Edgar Filing: FARMERS NATIONAL BANC CORP /OH/

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Farmers National Banc Corp. 10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)


þ		Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2007


o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file number 0-12055

Farmers National Banc Corp.

(Exact name of registrant as specified in its charter)


Ohio		34-1371693

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


20 South Broad Street Canfield, Ohio 44406		44406

(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: 330-533-3341

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, no par value

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large Accelerated filer o	Accelerated filer þ	Non-accelerated filer o	Smaller reporting company o
	(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

The registrant estimates that the aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $139.6 million based upon the last sales price as of June 30, 2007. (The exclusion from such amount of the market value of the shares owned by any person shall not be deemed an admission by the Registrant that such person is an affiliate of the Registrant.)

As of February 29, 2008, the registrant had outstanding 13,028,376 shares of common stock having no par value.

DOCUMENTS INCORPORATED BY REFERENCE


		Parts of Form 10-K
		into which
Document		Document is Incorporated

Portions of 2007 Annual Report to Shareholders		II

Definitive proxy statement for the 2007 Annual Meeting of Shareholders to be held on March 27, 2008		III

Form 10-K Cross Reference Index to Items Incorporated by Reference to the 2007 Annual Report
to Shareholders


	Pages
Part I
Item 1 — Business
Average Balance Sheets/Yields/Rates		6
Rate and Volume Analysis		7
Securities		13-14
Loans		11
Loan Loss Experience		12-13
Deposits		14
Financial Ratios		5
Short-Term Borrowings		14, 28-29

Part II
Item 5
Market For Registrant’s Common Stock, Number of Holders of Common Stock and Dividends on Common Stock		4

Item 6
Selected Financial Data		5

Item 7
Management’s Discussion and Analysis of Financial Condition and Results of Operations		7-15

Item 7A
Quantitative and Qualitative Disclosures About Market Risk		9-10

Item 8
Financial Statements and Supplementary Data		19-34

Item 9A
Management’s Report on Internal Control Over Financial Reporting		16
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting		17

Part IV
Item 15
Report of Crowe Chizek and Company LLC Independent Registered Public Accounting Firm		18
Financial Statements:
Consolidated Balance Sheets — December 31, 2007 and 2006		19
Consolidated Statements of Income & Comprehensive Income — Calendar Years 2007, 2006 and 2005		20
Consolidated Statement of Stockholders’ Equity Calendar Years 2007, 2006 and 2005		21
Consolidated Statements of Cash Flows Calendar Years 2007, 2006 and 2005		22
Notes to Consolidated Financial Statements		23-34

FARMERS NATIONAL BANC CORP.
FORM 10-K
2007

INDEX


Part I.
Item 1.	Business: General	1
Item 1A.	Risk Factors	3
Item 1B.	Unresolved Staff Comments	5
Item 2.	Properties	6
Item 3.	Legal Proceedings	6
Item 4.	Submission of Matters to a Vote of Security Holders	7

Part II.
Item 5.	Market for Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchase of Equity Securities	7
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	7
Item 9A.	Controls and Procedures	7
Item 9B.	Other Information	8

Part III.
Item 10.	Directors, Executive Officers and Corporate Governance	8
Item 11.	Executive Compensation	9
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	9
Item 13.	Certain Relationships and Related Transactions	10
Item 14.	Principal Accountant Fees and Services	10

Part IV.
Item 15.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K	10
Signatures		11
Index to Exhibits		12

Certifications of Chief Executive Officer
Certifications of Chief Financial Officer
Section 1350 Certification (Chief Executive Officer)
Section 1350 Certification (Chief Financial Officer)
EX-13 Annual Report
EX-23.A Consent of Crowe Chizek and Company LLC
EX-31.A Certification of CEO
EX-31.B Certification of CFO
EX-32.A 906 Certification of CEO
EX-32.B 906 Certification of CFO
EX-13
EX-23(A)
EX-31.A
EX-31.B
EX-32.A
EX-32.B

Part I

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 (the Bank). The Corporation was formed in 1983 to acquire the shares of the Bank. 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, Trumbull and Columbiana Counties in Ohio. The Bank’s commercial and retail 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, internet banking, travel cards, “E” Bond transactions, utility bill payments, MasterCard and Visa credit cards, brokerage services and other miscellaneous services normally offered by commercial banks.

The Bank faces significant competition in offering financial services to customers. Ohio has a high density of financial institution offices, many of which are branches of significantly larger institutions that have greater financial resources than the Bank, and all of which are competitors to varying degrees. Competition for loans comes principally from savings banks, savings and loan associations, commercial banks, mortgage banking companies, credit unions, insurance companies and other financial service companies. The most direct competition for deposits has historically come from savings and loan associations, savings banks, commercial banks and credit unions. Additional competition for deposits comes from non-depository competitors such as the mutual fund industry, securities and brokerage firms and insurance companies.

The Corporation had 274 full-time equivalent employees at December 31, 2007.

The Bank’s internet site, www.fnbcanfield.com contains an Investor Relations section which provides a hyperlink to the SEC where the Corporation’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, director and Officer Reports on Form(s) 3, 4, and 5 and amendments to those documents filed or furnished pursuant to the Securities Exchange Act of 1934 are available free of charge as soon as reasonably practicable after the Corporation has filed these documents with the Securities and Exchange Commission (SEC).
In addition, the Corporation’s filings with the SEC may be read and copied at the SEC Public Reference Room at 100 F. Street, NE, Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. These filings are also available on the SEC’s web-site at www.sec.gov free of charge as soon as reasonably practicable after the Corporation has filed the above referenced reports.

Supervision and Regulation

The Corporation is regulated by the Federal Reserve Bank (the “FRB”). The Bank is regulated by the Office of the Comptroller of the Currency (the “OCC”), as well as the Federal Deposit

Item 1 (Continued)

Insurance Corporation (the “FDIC”). A listing of the minimum regulatory requirements for capital and the Corporation’s capital position as of December 31, 2007 are presented in Note J on page 30 of the annual report to shareholders for the year ended December 31, 2007 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.

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 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 depends upon the relationship of its capital to various capital measures. A depository institution is 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 is 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 is 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 is 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 is deemed to be critically undercapitalized if it has a ratio of tangible equity to total assets that is equal to or less than 2%.

Item 1 (Continued)

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. The IBBEA also authorized banks to merge with banks located in another state.

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.

GRAMM-LEACH-BLILEY ACT

The Gramm-Leach-Bliley Act of 1999 (the “GLB Act”) allows new opportunities for banks, other depository institutions, insurance companies and securities firms to combine to form a single financial services organization to offer customers a broader choice of financial products and services. The GLB Act authorized the Federal Reserve Board to oversee all regulatory activities through the financial holding company, while the functional regulation of operating subsidiaries remains with their primary functional regulator. The GLB Act requires institutions to maintain Community Reinvestment Act ratings of satisfactory or higher in order to engage in any new financial activities. This act also established a federal right to privacy of non-public personal information of individual customers.

SARBANES-OXLEY ACT OF 2002

The Sarbanes-Oxley Act of 2002 addresses, among other issues, corporate governance, auditing and accounting, executive compensation, and enhanced and timely disclosure of corporate information. Section 302(a) of Sarbanes-Oxley requires the Corporation’s chief executive officer and chief financial officer to certify that the Corporation’s Quarterly and Annual Reports do not contain any untrue statement of a material fact. The rules have several requirements, including having these officers certify that: they are responsible for establishing, maintaining and regularly evaluating the effectiveness of the Corporation’s internal controls; they have made certain disclosures to the Corporation’s auditors and the audit committee of the Board of Directors about the Corporation’s internal controls; and they have included information in the Corporation’s Quarterly and Annual Reports about their evaluation and whether there have been significant changes in the Corporation’s internal controls or in other factors that could significantly affect internal controls subsequent to the evaluation.

Item 1A. Risk Factors

Changes in interest rates could adversely affect income and financial condition.

The Corporation’s income and cash flow depends to a great extent on the difference between the interest earned on loans and investment securities, and the interest paid on deposits and other borrowings. Interest rates are beyond the Corporation’s control, and they fluctuate in response to general economic conditions and the policies of various governmental and regulatory agencies, in particular, the Federal Reserve Board. Changes in monetary policy, including changes in interest rates, will influence the origination of loans, the purchase of investments, the generation of deposits and the rates received on loans and investment securities and paid on deposits.

Changes in economic and political conditions could adversely affect the Corporation’s earnings.

