Summary of FARMERS NATIONAL BANC CORP /OH/

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

Discussions in this report that are not statements of historical fact (including statements that include terms such as "will," "may," "should," "believe," "expect," "anticipate," "estimate," "project," intend," and "plan") are forward-looking statements that involve risks and uncertainties. Any forward-looking statement is not a guarantee of future performance and actual future results could differ materially from those contained in forward-looking information. Factors that could cause or contribute to such differences include, without limitation, risks and uncertainties detailed from time to time in the Company's filings with the Securities and Exchange Commission, including without limitation, the risk factors disclosed in Item 1A, "Risk Factors," in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.

Many of these factors are beyond the Company's ability to control or predict, and readers are cautioned not to put undue reliance on those forward-looking statements. The following list, which is not intended to be an all-encompassing list of risks and uncertainties affecting the Company, summarizes several factors that could cause the Company's actual results to differ materially from those anticipated or expected in these forward-looking statements:

• general economic conditions in market areas where we conduct business, which could materially impact credit quality trends;

• business conditions in the banking industry;

• the regulatory environment;

• fluctuations in interest rates;

• demand for loans in the market areas where we conduct business;

• rapidly changing technology and evolving banking industry standards;

• competitive factors, including increased competition with regional and national financial institutions;

• new service and product offerings by competitors and price pressures; and other like items.

Other factors not currently anticipated may also materially and adversely affect the Company's results of operations, cash flows and financial position. There can be no assurance that future results will meet expectations. While the Company believes that the forward-looking statements in this report are reasonable, the reader should not place undue reliance on any forward-looking statement. In addition, these statements speak only as of the date made. The Company does not undertake, and expressly disclaims, any obligation to update or alter any statements whether as a result of new information, future events or otherwise, except as may be required by applicable law.

Overview

Net income for the three months ended March 31, 2012 was $2.5 million, compared to $1.7 million for the same three month period in 2011. On a per share basis, net income for the first quarter ended March 31, 2012 was $0.13 per diluted share, compared to $0.10 for the first quarter ended March 31, 2011 and $0.16 for the fourth quarter ended December 31, 2011. The tangible common equity ratio increased to 9.91% at March 31, 2012, compared to 9.56% at March 31, 2011, mainly as a result of the increase in net income. Farmers' total assets reported at March 31, 2012 were $1.1 billion, representing a 9.1% increase compared to $1.0 billion in total assets recorded at March 31, 2011.

Net loans increased $5.2 million, or 0.9%, since December 31, 2011. Most of the loan growth in the past three months has occurred in the commercial real estate portfolio. Net loans were reported at $567.2 million at March 31, 2012, which compares to $562.0 million at December 31, 2011. Farmers believes its demand experience for business and consumer credit is consistent with the experience of other banks in the Federal Reserve's Fourth District and banks nationally per the Federal Reserve Beige Book. Deposits increased $46.5 million, or 5.5%, from $840.1 million at December 31, 2011 to $886.6 million at March 31, 2012, as customers continue to seek the safety and security of FDIC insured deposit accounts.

Stockholders' equity totaled $115.4 million, or 10.4% of total assets, at March 31, 2012, an increase of $959 thousand, or 0.8%, compared to $114.4 million at December 31, 2011. The increase is the result of net income and mark to market adjustments in investment securities, offset by cash dividends paid to shareholders during the quarter. Shareholders received a special one-time $0.03 cash dividend on February 28, 2012, a regular $0.03 per share cash dividend on March 31, 2012 and a total of $0.15 per share cash dividends paid in the past four quarters. Book value per share increased from $6.10 per share at December 31, 2011 to $6.14 per share at March 31, 2012. Farmers' tangible book value per share also increased from $5.76 per share at December 31, 2011 to $5.81 per share at March 31, 2012.

Results of Operations

The following is a comparison of selected financial ratios and other results at
or for the three months ended March 31, 2012 and 2011:



                                                  At or for the Three Months
                                                        Ended March 31,
      (In Thousands, except Per Share Data)          2012              2011
      Total Assets                              $    1,106,445      $ 1,014,561
      Net Income                                $        2,520      $     1,690
      Basic and Diluted Earnings Per Share      $          .13      $       .10
      Return on Average Assets (Annualized)                .94 %            .69 %
      Return on Average Equity (Annualized)               8.82 %           7.12 %
      Efficiency Ratio (tax equivalent basis)            68.42 %          62.57 %
      Equity to Asset Ratio                              10.43 %          10.16 %
      Tangible Common Equity Ratio *                      9.91 %           9.56 %
      Dividends to Net Income                            44.68 %          33.08 %
      Net Loans to Assets                                51.26 %          55.82 %
      Loans to Deposits                                  65.04 %          75.33 %

* The tangible common equity ratio is calculated by dividing total common stockholders' equity by total assets, after reducing both amounts by intangible assets. The tangible common equity ratio is not required by U.S.GAAP or by applicable bank regulatory requirements, but is a metric used by management to evaluate the adequacy of the Company's capital levels. Since there is no authoritative requirement to calculate the tangible common equity ratio, the Company's tangible common equity ratio is not necessarily comparable to similar capital measures disclosed or used by other companies in the financial services industry. Tangible common equity and tangible assets are non-U.S.GAAP financial measures and should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with U.S.GAAP. With respect to the calculation of the actual unaudited tangible common equity ratio as of March 31, 2012 and 2011, reconciliations of tangible common equity to U.S.GAAP total common stockholders' equity and tangible assets to U.S.GAAP total assets are set forth below:

                                                    March 31,       December 31,
    (In Thousands of Dollars)                          2012             2011
    Reconciliation of Common Stockholders' Equity
    to Tangible Common Equity
    Stockholders' Equity                            $  115,404     $      114,445
    Less Goodwill and other intangibles                  6,339              6,441

    Tangible Common Equity                          $  109,065     $      108,004

                                                       March 31,       December 31,
  (In Thousands of Dollars)                              2012              2011
  Reconciliation of Total Assets to Tangible Assets
  Total Assets                                        $ 1,106,445     $    1,067,871
  Less Goodwill and other intangibles                       6,339              6,441

  Tangible Assets                                     $ 1,100,106     $    1,061,430

Net Interest Income. The following schedule details the various components of net interest income for the periods indicated. All asset yields are calculated on a tax-equivalent basis where applicable. Security yields are based on amortized cost.

              Average Balance Sheets and Related Yields and Rates

                         (Dollar Amounts in Thousands)



                                                   Three Months Ended                            Three Months Ended
                                                     March 31, 2012                                March 31, 2011
                                          AVERAGE                                       AVERAGE
                                          BALANCE        INTEREST       RATE (1)        BALANCE       INTEREST       RATE (1)
EARNING ASSETS

Loans (3) (5) (6)                       $   562,031      $   8,072           5.78 %    $ 573,047      $   8,554           6.05 %
Loans held for sale                           1,144              5           1.76              0              0           0.00
Taxable securities (4)                      312,909          2,106           2.71        236,729          1,869           3.20
Tax-exempt securities (4) (6)                74,061          1,084           5.89         77,070          1,124           5.91
Equity securities (2) (6)                     4,363             50           4.61          4,126             46           4.52
Federal funds sold and other                 43,500             21           0.19         29,494              9           0.12

Total earning assets                        998,008         11,338           4.57        920,466         11,602           5.11

NONEARNING ASSETS

Cash and due from banks                      22,599                                       27,111
Premises and equipment                       16,790                                       13,887
Allowance for loan losses                    (9,684 )                                     (9,559 )
Unrealized gains (losses) on
securities                                   13,050                                        3,614
Other assets (3)                             42,705                                       42,049

Total assets                            $ 1,083,468                                    $ 997,568

INTEREST-BEARING LIABILITIES

Time deposits                           $   257,074      $   1,216           1.90 %    $ 252,828      $   1,308           2.10 %
Savings deposits                            391,860            298           0.31        323,802            372           0.47
Demand deposits                             112,886             11           0.04        111,268             18           0.07
Short term borrowings                        90,281             42           0.19        105,496             97           0.37
Long term borrowings                         10,690             98           3.69         23,996            251           4.24

Total interest-bearing liabilities          862,791          1,665           0.78        817,390          2,046           1.02