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 September 30, 2012 was $2.5 million, compared to $2.4 million for the same three month period in 2011. On a per share basis, net income for the third quarter ended September 30, 2012 was $0.13 per diluted share, compared to $0.13 for the third quarter ended September 30, 2011. Net income for the nine months ended September 30, 2012 was $7.3 million, compared to $6.2 million for the same nine month period in 2011. On a per share basis, net income for the nine months ended September 30, 2012 was $0.39, an increase of 14.7% compared to the same nine month period in 2011. The tangible common equity ratio increased to 10.20% at September 30, 2012, compared to 9.94% at September 30, 2011, mainly as a result of retained net income. Farmers' total assets reported at September 30, 2012 were $1.13 billion, representing a 6.1% increase compared to $1.07 billion in total assets recorded at December 31, 2011.

Net income increased to $2.5 million for the three months ended September 30, 2012, which represents a 5% increase over the $2.4 million reported for the same period in 2011. Noninterest income increased 22.4% during the same three month period compared to prior year, which is consistent with the strategy to diversify revenue. Asset quality continues to improve, evidenced by the reduction in the provision for loan losses from $700 thousand for the three month period ended September 30, 2011 to $325 thousand for the three months ended September 30, 2012. Non-performing loans declined from $10.9 million at September 30, 2011 to $8.7 million at September 30, 2012.

Net loans increased $2.3 million in comparing the September 30, 2012 balance to the December 31, 2011. Most of the loan growth in the nine month period has occurred in the commercial and industrial loan portfolio. Net loans were reported at $564.3 million at September 30, 2012, which compares to $562.0 million at December 31, 2011. Deposits increased $60.0 million from $840.1 million at December 31, 2011 to $900.1 million at September 30, 2012, as customers continue to seek the safety and security of FDIC insured deposit accounts. The Company's deposits are also being affected positively by the recent development of the Marcellus and Utica shale activity within the local region. At September 30, 2012, the Company had deposits totaling approximately $50.3 million that customers have received from energy exploration companies from the leasing or sale of mineral rights.

Stockholders' equity totaled $121.0 million, or 10.7% of total assets, at September 30, 2012, an increase of $6.6 million, or 5.7%, compared to $114.4 million at December 31, 2011. The increase is mainly the result of net income, offset by cash dividends paid to shareholders during the period. Shareholders received a total of $0.15 per share in cash dividends paid in the past four quarters, including a special $0.03 cash dividend on February 28, 2012. Book value per share increased 5.6% from $6.10 per share at December 31, 2011 to $6.44 per share at September 30, 2012. Farmers' tangible book value per share also increased 6.1% from $5.76 per share at December 31, 2011 to $6.11 per share at September 30, 2012.

Results of Operations

The following is a comparison of selected financial ratios and other results at
or for the three and nine months ended September 30, 2012 and 2011:



                                               At or for the Three Months               At or for the Nine Months
                                                   Ended September 30,                     Ended September 30,
(In Thousands, except Per Share Data)            2012                2011                2012                2011
Total Assets                                $    1,132,746        $ 1,086,405        $   1,132,746        $ 1,086,405
Net Income                                  $        2,489        $     2,371        $       7,295        $     6,178
Basic and Diluted Earnings Per Share        $          .13        $       .13        $         .39        $       .34
Return on Average Assets (Annualized)                  .88 %              .90 %                .88 %              .81 %
Return on Average Equity (Annualized)                 8.22 %             8.56 %               8.28 %             8.01 %
Efficiency Ratio (tax equivalent basis)              70.07 %            64.64 %              69.01 %            63.89 %
Equity to Asset Ratio                                10.68 %            10.48 %              10.68 %            10.48 %
Tangible Common Equity Ratio *                       10.20 %             9.94 %              10.20 %             9.94 %
Dividends to Net Income                              22.66 %            23.66 %              30.90 %            27.21 %
Net Loans to Assets                                  49.82 %            51.27 %              49.82 %            51.27 %
Loans to Deposits                                    63.65 %            70.45 %              63.65 %            70.45 %

* 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 September 30, 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:

                                                      September 30,         September 30,
(In Thousands of Dollars)                                 2012                  2011
Reconciliation of Common Stockholders' Equity to
Tangible Common Equity
Stockholders' Equity                                 $       121,008       $       113,858
Less Goodwill and other intangibles                            6,134                 6,553

Tangible Common Equity                               $       114,874       $       107,305


                                                      September 30,         September 30,
(In Thousands of Dollars)                                 2012                  2011
Reconciliation of Total Assets to Tangible
Assets
Total Assets                                         $     1,132,746       $     1,086,405
Less Goodwill and other intangibles                            6,134                 6,553

Tangible Assets                                      $     1,126,612       $     1,079,852

Net Interest Income. The following schedules detail 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
                                                   September 30, 2012                             September 30, 2011
                                          AVERAGE                                        AVERAGE
                                          BALANCE        INTEREST       RATE (1)         BALANCE        INTEREST       RATE (1)
EARNING ASSETS

Loans (3) (5) (6)                       $   566,382      $   8,067           5.67 %    $   557,084      $   8,386           5.97 %
Taxable securities (4)                      333,909          1,901           2.26          279,609          2,121           3.01
Tax-exempt securities (4) (6)                73,452          1,074           5.82           75,396          1,103           5.80
Equity securities (2) (6)                     4,363             50           4.56            4,373             48           4.35
Federal funds sold and other                 61,084             29           0.19           53,066             21           0.16

Total earning assets                      1,039,190         11,121           4.26          969,528         11,679           4.78

NONEARNING ASSETS

Cash and due from banks                      22,185                                         16,755
Premises and equipment                       18,044                                         14,709
Allowance for loan losses                    (8,945 )                                      (10,987 )
Unrealized gains (losses) on
securities                                   14,680                                         11,105
Other assets (3)                             45,081                                         42,582

Total assets                            $ 1,130,235                                    $ 1,043,692

INTEREST-BEARING LIABILITIES

Time deposits                           $   242,025      $   1,171           1.92 %    $   250,505      $   1,266           2.01 %
Savings deposits                            422,899            229           0.22          343,981            377           0.43
Demand deposits                             117,045              9           0.03          108,528             17           0.06
Short term borrowings                        95,681             22           0.09          116,501             75           0.26
Long term borrowings                         10,532             98           3.70           23,412            248           4.20

Total interest-bearing liabilities          888,182          1,529           0.68          842,927          1,983           0.93