Our success depends, to a certain extent, upon economic and political conditions, local and national, as well as governmental monetary policies. Conditions such as inflation, recession,

Item 1A (Continued)

unemployment, changes in interest rates, money supply and other factors beyond our control may
adversely affect our asset quality, deposit levels and loan demand and, therefore, our earnings.

Strong competition within the market the Bank operates could reduce our ability to attract and retain business.

In our market, we encounter significant competition from banks, savings and loan associations, credit unions, mortgage banks and other financial service companies. As a result of their size and ability to achieve economies of scale, some of our competitors offer a broader range of products and services than we can offer. Our ability to maintain our history of strong financial performance and return on investment to shareholders will depend in part on our continued ability to compete successfully in our market. Financial performance and return on investment to shareholders will also depend on its ability to expand its scope of available financial services to its customers. In addition to other banks, competitors include securities dealers, brokers, investment advisors, and finance and insurance companies. The increasingly competitive environment is, in part, a result of changes in regulation, changes in technology and product delivery systems, and the accelerating pace of consolidation among financial service providers.

Our business may be adversely affected by downturns in the local economy.

Because we have a significant amount of real estate loans, decreases in real estate values could adversely affect the value of property used as collateral. Adverse changes in the economy may also have a negative effect on the ability of our borrowers to make timely repayments of their loans, which would have an adverse impact on our earnings. In addition, substantially all of our loans are to individuals and businesses in Ohio. Consequently, a significant decline in the economy in Ohio could have a materially adverse effect on our financial condition and results of operations.

We are exposed to operational risk.

Similar to any large organization, we are exposed to many types of operational risk, including reputational risk, legal and compliance risk, the risk of fraud or theft by employees or outsiders, unauthorized transactions by employees or operational errors, including clerical or record-keeping errors or those resulting from faulty or disabled computer or telecommunications systems.

Negative public opinion can result from our actual or alleged conduct in any number of activities, including lending practices, corporate governance and acquisitions and from actions taken by government regulators and community organizations in response to those activities. Negative public opinion can adversely affect our ability to attract and keep customers and can expose us to litigation and regulatory action.

Given the volume of transactions we process, certain errors may be repeated or compounded before they are discovered and successfully rectified. Our necessary dependence upon automated systems to record and process our transaction volume may further increase the risk that technical system flaws or employee tampering or manipulation of those systems will result in losses that are difficult to detect. We may also be subject to disruptions of our operating systems arising from events that are wholly or partially beyond our control (for example, computer viruses or electrical or telecommunications outages), which may give rise to disruption of service to customers and to financial loss of liability. We are further exposed to the risk that our external vendors may be unable to fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their respective employees as we are) and to the risk that our (or our vendors’) business continuity and data security systems prove to be inadequate.

Item 1A (Continued)

Legislative or regulatory changes or actions, or significant litigation, could adversely impact us or the businesses in which we are engaged.

The financial services industry is extensively regulated. We are subject to extensive state and federal regulation, supervision and legislation that govern almost all aspects of our operations. Laws and regulations may change from time to time and are primarily intended for the protection of consumers, depositors and the deposit insurance funds, and not to benefit our shareholders. The impact of any changes to laws and regulations or other actions by regulatory agencies may negatively impact us or our ability to increase the value of our business. Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of an institution, the classification of assets by the institution and the adequacy of an institution’s allowance for loan losses. Additionally, actions by regulatory agencies or significant litigation against us could cause us to devote significant time and resources to defending our business and may lead to penalties that materially affect us and our shareholders.

Proposals to change the laws governing financial institutions are frequently raised in Congress and before bank regulatory authorities. It is impossible to predict the ultimate form any proposed legislation might take or how it might affect us. Future changes in the laws or regulations or their interpretations or enforcement could be materially adverse to our business and our shareholders.

We may be a defendant from time to time in the future in a variety of litigation and other actions, which could have a material adverse effect on our financial condition and results of operation.

We and our subsidiaries may be involved from time to time in the future in a variety of litigation arising out of our business. Our insurance may not cover all claims that may be asserted against us, and any claims asserted against us, regardless of merit or eventual outcome, may harm our reputation. Should the ultimate judgments or settlements in any litigation exceed our insurance coverage, they could have a material adverse effect on our financial condition and results of operation. In addition, we may not be able to obtain appropriate types or levels of insurance in the future, nor may we be able to obtain adequate replacement policies with acceptable terms, if at all.

We extend credit to a variety of customers based on internally set standards and judgment. We manage the credit risk through a program of underwriting standards, the review of certain credit decisions and an on-going process of assessment of the quality of the credit already extended. Our credit standards and on-going process of credit assessment might not protect us from significant credit losses.

We take credit risk by virtue of making loans and leases, extending loan commitments and letters of credit and, to a lesser degree, purchasing non-governmental securities.

Our exposure to credit risk is managed through the use of consistent underwriting standards that emphasize “in-market” lending while avoiding highly leveraged transactions as well as excessive industry and other concentrations. Our credit administration function employs risk management techniques to ensure that loans and leases adhere to corporate policy and problem loans and leases are promptly identified. While these procedures are designed to provide us with the information needed to implement policy adjustments where necessary, and to take proactive corrective actions, there can be no assurance that such measures will be effective in avoiding undue credit risk.

Item 1B. Unresolved Staff Comments

There are no matters of unresolved staff comments from the Commission staff.

Item 2. Properties

Farmers National Banc Corp.’s Properties

The Farmers National Banc Corp. owns no property. Operations are conducted at 20 and 30 South Broad Street, Canfield, Ohio.

Bank Property

The Main Office is located at 20 & 30 S. Broad Street, Canfield, Ohio. The other locations of the Bank are:


Office Building		40 & 46 S. Broad St., Canfield, Ohio
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
Poland Office		106 McKinley Way West, Poland, Ohio
Niles Office		1 South Main Street, Niles, Ohio
Niles Drive Up		170 East State Street, Niles, Ohio
Girard Office		121 North State Street, Girard, Ohio
Eastwood Office		5845 Youngstown-Warren Rd, Niles, Ohio
Warren Office		2910 Youngstown-Warren Rd, Warren, Ohio
Mineral Ridge Office		3826 South Main Street, Mineral Ridge, Ohio
Niles Operation Center		51 South Main Street, Niles, Ohio

The bank owns all locations except the Colonial Plaza, which is leased.

Item 3. Legal Proceedings

In the ordinary course of business, Farmers National Bank was named a defendant in a lawsuit filed in September 2005. In the lawsuit the plaintiff alleges that the Bank is indebted to the plaintiff for withdrawals from the plaintiff’s account by the plaintiff’s former agent, which the plaintiff claims were unauthorized. The plaintiff was seeking damages in excess of $423,000. During January 2008, the plaintiff dismissed the case without prejudice.

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

There were no matters submitted to a vote of security holders through the solicitation of proxies or otherwise during the fourth quarter of 2007.

Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuers
Purchases of Equity Securities

Purchases of equity securities by the issuer.

On June 12, 2007, The Corporation announced the adoption of a stock repurchase program that authorizes the re-purchase of up to 4.9% or approximately 638 thousand shares of its outstanding common stock in the open market or in privately negotiated transactions. This program expires in June 2008. The following table summarizes the treasury stock purchased by the issuer during the fourth quarter of 2007:


					Total Number of		Maximum Number of
					Shares Purchased as		Shares that May Yet
	Total Number of		Average Price Paid		Part of Publicly		Be Purchased Under
Period	Shares Purchased		Per Share		Announced Program		the Program
Oct. 1-31		20,030	$	9.35		20,030		410,141
Nov. 1-30		20,197		8.34		20,197		389,944
Dec. 1-31		10,000		8.20		10,000		379,944
TOTAL		50,227	$	8.72		50,227		379,944

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

During the fiscal years ended December 31, 2007 and December 31, 2006, there were no disagreements between the Corporation and Crowe Chizek and Company LLC (“Crowe Chizek”) on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to Crowe Chizek’s satisfaction, would have caused Crowe Chizek to make reference to the subject matter of the disagreement in connection with its reports on the Corporation’s consolidated financial statements for such periods.

Item 9A. Controls and Procedures

As of the end of the period covered by this report, the Corporation carried out an evaluation, under the supervision and with the participation of the Corporation’s management, including the Corporation’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures. Based on that evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures were effective to ensure that the financial and nonfinancial information required to be disclosed by the Corporation in the reports that it files or submits under the Securities Exchange Act of 1934, including this annual report on Form 10-K for the period ended December 31, 2007, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Management’s responsibilities related to establishing and maintaining effective disclosure controls and procedures include maintaining effective internal controls over financial reporting that are designed to produce reliable financial statements in accordance with accounting principles generally accepted in the United States. As disclosed in the Report on Management’s Assessment of

Item 9A (Continued)

Internal Control Over Financial Reporting on page 16 of our 2007 Annual Report to Shareholders, management assessed the Corporation’s system of internal control over financial reporting as of December 31, 2007, in relation to criteria for effective internal control over financial reporting as described in “Internal Control — Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Crowe Chizek and Company LLC, the corporation’s registered public accounting firm, has audited the Corporation’s internal control over financial reporting as of December 31, 2007. The attestation report by Crowe Chizek and Company LLC is located on page 17 of our 2007 Annual Report to Shareholders.

There have been no significant changes in the Corporation’s internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation or material weaknesses in such internal controls requiring corrective actions. As a result, no corrective actions were taken.

Item 9B. Other Information

During 2007, the Corporation recorded a non-operating after-tax charge of $576 thousand representing a reclassification and recognition of an other-than-temporary impairment of securities. The charge is directly related to $2.7 million of Fannie Mae Series F preferred stock that is held in the Securities portfolio. In mid November, Fannie Mae went to the markets with two new preferred share offerings carrying higher dividend rates that appear to have caused the market prices of the other Fannie Mae preferred stock issues, including the issue held by the Corporation, to decrease in current market value. Due to this sudden drop in value and uncertainty of future market conditions surrounding Fannie Mae, management has determined that this decrease is other-than-temporary and felt it prudent to recognize the non-cash after-tax charge of $576 thousand in the fourth quarter of 2007.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Information relating to Directors is set forth in the registrant’s definitive proxy statement, which will be used in connection with its annual meeting of shareholders which will be held March 27, 2008. The proxy statement is incorporated by reference.

Executive Officers of the Registrant

The names, ages and positions of the executive officers as of March 1, 2008

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. 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.

Item 10 (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.

Compliance with Section 16(a) of the Securities Exchange Act

Information regarding this item is set forth in the registrant’s definitive proxy statement, which will be used in connection with its annual meeting of shareholders to be held March 27, 2008. The proxy statement is incorporated by reference.

Code of Ethics

See Exhibit 14.

Nominating Committee

Identification of the Audit Committee

Audit Committee Financial Expert

The Board believes that Earl R. Scott and James R. Fisher qualify as “Audit Committee Financial Experts” as that term is defined by applicable SEC rules. In addition, the Board believes that Earl R. Scott and James R. Fisher are “independent” as that term is defined by applicable SEC rules.

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Securities Authorized for Issuance Under Equity Compensation Plans

Equity Compensation Plan Information

Number of

securities

remaining available

Number of

for future issuance

securities to be

under equity

issued upon

Weighted-average

compensation plans

exercise of

exercise price of

(excluding

outstanding

securities

options, warrants

reflected in column

and rights

(a))

Plan category

(a)

(b)

(c)

Equity compensation plans approved by security holders

46,500

$11/share

325,400

Item 12 (Continued)

Information regarding the equity (stock-based) compensation plan is set forth in the registrant’s annual report in Notes A and I in the Notes to Consolidated Financial Statements. This portion of the annual report is incorporated by reference.

Security Ownership of Management

Information relating to this item is set forth in the registrant’s definitive proxy statement, which will be used in connection with its annual meeting of shareholders to be held March 27, 2008. The proxy statement is incorporated by reference.

Item 13. Certain Relationships and Related Transactions and Director Independence

Item 14. Principal Accountant Fees and Services

PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)1. Financial Statements


Item 8.,		Financial Statements and Supplementary Data is set forth in the registrant’s 2007 Annual Report to Shareholders and is incorporated by reference in Part II of this report.

2. Financial Statement Schedules

No financial statement schedules are presented because they are not applicable.

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 12 hereof and is incorporated herein by reference. No financial statement schedules are presented because they are not applicable.

(b) 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 12 hereof and is incorporated herein by reference.

No financial statement schedules are presented under this section because none are applicable.

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.


/s/ Benjamin R. Brown Benjamin R. Brown	Director	March 11, 2008

/s/ Anne Frederick Crawford Anne Frederick Crawford	Director	March 11, 2008

/s/ James R. Fisher James R. