Item 1. Business General
The Corporation
	The registrant, Farmers National Banc Corp. (herein sometimes referred to as the Corporation), is a one-bank holding company registered under the Bank Holding Company Act of 1956, as amended. The only subsidiary is The Farmers National Bank of Canfield, which was acquired March 31, 1983. The Corporation and its subsidiary operate in one industry, domestic banking.
	The Corporation conducts no business activities except for investment in securities permitted under the Bank Holding Company Act. Bank holding companies are permitted under Regulation Y of the Board of Governors of the Federal Reserve System to engage in other activities such as leasing and mortgage banking.
The Bank
	The Bank is a full-service national bank engaged in commercial and retail banking in Mahoning and Columbiana Counties, Ohio. The Bank's commercial banking services include checking accounts, savings accounts, time deposit accounts, commercial, mortgage and installment loans, home equity loans, home equity lines of credit, night depository, safe deposit boxes, money orders, bank checks, automated teller machines and travelers checks, "E" Bond transactions, utility bill payments, MasterCard and Visa credit cards, and other miscellaneous services normally offered by Commercial Banks. In addition, the Bank offers Discount Brokerage Service.
Supervision and Regulation
The Corporation is a one bank holding company and is regulated by the Federal Reserve Bank (the "FRB"). The bank is a national bank and is regulated by the Office of the Comptroller of the Currency (the "OCC"), as well as the Federal Deposit Insurance Corporation (the "FDIC"). Changes have developed over the past several years regarding minimum capital requirements for financial institutions. A listing of the minimum requirements for capital and the Corporation's capital position as of December 31, 1996 are presented in Note J on page 31 of the annual report to shareholders for the year ended December 31, 1996 and is hereby incorporated by reference.
The Corporation is subject to regulation under the Bank Holding Company Act of 1956, as amended. This Act restricts the geographic and product range of bank holding companies by defining the types and locations of institutions the holding companies can own or acquire. This act also regulates transactions between the Corporation and the bank and generally prohibits tie-ins between credit and other products and services.
Supervision and Regulation (Continued)
The bank is subject to regulation under the National Banking Act and is periodically examined by the OCC and is subject to the rules and regulations of the FRB. As an insured institution and member of the Bank Insurance Fund ("BIF"), the bank is also subject to regulation by the FDIC. Establishment of branches is subject to approval of the OCC and geographic limits established by state law. Ohio branch banking law permits a bank having its principal place of business in the State of Ohio to establish branch offices in any county in Ohio without geographic restrictions.
FDICIA
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") revised the bank regulatory and funding provisions of the Federal Deposit Insurance Act and several other federal banking statutes. Among other things, FDICIA requires federal banking agencies to broaden the scope of corrective action taken with respect to banks that do not meet minimum capital requirements and to take such actions promptly in order to minimize losses to the FDIC.
FDICIA established five capital tiers: "well capitalized"; "adequately capitalized"; "undercapitalized"; "significantly undercapitalized"; and "critically undercapitalized" and imposes significant restrictions on the operations of a depository institution that is not in either of the first two of such categories. A depository institution's capital tier will depend upon the relationship of its capital to various capital measures. A depository institution will be deemed to be "well capitalized" if it significantly exceeds the minimum level required by regulation for each relevant capital measure, "adequately capitalized" if it meets each such measure, "undercapitalized" if it is significantly below any such measure and "critically undercapitalized" if it fails to meet any critical capital level set forth in regulations. An institution may be deemed to be in a capitalization category that is lower than is indicated by its actual capital position if it receives an unsatisfactory examination rating or is deemed to be in an unsafe or unsound condition or to be engaging in unsafe or unsound practices.
Under regulations adopted under these provisions, for an institution to be well capitalized it must have a total risk-based capital ratio of at least 10%, a Tier I risk-based capital ratio of at least 6% and a Tier I leverage ratio of at least 5% and not be subject to any specific capital order or directive. For an institution to be adequately capitalized, it must have a total risk-based capital ratio of at least 8%, a Tier I risk-based capital ratio of at least 4% and a Tier I leverage ratio of at least 4% (or in some cases 3%). Under the regulations, an institution will be deemed to be undercapitalized if the bank has a total risk-based capital ratio that is less than 8%, a Tier I risk-based capital ratio that is less than 4% or a Tier I leverage ratio of less than 4% (or in some cases 3%). An institution will be deemed to be significantly undercapitalized if the bank has a total risk-based capital ratio that is less than 6%, a Tier I risk-based capital ratio that is less than 3%, or a leverage ratio that is less than 3% and will be deemed to be critically undercapitalized if it has a ratio of tangible equity to total assets that is equal to or less than 2%.
Supervision and Regulation (Continued)
FDICIA generally prohibits a depository institution from making a capital distribution (including payment of dividends) or paying management fees to any entity that controls the institution if it thereafter would be undercapitalized.
If an institution becomes undercapitalized, it will be generally restricted from borrowing from the Federal Reserve, increasing its average total assets, making any acquisitions, establishing any branches or engaging in any new line of business. An undercapitalized institution must submit an acceptable capital restoration plan to the appropriate federal banking agency, which plan must, in the opinion of such agency, be based on realistic assumptions and be "likely to succeed" in restoring the institution's capital. In connection with the approval of such a plan, the holding company of the institution must guarantee that the institution will comply with the plan, subject to a limitation of liability equal to a portion of the institution's assets. If an undercapitalized institution fails to submit an acceptable plan or fails to implement such a plan, it will be treated as if it is significantly undercapitalized.
Under FDICIA, bank regulators are directed to require "significantly undercapitalized" institutions, among other things, to restrict business activities, raise capital through a sale of stock, merge with another institution and/or take any other action which the agency determines would better carry out the purposes of FDICIA.
Within 90 days after an institution is determined to be "critically undercapitalized", the appropriate federal banking agency must, in most cases, appoint a receiver or conservator for the institution or take such other action as the agency determines would better achieve the purposes of FDICIA. In general, "critically undercapitalized" institutions will be prohibited from paying principal or interest on their subordinated debt and will be subject to other substantial restrictions.
Under FDICIA, an institution that is not well capitalized is generally prohibited from accepting brokered deposits. Undercapitalized institutions are prohibited from offering interest rates on deposits significantly higher than prevailing rates.
The provisions of FDICIA governing capital regulations became effective on December 19, 1992. FDICIA also directs that each federal banking agency prescribe standards for depository institutions and depository institution holding companies relating to internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, a maximum ratio of classified assets to capital, a minimum ratio of market value to book value for publicly traded shares (if feasible) and such other standards as the agency deems appropriate.
Supervision and Regulation (Continued)
FDICIA also contains a variety of other provisions that could affect the operations of the Corporation, including new reporting requirements, regulatory standards for real estate lending, "truth in savings" provisions, the requirement that a depository institution give 90 days' prior notice to customers and regulatory authorities before closing any branch, limitations on credit exposure between banks, restrictions on loans to a bank's insiders and guidelines governing regulatory examinations.
Pursuant to FDICIA, the FDIC has developed a transitional risk-based assessment system, under which, beginning on January 1, 1993, the assessment rate for an insured depository institution varied according to its level of risk. An institution's risk category will depend upon whether the institution is well capitalized, adequately capitalized or less than adequately capitalized and whether it is assigned to Subgroup A, B or C. Subgroup A institutions are financially sound institutions with few minor weaknesses; Subgroup B institutions are institutions that demonstrate weaknesses which, if not corrected, could result in significant deterioration; and Subgroup C institutions are institutions for which there is a substantial probability that the FDIC will suffer a loss in connection with the institution unless effective action is taken to correct the area of weakness. Based on its capital and supervisory subgroups, each BIF member institution will be assigned an annual FDIC assessment rate per $100 of insured deposits.
INTERSTATE BANKING AND BRANCHING LEGISLATION
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the "IBBEA") authorizes interstate acquisitions of banks and bank holding companies without geographic constraint beginning September 29, 1995. Beginning June 1, 1997, the IBBEA also authorizes banks to merge with banks located in another state provided that neither state has "opted out" of interstate branching between September 29, 1994 and May 31, 1997. States also may enact legislation permitting interstate merger transactions prior to June 1, 1997. After acquiring interstate branches through a merger, a bank may establish additional branches in that state at the same locations as any bank involved in the merger could have established branches under state and federal law. In addition, a bank may establish a de novo branch in another state that expressly permits the establishment of such branches. A bank that establishes a de novo interstate branch may thereafter establish additional branches on the same basis as a bank that has established interstate branches through a merger transaction.
If a state "opts out" of interstate branching, no bank from another state may establish a branch in that state, whether through a merger or de novo establishment. Several states are considering legislation to opt out of the interstate branching provisions of the IBBEA or, alternatively, to permit interstate branching prior to the June 1, 1997 statutory effective date. It is not possible to predict the full impact of these actions on the Bank or the Corporation until May 31, 1997, the date by which all such statutes must be adopted.
Competition
The Bank competes with state and national banks located in Mahoning and Columbiana counties.
The Bank also competes with a large number of other financial institutions, such as savings and loan associations, insurance companies, consumer finance companies, credit unions and commercial finance and leasing companies, for deposits, loans and service business. Money market mutual funds, brokerage houses and similar institutions provide in a relatively unregulated environment many of the financial services offered by the Bank.
	Many competitors have substantially greater resources than the Bank. In the opinion of management, the principal methods of competition are the rates of interest charged for loans, the rates of interest paid for funds, the fees charged for services and the availability of services.
RATE AND VOLUME ANALYSIS
Loans
Total net loans were $263,504,434 at year-end 1996 compared to $229,248,832 at year-end 1995. This is an increase of $34,255,602, or 14.94%. Loans comprised 81.1% of the Bank's average earning assets during 1996, compared to 78.8% in 1995. The product mix in the Loan Portfolio shows Commercial Loans comprising 9.9%, Real Estate Mortgage Loans 39.2% and Installment Loans to Individuals 50.9% at December 31, 1996, compared with 9.7%, 42.5% and 47.8%, respectively, at December 31, 1995.
Loans contributed 86.5% of total interest income in 1996 compared to 84.6% in 1995. Loan yield was 8.59% in 1996, 46 basis points greater than the average rate for total earning assets. Management recognizes that while the Loan Portfolio holds some of the Bank's highest yielding assets, it is inherently the most risky portfolio. Accordingly, Management attempts to balance credit risk versus return with conservative credit standards. Management has developed and maintains comprehensive underwriting guidelines and a loan review function which monitors credits during and after the approval process. To minimize risks associated with changes in the borrower's future repayment capacity, the Bank generally requires scheduled periodic principal and interest payments on all types of loans and normally requires collateral.
Installment Loans to Individuals increased from $110,805,000 on December 31, 1995 to $135,832,000 on December 31, 1996 which represents a 22.6% increase. Management continues to target the automobile dealer network to purchase indirect Installment Loans. Dealer paper was purchased using strict underwriting guidelines with an emphasis on quality. Indirect Loans comprise 77% of the Installment Loan Portfolio. Net loan losses on the Installment Loan portfolio were $275,000 in 1996 as compared to $148,000 in 1995. This represents .20% of total Installments Loans outstanding for 1995 and .14% for 1995.
Real Estate Mortgage Loans increased to $104,389,000 at December 31, 1996, an increase of 5.8% over 1995. These loans are all made within the Bank's primary market area. The corporation originated both fixed rate and adjustable rate mortgages during 1996. All mortgage loans made in 1996 are held in the Mortgage Loan portfolio and are not sold on the secondary market. Fixed rate terms are limited to fifteen year terms while adjustable rate products are offered with maturities up to thirty years.
Commercial Loans at December 31, 1996 increased from year-end 1995 with outstanding balances of $26,481,000. This portfolio is comprised of primarily variable rate loans. The Bank's commercial loans are granted to customers within the immediate trade area of the Bank. The mix is diverse, covering a wide range of borrowers and business types. The Bank monitors and controls concentrations within a particular industry or segment of the economy. These loans are made for purposes such as equipment purchases, capital improvements, the purchase of inventory, general working capital purposes and small business lines of credit.
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
Deposits
Deposits represent the Corporation's principal source of funds. The deposit base consists of demand deposits, savings and money market accounts and other time deposits. During the year, the Corporation's total deposits grew from $267,955,000 in 1995 to $283,811,000 in 1996, which equates to an increase of 5.9% . Most of this growth occurred in time deposits, which increased from $119,468,000 in 1995 to $129,651,000 in 1996. This increase is primarily the result of a special rate offering on certificates of deposit occurring in the fourth quarter of the year which generated approximately $7,200,000 in new money to the Corporation. As a result of this special offering, the overall cost of time deposits increased slightly, from 5.71% in 1995 to 5.77% in 1996.
Item 2.
Item 2. Properties
Farmers National Banc Corp.'s Properties
The Farmers National Banc Corp. owns no property. Operations are conducted at 20 South Broad Street, Canfield, Ohio.
Bank Property
The Main Office is located at 20 S. Broad Street, Canfield, Ohio. The other eight offices of the bank are:
Austintown Office 22 N. Niles-Canfield Rd., Youngstown, Ohio
Lake Milton Office 17817 Mahoning Avenue, Lake Milton, Ohio
Cornersburg Office 3619 S. Meridian Rd., Youngstown, Ohio
Colonial Plaza Office		401 E. Main St. Canfield, Ohio
Western Reserve Office 102 W. Western Reserve Rd., Youngstown, Ohio
Salem Office 			1858 E. State Street, Salem, Ohio
Columbiana Office 		340 State Rt. 14, Columbiana, Ohio
Leetonia Office			16 Walnut St., Leetonia, Ohio
Damascus Office 29053 State Rt. 62 Damascus, Ohio
The bank owns the Main Office, Austintown, Cornersburg, Lake Milton, Salem, Columbiana, Leetonia and Damascus Offices. The Colonial Plaza and Western Reserve offices are occupied under operating leases expiring at various times to 1999. All of the leases provide for renewal options in favor of the bank.
Item 3.
Item 3. Legal Proceedings
There are no material pending legal proceedings to which the registrant or its subsidiary is a party or of which any of its property is subject, except proceedings which arise in the ordinary course of business. In the opinion of management, pending legal proceedings will not have a material affect on the consolidated financial position of the registrant or its subsidiary.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
There are no matters submitted to a vote of security holders through the solicitation of proxies or otherwise during the fourth quarter of 1996.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information relating to Directors is set forth in the registrant's definitive proxy statement, which was used in connection with its annual meeting of shareholders which will be held March 27, 1997. The proxy statement is attached hereto.
Executive Officers of the Registrant
The names, ages and positions of the executive officers as of March 1, 1997:
Name Age Position Held
William D. Stewart 67 Chairman
Richard L. Calvin 70 Vice Chairman
Frank L. Paden 46 President and Secretary
Carl D. Culp 33 Executive Vice President and Treasurer
Donald F. Lukas 50 Senior Vice President
Adrianne R. Kempers 39 Auditor
Officers are elected annually by the Board of Directors immediately following the annual meeting of shareholders. The term of office for all the above executive officers is for the period ending with the next annual meeting.
Principal Occupation and Business Experience of Executive Officers
Mr. William D. Stewart has served as Chairman since March 1996. Prior to that time, he was President and Secretary since the inception of registrant on March 31, 1983, was President of the Bank since 1972 and has held various other executive positions with the Bank.
Mr. Richard L. Calvin has served as Vice Chairman since March 1996. Prior to that time, he was Executive Vice President and Treasurer of the registrant since its inception on March 31, 1983, was Executive Vice President of the bank since 1972 and has held various other executive positions with the Bank.
Mr. Frank L. Paden has served as President and Secretary since March 1996. Prior to that time he was Executive Vice President of the registrant since March 1995, was Executive Vice President of the Bank since March 1995 and has held various other executive positions with the Bank.
PART III, (Continued)
Mr. Carl D. Culp has served as Executive Vice President and Treasurer since March 1996. Prior to that time he was Controller of the registrant since November 1995 and was Controller of the Bank since November 1995.
Mr. Donald F. Lukas has served as Senior Vice President of the registrant since March 1996. Prior to that time, he was Vice President of the Bank since March 1987.
Ms. Adrianne R. Kempers has served as Auditor of the registrant since November 1995 and as Auditor of the Bank since November 1995.
Item 11. Executive Compensation
Information regarding this item is set forth in the registrant's definitive proxy statement, which was used in connection with its annual meeting of shareholders which will be held March 27, 1997. The proxy statement is attached hereto.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information relating to this item is set forth in the registrant's definitive proxy statement, which was used in connection with its annual meeting of shareholders which will be held March 27, 1997. The proxy statement is attached hereto.
Item 13. Certain Relationships and Related Transactions
Information regarding this item is set forth in the registrant's definitive proxy statement, which was used in connection with its annual meeting of shareholders which will be held March 27, 1997. The proxy statement is attached hereto.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
	(a)1. Financial Statements
Included in Part II of this report
		Item 8.
Item 8., Financial Statements and Supplementary Data 		is set forth in the registrant's 1996 Annual Report to 		Shareholders and is incorporated by reference in Part II of this report.
(a)2. Financial Statement Schedules Page
Accountant's consent IV-2
				All schedules are omitted because they are 				not applicable.
	(a)3. Exhibits
		 The exhibits filed or incorporated by reference as a part of 		 this report are listed in the Index of Exhibits, which appears at page IV-4 hereof and is incorporated herein by reference.
	(b) Report on Form 8-K
No reports were filed for three months ended December 31, 1996.
INDEPENDENT AUDITORS' CONSENT
FARMERS NATIONAL BANC CORP.:
We hereby consent to the incorporation by reference in this Registration Statement of our report dated January 23, 1997, relating to the consolidated financial statements of Farmers National Banc Corp. and subsidiary.
/s/ HILL, BARTH & KING, INC.
Warren, Ohio March 25, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(D) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the under signed, thereunto duly authorized.
Farmers National Banc Corp. Farmers National Banc Corp.
by__________________________ by_____________________________
Frank L. Paden Carl D. Culp President and Secretary Executive Vice President and Treasurer
________________________ Chairman March 25, 1997 William D. Stewart
________________________ Director March 25, 1997 Benjamin R. Brown
________________________ Vice Chairman March 25, 1997 Richard L. Calvin
________________________ Director March 25, 1997 Joseph O. Lane
________________________ Director March 25, 1997 David C. Myers
________________________ Director March 25, 1997 Edward A. Ort
________________________ President March 25, 1997 Frank L. Paden and Director
________________________ Director March 25, 1997 Ronald V. Wertz
INDEX TO EXHIBITS
The following exhibits are filed or incorporated by references as part of this report:
2.	Not applicable.
3(i).	Not applicable.
3(ii).	Not applicable.
4. The registrant agrees to furnish to the Commission upon request copies of all instruments not filed herewith defining the rights of holders of long-term debt of the registrant and its subsidiaries.
9.	Not applicable.
10.	Not applicable.
11.	Not applicable.
12.	Not applicable.
13.	Annual Report to security holders (filed herewith).
16.	Not applicable.
18.	Not applicable.
21.	Subsidiaries of the registrant (filed herewith).
22.	Not applicable.
23.	Not applicable.
24.	Not applicable.
27.	Financial Data Schedule (filed herewith)	
99.	Definitive Proxy Statement (filed herewith)
Copies of any exhibits will be furnished to shareholders upon written request. Request should be directed to Carl D. Culp, Executive Vice President, Farmers National Banc Corp., 20 S. Broad Street, Canfield, Ohio 44406.