       |    |  | 23.08         |    |  | 22.47         |    |  | 20.64         |    |  | 19.47       |   
|Stock price range                                        |  | 29.00-31.00 |    |  | 26.25-30.98   |    |  | 18.00-27.25   |    |  | 18.00-29.00   |    |  | 28.25-29.00 |   
|                                                         |  |             |    |  |              
|Selected Consolidated Balance Sheet Data at December 31, |  |             |    |  |               |    |  |               |    |  |               |    |  |             |   
|Assets                                                   |  | $148,291    |    |  | $149,064      |    |  | $132,390      |    |  | $109,561      |    |  | $100,131    |   
|Investment securities                                    |  | 53,749      |    |  | 47,668        |    |  | 45,164        |    |  | 33,989        |    |  | 27,545      |   
|Loans (B)                                                |  | 79,655      |    |  | 87,022        |    |  | 71,555        |    |  | 61,038        |    |  | 62,679      |   
|Deposits                                                 |  | 101,210     |    |  | 102,468       |    |  | 97,012        |    |  | 85,753        |    |  | 84,927      |   
|Borrowed funds                                           |  | 32,508      |    |  | 32,200        |    |  | 21,246        |    |  | 10,094        |    |  | 2,258       |   
|Shareholders equity                                     |  | 13,268      |    |  | 13,064        |    |  | 12,908        |    |  | 12,179        |    |  | 11,776      |   
|                                                         |  |             |    |  |              
|Ratios (C)                                               |  |             |    |  |               |    |  |               |    |  |               |    |  |             |   
|Per $100 of average assets                               |  |             |    |  |               |    |  |               |    |  |               |    |  |             |   
|Net Interest Income (tax-equivalent basis)               |  | $3.15       |    |  | $2.97         |    |  | $3.78         |    |  | $3.76         |    |  | $4.36       |   
|Provision for loan losses                                |  | 0.06        |    |  | 0.03          |    |  | (0.23         | )  |  | 0             |    |  | (0.14       | ) 
|                                                         |  |             |    |  |               |    |  |               |    |  |               |    |  |             |   
|Net interest income after provision for loan losses      |  | 3.09        |    |  | 2.94          |    |  | 4.01          |    |  | 3.76          |    |  | 4.50        |   
|Non-interest income                                      |  | 0.80        |    |  | 1.10          |    |  | .73           |    |  | .77           |    |  | 0.69        |   
|Non-interest expense                                     |  | 3.14        |    |  | 3.14          |    |  | 3.80          |    |  | 3.45          |    |  | 3.85        |   
|                                                         |  |             |    |  |               |    |  |               |    |  |               |    |  |             |   
|Income before income taxes                               |  | 0.75        |    |  | 0.90          |    |  | 0.94          |    |  | 1.08          |    |  | 1.34        |   
|Income tax expense                                       |  | .30         |    |  | .12           |    |  | .13           |    |  | .18           |    |  | 0.44        |   
|                                                         |  |             |    |  |               |    |  |               |    |  |               |    |  |             |   
|Net income                                               |  | $0.45       |    |  | $0.78         |    |  | $0.81         |    |  | $0.90         |    |  | $0.90       |   
|                                                         |  |             |    |  |               |    |  |               |    |  |               |    |  |             |   
|Leverage (D)                                             |  | 11.3        | 8x |  | 11.2          | 5x |  | 9.8           | 7x |  | 9.0           | 6x |  | 8.6         | 8x
|Return on average shareholders equity                   |  | 5.16        | %  |  | 8.75          | %  |  | 8.03          | %  |  | 8.21          | %  |  | 7.75        | % 
|Average shareholders equity to average assets           |  | 8.79        | %  |  | 8.89          | %  |  | 10.16         | %  |  | 11.04         | %  |  | 11.52       | % 
|Dividend payout ratio                                    |  | 64.28       | %  |  | 36.94         | %  |  | 38.82         | %  |  | 39.66         | %  |  | 44.48       | % 
|Tier 1 capital ratio at December 31                      |  | 14.81       | %  |  | 13.57         | %  |  | 14.75         | %  |  | 16.82         | %  |  | 18.40       | % 
|Tier 1 and Tier 2 capital ratio at December 31           |  | 15.89       | %  |  | 14.82         | %  |  | 16.00         | %  |  | 18.09         | %  |  | 19.70       | % 
|Leverage ratio                                           |  | 8.85        | %  |  | 8.51          | %  |  | 9.38          | %  |  | 10.77         | %  |  | 11.50       | % 

---

|(A) | Includes gains (losses) from securities transactions of $56 in 2004, $436 in 2003, $37 in 2002, $40 in 2001, and $19 in 2000.
|--- | -----------------------------------------------------------------------------------------------------------------------------

|(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.
|--- | -----------------------------------------------------------



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##### Table of Contents

Item 6 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 accordance with U.S. generally accepted accounting principles. The Audit Committee of the Board of Directors engaged S.R. Snodgrass AC,
independent auditors, to audit the consolidated financial statements. The auditors report is included as a part of the 2004 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.



| | 1. | 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, 2004 and 2003;
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | 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
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | 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.



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##### Table of Contents

Critical Accounting Policies



The Companys accounting policies are integral to understanding the results reported. The accounting policies are
described in detail in Note 1 of the consolidated financial statements. Our most complex accounting policies require managements judgment to ascertain the valuation of assets, liabilities, commitments and contingencies. We have established
detailed policies and control procedures that are intended to ensure valuation methods are well controlled and applied consistently from period to period. In addition, the policies and procedures are intended to ensure that the process for changing
methodologies occurs in an appropriate manner. The following is a brief description of our current accounting policies involving significant management valuation judgments.



Other Than Temporary Impairment of Equity Securities



Equity securities are evaluated periodically to determine whether a decline
in their value is other than temporary. Management utilizes criteria such as the magnitude and duration of the decline, in addition to the reasons underlying the decline, to determine whether the loss in value is other than temporary. The term
other than temporary is not intended to indicate that the decline is permanent. It indicates that the prospects for a near term recovery of value are not necessarily favorable, or that there is a lack of evidence to support fair values
equal to, or greater than, the carrying value of the investment. Once a decline in value is determined to be other than temporary, the value of the security is reduced and a corresponding charge to earnings is recognized.



Allowance for Loan Losses



Arriving at an appropriate level of allowance for loan losses involves a
high degree of judgment. The Companys allowance for loan losses provides for probable losses based upon evaluations of known, and inherent risks in the loan portfolio.



Management uses historical information to assess the adequacy of the allowance for loan losses as well as the prevailing
business environment; as it is affected by changing economic conditions and various external factors, which may impact the portfolio in ways currently unforeseen. The allowance is increased by provisions for loan losses and by recoveries of loans
previously charged-off and reduced by loans charged-off. For a full discussion of the Companys methodology of assessing the adequacy of the reserve for loan losses, refer to Note 1 of Notes to Consolidated Financial Statements
commencing on page 32 of this Form 10-KSB.



Deferred Tax
Assets



We use an estimate of future earnings to
support our position that the benefit of our deferred tax assets will be realized. If future income should prove non-existent or less than the amount of the deferred tax assets within the tax years to which they may be applied, the asset may not be
realized and our net income will be reduced. Our deferred tax assets are described further in Note 9 of the consolidated financial statements.



Financial Condition



The Corporations consolidated total assets amounted to $148.3 million at December 31, 2004, a decrease of 0.54% from the $149.1 million at December
31, 2003. A $7.4 million decrease in loans was partially offset by a $6.1 million increase in investments. Significant variances in the liabilities were a decrease of $1.3 million in deposits and a $0.3 million net increase in borrowings.



15



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##### Table of Contents

LoanPortfolio Loans, as a component of earning assets, represent a significant portion of earning assets.
At December 31, 2004, the Banks real estate loans secured by 1-to-4 family residential properties were $35,219,000. Loans secured by farmland and loans to finance agricultural production and other loans to farmers were $14,188,000. As noted in
Note 4, of the Notes to Consolidated Financial Statements, the Bank also was a creditor for $2,560,000 of loans to related parties.



|                                                 |  |      |        |   |      |   |        |      |  |   |        |    |  |      |         |    |  |   |        |   
|------------------------------------------------ |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -- |  | ---- | ------- | -- |  | - | ------ | --
|In thousands, except ratios                      |  | 2004 |        |   | 2003 |   |        | 2002 |  |   | 2001   |    |  | 2000 |        
|Loans at December 31,                            |  |      |        |   |      |   |        |      |  |   |        |    |  |      |         |    |  |   |        |   
|Loans secured by real estate:                    |  |      |        |   |      |   |        |      |  |   |        |    |  |      |         |    |  |   |        |   
|Construction                                     |  | $    | 1,259  |   |      | $ | 2,021  |      |  | $ | 558    |    |  | $    | 1,087   |    |  | $ | 841    |   
|Commercial                                       |  |      | 23,908 |   |      |   | 23,514 |      |  |   | 22,029 |    |  |      | 19,753  |    |  |   | 20,515 |   
|Residential                                      |  |      | 35,219 |   |      |   | 43,908 |      |  |   | 32,227 |    |  |      | 26,104  |    |  |   | 27,665 |   
|Commercial, Financial, Agricultural              |  |      | 14,188 |   |      |   | 11,045 |      |  |   | 7,802  |    |  |      | 5,940   |    |  |   | 5,781  |   
|Consumer                                         |  |      | 5,081  |   |      |   | 6,534  |      |  |   | 8,939  |    |  |      | 8,154   |    |  |   | 7,877  |   
|                                                 |  |      |        |   |      |   |        |      |  |   |        |    |  |      |         |    |  |   |        |   
|Total                                            |  | $    | 79,655 |   |      | $ | 87,022 |      |  | $ | 71,555 |    |  | $    | 61,038  |    |  | $ | 62,679 |   
|                                                 |  |      |        |   |      |   |        |      |  |   |        |    |  |      |         |    |  |   |        |   
|Allowance for Loan Losses                        |  |      |        |   |      |   |        |      |  |   |        |    |  |      |         |    |  |   |        |   
|Balance at beginning of year                     |  | $    | 1,194  |   |      | $ | 1,213  |      |  | $ | 1,499  |    |  | $    | 1,496   |    |  | $ | 1,732  |   
|Provision for loan losses                        |  |      | 90     |   |      |   | 50     |      |  |   | (275   | )  |  |      | 0       |    |  |   | (134   | ) 
|Charge-offs                                      |  |      |        |   |      |   |        |      |  |   |        |    |  |      |         |    |  |   |        |   
|Commercial and agricultural                      |  |      | 316    |   |      |   | 46     |      |  |   | 2      |    |  |      | 35      |    |  |   | 64     |   
|Consumer                                         |  |      | 29     |   |      |   | 41     |      |  |   | 23     |    |  |      | 56      |    |  |   | 51     |   
|Real estate                                      |  |      | 0      |   |      |   | 0      |      |  |   | 0      |    |  |      | 0       |    |  |   | 68     |   
|                                                 |  |      |        |   |      |   |        |      |  |   |        |    |  |      |         |    |  |   |        |   
|Total Charge-offs                                |  |      | 345    |   |      |   | 87     |      |  |   | 25     |    |  |      | 91      |    |  |   | 183    |   
|                                                 |  |      |        |   |      |   |        |      |  |   |        |    |  |      |         |    |  |   |        |   
|Recoveries                                       |  |      |        |   |      |   |        |      |  |   |        |    |  |      |         |    |  |   |        |   
|Commercial and agricultural                      |  |      | 0      |   |      |   | 5      |      |  |   | 1      |    |  |      | 32      |    |  |   | 39     |   
|Consumer                                         |  |      | 27     |   |      |   | 13     |      |  |   | 13     |    |  |      | 18      |    |  |   | 42     |   
|Real estate                                      |  |      | 0      |   |      |   | 0      |      |  |   | 0      |    |  |      | 44      |    |  |   | 0      |   
|                                                 |  |      |        |   |      |   |        |      |  |   |        |    |  |      |         |    |  |   |        |   
|Total recoveries                                 |  |      | 27     |   |      |   | 18     |      |  |   | 14     |    |  |      | 94      |    |  |   | 81     |   
|                                                 |  |      |        |   |      |   |        |      |  |   |        |    |  |      |         |    |  |   |        |   
|Net charge-offs (recoveries)                     |  |      | 318    |   |      |   | 69     |      |  |   | 11     |    |  |      | (3      | )  |  |   | 102    |   
|                                                 |  |      |        |   |      |   |        |      |  |   |        |    |  |      |         |    |  |   |        |   
|Balance at end of year                           |  | $    | 966    |   |      | $ | 1,194  |      |  | $ | 1,213  |    |  | $    | 1,499   |    |  | $ | 1,496  |   
|                                                 |  |      |        |   |      |   |        |      |  |   |        |    |  |      |         |    |  |   |        |   
|Allocation of Allowance for Loan Losses          |  |      |        |   |      |   |        |      |  |   |        |    |  |      |         |    |  |   |        |   
|Commercial                                       |  | $    | 717    |   |      | $ | 745    |      |  | $ | 861    |    |  | $    | 1,187   |    |  | $ | 1,044  |   
|Consumer                                         |  |      | 58     |   |      |   | 71     |      |  |   | 130    |    |  |      | 113     |    |  |   | 108    |   
|Real estate                                      |  |      | 59     |   |      |   | 184    |      |  |   | 222    |    |  |      | 190     |    |  |   | 199    |   
|Unallocated                                      |  |      | 132    |   |      |   | 194    |      |  |   | 0      |    |  |      | 9       |    |  |   | 145    |   
|                                                 |  |      |        |   |      |   |        |      |  |   |        |    |  |      |         |    |  |   |        |   
|Total                                            |  | $    | 966    |   |      | $ | 1,194  |      |  | $ | 1,213  |    |  | $    | 1,499   |    |  | $ | 1,496  |   
|                                                 |  |      |        |   |      |   |        |      |  |   |        |    |  |      |         |    |  |   |        |   
|Credit Quality Ratios                            |  |      |        |   |      |   |        |      |  |   |        |    |  |      |         |    |  |   |        |   
|Net charge-offs as a percentage of average loans |  |      | 0.40   | % |      |   | 0.09   | %    |  |   | 0.01   | %  |  |      | (0.00   | )% |  |   | 0.17   | % 
|Allowance for loan losses to                     |  |      |        |   |      |   |        |      |  |   |        |    |  |      |         |    |  |   |        |   
|Total loans at year-end                          |  |      | 1.21   | % |      |   | 1.37   | %    |  |   | 1.69   | %  |  |      | 2.45    | %  |  |   | 2.39   | % 
|Net charge-offs                                  |  |      | 3.04   |   |      |   | 17.30  |      |  |   | 110.27 |    |  |      | 499.67  |    |  |   | 14.67  |   
|Provision for loan losses to average loans       |  |      | 0.11   | % |      |   | 0.06   | %    |  |   | (0.41  | )% |  |      | 0.00    | %  |  |   | (0.23  | )%
|Earnings coverage of net charge-offs             |  |      | 2.15   |   |      |   | 16.48  |      |  |   | 89.45  |    |  |      | (385.33 | )  |  |   | 11.68  |   



There was a significant increase
in charge-offs of commercial and agricultural loans from $46,000 in 2003 to $316,000 in 2004. The commercial and agricultural loans charged off in 2004 had previously been identified by management and the potential loss on these problem loans had
been provided for in the allowance for loan losses in prior years. Of the $316,000 in commercial and agricultural loans charged off during 2004, $276,000 of the total consisted of two commercial loans. We do not anticipate that the need to charge
off these loans in 2004, which led to the substantial increase in charge-offs in 2004, will impact our future operating results.



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##### Table of Contents

Total loans at year end were $79,655,000, a decrease of 8.47% from last year end of $87,022,000. This
decrease was due to the sale of $12.0 million in long term fixed rate mortgages. These were sold in order to decrease interest rate risk and to shorten the duration of the 1-4 family mortgage loan portfolio. Overall loans decreased by 7,367,000.
Decreases were in loans secured by real estate of $9,057,000, and consumer loans of $1,453,000. Commercial, financial, and agricultural loans increased by $3,143,000. The loan information table provides a five-year loan history.



The following table sets forth the maturity of our loan portfolio as of December 31, 2004
which have pre-determined interest rates and which have floating or adjustable rates. The table does not include prepayments or scheduled principal repayments. All loans are shown as maturing based on contractual maturities.



|                                        |  |              |  |          |  |               |  |           
|--------------------------------------- |  | ------------ |  | -------- |  | ------------- |  | ----------
|                                        |  | Within1 Year |  | 1-5Years |  | After 5 Years |  | TotalLoans
|Fixed Rate                              |  |              |  |          |  |               |  |           
|                                        |  |              |  |         
|Loans Secured by Real Estate            |  | 1,605        |  | 6,581    |  | 44,523        |  | 52,709    
|Commercial, Financial, and Agricultural |  | 566          |  | 4,359    |  | 4,148         |  | 9,073     
|Consumer                                |  | 309          |  | 4,651    |  | 0             |  | 4,960     
|                                        |  |              |  |          |  |               |  |           
|Total Fixed                             |  | 2,480        |  | 15,591   |  | 48,671        |  | 66,742    
|                                        |  |              |  |         
|Adjustable Rate                         |  |              |  |          |  |               |  |           
|                                        |  |              |  |         
|Loans Secured by Real Estate            |  | 5,853        |  | 1,824    |  | 0             |  | 7,677     
|Commercial, Financial, and Agricultural |  | 4,424        |  | 691      |  | 0             |  | 5,115     
|Consumer                                |  | 121          |  | 0        |  | 0             |  | 121       
|                                        |  |              |  |          |  |               |  |           
|Total Adjustable                        |  | 10,398       |  | 2,515    |  | 0             |  | 12,913    
|                                        |  |              |  |         
|Total Loans                             |  | 12,878       |  | 18,106   |  | 48,671        |  | 79,655    



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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. These arrangements could have a current or future effect on changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures, or capital resources. The company has various financial obligations, including contractual obligations and commitments, which may require future cash payments. The following table shows
possible contractual obligations and commitments:



Contractual Obligations,
Commitments, Contingent Liabilities, and Off-balance Sheet arrangements



Contractual Obligations:



The following table presents as of
December 31, 2004 significant contractual obligations to third parties by payment date. Discussion of the obligations can be found in the notes to the consolidated financial statements.



|                                   |  |                 |        |                   |   |                    |  |                 |       |       |   |       |  |   |       
|---------------------------------- |  | --------------- | ------ | ----------------- | - | ------------------ |  | --------------- | ----- | ----- | - | ----- |  | - | ------
|                                   |  | Payments Due In
|(In thousands)                     |  | One Year orLess |        | One to ThreeYears |   | Three to FiveYears |  | Over Five Years |       | Total
|Deposits without a stated maturity |  | $               | 56,383 |                   | $ |                   |  | $               |      |       | $ |      |  | $ | 56,383
|Certificates of Deposit            |  |                 | 26,517 |                   |   | 15,631             |  |                 | 2,679 |       |   |      |  |   | 44,827
|Short-term Borrowings              |  |                 | 11,621 |                   |   |                   |  |                 |      |       |   |      |  |   | 11,621
|Other Borrowings                   |  |                 | 1,810  |                   |   | 10,591             |  |                 | 444   |       |   | 8,042 |  |   | 20,887



Commitments



The following table presents as of December 31, 2004, the amounts and expected maturities of
significant commitments. Discussion of the obligations can be found in the notes to the consolidated financial statements.



|                             |  |                 |       |                   |   |                    |   |                 |   |       |   |      
|---------------------------- |  | --------------- | ----- | ----------------- | - | ------------------ | - | --------------- | - | ----- | - | -----
|(In thousands)               |  | One Year orLess |       | One to ThreeYears |   | Three to FiveYears |   | Over Five Years |   | Total
|Commitments to extend credit |  |                 |       |                   |   |                    |   |                 |   |       |   |      
|Commercial                   |  | $               | 2,797 |                   |  |                    |  |                 |  |       | $ | 2,797
|Residential real estate      |  |                 |      |                   |  |                    |  |                 |  |       |   |     
|Home Equity Lines            |  |                 | 2,723 |                   |  |                    |  |                 |  |       |   | 2,723
|Other                        |  |                 |      |                   |  |                    |  |                 |  |       |   |     
|Standby letters of credit    |  |                 | 10    |                   |  |                    |  |                 |  |       |   | 10   



Commitments to extend credit,
including loan commitments, and standby letters of credit do not necessarily represent future cash requirements, in that these commitments often expire without being drawn upon.



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Non-Performing Assets Non-accrual loans as of December 31, 2004, were $278,000 compared to
$191,000 as of the previous year end. There are five loans on non-accrual of which four are secured by real estate. The other loan on non-accrual is a small loan secured by an automobile. Loans which are contractually past due 90 days more amounted
to $89,000 as of December 31, 2004, and were $8,000 as of the previous year end. This consists of one loan which is secured by real estate. Management believes that the Allowance for Loan Losses is adequate to cover any potential losses in the loan
portfolio at December 31, 2004. 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 2004 and 2003 amounted to $367,000 and $199,000, respectfully. 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 commercial 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.



A provision for loan losses of $90,000 was provided in 2004 as a result of
managements thorough analysis of the banks portfolio and the factors surrounding the current market conditions. As of December 31, 2004, the reserve for loan losses was $966,000 which represents 1.21% of outstanding loans. The reserve
continues to exceed peer groups and based upon both internal and external evaluations indicate that the levels of reserves are adequate given the risk within the loan portfolio. Current analysis indicated that this level of reserve is adequate give
the current economic trends, delinquency patterns and loan quality within the various portfolios.



19



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##### Table of Contents

The following table illustrates the allocation of the allowance for loan losses for each category of loan. The allocation
of the allowance to each category is not necessarily indicative of future loss in a particular category and does not restrict our use of the allowance to absorb losses in other loan categories.



|                        |  |                 |     |                                               |        |   |        |      |                                               |  |        |        |  |                                               |       |  |        |  
|----------------------- |  | --------------- | --- | --------------------------------------------- | ------ | - | ------ | ---- | --------------------------------------------- |  | ------ | ------ |  | --------------------------------------------- | ----- |  | ------ | -
|                        |  | At December 31, |    
|                        |  | 2004            |     |                                               | 2003   |   |        | 2002 |                                              
|                        |  | Amount          |     | Percent ofLoans in EachCategory toTotal Loans |        |   | Amount |      | Percent ofLoans in EachCategory toTotal Loans |  |        | Amount |  | Percent ofLoans in EachCategory toTotal Loans |      
|Type of Loans:          |  |                 |     |                                               |        |   |        |      |                                               |  |        |        |  |                                               |       |  |        |  
|                        |  |                 |     |                                               |        |  
|Commercial & Commercial |  |                 |     |                                               |        |   |        |      |                                               |  |        |        |  |                                               |       |  |        |  
|Real Estate             |  | $               | 717 |                                               | 47.83  | % |        | $    | 745                                           |  | 39.71  | %      |  | $                                             | 861   |  | 41.69  | %
|Residential Real Estate |  |                 | 59  |                                               | 45.79  | % |        |      | 184                                           |  | 52.78  | %      |  |                                               | 222   |  | 45.82  | %
|Consumer                |  |                 | 58  |                                               | 6.38   | % |        |      | 71                                            |  | 7.51   | %      |  |                                               | 130   |  | 12.49  | %
|Unallocated             |  |                 | 132 |                                               | 0.00   | % |        |      | 194                                           |  | 0.00   | %      |  |                                               | 0     |  | 0.00   | %
|                        |  |                 |     |                                               |        |  
|Total                   |  | $               | 966 |                                               | 100.00 | % |        | $    | 1,194                                         |  | 100.00 | %      |  | $                                             | 1,213 |  | 100.00 | %



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, and mortgage backed securities. Securities categorized as
available-for-sale can 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, 2004 and 2003, the entire investment portfolio of the Bank was classified as available-for-sale.



The following table is a schedule of the maturity distributions and weighted average yield of investment securities as of December 31, 2004:



Available for Sale



|                                                 |  |                          |        |   |                          |   |        |                           |  |   |                |   |  |       |        |   |  |   |        |  
|------------------------------------------------ |  | ------------------------ | ------ | - | ------------------------ | - | ------ | ------------------------- |  | - | -------------- | - |  | ----- | ------ | - |  | - | ------ | -
|                                                 |  | Amortized Cost Maturing: |       
|                                                 |  | Within 1 Year            |        |   | After 1but within5 Years |   |        | After 5but within10 Years |  |   | After 10 Years |   |  | Total |       
|                                                 |  | (Dollars in Thousands)   |       
|U. S. Government agency Securities               |  | $                        | 3,990  |   |                          | $ | 11,624 |                           |  | $ | 1,960          |   |  | $     |       |   |  | $ | 17,574 |  
|                                                 |  |                          |        |   |                         
|Obligations of states and political Subdivisions |  |                          | 43     |   |                          |   | 567    |                           |  |   | 1,244          |   |  |       | 10,913 |   |  |   | 12,767 |  
|                                                 |  |                          |        |   |                         
|Other debt securities                            |  |                          | 8      |   |                          |   |       |                           |  |   |               |   |  |       |       |   |  |   | 8      |  
|Mortgage  backed securities (2)                 |  |                          | 6,001  |   |                          |   | 11,262 |                           |  |   | 3,869          |   |  |       | 2,268  |   |  |   | 23,400 |  
|                                                 |  |                          |        |   |                          |   |        |                           |  |   |                |   |  |       |        |   |  |   |        |  
|Total                                            |  | $                        | 10,042 |   |                          | $ | 23,453 |                           |  | $ | 7,073          |   |  | $     | 13,181 |   |  | $ | 53,749 |  
|                                                 |  |                          |        |   |                          |   |        |                           |  |   |                |   |  |       |        |   |  |   |        |  
|Weighted average yield (1)                       |  |                          | 4.02   | % |                          |   | 4.22   | %                         |  |   | 5.14           | % |  |       | 6.03   | % |  |   | 4.66   | %
|                                                 |  |                          |        |   |                          |   |        |                           |  |   |                |   |  |       |        |   |  |   |        |  

---

|(1) | Weighted average yields were computed on a tax equivalent basis using the federal income tax statutory rate and were determined on the basis of cost, adjusted for amortization of
premium or accretion of discount.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Mortgage-backed securities provide for periodic principal repayments. It is anticipated that these securities will be repaid prior to their contractural maturity dates.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Investment securities available for sale increased $6,081,000 from of $47,668,000 as of December 31, 2003
to $53,749,000 as of December 31, 2004, an increase of 12.76%. Investment securities and federal funds sold are consistently maintained at levels that will cover the short-term liquidity needs of the Bank. 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.



Deposits Total Deposits decreased $1,258,000 from $102,468,000 as of December 31, 2003 to $101,210,000 as of December 31, 2004, a decrease of 1.23%. Increases were in non-interest bearing checking of
$1,143,000, savings accounts of $62,000, and money market accounts of $3,847,000. Decreases were in interest bearing demand of $1,593,000 and time deposits of $4,717,000. The average cost of deposits for the Bank was approximately 1.67% for the
year-ended December 31, 2004 compared to 1.73% and 2.34% for 2003 and 2002, respectively.



Time deposits at December 31, 2004, mature $26,517, $12,073, $3,558, $1,767, and $912 during 2005, 2006, 2007, 2008, and 2009, respectively.



Time deposits include certificates of deposit in denominations of $100,000 or more. Such deposits aggregated $11,526 and $14,217 at December
31, 2004 and 2003, respectively.



Maturities on time deposits of $100,000 or
more at December 31, 2004, are as follows:



|                                    |  |   |       
|----------------------------------- |  | - | ------
|Within three months                 |  | $ | 5,812 
|Beyond three but within six months  |  |   | 1,886 
|Beyond six but within twelve months |  |   | 454   
|Beyond one year                     |  |   | 3,374 
|                                    |  |   |       
|Total                               |  | $ | 11,526
|                                    |  |   |       



Short Term
BorrowingsShort-term borrowings increased by $3,149,000 from $8,472,000 as of December 31, 2003 to $11,621,000 as of December 31, 2004. Please refer to Note 7 of the Notes to Consolidated Financial Statements for additional information.



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



|                                      |  |      |        |   |      |   |       |  
|------------------------------------- |  | ---- | ------ | - | ---- | - | ----- | -
|                                      |  | 2004 |        |   | 2003 |  
|Balance at year-end                   |  | $    | 11,621 |   |      | $ | 8,472 |  
|Average balance outstanding           |  |      | 11,070 |   |      |   | 6,019 |  
|Maximum month-end balance             |  |      | 14,474 |   |      |   | 9,971 |  
|Weighted-average rate at year-end     |  |      | 1.90   | % |      |   | 0.97  | %
|Weighted-average rate during the year |  |      | 1.02   | % |      |   | 1.06  | %



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



21



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##### Table of Contents

Other BorrowingsOther borrowings decreased by $2,841,000 from $23,728,000 as of December 31, 2003
to $20,887,000 as of December 31, 2004.



The following table sets forth
information concerning other borrowings with the FHLB and a note payable:



|                       |  |                |  |                                 |                            |      |      |                 |      |    |  |      |      |  |      |        |  |   |       
|---------------------- |  | -------------- |  | ------------------------------- | -------------------------- | ---- | ---- | --------------- | ---- | -- |  | ---- | ---- |  | ---- | ------ |  | - | ------
|                       |  |                |  | Weighted- average interest rate |                            |      |      |                 |      |    |  |     
|                       |  | Maturity range |  |                                 | Stated interest rate range |      |      | At December 31,
|Description            |  | from           |  | to                              |                            |      | from |                 |      | to |  |      | 2004 |  | 2003
|Mortgage match         |  | 10/04/11       |  | 11/01/11                        |                            | 4.99 | %    |                 | 4.99 | %  |  | 4.99 | %    |  | $    | 127    |  | $ | 221   
|Convertible            |  | 04/23/07       |  | 01/28/13                        |                            | 4.15 |      |                 | 3.51 |    |  | 4.57 |      |  |      | 13,000 |  |   | 13,000
|Convertible amortizing |  | 03/13/03       |  | 04/01/08                        |                            | 2.38 |      |                 | 2.38 |    |  | 2.38 |      |  |      | 3,399  |  |   | 4,367 
|Fixed rate             |  | 02/22/04       |  | 12/11/07                        |                            | 4.52 |      |                 | 3.68 |    |  | 5.47 |      |  |      | 2,000  |  |   | 3,000 
|CMP advances           |  | 08/01/07       |  | 02/01/08                        |                            | 3.15 |      |                 | 2.69 |    |  | 3.48 |      |  |      | 2,361  |  |   | 3,139 
|                       |  |                |  |                                 |                            |      |      |                 |      |    |  |      |      |  |      |        |  |   |       
|                       |  |                |  |                                 |                            |      |      |                 |      |    |  |      |      |  |      | 20,887 |  |   | 23,727
|Note payable           |  |                |  |                                 |                            |      |      |                 |      |    |  |      |      |  |      |       |  |   | 1     
|                       |  |                |  |                                 |                            |      |      |                 |      |    |  |      |      |  |      |        |  |   |       
|                       |  |                |  |                                 |                            |      |      |                 |      |    |  |      |      |  | $    | 20,887 |  | $ | 23,728
|                       |  |                |  |                                 |                            |      |      |                 |      |    |  |      |      |  |      |        |  |   |       



Maturities of other borrowings at
December 31, 2004, are summarized as follows:



|                         |  |        |        |                        |      |  
|------------------------ |  | ------ | ------ | ---------------------- | ---- | -
|Year Ending December 31, |  | Amount |        | Weighted- Average Rate |     
|2005                     |  | $      | 1,810  |                        | 2.76 | %
|2006                     |  |        | 2,861  |                        | 3.67 |  
|2007                     |  |        | 7,730  |                        | 4.03 |  
|2008                     |  |        | 424    |                        | 2.53 |  
|2009                     |  |        | 20     |                        | 4.99 |  
|2010 and after           |  |        | 8,042  |                        | 3.89 |  
|                         |  |        |        |                        |      |  
|                         |  | $      | 20,887 |                        | 3.79 | %
|                         |  |        |        |                        |      |  



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 are presented in the five-year Consolidated Financial Summary. In 2004, the
Return on Average Shareholders Equity decreased to 5.16%, compared to 8.75% in 2003, and 8.03% in 2002. It should also be noted that the return on average assets for 2004 was .45% compared to .78% in 2003 and .81% 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. At December 31, 2004 the Companys risk-based capital ratio for Tier I
and Tier II capital is 14.81% and 15.89%, 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.



22



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##### Table of Contents

The Consolidated Average Balance Sheets and Related Yields and Rates table summarizes items discussed in
the net interest income section of the Comparison of Results for the Years Ended December 31, 2004 and 2003. The tax equivalent adjustment on tax exempt investment securities and loans was $414,000 for 2004, $387,000 for 2003, and $261,000 for 2002.



Consolidated Average Balance Sheets and Related Yields and Rates*



|                                               |  |                 |         |   |                          |   |                       |      |       |                 |  |   |                          |   |                       |   |       |                 |       |   |                          |   |                       |   |  |   |       |  |       |  
|---------------------------------------------- |  | --------------- | ------- | - | ------------------------ | - | --------------------- | ---- | ----- | --------------- |  | - | ------------------------ | - | --------------------- | - | ----- | --------------- | ----- | - | ------------------------ | - | --------------------- | - |  | - | ----- |  | ----- | -
|                                               |  | 2004            |         |   | 2003                     |   |                       | 2002 |      
|In thousands, except ratios                    |  | Average Balance |         |   | Interest Income/ Expense |   | Average Yields/ Rates |      |       | Average Balance |  |   | Interest Income/ Expense |   | Average Yields/ Rates |   |       | Average Balance |       |   | Interest Income/ Expense |   | Average Yields/ Rates |  
|Assets                                         |  |                 |         |   |                          |   |                       |      |       |                 |  |   |                          |   |                       |   |       |                 |       |   |                          |   |                       |   |  |   |       |  |       |  
|Cash and due from banks                        |  | $               | 4,000   |   |                          |   |                       |      |       |                 |  | $ | 3,956                    |   |                       |   |       |                 |       |   |                          | $ | 3,271                 |   |  |   |       |  |       |  
|Federal Funds sold                             |  |                 | 1,730   |   |                          |   | 18                    |      | 1.04  | %               |  |   | 888                      |   |                       |   | 8     |                 | 0.99  | % |                          |   | 1,211                 |   |  |   | 19    |  | 1.57  | %
|Investment securities                          |  |                 |         |   |                          |   |                       |      |       |                 |  |   |                          |   |                       |   |       |                 |       |   |                          |   |                       |   |  |   |       |  |       |  
|Taxable securities                             |  |                 | 36,877  |   |                          |   | 1,367                 |      | 3.71  | %               |  |   | 36,425                   |   |                       |   | 1,254 |                 | 3.44  | % |                          |   | 29,378                |   |  |   | 1,411 |  | 4.80  | %
|Tax-exempt securities                          |  |                 | 17,291  |   |                          |   | 1,167                 |      | 6.75  | %               |  |   | 16,509                   |   |                       |   | 1,065 |                 | 6.45  | % |                          |   | 11,428                |   |  |   | 755   |  | 6.60  | %
|                                               |  |                 |         |   |                          |   |                       |      |       |                 |  |   |                          |   |                       |   |       |                 |       |   |                          |   |                       |   |  |   |       |  |       |  
|Total Investment securities                    |  |                 | 54,168  |   |                          |   | 2,534                 |      | 4.68  | %               |  |   | 52,934                   |   |                       |   | 2,319 |                 | 4.38  | % |                          |   | 40,806                |   |  |   | 2,166 |  | 5.31  | %
|Loans                                          |  |                 |         |   |                          |   |                       |      |       |                 |  |   |                          |   |                       |   |       |                 |       |   |                          |   |                       |   |  |   |       |  |       |  
|Real Estate                                    |  |                 | 45,486  |   |                          |   | 2,743                 |      | 6.03  | %               |  |   | 46,068                   |   |                       |   | 2,995 |                 | 6.50  | % |                          |   | 34,017                |   |  |   | 2,593 |  | 7.62  | %
|Consumer                                       |  |                 | 5,360   |   |                          |   | 389                   |      | 7.26  | %               |  |   | 7,237                    |   |                       |   | 538   |                 | 7.43  | % |                          |   | 8,603                 |   |  |   | 751   |  | 8.73  | %
|Commercial (includes real estate)              |  |                 | 28,693  |   |                          |   | 1,792                 |      | 6.25  | %               |  |   | 25,263                   |   |                       |   | 1,708 |                 | 6.76  | % |                          |   | 22,999                |   |  |   | 1,738 |  | 7.56  | %
|                                               |  |                 |         |   |                          |   |                       |      |       |                 |  |   |                          |   |                       |   |       |                 |       |   |                          |   |                       |   |  |   |       |  |       |  
|Total loans                                    |  |                 | 79,539  |   |                          |   | 4,924                 |      | 6.19  | %               |  |   | 78,502                   |   |                       |   | 5,241 |                 | 6.67  | % |                          |   | 65,619                |   |  |   | 5,082 |  | 7.74  | %
|                                               |  |                 |         |   |                          |   |                       |      |      
|Total earning assets                           |  |                 | 135,437 |   |                          |   | 7,476                 |      | 5.52  | %               |  |   | 132,390                  |   |                       |   | 7,568 |                 | 5.72  | % |                          |   | 107,636               |   |  |   | 7,267 |  | 6.75  | %
|Allowance for loan losses                      |  |                 | (1,081  | ) |                          |   |                       |      |       |                 |  |   | (1,223                   | ) |                       |   |       |                 |       |   |                          |   | (1,287                | ) |  |   |       |  |       |  
|Other assets                                   |  |                 | 12,172  |   |                          |   |                       |      |       |                 |  |   | 11,423                   |   |                       |   |       |                 |       |   |                          |   | 10,824                |   |  |   |       |  |       |  
|                                               |  |                 |         |   |                          |   |                       |      |       |                 |  |   |                          |   |                       |   |       |                 |       |   |                          |   |                       |   |  |   |       |  |       |  
|Total assets                                   |  | $               | 150,528 |   |                          |   |                       |      |       |                 |  | $ | 146,546                  |   |                       |   |       |                 |       |   |                          | $ | 120,444               |   |  |   |       |  |       |  
|                                               |  |                 |         |   |                          |   |                       |      |       |                 |  |   |                          |   |                       |   |       |                 |       |   |                          |   |                       |   |  |   |       |  |       |  
|Liabilities and Shareholders Equity           |  |                 |         |   |                          |   |                       |      |       |                 |  |   |                          |   |                       |   |       |                 |       |   |                          |   |                       |   |  |   |       |  |       |  
|Non-interest-bearing deposits                  |  | $               | 13,786  |   |                          |   |                       |      |       |                 |  | $ | 13,172                   |   |                       |   |       |                 |       |   |                          | $ | 12,262                |   |  |   |       |  |       |  
|Interest-bearing deposits                      |  |                 |         |   |                          |   |                       |      |       |                 |  |   |                          |   |                       |   |       |                 |       |   |                          |   |                       |   |  |   |       |  |       |  
|NOW accounts                                   |  |                 | 13,783  |   |                          |   | 28                    |      | 0.20  | %               |  |   | 14,163                   |   |                       |   | 33    |                 | 0.23  | % |                          |   | 12,682                |   |  |   | 89    |  | 0.70  | %
|Money market accounts                          |  |                 | 11,767  |   |                          |   | 211                   |      | 1.79  | %               |  |   | 5,975                    |   |                       |   | 71    |                 | 1.19  | % |                          |   | 5,306                 |   |  |   | 130   |  | 2.45  | %
|Savings accounts                               |  |                 | 15,432  |   |                          |   | 39                    |      | 0.25  | %               |  |   | 15,585                   |   |                       |   | 55    |                 | 0.35  | % |                          |   | 15,421                |   |  |   | 205   |  | 1.33  | %
|Time deposits                                  |  |                 | 47,463  |   |                          |   | 1,496                 |      | 3.15  | %               |  |   | 53,302                   |   |                       |   | 1,712 |                 | 3.21  | % |                          |   | 44,067                |   |  |   | 1,494 |  | 3.39  | %
|                                               |  |                 |         |   |                          |   |                       |      |       |                 |  |   |                          |   |                       |   |       |                 |       |   |                          |   |                       |   |  |   |       |  |       |  
|Total interest-bearing deposits                |  |                 | 88,445  |   |                          |   | 1,774                 |      | 2.01  | %               |  |   | 89,025                   |   |                       |   | 1,871 |                 | 2.10  | % |                          |   | 77,476                |   |  |   | 1,918 |  | 2.48  | %
|Borrowed funds                                 |  |                 | 33,191  |   |                          |   | 952                   |      | 2.87  | %               |  |   | 29,769                   |   |                       |   | 975   |                 | 3.28  | % |                          |   | 16,777                |   |  |   | 517   |  | 3.08  | %
|                                               |  |                 |         |   |                          |   |                       |      |       |                 |  |   |                          |   |                       |   |       |                 |       |   |                          |   |                       |   |  |   |       |  |       |  
|Total interest-bearing liabilities             |  |                 | 121,636 |   |                          |   | 2,726                 |      | 2.24  | %               |  |   | 118,794                  |   |                       |   | 2,846 |                 | 2.40  | % |                          |   | 94,253                |   |  |   | 2,435 |  | 2.58  | %
|Other liabilities                              |  |                 | 1,875   |   |                          |   |                       |      |       |                 |  |   | 1,585                    |   |                       |   |       |                 |       |   |                          |   | 1,688                 |   |  |   |       |  |       |  
|                                               |  |                 |         |   |                          |   |                       |      |      
|Shareholders equity                           |  |                 | 13,231  |   |                          |   |                       |      |       |                 |  |   | 12,995                   |   |                       |   |       |                 |       |   |                          |   | 12,241                |   |  |   |       |  |       |  
|                                               |  |                 |         |   |                          |   |                       |      |       |                 |  |   |                          |   |                       |   |       |                 |       |   |                          |   |                       |   |  |   |       |  |       |  
|Total liabilities and shareholders equity     |  | $               | 150,528 |   |                          |   |                       |      |       |                 |  | $ | 146,546                  |   |                       |   |       |                 |       |   |                          | $ | 120,444               |   |  |   |       |  |       |  
|                                               |  |                 |         |   |                          |   |                       |      |       |                 |  |   |                          |   |                       |   |       |                 |       |   |                          |   |                       |   |  |   |       |  |       |  
|Net interest income (tax-equivalent basis)     |  |                 |         |   |                          | $ | 4,750                 |      |       |                 |  |   |                          |   |                       | $ | 4,722 |                 |       |   |                          |   |                       |   |  | $ | 4,832 |  |       |  
|                                               |  |                 |         |   |                          |   |                       |      |       |                 |  |   |                          |   |                       |   |       |                 |       |   |                          |   |                       |   |  |   |       |  |       |  
|Yield spread                                   |  |                 |         |   |                          |   |                       |      | 3.28  | %               |  |   |                          |   |                       |   |       |                 | 3.32  | % |                          |   |                       |   |  |   |       |  | 4.17  | %
|Net interest income to earnings assets         |  |                 |         |   |                          |   |                       |      | 3.51  | %               |  |   |                          |   |                       |   |       |                 | 3.57  | % |                          |   |                       |   |  |   |       |  | 4.49  | %
|Interest-bearing liabilities to earning assets |  |                 |         |   |                          |   |                       |      | 89.81 | %               |  |   |                          |   |                       |   |       |                 | 89.73 | % |                          |   |                       |   |  |   |       |  | 87.57 | %

---

|* | Interest income/expense and yield/rates are calculated on a tax-equivalent basis utilizing a federal incremental tax rate of 34% in 2004, 2003 and 2002. Non-accrual loans and the
related negative income effect have been included in the calculation of average rates.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



23



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##### Table of Contents

Following is a rate/volume analysis schedule as of December 31, 2004:



|                                      |  |                                                                          |      |   |               |   |      |             |  |   |                 |   |  |               |       |   |             |   |        |   |  |   |      |  
|------------------------------------- |  | ------------------------------------------------------------------------ | ---- | - | ------------- | - | ---- | ----------- |  | - | --------------- | - |  | ------------- | ----- | - | ----------- | - | ------ | - |  | - | ---- | -
|                                      |  | Analysis of Changes in Net Interest Income on a Tax-Equivalent Basis (1) |     
|                                      |  | 2004                                                                     |      |   | 2003          |  
|                                      |  | Change inVolume                                                          |      |   | Changein Rate |   |      | TotalChange |  |   | Change inVolume |   |  | Changein Rate |       |   | TotalChange |  
|Interest Income:                      |  |                                                                          |      |   |               |   |      |             |  |   |                 |   |  |               |       |   |             |   |        |   |  |   |      |  
|Short-term investments:               |  |                                                                          |      |   |               |   |      |             |  |   |                 |   |  |               |       |   |             |   |        |   |  |   |      |  
|Fed Funds Sold                        |  | $                                                                        | 9    |   |               | $ | 1    |             |  | $ | 10              |   |  | $             | (8    | ) |             | $ | (3     | ) |  | $ | (11  | )
|                                      |  |                                                                          |      |   |               |  
|Investment securities:                |  |                                                                          |      |   |               |   |      |             |  |   |                 |   |  |               |       |   |             |   |        |   |  |   |      |  
|Taxable                               |  |                                                                          | 40   |   |               |   | 73   |             |  |   | 113             |   |  |               | 295   |   |             |   | (452   | ) |  |   | (157 | )
|Tax-exempt (3)                        |  |                                                                          | 52   |   |               |   | 50   |             |  |   | 102             |   |  |               | 328   |   |             |   | (18    | ) |  |   | 310  |  
|                                      |  |                                                                          |      |   |               |   |      |             |  |   |                 |   |  |               |       |   |             |   |        |   |  |   |      |  
|Total investments                     |  |                                                                          | 92   |   |               |   | 123  |             |  |   | 215             |   |  |               | 623   |   |             |   | (470   | ) |  |   | 153  |  
|                                      |  |                                                                          |      |   |               |   |      |             |  |   |                 |   |  |               |       |   |             |   |        |   |  |   |      |  
|Loans:                                |  |                                                                          |      |   |               |   |      |             |  |   |                 |   |  |               |       |   |             |   |        |   |  |   |      |  
|Residential mortgage loans            |  |                                                                          | (86  | ) |               |   | (166 | )           |  |   | (252            | ) |  |               | 823   |   |             |   | (421   | ) |  |   | 402  |  
|Consumer                              |  |                                                                          | (97  | ) |               |   | (52  | )           |  |   | (149            | ) |  |               | 148   |   |             |   | (361   | ) |  |   | (213 | )
|Commercial and Commercial Real Estate |  |                                                                          | 241  |   |               |   | (157 | )           |  |   | 84              |   |  |               | 162   |   |             |   | (192   | ) |  |   | (30  | )
|                                      |  |                                                                          |      |   |               |   |      |             |  |   |                 |   |  |               |       |   |             |   |        |   |  |   |      |  
|Total loans, net of discount          |  |                                                                          | 58   |   |               |   | (375 | )           |  |   | (317            | ) |  |               | 1,133 |   |             |   | (974   | ) |  |   | 159  |  
|                                      |  |                                                                          |      |   |               |   |      |             |  |   |                 |   |  |               |       |   |             |   |        |   |  |   |      |  
|Total Interest Income                 |  |                                                                          | 159  |   |               |   | (251 | )           |  |   | (92             | ) |  |               | 1,748 |   |             |   | (1,447 | ) |  |   | 301  |  
|                                      |  |                                                                          |      |   |               |   |      |             |  |   |                 |   |  |               |       |   |             |   |        |   |  |   |      |  
|Interest Expense:                     |  |                                                                          |      |   |               |   |      |             |  |   |                 |   |  |               |       |   |             |   |        |   |  |   |      |  
|Interest-bearing deposits:            |  |                                                                          |      |   |               |   |      |             |  |   |                 |   |  |               |       |   |             |   |        |   |  |   |      |  
|NOW accounts                          |  |                                                                          | (1   | ) |               |   | (4   | )           |  |   | (5              | ) |  |               | 9     |   |             |   | (65    | ) |  |   | (56  | )
|Money market accounts                 |  |                                                                          | 111  |   |               |   | 29   |             |  |   | 140             |   |  |               | 14    |   |             |   | (73    | ) |  |   | (59  | )
|Savings accounts                      |  |                                                                          | (1   | ) |               |   | (15  | )           |  |   | (16             | ) |  |               | 3     |   |             |   | (153   | ) |  |   | (150 | )
|Certificates of deposit               |  |                                                                          | (165 | ) |               |   | (51  | )           |  |   | (216            | ) |  |               | 281   |   |             |   | (63    | ) |  |   | 218  |  
|                                      |  |                                                                          |      |   |               |   |      |             |  |   |                 |   |  |               |       |   |             |   |        |   |  |   |      |  
|Total interest-bearing deposits       |  |                                                                          | (56  | ) |               |   | (41  | )           |  |   | (97             | ) |  |               | 307   |   |             |   | (354   | ) |  |   | (47  | )
|Other borrowed funds                  |  |                                                                          | (3   | ) |               |   | (20  | )           |  |   | (23             | ) |  |               | 428   |   |             |   | 30     |   |  |   | 458  |  
|                                      |  |                                                                          |      |   |               |   |      |             |  |   |                 |   |  |               |       |   |             |   |        |   |  |   |      |  
|Total interest expense                |  |                                                                          | (59  | ) |               |   | (61  | )           |  |   | (120            | ) |  |               | 735   |   |             |   | (324   | ) |  |   | 411  |  
|                                      |  |                                                                          |      |   |               |   |      |             |  |   |                 |   |  |               |       |   |             |   |        |   |  |   |      |  
|Net interest income                   |  | $                                                                        | 218  |   |               | $ | (190 | )           |  | $ | 28              |   |  | $             | 1,013 |   |             | $ | (1,123 | ) |  | $ | (110 | )
|                                      |  |                                                                          |      |   |               |   |      |             |  |   |                 |   |  |               |       |   |             |   |        |   |  |   |      |  

---

|(1) | The portion of the total change attributable to both volume and rate changes during the year has been allocated to volume and rate components based upon the absolute dollar amount
of the change in each component prior to allocation.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



24



---

##### Table of Contents

Comparison of Results of Operations for the Years Ended December 31, 2004 and 2003



General Net income for the year-ended December 31, 2004, was
$683,000, a decrease of $454,000, or 39.93% from the $1,137,000 net income in 2003. The decrease in net income resulted primarily from an increase in provision for loan losses of $40,000, an increase in non interest expenses of $130,000, and a
decrease of $403,000 in non interest income. These were offset by an increase in net interest income of $1,000, and a decrease in income taxes of $118,000. The results of operations are reflected in the Five Year Consolidated Summary. The years
2001, 2002, and 2003 have been restated to reflect changes detailed in Note 1 of the Notes to Consolidated Financial Statements.



Net Interest Income Interest income totaled $7,062,000 for the year-ended December 31, 2004, a decrease of $119,000 or 1.66% from the $7,181,000
recorded in 2003. The average rate earned (taxable equivalent) on earning assets decreased from 5.72% in 2003 to 5.52% in 2004. Interest income on investment securities increased by $215,000, or 9.27%, due to the increase in the size of the
investment portfolio coupled with an increase of 30 basis points in the weighted-average yield (taxable equivalent) year-to-year, from 4.38% in 2003 to 4.68% in 2004. Interest income on federal funds sold increased by $10,000 for the year-ended
December 31, 2004. The average balance invested in federal funds sold increased by $842,000 compared to 2003. The yield on federal funds sold increased from 0.99% in 2003 to 1.04% in 2004.



Interest income on loans decreased $309,000, or 5.92%, during 2004, due
primarily to the sale of the $12.0 million in mortgage loans. The average yield on loans decreased from 6.67% in 2003 to 6.19% in 2004. Declining interest rate and historically high refinance levels all contributed to the decrease in the yield on
loans in 2004.



Interest expense decreased by $120,000, or
4.22%, during 2004, due primarily to lower average deposit balances and a lower average cost of borrowed funds. The average cost of deposits decreased from 2.10% in 2003 to 2.01% in 2004. Interest expense on deposits decreased by $97,000 in 2004.
This was due to the average balances decreasing from $89,025,000 in 2003 to $88,445,000 in 2004. Interest expense on borrowings decreased by $23,000 due to a reduction in the yield on borrowed funds which decreased from 3.28% in 2003 to 2.87% in
2004. The average balance of borrowed funds increased by $3,433,000 during 2004, but this helped to decrease the yield because it was in lower yielding short-term borrowings.



As a result of the changes in interest income and interest expense, net interest income increased by $1,000 or 0.02%, during
2004, as compared to 2003. The interest rate spread decreased by 4 basis points to 3.28% for 2004 as compared to 3.32% for 2003, while the net interest margin decreased by 6 basis points to 3.51% for year 2004 compared to 3.57% in 2003. The
Consolidated Average Balance Sheets and Related Yields and Rates table summarizes the above information. The tax equivalent adjustment on tax exempt investment securities and loans was $414,000 for 2004, $387,000 for 2003, and $261,000 for 2002.



Provision for Loan Losses Farmers Citizens maintains an
allowance for loan losses in an amount, which, in managements judgment, 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, 2004. 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 $318,000 in 2004 compared to $69,000 in 2003. 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.



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Management provided an additional $90,000 to the Reserve for Loan Losses in 2004 to reflect the
overall credit quality of the portfolio as of December 31, 2004. The bank expensed a provision of $50,000 in 2003. There was a negative provision of $275,000 for possible loan losses in 2002. 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.



As a result of loans sold in 2004, our loan portfolio
decreased. We had projected future loan growth that would have more than offset the amount of loans sold. The amounts provided to the reserve for loan losses in 2004 were a result of our normal monthly process to establish the allocation to the
reserve for loan losses. The procedures for assessing the adequacy of the allowance for loan losses reflect our evaluation of credit risk after careful consideration of all information available to us. In developing this assessment, we much rely on
estimates and exercise judgment regarding matters where the ultimate outcome is unknown, such as economic factors, developments affecting companies in specific industries and issues with respect to single borrowers. Depending on changes in
circumstances, future assessments of credit risk may yield different results, which may require an increase or a decrease in the allowance for loan losses.



The allowance is regularly reviewed by management to determine whether the amount is considered adequate to absorb probably losses. This evaluation
includes: (1) specific loss estimates on certain individually reviewed loans; (2) statistical loss estimates for loan pools that are based on historical loss experience; (3) general loss estimates that are based upon the size, quality, and
concentration characteristics of the various loan portfolios; (4) adverse situations that may affect a borrowers ability to repay; and (5) current economic and industry conditions. Also considered as part of that judgment is a review of the
Banks trends in delinquencies and loan losses, as well as trends in delinquencies and losses for the region and nationally, and economic factors. The allowance for loan losses is maintained at a level believed adequate by management to absorb
probable losses inherent in the loan portfolio. Managements evaluation of the adequacy of the allowance is an estimate based on managements current judgment about the credit quality of the loan portfolio. While we strive to reflect all
known risk factors in its evaluations, judgment errors may occur. After these procedures were carried out, managements decision was to add the $90,000 to the reserve in 2004.



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, 2004. 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 1.21% in 2004 from 1.37% in 2003 and 1.69% in 2002. The decrease was due primarily to net charge-offs recorded in 2004. An analysis of the Allowance for Loan Losses is presented in the Loan Information table.



Non-Interest Income Non-interest income decreased 25.06% from
$1,608,000 in 2003 to $1,205,000 in 2004. This decrease was due primarily to decreases in investment security gains, net of $380,000, and a decrease in gain on disposal of premises and equipment of $88,000. In 2003, the bank took advantage of
opportunities in the yield curve which resulted in the higher than normal net investment security gains. Please refer to the Consolidated Statement of Income for further analysis.



Non-Interest Expense The non-interest expense increased from $4,590,000 in 2003 to $ 4,720,000 in 2004. The most
significant increase was in data processing expense, which increased by $154,000. Professional fees decreased in 2004 by 11.56% or $37 as a result of decreased legal and professional costs. Salaries and employee benefits, net occupancy and equipment
expenses, state franchise tax, and other expense remained constant. Please refer to the Consolidated Statement of Income for further analysis.



Income Taxes The provision for federal income taxes totaled $48,000 for the fiscal year-ended December 31, 2004, a decrease of $118,000, or 71.08%,
over the provision in 2003. The effective tax rates were 6.57% and 12.74% for the years ended December 31, 2004 and 2003. 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 $770,000, $703,000; $498,000; $291,000, and $269,000 for the years 2004, 2003, 2002, 2001, and 2000, 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.



In evaluating the deferred tax position at December 31, 2004, it was determined that future taxable income could be expected to be sufficient to utilize
both the net operating loss (NOL) expected for 2004 ($129,000) and the alternative minimum tax (AMT) credit carryforward ($186,000), prior to these carryforwards expiring under Internal Revenue Service regulations. However, there were two factors
considered when making this determination:



|1. | The NOL carryforward period is twenty years and the AMT credit can be carried forward indefinitely.
|-- | ---------------------------------------------------------------------------------------------------



|2. | The recent taxable position of FC Banc Corp during the last three years has resulted in either an AMT tax position or a net operating loss position.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------



Based on these two factors, it was determined that any income statement
benefit for 2004 resulting from these deferred tax assets would not be appropriate, since the recent past indicates that it may be several years before the benefits would be utilized. Therefore, a valuation allowance of $57,000 was recorded in 2004
to offset any current year income statement benefit that would have resulted from recording the deferred tax asset.



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.



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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, 2004 |         |    | Repricing or Maturing 
|In thousands, except ratios                 |  | Within 3 Months   |         |    | Over 3 Monthsto 1 Year |   |         | Over 1 Year to 2 Years |  |   | After 2 Years |    |  | Total
|Loans                                       |  | $                 | 7,314   |    |                        | $ | 14,913  |                        |  | $ | 8,453         |    |  | $     | 48,975 |   |  | $ | 79,655 
|Investment securities                       |  |                   | 3,876   |    |                        |   | 9,549   |                        |  |   | 5,606         |    |  |       | 34,718 |   |  |   | 53,749 
|Other earning assets                        |  |                   |        |    |                        |   |        |                        |  |   |              |    |  |       |        |   |  |   |        
|Other assets                                |  |                   |        |    |                        |   |        |                        |  |   |              |    |  |       | 14,887 |   |  |   | 14,887 
|                                            |  |                   |         |    |                        |   |         |                        |  |   |               |    |  |       |        |   |  |   |        
|Total assets                                |  | $                 | 11,190  |    |                        | $ | 24,462  |                        |  | $ | 14,059        |    |  | $     | 98,580 |   |  |   | 148,291
|                                            |  |                   |         |    |                        |   |         |                        |  |   |               |    |  |       |        |   |  |   |        
|Noninterest-bearing deposits                |  |                   |         |    |                        |   |         |                        |  |   |               |    |  | $     | 14,259 |   |  | $ | 14,259 
|Interest-bearing deposits                   |  | $                 | 13,869  |    |                        | $ | 19,492  |                        |  | $ | 20,788        |    |  |       | 32,802 |   |  |   | 86,951 
|Borrowed funds                              |  |                   | 11,621  |    |                        |   | 1,810   |                        |  |   | 0             |    |  |       | 19,077 |   |  |   | 32,508 
|Other liabilities and equity                |  |                   |        |    |                        |   |        |                        |  |   |              |    |  |       | 14,573 |   |  |   | 14,573 
|                                            |  |                   |         |    |                        |   |         |                        |  |   |               |    |  |       |        |   |  |   |        
|Total liabilities and equity                |  | $                 | 25,490  |    |                        | $ | 21,302  |                        |  | $ | 20,788        |    |  | $     | 80,711 |   |  | $ | 148,291
|                                            |  |                   |         |    |                        |   |         |                        |  |   |               |    |  |       |        |   |  |   |        
|Gap*                                        |  | $                 | (14,300 | )  |                        | $ | 3,160   |                        |  | $ | (6,729        | )  |  | $     | 17,869 |   |  |   |        
|Cumulative gap                              |  |                   | (14,300 | )  |                        |   | (11,140 | )                      |  |   | (17,869       | )  |  |       |        |   |  |   |        
|Cumulative gap as a percent of total assets |  |                   | (9.64   | )% |                        |   | (7.51   | )%                     |  |   | (12.05        | )% |  |       | 0.00   | % |  |   |        
|                                            |  |                  
|                                            |  | December 31, 2003 |         |    | Repricing or Maturing 
|In thousands, except ratios                 |  | Within 3 Months   |         |    | Over 3 Monthsto 1 Year |   |         | Over 1 Year to 2 Years |  |   | After 2 Years |    |  | Total
|Loans                                       |  | $                 | 9,419   |    |                        | $ | 14,474  |                        |  | $ | 8,384         |    |  | $     | 54,745 |   |  | $ | 87,022 
|Investment securities                       |  |                   | 4,597   |    |                        |   | 7,717   |                        |  |   | 6,005         |    |  |       | 29,349 |   |  |   | 47,668 
|Other earning assets                        |  |                   |        |    |                        |   |        |                        |  |   |              |    |  |       |        |   |  |   |        
|Other assets                                |  |                   |        |    |                        |   |        |                        |  |   |              |    |  |       | 14,374 |   |  |   | 14,374 
|                                            |  |                   |         |    |                        |   |         |                        |  |   |               |    |  |       |        |   |  |   |        
|Total assets                                |  | $                 | 14,016  |    |                        | $ | 22,191  |                        |  | $ | 14,389        |    |  | $     | 98,468 |   |  |   | 149,064
|                                            |  |                   |         |    |                        |   |         |                        |  |   |               |    |  |       |        |   |  |   |        
|Noninterest-bearing deposits                |  |                   |         |    |                        |   |         |                        |  |   |               |    |  | $     | 13,116 |   |  | $ | 13,116 
|Interest-bearing deposits                   |  | $                 | 13,036  |    |                        | $ | 22,843  |                        |  | $ | 19,713        |    |  |       | 33,760 |   |  |   | 89,352 
|Borrowed funds                              |  |                   | 9,472   |    |                        |   |        |                        |  |   | 0             |    |  |       | 22,728 |   |  |   | 32,200 
|Other liabilities and equity                |  |                   |        |    |                        |   |        |                        |  |   |              |    |  |       | 14,396 |   |  |   | 14,396 
|                                            |  |                   |         |    |                        |   |         |                        |  |   |               |    |  |       |        |   |  |   |        
|Total liabilities and equity                |  | $                 | 22,508  |    |                        | $ | 22,843  |                        |  | $ | 19,713        |    |  | $     | 84,000 |   |  | $ | 149,064
|                                            |  |                   |         |    |                        |   |         |                        |  |   |               |    |  |       |        |   |  |   |        
|Gap*                                        |  | $                 | (8,492  | )  |                        | $ | (652    | )                      |  | $ | (5,324        | )  |  | $     | 14,468 |   |  |   |        
|Cumulative gap                              |  |                   | (8,492  | )  |                        |   | (9,144  | )                      |  |   | (14,468       | )  |  |       |        |   |  |   |        
|Cumulative gap as a percent of total assets |  |                   | (5.70   | )% |                        |   | (6.13   | )%                     |  |   | (9.71         | )% |  |       | 0.00   | % |  |   |        



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ITEM 7 FINANCIAL STATEMENTS



REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



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, 2004 and 2003, and the related consolidated statements of
income, changes in stockholders equity, and cash flows for each of the three years in the period ended December 31, 2004. 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.



We conducted our
audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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, 2004 and 2003, and the results of their operations and their cash flows for each of the years then ended in conformity with U.S. generally accepted accounting principles.



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



Wexford, PA

February 11, 2005



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FC BANC CORP.

CONSOLIDATED BALANCE SHEET



|                                                                                          |  |                        |         |   |               |   |         |  
|----------------------------------------------------------------------------------------- |  | ---------------------- | ------- | - | ------------- | - | ------- | -
|                                                                                          |  | December 31,           |        
|                                                                                          |  | 2004                   |         |   | 2003          |  
|                                                                                          |  | (Dollars in thousands) |        
|                                                                                          |  |                        |         |   | (as restated) |  
|ASSETS                                                                                    |  |                        |         |   |               |   |         |  
|Cash and due from banks                                                                   |  | $                      | 3,584   |   |               | $ | 3,936   |  
|Investment securities available for sale                                                  |  |                        | 53,749  |   |               |   | 47,668  |  
|Loans                                                                                     |  |                        | 79,655  |   |               |   | 87,022  |  
|Less allowance for loan losses                                                            |  |                        | 966     |   |               |   | 1,194   |  
|                                                                                          |  |                        |         |   |               |   |         |  
|Net loans                                                                                 |  |                        | 78,689  |   |               |   | 85,828  |  
|Premises and equipment                                                                    |  |                        | 6,698   |   |               |   | 6,746   |  
|Bank-owned life insurance                                                                 |  |                        | 3,001   |   |               |   | 2,874   |  
|Accrued interest and other assets                                                         |  |                        | 2,570   |   |               |   | 2,012   |  
|                                                                                          |  |                        |         |   |               |   |         |  
|TOTAL ASSETS                                                                              |  | $                      | 148,291 |   |               | $ | 149,064 |  
|                                                                                          |  |                        |         |   |               |   |         |  
|LIABILITIES                                                                               |  |                        |         |   |               |   |         |  
|Deposits:                                                                                 |  |                        |         |   |               |   |         |  
|Noninterest-bearing                                                                       |  | $                      | 14,259  |   |               | $ | 13,116  |  
|Interest-bearing demand                                                                   |  |                        | 13,795  |   |               |   | 15,388  |  
|Savings                                                                                   |  |                        | 15,093  |   |               |   | 15,031  |  
|Money market                                                                              |  |                        | 13,236  |   |               |   | 9,389   |  
|Time                                                                                      |  |                        | 44,827  |   |               |   | 49,544  |  
|                                                                                          |  |                        |         |   |               |   |         |  
|Total deposits                                                                            |  |                        | 101,210 |   |               |   | 102,468 |  
|                                                                                          |  |                       
|Short-term borrowings                                                                     |  |                        | 11,621  |   |               |   | 8,472   |  
|Other borrowings                                                                          |  |                        | 20,887  |   |               |   | 23,728  |  
|Accrued interest and other liabilities                                                    |  |                        | 1,305   |   |               |   | 1,332   |  
|                                                                                          |  |                        |         |   |               |   |         |  
|TOTAL LIABILITIES                                                                         |  |                        | 135,023 |   |               |   | 136,000 |  
|                                                                                          |  |                        |         |   |               |   |         |  
|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     |   |               |   | 832     |  
|Additional paid-in capital                                                                |  |                        | 1,358   |   |               |   | 1,361   |  
|Retained earnings                                                                         |  |                        | 13,269  |   |               |   | 13,025  |  
|Accumulated other comprehensive income                                                    |  |                        | 5       |   |               |   | 116     |  
|Treasury stock, at cost (86,800 and 89,983 shares)                                        |  |                        | (2,196  | ) |               |   | (2,270  | )
|                                                                                          |  |                        |         |   |               |   |         |  
|TOTAL STOCKHOLDERS EQUITY                                                                |  |                        | 13,268  |   |               |   | 13,064  |  
|                                                                                          |  |                        |         |   |               |   |         |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                |  | $                      | 148,291 |   |               | $ | 149,064 |  
|                                                                                          |  |                        |         |   |               |   |         |  



See accompanying notes to consolidated
financial statements.



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FC BANC CORP.

CONSOLIDATED STATEMENT OF INCOME



|                                                               |  |                         |       |               |   |               |  |   |       |  
|-------------------------------------------------------------- |  | ----------------------- | ----- | ------------- | - | ------------- |  | - | ----- | -
|                                                               |  | Year Ended December 31, |      
|                                                               |  | 2004                    |       | 2003          |   | 2002          | 
|                                                               |  | (Dollars in thousands)  |      
|                                                               |  |                         |       | (as restated) |   | (as restated) | 
|INTEREST INCOME                                                |  |                         |       |               |   |               |  |   |       |  
|Interest and fees on loans                                     |  | $                       | 4,907 |               | $ | 5,216         |  | $ | 5,050 |  
|Federal funds sold                                             |  |                         | 18    |               |   | 8             |  |   | 19    |  
|Investment securities:                                         |  |                         |       |               |   |               |  |   |       |  
|Taxable                                                        |  |                         | 1,367 |               |   | 1,254         |  |   | 1,439 |  
|Exempt from federal income tax                                 |  |                         | 770   |               |   | 703           |  |   | 498   |  
|                                                               |  |                         |       |               |   |               |  |   |       |  
|Total interest income                                          |  |                         | 7,062 |               |   | 7,181         |  |   | 7,006 |  
|                                                               |  |                         |       |               |   |               |  |   |       |  
|INTEREST EXPENSE                                               |  |                         |       |               |   |               |  |   |       |  
|Deposits                                                       |  |                         | 1,774 |               |   | 1,871         |  |   | 1,918 |  
|Short-term borrowings                                          |  |                         | 113   |               |   | 64            |  |   | 87    |  
|Other borrowings                                               |  |                         | 839   |               |   | 911           |  |   | 430   |  
|                                                               |  |                         |       |               |   |               |  |   |       |  
|Total interest expense                                         |  |                         | 2,726 |               |   | 2,846         |  |   | 2,435 |  
|                                                               |  |                         |       |               |   |               |  |   |       |  
|NET INTEREST INCOME                                            |  |                         | 4,336 |               |   | 4,335         |  |   | 4,571 |  
|                                                               |  |                         |      
|Provision (recovery) for loan losses                           |  |                         | 90    |               |   | 50            |  |   | (275  | )
|                                                               |  |                         |       |               |   |               |  |   |       |  
|NET INTEREST INCOME AFTER PROVISION (RECOVERY) FOR LOAN LOSSES |  |                         | 4,246 |               |   | 4,285         |  |   | 4,846 |  
|                                                               |  |                         |       |               |   |               |  |   |       |  
|NONINTEREST INCOME                                             |  |                         |       |               |   |               |  |   |       |  
|Service charges on deposit accounts                            |  |                         | 673   |               |   | 655           |  |   | 532   |  
|Investment securities gains, net                               |  |                         | 56    |               |   | 436           |  |   | 37    |  
|Bank-owned life insurance earnings                             |  |                         | 127   |               |   | 117           |  |   | 161   |  
|Gain on sale of premises and equipment                         |  |                         |      |               |   | 88            |  |   |      |  
|Other income                                                   |  |                         | 349   |               |   | 312           |  |   | 154   |  
|                                                               |  |                         |       |               |   |               |  |   |       |  
|Total noninterest income                                       |  |                         | 1,205 |               |   | 1,608         |  |   | 884   |  
|                                                               |  |                         |       |               |   |               |  |   |       |  
|NONINTEREST EXPENSE                                            |  |                         |       |               |   |               |  |   |       |  
|Salaries and employee benefits                                 |  |                         | 2,175 |               |   | 2,175         |  |   | 2,338 |  
|Net occupancy and equipment expenses                           |  |                         | 774   |               |   | 773           |  |   | 670   |  
|Professional fees                                              |  |                         | 283   |               |   | 320           |  |   | 249   |  
|State franchise tax                                            |  |                         | 171   |               |   | 166           |  |   | 155   |  
|Data processing                                                |  |                         | 418   |               |   | 264           |  |   | 214   |  
|Other expense                                                  |  |                         | 899   |               |   | 892           |  |   | 975   |  
|                                                               |  |                         |       |               |   |               |  |   |       |  
|Total noninterest expense                                      |  |                         | 4,720 |               |   | 4,590         |  |   | 4,601 |  
|                                                               |  |                         |       |               |   |               |  |   |       |  
|Income before income taxes                                     |  |                         | 731   |               |   | 1,303         |  |   | 1,129 |  
|Income taxes                                                   |  |                         | 48    |               |   | 166           |  |   | 145   |  
|                                                               |  |                         |       |               |   |               |  |   |       |  
|NET INCOME                                                     |  | $                       | 683   |               | $ | 1,137         |  | $ | 984   |  
|                                                               |  |                         |       |               |   |               |  |   |       |  
|EARNINGS PER SHARE                                             |  |                         |       |               |   |               |  |   |       |  
|Basic                                                          |  | $                       | 1.18  |               | $ | 1.98          |  | $ | 1.70  |  
|Diluted                                                        |  |                         | 1.17  |               |   | 1.97          |  |   | 1.70  |  



See accompanying notes to consolidated
financial statements.



30



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##### Table of Contents

FC BANC CORP.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY



|                                                                                                                 |  |                        |     |                          |   |       |                  |  |   |                                            |   |  |               |      |   |                          |   |        |                     |  |   |        |   |  |   |       |  
|---------------------------------------------------------------------------------------------------------------- |  | ---------------------- | --- | ------------------------ | - | ----- | ---------------- |  | - | ------------------------------------------ | - |  | ------------- | ---- | - | ------------------------ | - | ------ | ------------------- |  | - | ------ | - |  | - | ----- | -
|                                                                                                                 |  | CommonStock            |     | AdditionalPaid-inCapital |   |       | RetainedEarnings |  |   | AccumulatedOtherComprehensiveIncome (Loss) |   |  | TreasuryStock |      |   | TotalStockholdersEquity |   |        | ComprehensiveIncome | 
|                                                                                                                 |  | (Dollars in thousands) |    
|Balance, December 31, 2001                                                                                       |  | $                      | 832 |                          | $ | 1,366 |                  |  | $ | 11,793                                     |   |  | $             | 109  |   |                          | $ | (1,921 | )                   |  | $ | 12,179 |   |  |   |       |  
|Restatment                                                                                                       |  |                        |    |                          |   |      |                  |  |   | (87                                        | ) |  |               |     |   |                          |   |       |                     |  |   | (87    | ) |  |   |       |  
|                                                                                                                 |  |                        |     |                          |   |       |                  |  |   |                                            |   |  |               |      |   |                          |   |        |                     |  |   |        |   |  |   |       |  
|Balance, December 31, 2001 (as restated)                                                                         |  |                        | 832 |                          |   | 1,366 |                  |  |   | 11,706                                     |   |  |               | 109  |   |                          |   | (1,921 | )                   |  |   | 12,092 |   |  |   |       |  
|Net income (as restated)                                                                                         |  |                        |     |                          |   |       |                  |  |   | 984                                        |   |  |               |      |   |                          |   |        |                     |  |   | 984    |   |  | $ | 984   |  
|Other comprehensive income:                                                                                      |  |                        |     |                          |   |       |                  |  |   |                                            |   |  |               |      |   |                          |   |        |                     |  |   |        |   |  |   |       |  
|Unrealized gain on available-for-sale securities, net of reclassification adjustment, net of taxes of $220       |  |                        |     |                          |   |       |                  |  |   |                                            |   |  |               | 427  |   |                          |   |        |                     |  |   | 427    |   |  |   | 427   |  
|                                                                                                                 |  |                        |     |                          |   |       |                  |  |   |                                            |   |  |               |      |   |                          |   |        |                     |  |   |        |   |  |   |       |  
|Comprehensive income (as restated)                                                                               |  |                        |     |                          |   |       |                  |  |   |                                            |   |  |               |      |   |                          |   |        |                     |  |   |        |   |  | $ | 1,411 |  
|                                                                                                                 |  |                        |     |                          |   |       |                  |  |   |                                            |   |  |               |      |   |                          |   |        |                     |  |   |        |   |  |   |       |  
|Cash dividends ($.66 per share)                                                                                  |  |                        |     |                          |   |       |                  |  |   | (382                                       | ) |  |               |      |   |                          |   |        |                     |  |   | (382   | ) |  |   |       |  
|Purchase of treasury stock                                                                                       |  |                        |     |                          |   |       |                  |  |   |                                            |   |  |               |      |   |                          |   | (406   | )                   |  |   | (406   | ) |  |   |       |  
|Exercise of stock options (1,600 shares)                                                                         |  |                        |     |                          |   | (2    | )                |  |   |                                            |   |  |               |      |   |                          |   | 40     |                     |  |   | 38     |   |  |   |       |  
|                                                                                                                 |  |                        |     |                          |   |       |                  |  |   |                                            |   |  |               |      |   |                          |   |        |                     |  |   |        |   |  |   |       |  
|Balance, December 31, 2002 (as restated)                                                                         |  |                        | 832 |                          |   | 1,364 |                  |  |   | 12,308                                     |   |  |               | 536  |   |                          |   | (2,287 | )                   |  |   | 12,753 |   |  |   |       |  
|                                                                                                                 |  |                        |     |                          |   |       |                 
|Net income (as restated)                                                                                         |  |                        |     |                          |   |       |                  |  |   | 1,137                                      |   |  |               |      |   |                          |   |        |                     |  |   | 1,137  |   |  | $ | 1,137 |  
|Other comprehensive loss:                                                                                        |  |                        |     |                          |   |       |                  |  |   |                                            |   |  |               |      |   |                          |   |        |                     |  |   |        |   |  |   |       |  
|Unrealized loss on available-for-sale securities, net of reclassification adjustment, net of tax benefit of $216 |  |                        |     |                          |   |       |                  |  |   |                                            |   |  |               | (420 | ) |                          |   |        |                     |  |   | (420   | ) |  |   | (420  | )
|                                                                                                                 |  |                        |     |                          |   |       |                  |  |   |                                            |   |  |               |      |   |                          |   |        |                     |  |   |        |   |  |   |       |  
|Comprehensive income (as restated)                                                                               |  |                        |     |                          |   |       |                  |  |   |                                            |   |  |               |      |   |                          |   |        |                     |  |   |        |   |  | $ | 717   |  
|                                                                                                                 |  |                        |     |                          |   |       |                  |  |   |                                            |   |  |               |      |   |                          |   |        |                     |  |   |        |   |  |   |       |  
|Cash dividends ($.73 per share)                                                                                  |  |                        |     |                          |   |       |                  |  |   | (420                                       | ) |  |               |      |   |                          |   |        |                     |  |   | (420   | ) |  |   |       |  
|Purchase of treasury stock                                                                                       |  |                        |     |                          |   |       |                  |  |   |                                            |   |  |               |      |   |                          |   | (108   | )                   |  |   | (108   | ) |  |   |       |  
|Exercise of stock options (4,940 shares)                                                                         |  |                        |     |                          |   | (3    | )                |  |   |                                            |   |  |               |      |   |                          |   | 125    |                     |  |   | 122    |   |  |   |       |  
|                                                                                                                 |  |                        |     |                          |   |       |                  |  |   |                                            |   |  |               |      |   |                          |   |        |                     |  |   |        |   |  |   |       |  
|Balance, December 31, 2003 (as restated)                                                                         |  |                        | 832 |                          |   | 1,361 |                  |  |   | 13,025                                     |   |  |               | 116  |   |                          |   | (2,270 | )                   |  |   | 13,064 |   |  |   |       |  
|                                                                                                                 |  |                        |     |                          |   |       |                 
|Net income                                                                                                       |  |                        |     |                          |   |       |                  |  |   | 683                                        |   |  |               |      |   |                          |   |        |                     |  |   | 683    |   |  | $ | 683   |  
|Other comprehensive loss:                                                                                        |  |                        |     |                          |   |       |                  |  |   |                                            |   |  |               |      |   |                          |   |        |                     |  |   |        |   |  |   |       |  
|Unrealized loss on available-for-sale securities, net of reclassification adjustment, net of tax benefit of $57  |  |                        |     |                          |   |       |                  |  |   |                                            |   |  |               | (111 | ) |                          |   |        |                     |  |   | (111   | ) |  |   | (111  | )
|                                                                                                                 |  |                        |     |                          |   |       |                  |  |   |                                            |   |  |               |      |   |                          |   |        |                     |  |   |        |   |  |   |       |  
|Comprehensive income                                                                                             |  |                        |     |                          |   |       |                  |  |   |                                            |   |  |               |      |   |                          |   |        |                     |  |   |        |   |  | $ | 572   |  
|                                                                                                                 |  |                        |     |                          |   |       |                  |  |   |                                            |   |  |               |      |   |                          |   |        |                     |  |   |        |   |  |   |       |  
|Cash dividends ($.76 per share)                                                                                  |  |                        |     |                          |   |       |                  |  |   | (439                                       | ) |  |               |      |   |                          |   |        |                     |  |   | (439   | ) |  |   |       |  
|Purchase of treasury stock                                                                                       |  |                        |     |                          |   |       |                  |  |   |                                            |   |  |               |      |   |                          |   | (31    | )                   |  |   | (31    | ) |  |   |       |  
|Exercise of stock options (4,200 shares)                                                                         |  |                        |     |                          |   | (3    | )                |  |   |                                            |   |  |               |      |   |                          |   | 105    |                     |  |   | 102    |   |  |   |       |  
|                                                                                                                 |  |                        |     |                          |   |       |                  |  |   |                                            |   |  |               |      |   |                          |   |        |                     |  |   |        |   |  |   |       |  
|Balance, December 31, 2004                                                                                       |  | $                      | 832 |                          | $ | 1,358 |                  |  | $ | 13,269                                     |   |  | $             | 5    |   |                          | $ | (2,196 | )                   |  | $ | 13,268 |   |  |   |       |  
|                                                                                                                 |  |                        |     |                          |   |       |                  |  |   |                                            |   |  |               |      |   |                          |   |        |                     |  |   |        |   |  |   |       |  



|                                                                          |  |      |      |   |      |   |      |      |  |   |     |  
|------------------------------------------------------------------------- |  | ---- | ---- | - | ---- | - | ---- | ---- |  | - | --- | -
|                                                                          |  | 2004 |      |   | 2003 |   |      | 2002 | 
|Components of comprehensive income (loss):                                |  |      |      |   |      |   |      |      |  |   |     |  
|Change in net unrealized gain (loss) on investments available for sale    |  | $    | (74  | ) |      | $ | (132 | )    |  | $ | 451 |  
|Realized gains included in net income, net of taxes of $19, $148, and $13 |  |      | (37  | ) |      |   | (288 | )    |  |   | (24 | )
|                                                                          |  |      |      |   |      |   |      |      |  |   |     |  
|Total                                                                     |  | $    | (111 | ) |      | $ | (420 | )    |  | $ | 427 |  
|                                                                          |  |      |      |   |      |   |      |      |  |   |     |  



See accompanying notes to consolidated
financial statements.



31



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##### Table of Contents

FC BANC CORP.

CONSOLIDATED STATEMENT OF CASH FLOWS



|                                                                                  |  |                         |         |   |               |   |         |               |  |   |         |  
|--------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | ------------- | - | ------- | ------------- |  | - | ------- | -
|                                                                                  |  | Year Ended December 31, |        
|                                                                                  |  | 2004                    |         |   | 2003          |   |         | 2002          | 
|                                                                                  |  | (Dollars in thousands)  |        
|                                                                                  |  |                         |         |   | (as restated) |   |         | (as restated) | 
|OPERATING ACTIVITIES                                                              |  |                         |         |   |               |   |         |               |  |   |         |  
|Net income                                                                        |  | $                       | 683     |   |               | $ | 1,137   |               |  | $ | 984     |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                         |         |   |               |   |         |               |  |   |         |  
|Provision for loan losses                                                         |  |                         | 90      |   |               |   | 50      |               |  |   | (275    | )
|Investment securities gains, net                                                  |  |                         | (56     | ) |               |   | (436    | )             |  |   | (37     | )
|Gain on sale of premises and equipment                                            |  |                         |        |   |               |   | (88     | )             |  |   |        |  
|Depreciation, amortization, and accretion                                         |  |                         | 762     |   |               |   | 1,093   |               |  |   | 477     |  
|Deferred income taxes                                                             |  |                         | (41     | ) |               |   | (68     | )             |  |   | 43      |  
|Decrease (increase) in accrued interest receivable                                |  |                         | 18      |   |               |   | (43     | )             |  |   | 5       |  
|Increase (decrease) in accrued interest payable                                   |  |                         | (154    | ) |               |   | (11     | )             |  |   | 3       |  
|Earnings on bank-owned life insurance                                             |  |                         | (127    | ) |               |   | (117    | )             |  |   | (161    | )
|Other, net                                                                        |  |                         | (260    | ) |               |   | 593     |               |  |   | (130    | )
|                                                                                  |  |                         |         |   |               |   |         |               |  |   |         |  
|Net cash provided by operating activities                                         |  |                         | 915     |   |               |   | 2,110   |               |  |   | 909     |  
|                                                                                  |  |                         |         |   |               |   |         |               |  |   |         |  
|INVESTING ACTIVITIES                                                              |  |                         |         |   |               |   |         |               |  |   |         |  
|Investment securities available for sale:                                         |  |                         |         |   |               |   |         |               |  |   |         |  
|Proceeds from repayments and maturities                                           |  |                         | 19,098  |   |               |   | 19,637  |               |  |   | 16,177  |  
|Purchases                                                                         |  |                         | (32,577 | ) |               |   | (41,296 | )             |  |   | (36,749 | )
|Proceeds from sales                                                               |  |                         | 6,918   |   |               |   | 18,146  |               |  |   | 10,045  |  
|Decrease (increase) in loans, net                                                 |  |                         | 7,071   |   |               |   | (15,413 | )             |  |   | (10,660 | )
|Purchases of premises and equipment                                               |  |                         | (396    | ) |               |   | (176    | )             |  |   | (2,755  | )
|Sale of premises and equipment                                                    |  |                         |        |   |               |   | 133     |               |  |   |        |  
|Purchase of regulatory stock                                                      |  |                         | (63     | ) |               |   | (34     | )             |  |   | (462    | )
|                                                                                  |  |                         |         |   |               |   |         |               |  |   |         |  
|Net cash (used for) provided by investing activities                              |  |                         | 51      |   |               |   | (19,003 | )             |  |   | (24,404 | )
|                                                                                  |  |                         |         |   |               |   |         |               |  |   |         |  
|FINANCING ACTIVITIES                                                              |  |                         |         |   |               |   |         |               |  |   |         |  
|Increase (decrease) in deposits, net                                              |  |                         | (1,258  | ) |               |   | 5,456   |               |  |   | 11,259  |  
|Increase in short-term borrowings, net                                            |  |                         | 3,149   |   |               |   | 3,995   |               |  |   | 392     |  
|Proceeds from other borrowings                                                    |  |                         |        |   |               |   | 9,000   |               |  |   | 10,847  |  
|Repayments of other borrowings                                                    |  |                         | (2,841  | ) |               |   | (2,041  | )             |  |   | (87     | )
|Purchases of treasury stock                                                       |  |                         | (31     | ) |               |   | (108    | )             |  |   | (406    | )
|Proceeds from stock option exercises                                              |  |                         | 102     |   |               |   | 122     |               |  |   | 38      |  
|Cash dividends                                                                    |  |                         | (439    | ) |               |   | (420    | )             |  |   | (382    | )
|                                                                                  |  |                         |         |   |               |   |         |               |  |   |         |  
|Net cash (used for) provided by financing activities                              |  |                         | (1,318  | ) |               |   | 16,004  |               |  |   | 21,661  |  
|                                                                                  |  |                         |         |   |               |   |         |               |  |   |         |  
|Decrease in cash and cash equivalents                                             |  |                         | (352    | ) |               |   | (889    | )             |  |   | (1,834  | )
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                    |  |                         | 3,936   |   |               |   | 4,825   |               |  |   | 6,659   |  
|                                                                                  |  |                         |         |   |               |   |         |               |  |   |         |  
|CASH AND CASH EQUIVALENTS AT END OF YEAR                                          |  | $                       | 3,584   |   |               | $ | 3,936   |               |  | $ | 4,825   |  
|                                                                                  |  |                         |         |   |               |   |         |               |  |   |         |  
|SUPPLEMENTAL INFORMATION                                                          |  |                         |         |   |               |   |         |               |  |   |         |  
|Cash paid during the year for:                                                    |  |                         |         |   |               |   |         |               |  |   |         |  
|Interest on deposits and borrowings                                               |  | $                       | 2,880   |   |               | $ | 2,857   |               |  | $ | 2,432   |  
|Income taxes                                                                      |  |                         |        |   |               |   |        |               |  |   | 184     |  



See accompanying notes to consolidated
financial statements.



32



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##### Table of Contents

|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 U.S. generally accepted accounting practices 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 represent 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.



33



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##### Table of Contents

|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.



34



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##### Table of Contents

|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 3 to 10 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 7 to 15 years. Expenditures for maintenance and repairs are charged against income as incurred. Costs of major additions and improvements are capitalized.



Bank-Owned Life Insurance (BOLI)



The Bank has purchased life insurance policies on certain key employees.
BOLI is recorded at its cash surrender value, or the amount that can be realized.



Postretirement Benefits



The Company maintains a noncontributory defined postretirement 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 are 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 nonemployee 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.



35



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##### Table of Contents

|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 and basic and diluted net income per common share for the year ended December 31 would have been as follows:



|                                          |  |      |      |               |   |               |  |   |     
|----------------------------------------- |  | ---- | ---- | ------------- | - | ------------- |  | - | ----
|                                          |  | 2004 |      | 2003          |   | 2002         
|                                          |  |      |      | (as restated) |   | (as restated)
|Net income as reported                    |  | $    | 683  |               | $ | 1,137         |  | $ | 984 
|Less pro forma expense related to options |  |      | 19   |               |   | 39            |  |   | 39  
|                                          |  |      |      |               |   |               |  |   |     
|Pro forma net income                      |  | $    | 664  |               | $ | 1,098         |  | $ | 945 
|                                          |  |      |      |               |   |               |  |   |     
|Basic net income per common share:        |  |      |      |               |   |               |  |   |     
|As reported                               |  | $    | 1.18 |               | $ | 1.98          |  | $ | 1.70
|Pro forma                                 |  |      | 1.15 |               |   | 1.91          |  |   | 1.63
|Diluted net income per common share:      |  |      |      |               |   |               |  |   |     
|As reported                               |  | $    | 1.17 |               | $ | 1.97          |  | $ | 1.70
|Pro forma                                 |  |      | 1.14 |               |   | 1.90          |  |   | 1.63



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 that 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 |  | ExpectedDividendYield |   |  | Risk-FreeInterest Rate |   |  | ExpectedVolatility |   |  | Remaining Expected Life (in years)
|1997       |  | 1.10                  | % |  | 6.89                   | % |  | 6.41               | % |  | 9.32                              
|1998       |  | 1.05                  | % |  | 5.77                   | % |  | 27.00              | % |  | 9.18                              
|1999       |  | 1.02                  | % |  | 5.17                   | % |  | 15.25              | % |  | 9.24                              
|2000       |  | 1.02                  | % |  | 6.75                   | % |  | 5.56               | % |  | 9.05                              
|2001       |  | 1.03                  | % |  | 5.37                   | % |  | 3.59               | % |  | 9.51                              
|2002       |  | 1.03                  | % |  | 4.05                   | % |  | 16.50              | % |  | 9.89                              
|2004       |  | 1.03                  | % |  | 4.08                   | % |  | 26.53              | % |  | 9.13                              



Cash Flow
Information



The Company has defined cash and cash
equivalents as those amounts included in the Consolidated Balance Sheet caption Cash and due from banks.



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|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|-- | ------------------------------------------------------



Recent Accounting Pronouncements



In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (FAS) No. 123
(Revised 2004), Share-Based Payment. The statement requires that compensation cost relating to share-based payment transactions be recognized in financial statements and that this cost be measured based on the fair value of the equity or
liability instruments issued. FAS No. 123 (Revised 2004) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase
plans. The Company will adopt FAS No. 123 (Revised 2004) on January 1, 2006, and is currently evaluating the impact the adoption of the standard will have on the Companys results of operations.



In October 2003, the American Institute of Certified Public Accountants
issued SOP 03-3, Accounting for Loans or Certain Debt Securities Acquired in a Transfer.SOP 03-3 applies to a loan that is acquired where it is probable, at acquisition, that a transferee will be unable to collect all contractually required
payments receivable. SOP 03-3 requires the recognition, as accretable yield, the excess of all cash flows expected at acquisition over the investors initial investment in the loan as interest income on a level-yield basis over the life of the
loan. The amount by which the loans contractually required payments exceed the amount of its expected cash flows at acquisition may not be recognized as an adjustment to yield, a loss accrual, or a valuation allowance for credit risk. SOP 03-3
is effective for loans acquired in fiscal years beginning after December 31, 2004. Early adoption is permitted. The adoption of SOP 03-3 is not expected to have a material impact on the consolidated financial statements.



Effect of Restatement



The consolidated retained earnings as presented for the fiscal year ended
December 31, 2001, have been restated by $83, net of tax, to reflect the correction of an error for the method of accounting for an indexed postretirement benefit on the behalf of a former senior executive officer. The third-party administrator
recently informed the Company that the banking regulatory authorities had determined that their method of accruing for future benefits under the plan was not in accordance with current accounting standards. The Company, in previous periods, has
relied on the third-party information to accrue an annual expense in relation to the plan.



An additional adjustment related to the correction of an error in the calculation of the interest due on certain adjustable rate certificates of deposit held in Individual Retirement Accounts was recorded. The Bank
recently discovered that the interest rate paid on the affected accounts had fallen below the established contractual rate floor on the accounts. The Bank has notified the customers of the error and has made full restitution to all affected
customers. As a result of the restatement, retained earnings for the fiscal year ended December 31, 2001, have been decreased by $4, and net income was decreased by $68 for both periods ended December 31, 2003 and 2002. Additionally, for each of the
periods ended December 31, 2003 and 2002, basic earnings per share have been decreased by $.12 per basic share, and diluted earnings per share have been decreased by $.12 and $.11, respectively.



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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.



|                                                                                                         |  |         |  |         |  |        
|-------------------------------------------------------------------------------------------------------- |  | ------- |  | ------- |  | -------
|                                                                                                         |  | 2004    |  | 2003    |  | 2002   
|Weighted-average common shares and common stock equivalents used to calculate basic earnings per share   |  | 578,381 |  | 574,954 |  | 579,444
|                                                                                                         |  |         | 
|Additional common stock equivalents (stock options) used to calculate diluted earnings per share         |  | 3,306   |  | 2,335   |  | 871    
|                                                                                                         |  |         |  |         |  |        
|Weighted-average common shares and common stock equivalents used to calculate diluted earnings per share |  | 581,687 |  | 577,289 |  | 580,315
|                                                                                                         |  |         |  |         |  |        



Options to purchase
14,500 shares of common stock at prices from $28 to $28.50, as of December 31, 2002, were not included in the computation of diluted earnings per share because to do so would have been antidilutive. There were no antidilutive shares as of December
31, 2004 and 2003.



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|3. | INVESTMENT SECURITIES AVAILABLE FOR SALE
|-- | ----------------------------------------



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



|                                                 |  |               |        |                      |   |                       |  |   |                      |   |  |   |       
|------------------------------------------------ |  | ------------- | ------ | -------------------- | - | --------------------- |  | - | -------------------- | - |  | - | ------
|                                                 |  | 2004         
|                                                 |  | AmortizedCost |        | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | EstimatedMarketValue
|U.S. government agency securities                |  | $             | 17,678 |                      | $ | 17                    |  | $ | (121                 | ) |  | $ | 17,574
|Obligations of states and political subdivisions |  |               | 12,585 |                      |   | 211                   |  |   | (29                  | ) |  |   | 12,767
|Mortgage-backed securities                       |  |               | 23,470 |                      |   | 83                    |  |   | (153                 | ) |  |   | 23,400
|                                                 |  |               |        |                      |   |                       |  |   |                      |   |  |   |       
|Total debt securities                            |  |               | 53,733 |                      |   | 311                   |  |   | (303                 | ) |  |   | 53,741
|Equity securities                                |  |               | 8      |                      |   |                      |  |   |                     |   |  |   | 8     
|                                                 |  |               |        |                      |   |                       |  |   |                      |   |  |   |       
|Total                                            |  | $             | 53,741 |                      | $ | 311                   |  | $ | (303                 | ) |  | $ | 53,749
|                                                 |  |               |        |                      |   |                       |  |   |                      |   |  |   |       
|                                                 | 
|                                                 |  | 2003         
|                                                 |  | AmortizedCost |        | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | EstimatedMarketValue
|U.S. government agency securities                |  | $             | 7,770  |                      | $ | 36                    |  | $ | (12                  | ) |  | $ | 7,794 
|Obligations of states and political subdivisions |  |               | 20,012 |                      |   | 329                   |  |   | (149                 | ) |  |   | 20,192
|Mortgage-backed securities                       |  |               | 19,702 |                      |   | 91                    |  |   | (119                 | ) |  |   | 19,674
|                                                 |  |               |        |                      |   |                       |  |   |                      |   |  |   |       
|Total debt securities                            |  |               | 47,484 |                      |   | 456                   |  |   | (280                 | ) |  |   | 47,660
|Equity securities                                |  |               | 8      |                      |   |                      |  |   |                     |   |  |   | 8     
|                                                 |  |               |        |                      |   |                       |  |   |                      |   |  |   |       
|Total                                            |  | $             | 47,492 |                      | $ | 456                   |  | $ | (280                 | ) |  | $ | 47,668
|                                                 |  |               |        |                      |   |                       |  |   |                      |   |  |   |       



The following table
shows the Companys gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at December 31, 2004.



|                                                 |  |                        |        |                         |   |                      |  |                       |        |                      |   |                       |  |   |        |  |   |    
|------------------------------------------------ |  | ---------------------- | ------ | ----------------------- | - | -------------------- |  | --------------------- | ------ | -------------------- | - | --------------------- |  | - | ------ |  | - | ---
|                                                 |  | Less than TwelveMonths |        | Twelve Months orGreater |   | Total               
|                                                 |  | EstimatedMarketValue   |        | GrossUnrealizedLosses   |   | EstimatedMarketValue |  | GrossUnrealizedLosses |        | EstimatedMarketValue |   | GrossUnrealizedLosses
|U.S. government agency securities                |  | $                      | 9,897  |                         | $ | 119                  |  | $                     | 496    |                      | $ | 2                     |  | $ | 10,393 |  | $ | 121
|Obligations of states and political subdivisions |  |                        | 318    |                         |   | 9                    |  |                       | 2,476  |                      |   | 20                    |  |   | 2,794  |  |   | 29 
|Mortgage-backed securities                       |  |                        | 7,129  |                         |   | 58                   |  |                       | 7,698  |                      |   | 95                    |  |   | 14,827 |  |   | 153
|                                                 |  |                        |        |                         |   |                      |  |                       |        |                      |   |                       |  |   |        |  |   |    
|Total                                            |  | $                      | 17,344 |                         | $ | 186                  |  | $                     | 10,670 |                      | $ | 117                   |  | $ | 28,014 |  | $ | 303
|                                                 |  |                        |        |                         |   |                      |  |                       |        |                      |   |                       |  |   |        |  |   |    





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|3. | INVESTMENT SECURITIES AVAILABLE FOR SALE (Continued)
|-- | ----------------------------------------------------



The policy of the Company is to recognize an other-than-temporary impairment of equity securities where the fair value has been
significantly below cost for three consecutive quarters. For fixed maturity investments with unrealized losses due to interest rates where the Company has the positive intent and ability to hold the investment for a period of time sufficient to
allow a market recovery, declines in value below cost are not assumed to be other than temporary. The Company reviews its position quarterly and has asserted that at December 31, 2004, the declines outlined in the above table represent temporary
declines and the Company does have the intent and ability either to hold those securities to maturity or to allow a market recovery.



The Company has concluded that any impairment of its investment securities portfolio is not other than temporary but is the result of
interest rate changes, sector credit changes, or Company-specific rating changes that are not expected to result in the noncollection of principal and interest during the period.



The amortized cost and estimated market value of debt securities at December 31, 2004, 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.



|                                       |  |               |        |                      |   |       
|-------------------------------------- |  | ------------- | ------ | -------------------- | - | ------
|                                       |  | AmortizedCost |        | EstimatedMarketValue
|Due after one year through five years  |  | $             | 4,600  |                      | $ | 4,599 
|Due after five years through ten years |  |               | 21,065 |                      |   | 21,003
|Due after ten years                    |  |               | 28,068 |                      |   | 28,139
|                                       |  |               |        |                      |   |       
|Total                                  |  | $             | 53,733 |                      | $ | 53,741
|                                       |  |               |        |                      |   |       



Investment securities
with a carrying value of $24,345 and $22,609 at December 31, 2004 and 2003, 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.



|                    |  |      |       |      |   |        |  |   |       
|------------------- |  | ---- | ----- | ---- | - | ------ |  | - | ------
|                    |  | 2004 |       | 2003 |   | 2002  
|Proceeds from sales |  | $    | 6,918 |      | $ | 18,146 |  | $ | 10,045
|Gross gains         |  |      | 87    |      |   | 448    |  |   | 63    
|Gross losses        |  |      | 31    |      |   | 12     |  |   | 26    



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|4. | LOANS
|-- | -----



Major classifications of loans are summarized as follows:



|                                        |  |      |        |      |   |       
|--------------------------------------- |  | ---- | ------ | ---- | - | ------
|                                        |  | 2004 |        | 2003
|Loans secured by real estate:           |  |      |        |      |   |       
|Residential                             |  | $    | 35,219 |      | $ | 43,908
|Commercial                              |  |      | 23,908 |      |   | 23,514
|Construction                            |  |      | 1,259  |      |   | 2,021 
|Commercial, financial, and agricultural |  |      | 14,188 |      |   | 11,045
|Consumer                                |  |      | 5,081  |      |   | 6,534 
|                                        |  |      |        |      |   |       
|                                        |  |      | 79,655 |      |   | 87,022
|Less allowance for loan losses          |  |      | 966    |      |   | 1,194 
|                                        |  |      |        |      |   |       
|Net loans                               |  | $    | 78,689 |      | $ | 85,828
|                                        |  |      |        |      |   |       



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



|                                 |  |      |       |   |      |   |       |      |  |   |       |  
|-------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                 |  | 2004 |       |   | 2003 |   |       | 2002 | 
|Balance, January 1               |  | $    | 1,194 |   |      | $ | 1,213 |      |  | $ | 1,499 |  
|Add:                             |  |      |       |   |      |   |       |      |  |   |       |  
|Provisions charged to operations |  |      | 90    |   |      |   | 50    |      |  |   | (275  | )
|Recoveries                       |  |      | 27    |   |      |   | 18    |      |  |   | 14    |  
|Less loans charged off           |  |      | (345  | ) |      |   | (87   | )    |  |   | (25   | )
|                                 |  |      |       |   |      |   |       |      |  |   |       |  
|Balance, December 31             |  | $    | 966   |   |      | $ | 1,194 |      |  | $ | 1,213 |  
|                                 |  |      |       |   |      |   |       |      |  |   |       |  



Management
provided an additional $90,000 to the reserve for loan losses in 2004 to reflect the overall credit quality of the portfolio as of December 31, 2004.



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, 2004 and 2003, a substantial portion of its debtors ability to honor their loan agreements is dependent upon the economic stability of its immediate trade
area.



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 percent) were indebted to the Company at December 31, 2004 and 2003. 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:



|       |  |          |     |            |   |      |  |   |      
|------ |  | -------- | --- | ---------- | - | ---- |  | - | -----
|2003   |  | Advances |     | Repayments |   | 2004
|$2,486 |  | $        | 284 |            | $ | 210  |  | $ | 2,560



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|5. | PREMISES AND EQUIPMENT
|-- | ----------------------



Major classifications of premises and equipment are summarized as follows:



|                                    |  |      |       |      |   |      
|----------------------------------- |  | ---- | ----- | ---- | - | -----
|                                    |  | 2004 |       | 2003
|Land and land improvements          |  | $    | 808   |      | $ | 799  
|Building and leasehold improvements |  |      | 5,841 |      |   | 5,578
|Furniture, fixtures, and equipment  |  |      | 1,992 |      |   | 1,868
|                                    |  |      |       |      |   |      
|                                    |  |      | 8,641 |      |   | 8,245
|Less accumulated depreciation       |  |      | 1,943 |      |   | 1,499
|                                    |  |      |       |      |   |      
|Total                               |  | $    | 6,698 |      | $ | 6,746
|                                    |  |      |       |      |   |      



Depreciation charged
to operations was $444 in 2004, $408 in 2003, and $308 in 2002.



|6. | DEPOSITS
|-- | --------



Time deposits at December 31, 2004, mature $26,517, $12,073, $3,558, $1,767, and $912 during 2005, 2006, 2007, 2008, and 2009, respectively.



Time deposits include certificates of deposit in denominations of
$100,000 or more. Such deposits aggregated $11,526 and $14,217 at December 31, 2004 and 2003, respectively.



Maturities on time deposits of $100,000 or more at December 31, 2004, are as follows:



|                                    |  |   |       
|----------------------------------- |  | - | ------
|Within three months                 |  | $ | 5,812 
|Beyond three but within six months  |  |   | 1,886 
|Beyond six but within twelve months |  |   | 454   
|Beyond one year                     |  |   | 3,374 
|                                    |  |   |       
|Total                               |  | $ | 11,526
|                                    |  |   |       



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##### Table of Contents

|7. | SHORT-TERM BORROWINGS
|-- | ---------------------



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



|                                      |  |      |        |   |      |   |       |  
|------------------------------------- |  | ---- | ------ | - | ---- | - | ----- | -
|                                      |  | 2004 |        |   | 2003 |  
|Balance at year-end                   |  | $    | 11,621 |   |      | $ | 8,472 |  
|Average balance outstanding           |  |      | 11,070 |   |      |   | 6,019 |  
|Maximum month-end balance             |  |      | 14,474 |   |      |   | 9,971 |  
|Weighted-average rate at year-end     |  |      | 1.90   | % |      |   | 0.97  | %
|Weighted-average rate during the year |  |      | 1.02   | % |      |   | 1.06  | %



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



|8. | OTHER BORROWINGS
|-- | ----------------



The following table sets forth information concerning other borrowings with the FHLB:



|                       |  |                |  |                                 |  |      |                           |  |      |                 |  |      |      |  |      |        |  |   |       
|---------------------- |  | -------------- |  | ------------------------------- |  | ---- | ------------------------- |  | ---- | --------------- |  | ---- | ---- |  | ---- | ------ |  | - | ------
|                       |  | Maturity range |  | Weighted- average interest rate |  |      | Stated interestrate range |  |      | At December 31,
|Description            |  | from           |  | to                              |  |      | from                      |  |      | to              |  |      | 2004 |  | 2003
|Mortgage match         |  | 11/01/11       |  | 11/01/11                        |  | 4.99 | %                         |  | 4.99 | %               |  | 4.99 | %    |  | $    | 127    |  | $ | 221   
|Convertible            |  | 04/23/07       |  | 01/28/13                        |  | 4.15 |                           |  | 3.51 |                 |  | 4.57 |      |  |      | 13,000 |  |   | 13,000
|Convertible amortizing |  | 04/01/08       |  | 04/01/08                        |  | 2.38 |                           |  | 2.38 |                 |  | 2.38 |      |  |      | 3,399  |  |   | 4,367 
|Fixed rate             |  | 03/21/06       |  | 12/11/07                        |  | 4.52 |                           |  | 3.68 |                 |  | 5.47 |      |  |      | 2,000  |  |   | 3,000 
|CMP advances           |  | 08/01/07       |  | 02/01/08                        |  | 3.15 |                           |  | 2.69 |                 |  | 3.48 |      |  |      | 2,361  |  |   | 3,139 
|                       |  |                |  |                                 |  |      |                           |  |      |                 |  |      |      |  |      |        |  |   |       
|                       |  |                |  |                                 |  |      |                           |  |      |                 |  |      |      |  |      | 20,887 |  |   | 23,727
|Note payable           |  |                |  |                                 |  |      |                           |  |      |                 |  |      |      |  |      |       |  |   | 1     
|                       |  |                |  |                                 |  |      |                           |  |      |                 |  |      |      |  |      |        |  |   |       
|                       |  |                |  |                                 |  |      |                           |  |      |                 |  |      |      |  | $    | 20,887 |  | $ | 23,728
|                       |  |                |  |                                 |  |      |                           |  |      |                 |  |      |      |  |      |        |  |   |       



Maturities of other
borrowings at December 31, 2004, are summarized as follows:



|                         |  |        |        |                        |      |  
|------------------------ |  | ------ | ------ | ---------------------- | ---- | -
|Year Ending December 31, |  | Amount |        | Weighted- Average Rate |     
|2005                     |  | $      | 1,810  |                        | 2.76 | %
|2006                     |  |        | 2,861  |                        | 3.67 |  
|2007                     |  |        | 7,730  |                        | 4.03 |  
|2008                     |  |        | 424    |                        | 2.53 |  
|2009                     |  |        | 20     |                        | 4.99 |  
|2010 and after           |  |        | 8,042  |                        | 3.89 |  
|                         |  |        |        |                        |      |  
|                         |  | $      | 20,887 |                        | 3.79 | %
|                         |  |        |        |                        |      |  



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##### Table of Contents

|8. | OTHER BORROWINGS (Continued)
|-- | ----------------------------



The terms of the convertible borrowings allow the FHLB to convert the interest rate to an adjustable rate based on the three-month London Interbank
Offered Rate (LIBOR) at a predetermined anniversary year of the borrowings origination, ranging from one to seven years. These initial conversion dates range from October 2006 through March 2008. The fixed rate amortizing
borrowings require monthly payments of principal and interest of $45,457 through July 2007, $26,747 through January 2008, $88,473 through March 2008, and $2,796 through October 2011.



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, 2004, the
Banks maximum borrowing capacity with the FHLB was approximately $21,489.



|9. | INCOME TAXES
|-- | ------------



The provision for federal income taxes consists of:



|                               |  |      |     |   |               |   |     |               |  |   |    
|------------------------------ |  | ---- | --- | - | ------------- | - | --- | ------------- |  | - | ---
|                               |  | 2004 |     |   | 2003          |   |     | 2002         
|                               |  |      |     |   | (as restated) |   |     | (as restated)
|Current payable                |  | $    | 89  |   |               | $ | 234 |               |  | $ | 102
|Deferred                       |  |      | (98 | ) |               |   | (68 | )             |  |   | 43 
|Valuation allowance adjustment |  |      | 57  |   |               |   |    |               |  |   |   
|                               |  |      |     |   |               |   |     |               |  |   |    
|Total provision                |  | $    | 48  |   |               | $ | 166 |               |  | $ | 145
|                               |  |      |     |   |               |   |     |               |  |   |    



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:



|                                                 |  |      |     |   |               |   |    
|------------------------------------------------ |  | ---- | --- | - | ------------- | - | ---
|                                                 |  | 2004 |     |   | 2003         
|                                                 |  |      |     |   | (as restated)
|Deferred tax assets                              |  |      |     |   |               |   |    
|Allowance for loan losses                        |  | $    | 4   |   |               | $ | 81 
|Accrued expenses and employee benefits           |  |      | 298 |   |               |   | 274
|AMT credit carryover                             |  |      | 186 |   |               |   | 143
|NOL carryover                                    |  |      | 129 |   |               |   |   
|                                                 |  |      |     |   |               |   |    
|Gross deferred tax assets                        |  |      | 617 |   |               |   | 498
|Valuation allowance                              |  |      | (57 | ) |               |   |   
|                                                 |  |      |     |   |               |   |    
|Net deferred tax assets                          |  |      | 560 |   |               |   | 498
|                                                 |  |      |     |   |               |   |    
|Deferred tax liabilities:                        |  |      |     |   |               |   |    
|Unrealized gain on available-for-sale securities |  |      | 3   |   |               |   | 60 
|Premises and equipment                           |  |      | 122 |   |               |   | 132
|Other                                            |  |      | 83  |   |               |   | 52 
|                                                 |  |      |     |   |               |   |    
|Deferred tax liabilities                         |  |      | 208 |   |               |   | 244
|                                                 |  |      |     |   |               |   |    
|Net deferred tax assets                          |  | $    | 352 |   |               | $ | 254
|                                                 |  |      |     |   |               |   |    



44



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##### Table of Contents

|9. | INCOME TAXES (Continued)
|-- | ------------------------



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



|                                      |  |        |      |   |                  |       |   |               |   |      |                  |  |       |        |  |   |                  |   |  |       |  
|------------------------------------- |  | ------ | ---- | - | ---------------- | ----- | - | ------------- | - | ---- | ---------------- |  | ----- | ------ |  | - | ---------------- | - |  | ----- | -
|                                      |  | 2004   |      |   | 2003             |       |   | 2002          |  
|                                      |  |        |      |   |                  |       |   | (as restated) |   |      | (as restated)    | 
|                                      |  | Amount |      |   | % ofPretaxIncome |       |   | Amount        |   |      | % ofPretaxIncome |  |       | Amount |  |   | % ofPretaxIncome |  
|Provision at statutory rate           |  | $      | 248  |   |                  | 34.0  | % |               | $ | 443  |                  |  | 34.0  | %      |  | $ | 384              |   |  | 34.0  | %
|Tax-exempt interest                   |  |        | (253 | ) |                  | (34.6 | ) |               |   | (232 | )                |  | (17.8 | )      |  |   | (172             | ) |  | (15.2 | )
|Life insurance income                 |  |        | (43  | ) |                  | (5.9  | ) |               |   | (44  | )                |  | (3.4  | )      |  |   | (55              | ) |  | (4.9  | )
|Valuation allowance adjustment        |  |        | 57   |   |                  | 7.8   |   |               |   |     |                  |  |      |        |  |   |                 |   |  |      |  
|Other                                 |  |        | 39   |   |                  | 5.3   |   |               |   | (1   | )                |  | (0.1  | )      |  |   | (12              | ) |  | (1.1  | )
|                                      |  |        |      |   |                  |       |   |               |   |      |                  |  |       |        |  |   |                  |   |  |       |  
|Actual tax expense and effective rate |  | $      | 48   |   |                  | 6.6   | % |               | $ | 166  |                  |  | 12.7  | %      |  | $ | 145              |   |  | 12.8  | %
|                                      |  |        |      |   |                  |       |   |               |   |      |                  |  |       |        |  |   |                  |   |  |       |  



|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 $33, $63 and $41 for the years ended December 31, 2004, 2003, and 2002, respectively.



45



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|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 $52 in 2004, $40 in 2003, and $30 in 2002.



Executive Compensation



The Company and the Bank entered into an Amended and Restated Salary Continuation Agreement dated July 10, 2001, with a former president. The former
president was dismissed on February 19, 2002. The agreement provided that a benefit be paid for 15 years once he reaches normal retirement age of 65 if his employment is 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 recorded an accrual of $216,000 that represents the estimated present value (using a discount rate of 8 percent) of the total future
distributions. 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 $40 in 2004, $16 in 2003, and $51 in 2002.



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
noncontributory postretirement plan providing health care coverage. The Banks funding policy is to contribute as billed with their normal health care plan. For 2004, 2003, and 2002, the aggregate contributions were $40, $28, and $28,
respectively.



The following table sets forth the plans
funded status at December 31, 2004 and 2003:



|                                                                                                                        |  |      |      |   |      |   |      |  
|----------------------------------------------------------------------------------------------------------------------- |  | ---- | ---- | - | ---- | - | ---- | -
|                                                                                                                        |  | 2004 |      |   | 2003 |  
|Accumulated postretirement benefit obligation:                                                                          |  |      |      |   |      |   |      |  
|Retirees                                                                                                                |  | $    | 389  |   |      | $ | 433  |  
|Other active plan participants                                                                                          |  |      |     |   |      |   | 67   |  
|                                                                                                                        |  |      |      |   |      |   |      |  
|Total                                                                                                                   |  |      | 389  |   |      |   | 500  |  
|Plan assets at fair value                                                                                               |  |      |     |   |      |   |     |  
|                                                                                                                        |  |      |      |   |      |   |      |  
|Accumulated postretirement benefit obligation in excess of plan assets                                                  |  |      | 389  |   |      |   | 500  |  
|Prior service cost not yet recognized in net periodic postretirement benefit cost                                       |  |      | (159 | ) |      |   | (221 | )
|Unrecognized net gain (loss) from past experience different from that assumed and effects of any changes in assumptions |  |      | (15  | ) |      |   | 41   |  
|Unrecognized transition obligation, net of amortization                                                                 |  |      |     |   |      |   | (96  | )
|                                                                                                                        |  |      |      |   |      |   |      |  
|Accrued postretirement cost                                                                                             |  | $    | 215  |   |      | $ | 224  |  
|                                                                                                                        |  |      |      |   |      |   |      |  





46



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##### Table of Contents

|10. | EMPLOYEE BENEFITS (Continued)
|--- | -----------------------------



Postretirement Benefits (Continued)



Postretirement expense for 2004, 2003, and 2002 includes the following components:



|                                      |  |      |    |      |   |      |  |   |   
|------------------------------------- |  | ---- | -- | ---- | - | ---- |  | - | --
|                                      |  | 2004 |    | 2003 |   | 2002
|Service cost                          |  | $    |   |      | $ | 7    |  | $ | 6 
|Interest cost                         |  |      | 19 |      |   | 34   |  |   | 19
|Amortization of transition obligation |  |      |   |      |   | 9    |  |   | 9 
|Amortization of prior service cost    |  |      | 12 |      |   | 16   |  |   |  
|                                      |  |      |    |      |   |      |  |   |   
|Total                                 |  | $    | 31 |      | $ | 66   |  | $ | 34
|                                      |  |      |    |      |   |      |  |   |   



For measurement
purposes 10 percent and 10 percent annual rates of increase in the per capita of covered health care benefits for those under and over 65, respectively, were assumed for 2004 and 2003. The rates were assumed to decrease gradually to 6 percent at
2014 and remain at that level thereafter.



The
weighted-average discount rate used in determining the accumulated postretirement benefit obligation was 5.5 percent in 2004 and 6 percent in 2003.



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
ten years from the date of grant. Vesting occurs at 20 percent per year of service.



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



|                         |  |        |   |  |                                |       |      |        |   |                                |   |      
|------------------------ |  | ------ | - |  | ------------------------------ | ----- | ---- | ------ | - | ------------------------------ | - | -----
|                         |  | 2004   |   |  | Weighted- AverageExercisePrice |       | 2003 |        |   | Weighted- AverageExercisePrice
|Outstanding, January 1   |  | 34,620 |   |  | $                              | 24.55 |      | 39,560 |   |                                | $ | 23.69
|Granted                  |  | 3,700  |   |  |                                | 29.00 |      |       |   |                                |   | 26.25
|Exercised                |  | (4,200 | ) |  |                                | 22.04 |      | (4,940 | ) |                                |   | 22.00
|Forfeited                |  | (2,400 | ) |  |                                | 26.53 |      |       |   |                                |   | 22.54
|                         |  |        |   |  |                                |       |      |        |   |                                |   |      
|Outstanding, December 31 |  | 31,720 |   |  | $                              | 24.91 |      | 34,620 |   |                                | $ | 24.55
|                         |  |        |   |  |                                |       |      |        |   |                                |   |      
|Exercisable at year-end  |  | 27,244 |   |  | $                              | 24.53 |      | 27,872 |   |                                | $ | 23.93
|                         |  |        |   |  |                                |       |      |        |   |                                |   |      



47



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##### Table of Contents

|10. | EMPLOYEE BENEFITS (Continued)
|--- | -----------------------------



Stock Option Plan (Continued)



The following table summarizes the characteristics of stock options at December 31, 2004:



|           |  |               |       |             |        |                        |      |                      |   |        |  |                      |  |   |      
|---------- |  | ------------- | ----- | ----------- | ------ | ---------------------- | ---- | -------------------- | - | ------ |  | -------------------- |  | - | -----
|           |  |               |       | Outstanding |        | Exercisable           
|Grant Date |  | ExercisePrice |       | Shares      |        | ContractualAverageLife |      | AverageExercisePrice |   | Shares |  | AverageExercisePrice
|04/23/97   |  | $             | 22.00 |             | 3,600  |                        | 2.30 |                      | $ | 22.00  |  | 3,600                |  | $ | 22.00
|03/03/98   |  |               | 22.00 |             | 8,060  |                        | 3.16 |                      |   | 22.00  |  | 8,060                |  |   | 22.00
|03/24/99   |  |               | 28.00 |             | 12,700 |                        | 4.22 |                      |   | 28.00  |  | 12,700               |  |   | 28.00
|01/18/00   |  |               | 28.50 |             | 1,800  |                        | 5.04 |                      |   | 28.50  |  | 1,440                |  |   | 28.50
|07/01/01   |  |               | 22.40 |             | 500    |                        | 6.50 |                      |   | 22.40  |  | 300                  |  |   | 22.40
|11/19/02   |  |               | 26.25 |             | 2,860  |                        | 7.88 |                      |   | 26.25  |  | 1,144                |  |   | 26.25
|02/17/04   |  |               | 29.00 |             | 2,200  |                        | 9.13 |                      |   | 29.00  |  |                     |  |   |     
|           |  |               |       |             |        |                        |      |                      |   |        |  |                      |  |   |      
|           |  |               |       |             | 31,720 |                        |      |                      |   | 24.91  |  | 27,244               |  |   | 24.53
|           |  |               |       |             |        |                        |      |                      |   |        |  |                      |  |   |      



|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 comprised the following:



|                             |  |      |       |      |   |      
|---------------------------- |  | ---- | ----- | ---- | - | -----
|                             |  | 2004 |       | 2003
|Commitments to extend credit |  | $    | 5,520 |      | $ | 4,768
|Standby letters of credit    |  |      | 10    |      |   | 85   
|                             |  |      |       |      |   |      
|Total                        |  | $    | 5,530 |      | $ | 4,853
|                             |  |      |       |      |   |      



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 comprise 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.



48



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##### Table of Contents

|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.



Standby letters of credit represent conditional commitments issued by the Company to guarantee the performance of a customer
to a third party. These instruments are issued primarily to support bid or performance-related contracts. The coverage period for these instruments is typically a one-year period with an annual renewal option subject to prior approval by management.
Fees earned from the issuance of these letters are recognized at the expiration of the coverage period. For secured letters of credit, the collateral is typically Bank deposit instruments.



|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, 2004 and 2003 was
$520 and $833, 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 10 percent of the Banks common stock and capital surplus.



Dividends



The Bank is subject to a dividend restriction that 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 2005 is $1,055 plus 2005 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, 2004 and 2003, 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 I risk-based, and Tier I Leverage
capital ratios must be at least 10 percent, 6 percent, and 5 percent, respectively.



49



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##### Table of Contents

|13. | REGULATORY CAPITAL (Continued)
|--- | ------------------------------



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



|                                         |  |        |        |       |       |   |               |   |        |  |       |  
|---------------------------------------- |  | ------ | ------ | ----- | ----- | - | ------------- | - | ------ |  | ----- | -
|                                         |  | 2004   |        |       | 2003  |  
|                                         |  |        |        |       |       |   | (as restated) |  
|                                         |  | Amount |        | Ratio |       |   | Amount        |   | Ratio  | 
|Total Capital (to Risk-Weighted Assets)  |  |        |        |       |       |   |               |   |        |  |       |  
|                                         |  |        |        |      
|Actual                                   |  | $      | 14,222 |       | 15.89 | % |               | $ | 14,142 |  | 14.82 | %
|For Capital Adequacy Purposes            |  |        | 7,159  |       | 8.00  |   |               |   | 7,636  |  | 8.00  |  
|To Be Well Capitalized                   |  |        | 8,949  |       | 10.00 |   |               |   | 9,545  |  | 10.00 |  
|                                         |  |        |        |      
|Tier I Capital (to Risk-Weighted Assets) |  |        |        |       |       |   |               |   |        |  |       |  
|                                         |  |        |        |      
|Actual                                   |  | $      | 13,256 |       | 14.81 | % |               | $ | 12,948 |  | 13.57 | %
|For Capital Adequacy Purposes            |  |        | 3,579  |       | 4.00  |   |               |   | 3,818  |  | 4.00  |  
|To Be Well Capitalized                   |  |        | 5,369  |       | 6.00  |   |               |   | 5,727  |  | 6.00  |  
|                                         |  |        |        |      
|Tier I Capital (to Average Assets)       |  |        |        |       |       |   |               |   |        |  |       |  
|                                         |  |        |        |      
|Actual                                   |  | $      | 13,256 |       | 8.85  | % |               | $ | 12,948 |  | 8.51  | %
|For Capital Adequacy Purposes            |  |        | 5,992  |       | 4.00  |   |               |   | 6,087  |  | 4.00  |  
|To Be Well Capitalized                   |  |        | 7,490  |       | 5.00  |   |               |   | 7,609  |  | 5.00  |  



50



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##### Table of Contents

|14. | FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS
|--- | ----------------------------------------------



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



|                                         |  |               |         |            |   |               |  |            |         |  |   |        
|---------------------------------------- |  | ------------- | ------- | ---------- | - | ------------- |  | ---------- | ------- |  | - | -------
|                                         |  | 2004          |         | 2003      
|                                         |  | CarryingValue |         | Fair Value |   | CarryingValue |  | Fair Value
|Financial assets:                        |  |               |         |            |   |               |  |            |         |  |   |        
|Cash and due from banks                  |  | $             | 3,584   |            | $ | 3,584         |  | $          | 3,936   |  | $ | 3,936  
|Investment securities available for sale |  |               | 53,749  |            |   | 53,749        |  |            | 47,668  |  |   | 47,668 
|Net loans                                |  |               | 78,689  |            |   | 80,264        |  |            | 85,828  |  |   | 87,983 
|Bank-owned life insurance                |  |               | 3,001   |            |   | 3,001         |  |            | 2,874   |  |   | 2,874  
|Regulatory stock                         |  |               | 1,011   |            |   | 1,011         |  |            | 948     |  |   | 948    
|Accrued interest receivable              |  |               | 821     |            |   | 821           |  |            | 839     |  |   | 839    
|Mortgage servicing rights                |  |               | 68      |            |   | 68            |  |            |        |  |   |       
|                                         |  |               |         |           
|Financial liabilities:                   |  |               |         |            |   |               |  |            |         |  |   |        
|Deposits                                 |  | $             | 101,210 |            | $ | 102,331       |  | $          | 102,468 |  | $ | 103,694
|Short-term borrowings                    |  |               | 11,621  |            |   | 11,621        |  |            | 8,472   |  |   | 8,472  
|Other borrowings                         |  |               | 20,887  |            |   | 21,493        |  |            | 23,728  |  |   | 24,386 
|Accrued interest payable                 |  |               | 109     |            |   | 109           |  |            | 263     |  |   | 263    



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.



51



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|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, 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 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, Mortgage Servicing Rights, Deposits, and Other Borrowings



The fair value of loans, mortgage servicing rights, 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.



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|15. | PARENT COMPANY
|--- | --------------



Following are condensed financial statements for the Company.



CONDENSED BALANCE SHEET



|                                           |  |              |        |               |   |       
|------------------------------------------ |  | ------------ | ------ | ------------- | - | ------
|                                           |  | December 31,
|                                           |  | 2004         |        | 2003         
|                                           |  |              |        | (as restated)
|ASSETS                                     |  |              |        |               |   |       
|Cash and due from banks                    |  | $            | 29     |               | $ | 41    
|Investment securities available for sale   |  |              | 8      |               |   | 8     
|Investment in subsidiary bank              |  |              | 13,169 |               |   | 12,995
|Other assets                               |  |              | 68     |               |   | 22    
|                                           |  |              |        |               |   |       
|TOTAL ASSETS                               |  | $            | 13,274 |               | $ | 13,066
|                                           |  |              |        |               |   |       
|TOTAL LIABILITIES                          |  | $            | 6      |               | $ | 2     
|                                           |  |             
|STOCKHOLDERS EQUITY                       |  |              | 13,268 |               |   | 13,064
|                                           |  |              |        |               |   |       
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |  | $            | 13,274 |               | $ | 13,066
|                                           |  |              |        |               |   |       



CONDENSED STATEMENT OF
INCOME



|                                                                               |  |                         |     |               |   |               |  |   |    
|------------------------------------------------------------------------------ |  | ----------------------- | --- | ------------- | - | ------------- |  | - | ---
|                                                                               |  | Year Ended December 31,
|                                                                               |  | 2004                    |     | 2003          |   | 2002         
|                                                                               |  |                         |     | (as restated) |   | (as restated)
|INCOME                                                                         |  |                         |     |               |   |               |  |   |    
|Dividends from subsidiary bank                                                 |  | $                       | 445 |               | $ | 438           |  | $ | 771
|Dividend income                                                                |  |                         |    |               |   | 1             |  |   | 3  
|Investment securities gains, net                                               |  |                         |    |               |   | 24            |  |   | 7  
|Other income                                                                   |  |                         | 1   |               |   | 1             |  |   | 2  
|                                                                               |  |                         |     |               |   |               |  |   |    
|Total income                                                                   |  |                         | 446 |               |   | 464           |  |   | 783
|                                                                               |  |                         |    
|EXPENSES                                                                       |  |                         |     |               |   |               |  |   |    
|Professional fees                                                              |  |                         | 72  |               |   | 95            |  |   | 78 
|Other                                                                          |  |                         | 13  |               |   | 20            |  |   | 15 
|                                                                               |  |                         |     |               |   |               |  |   |    
|Total expenses                                                                 |  |                         | 85  |               |   | 115           |  |   | 93 
|                                                                               |  |                         |    
|Income before tax benefit and equity in undistributed net income of subsidiary |  |                         | 361 |               |   | 349           |  |   | 690
|Income tax benefit                                                             |  |                         | 27  |               |   | 28            |  |   | 23 
|Equity in undistributed net income of subsidiary                               |  |                         | 295 |               |   | 760           |  |   | 271
|                                                                               |  |                         |     |               |   |               |  |   |    
|NET INCOME                                                                     |  | $                       | 683 |               | $ | 1,137         |  | $ | 984
|                                                                               |  |                         |     |               |   |               |  |   |    





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|15. | PARENT COMPANY (Continued)
|--- | --------------------------



CONDENSED STATEMENT OF CASH FLOWS



|                                                                                  |  |                         |      |   |               |   |       |               |  |   |      |  
|--------------------------------------------------------------------------------- |  | ----------------------- | ---- | - | ------------- | - | ----- | ------------- |  | - | ---- | -
|                                                                                  |  | Year Ended December 31, |     
|                                                                                  |  | 2004                    |      |   | 2003          |   |       | 2002          | 
|                                                                                  |  |                         |      |   | (as restated) |   |       | (as restated) | 
|OPERATING ACTIVITIES                                                              |  |                         |      |   |               |   |       |               |  |   |      |  
|Net income                                                                        |  | $                       | 683  |   |               | $ | 1,137 |               |  | $ | 984  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                         |      |   |               |   |       |               |  |   |      |  
|Equity in undistributed net income of subsidiary                                  |  |                         | (295 | ) |               |   | (760  | )             |  |   | (271 | )
|Investment securities gains, net                                                  |  |                         |     |   |               |   | (24   | )             |  |   | (7   | )
|Other                                                                             |  |                         | (32  | ) |               |   | (34   | )             |  |   | 45   |  
|                                                                                  |  |                         |      |   |               |   |       |               |  |   |      |  
|Net cash provided by operating activities                                         |  |                         | 356  |   |               |   | 319   |               |  |   | 751  |  
|                                                                                  |  |                         |      |   |               |   |       |               |  |   |      |  
|INVESTING ACTIVITIES                                                              |  |                         |      |   |               |   |       |               |  |   |      |  
|Investment securities available for sale:                                         |  |                         |      |   |               |   |       |               |  |   |      |  
|Proceeds from sales                                                               |  |                         |     |   |               |   | 73    |               |  |   | 22   |  
|                                                                                  |  |                         |      |   |               |   |       |               |  |   |      |  
|Net cash provided by investing activities                                         |  |                         |     |   |               |   | 73    |               |  |   | 22   |  
|                                                                                  |  |                         |      |   |               |   |       |               |  |   |      |  
|FINANCING ACTIVITIES                                                              |  |                         |      |   |               |   |       |               |  |   |      |  
|Purchase of treasury stock                                                        |  |                         | (31  | ) |               |   | (108  | )             |  |   | (406 | )
|Proceeds from stock option exercise                                               |  |                         | 102  |   |               |   | 122   |               |  |   | 38   |  
|Cash dividends                                                                    |  |                         | (439 | ) |               |   | (420  | )             |  |   | (382 | )
|                                                                                  |  |                         |      |   |               |   |       |               |  |   |      |  
|Net cash used for financing activities                                            |  |                         | (368 | ) |               |   | (406  | )             |  |   | (750 | )
|                                                                                  |  |                         |      |   |               |   |       |               |  |   |      |  
|Increase (decrease) in cash                                                       |  |                         | (12  | ) |               |   | (14   | )             |  |   | 23   |  
|                                                                                  |  |                         |     
|CASH AT BEGINNING OF YEAR                                                         |  |                         | 41   |   |               |   | 55    |               |  |   | 32   |  
|                                                                                  |  |                         |      |   |               |   |       |               |  |   |      |  
|CASH AT END OF YEAR                                                               |  | $                       | 29   |   |               | $ | 41    |               |  | $ | 55   |  
|                                                                                  |  |                         |      |   |               |   |       |               |  |   |      |  



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|16. | QUARTERLY DATA (unaudited)
|--- | --------------------------



|                                                    |  |                    |         |              |   |         |                   |  |                  |         |  |   |        
|--------------------------------------------------- |  | ------------------ | ------- | ------------ | - | ------- | ----------------- |  | ---------------- | ------- |  | - | -------
|                                                    |  | Three Months Ended
|                                                    |  | March 31,2004      |         | June 30,2004 |   |         | September 30,2004 |  | December 31,2004
|Total interest income                               |  | $                  | 1,779   |              | $ | 1,717   |                   |  | $                | 1,808   |  | $ | 1,758  
|Total interest expense                              |  |                    | 655     |              |   | 656     |                   |  |                  | 729     |  |   | 686    
|                                                    |  |                    |         |              |   |         |                   |  |                  |         |  |   |        
|Net interest income                                 |  |                    | 1,124   |              |   | 1,061   |                   |  |                  | 1,079   |  |   | 1,072  
|Provision for loan losses                           |  |                    |        |              |   | 50      |                   |  |                  | 25      |  |   | 15     
|                                                    |  |                    |         |              |   |         |                   |  |                  |         |  |   |        
|Net interest income after provision for loan losses |  |                    | 1,124   |              |   | 1,011   |                   |  |                  | 1,054   |  |   | 1,057  
|                                                    |  |                    |         |             
|Total noninterest income                            |  |                    | 275     |              |   | 296     |                   |  |                  | 371     |  |   | 263    
|Total noninterest expense                           |  |                    | 1,109   |              |   | 1,198   |                   |  |                  | 1,225   |  |   | 1,188  
|                                                    |  |                    |         |              |   |         |                   |  |                  |         |  |   |        
|Income before income taxes                          |  |                    | 290     |              |   | 109     |                   |  |                  | 200     |  |   | 132    
|Income taxes                                        |  |                    | 21      |              |   | (23     | )                 |  |                  | 8       |  |   | 42     
|                                                    |  |                    |         |              |   |         |                   |  |                  |         |  |   |        
|Net income                                          |  | $                  | 269     |              | $ | 132     |                   |  | $                | 192     |  | $ | 90     
|                                                    |  |                    |         |              |   |         |                   |  |                  |         |  |   |        
|Per share data:                                     |  |                    |         |              |   |         |                   |  |                  |         |  |   |        
|Net income                                          |  |                    |         |              |   |         |                   |  |                  |         |  |   |        
|Basic                                               |  | $                  | 0.47    |              | $ | 0.23    |                   |  | $                | 0.34    |  | $ | 0.16   
|Diluted                                             |  |                    | 0.46    |              |   | 0.19    |                   |  |                  | 0.33    |  |   | 0.15   
|Average shares outstanding                          |  |                    |         |              |   |         |                   |  |                  |         |  |   |        
|Basic                                               |  |                    | 576,692 |              |   | 579,016 |                   |  |                  | 578,899 |  |   | 578,891
|Diluted                                             |  |                    | 580,409 |              |   | 581,758 |                   |  |                  | 580,925 |  |   | 583,093



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|16. | QUARTERLY DATA (unaudited) (Continued)
|--- | --------------------------------------



|                                                    |  |                    |         |               |   |                   |  |                  |         |  |   |        
|--------------------------------------------------- |  | ------------------ | ------- | ------------- | - | ----------------- |  | ---------------- | ------- |  | - | -------
|                                                    |  | Three Months Ended
|                                                    |  | March 31,2003      |         | June 30,2003  |   | September 30,2003 |  | December 31,2003
|                                                    |  | (as restated)      |         | (as restated) |   | (as restated)     |  | (as restated)   
|Total interest income                               |  | $                  | 1,833   |               | $ | 1,780             |  | $                | 1,709   |  | $ | 1,859  
|Total interest expense                              |  |                    | 699     |               |   | 734               |  |                  | 707     |  |   | 706    
|                                                    |  |                    |         |               |   |                   |  |                  |         |  |   |        
|Net interest income                                 |  |                    | 1,134   |               |   | 1,046             |  |                  | 1,002   |  |   | 1,153  
|Provision for loan losses                           |  |                    |        |               |   | 50                |  |                  |        |  |   |       
|                                                    |  |                    |         |               |   |                   |  |                  |         |  |   |        
|Net interest income after provision for loan losses |  |                    | 1,134   |               |   | 996               |  |                  | 1,002   |  |   | 1,153  
|                                                    |  |                    |         |              
|Total noninterest income                            |  |                    | 322     |               |   | 347               |  |                  | 416     |  |   | 523    
|Total noninterest expense                           |  |                    | 1,148   |               |   | 1,043             |  |                  | 1,144   |  |   | 1,255  
|                                                    |  |                    |         |               |   |                   |  |                  |         |  |   |        
|Income before income taxes                          |  |                    | 308     |               |   | 300               |  |                  | 274     |  |   | 421    
|Income taxes                                        |  |                    | 45      |               |   | 44                |  |                  | 12      |  |   | 65     
|                                                    |  |                    |         |               |   |                   |  |                  |         |  |   |        
|Net income                                          |  | $                  | 263     |               | $ | 256               |  | $                | 262     |  | $ | 356    
|                                                    |  |                    |         |               |   |                   |  |                  |         |  |   |        
|Per share data:                                     |  |                    |         |               |   |                   |  |                  |         |  |   |        
|Net income                                          |  |                    |         |               |   |                   |  |                  |         |  |   |        
|Basic                                               |  | $                  | 0.46    |               | $ | 0.45              |  | $                | 0.46    |  | $ | 0.62   
|Diluted                                             |  |                    | 0.46    |               |   | 0.44              |  |                  | 0.45    |  |   | 0.61   
|Average shares outstanding                          |  |                    |         |               |   |                   |  |                  |         |  |   |        
|Basic                                               |  |                    | 574,427 |               |   | 574,620           |  |                  | 575,682 |  |   | 575,704
|Diluted                                             |  |                    | 576,932 |               |   | 576,142           |  |                  | 577,346 |  |   | 579,172



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ITEM 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure



(Not Applicable)



ITEM 8A  Controls and Procedures



The Company,
under the supervision, and with the participation, of its management, including the Companys Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Companys disclosure controls
and procedures pursuant to the requirements of Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures were effective as of
December 31, 2004, in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Companys periodic SEC filings.



There was no change in the Companys internal control over financial reporting that
occurred during the Companys fiscal quarter ended December 31, 2004 that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.



PART III



ITEM 9. Directors and Executive Officers of the Registrant



The information set forth under the caption FIRST PROPOSAL- ELECTION OF DIRECTORS, page 3 of the Proxy Statement of the Company and the information under the caption SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE on page 13
of the Proxy Statement filed March 25, 2005, with the United States Securities and Exchange Commission are incorporated by reference herein.



The Board of Directors has determined that the Company does not have an audit committee financial expert serving on its audit committee. However, the Board of Directors
believes that each audit committee member has sufficient knowledge in financial and auditing matters to serve on the committee. At this time, the Board does not believe it is necessary to actively search for an outside person to serve on the Board
who would qualify as a financial expert.



The Company has adopted a code of
ethics that applies to its principal executive, financial and accounting officers, a copy of which is attached as an exhibit to this 10-K. In the event we make any amendment to, or grant any waiver of, a provision of the code of ethics that applies
to the principal executive, financial or accounting officer, or any person performing similar functions, that requires disclosure under applicable SEC rules, we intend to disclose such amendment or waiver, the nature of and reasons for it, along
with the name of the person to whom it was granted, on our internet website. The Companys website address is www.farmerscitizensbank.com.



ITEM 10. Executive Compensation



The information
required by this item is incorporated herein by reference to the section captioned EXECUTIVE COMPENSATION on pages 9 and 10 in the Proxy Statement of the Company filed March 25, 2005, with the United States Securities and Exchange
Commission.



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##### Table of Contents

ITEM 11. Security Ownership of Certain Beneficial Owners and Management



The information set forth under the caption VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF on page 2 of the Proxy Statement of the Company filed March 25, 2005, with the United States Securities and
Exchange Commission is incorporated by reference herein.



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.



|                                                           |  |                                                                                         |  |                                                                          |                 |                                                                                                                                       |              
|---------------------------------------------------------- |  | --------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------ | --------------- | ------------------------------------------------------------------------------------------------------------------------------------- | -------------
|                                                           |  | Number of securitiesto be issued uponexercise ofoutstanding options,warrants and rights |  | Weighted-averageexercise price ofoutstanding options,warrants and rights |                 | Number of securitiesremaining availablefor future issuanceunder equitycompensation
plans(excluding securities reflectedin column (a))
|                                                           |  | (a)                                                                                     |  | (b)                                                                      |                 | (c)                                                                                                                                  
|Equity compensation Plans approved by Security holders     |  | 18,970 shares                                                                           |  | $                                                                        | 23.95 per share |                                                                                                                                       | 46,214 shares
|Equity compensation plans not approved by security holders |  | 12,750 shares                                                                           |  | $                                                                        | 26.34 per share |                                                                                                                                       | None         
|                                                           |  |                                                                                         |  |                                                                          |                 |                                                                                                                                       |              
|Total                                                      |  | 31,720 shares                                                                           |  | $                                                                        | 24.91 per share |                                                                                                                                       | 46,214 shares
|                                                           |  |                                                                                         |  |                                                                          |                 |                                                                                                                                       |              



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 pages 12 and 13 in the Proxy Statement of the Company filed March 25,
2005 with the United States Securities and Exchange Commission.



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ITEM 13. Exhibits



Exhibit 3.1Amended 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 4For 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 10.1Employment Agreement dated January 11, 2005, for Coleman J. Clougherty, President of Company and Chief Executive Officer of Bank, filed as Exhibit
10.1 to Form 8-K on March 9, 2005, and incorporated herein by reference.



Exhibit 10.2The FC Banc Corp 1997 Stock Option Plan is incorporated herein by reference to the registrants proxy statement filed March 25, 2005 with the United States Securities and Exchange Commission.



Exhibit 10.3Change of Control Agreement dated February 10, 2005, for Anne Spreng
Ferris, employed as President of the Bank.



Exhibit 10.4Change of
Control Agreement dated August 9, 2004, for Bradley K. Brinkerhoff, employed as Vice President of the Bank.



Exhibit 10.5Change of Control Agreement dated January 31, 2005 for Matthew C. Evans, employed as Vice President of the Bank.



Exhibit 10.6Change of Control Agreement dated January 24, 2005 for Jeffrey A. Wise, employed as Vice President/Chief Financial
Officer of the Bank.



Exhibit 14 Code of Ethics.



Exhibit 21 Subsidiaries of Registrant.



Exhibit 23 Consent of the Independent Auditor.



Exhibit 23.1 Consent of Independent Registered Public Accounting Firm.



Exhibit 31.1 CEO Certification Pursuant to Rule 13A-14(a)/15d-14(a) as enacted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.



Exhibit 31.2CFO Certification Pursuant to Rule 13A-14(a)/15d-14(a) as enacted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.



Exhibit 32.1 CEO Certification Pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



Exhibit 32.2CFO Certification Pursuant to 18 U.S.C. Section 1350, as enacted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.



ITEM 14  PRINCIPAL ACCOUNTANT FEES AND SERVICES



The information required by this item is incorporated herein by reference to the section captioned INFORMATION CONCERNING INDEPENDENT ACCOUNTANTS on page 11 of the Proxy Statement of the Company filed March 25, 2005, with the
United States Securities and Exchange Commission.



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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:                    |  | /s/ COLEMAN J. CLOUGHERTY
|                       |  | Coleman J. Clougherty    
|                       |  | President                
|                      
|Date    March 29, 2005



In accordance with the Exchange Act,
this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



|                       |  |                                                                 
|---------------------- |  | ----------------------------------------------------------------
|By:                    |  | /s/ COLEMAN J. CLOUGHERTY                                       
|                       |  | Coleman J. Clougherty, President and Principle Executive Officer
|                      
|Date    March 29, 2005



|                                   |  |                                |  | 
|---------------------------------- |  | ------------------------------ |  | 
|/s/ ROBERT D. HORD                 |  | /s/ DAVID G. DOSTAL           
|Robert D. Hord                     |  | David G. Dostal               
|Chairman                           |  | Director                      
|Date    March 29, 2005             |  | Date    March 29, 2005        
|                                   | 
|/s/ CHARLES W. KIMERLINE           |  | /s/ PATRICK J. DROUHARD       
|Charles W. Kimerline               |  | Patrick J. Drouhard           
|Director                           |  | Director                      
|Date    March 29, 2005             |  | Date    March 29, 2005        
|                                   | 
|/s/ TERRY L. GERNERT               |  | /s/ JOHN O. SPRENG, JR.       
|Terry L. Gernert                   |  | John O. Spreng, Jr.           
|Director                           |  | Director                      
|Date    March 29, 2005             |  | Date    March 29, 2005        
|                                   | 
|/s/ SAMUEL J. HARVEY               |  | /s/ COLEMAN J. CLOUGHERTY     
|Samuel J. Harvey                   |  | Coleman J. Clougherty         
|Director                           |  | President, Principal Executive
|                                   |  | Officer and Director          
|Date    March 29, 2005             |  | Date    March 29, 2005        
|                                   | 
|/s/ JEFFREY A. WISE                |  |                               
|Jeffrey A. Wise                    |  |                               
|Principal Financial and Accounting |  |                               
|Officer and Treasurer              |  |                               
|Date    March 29, 2005             |  |                               



60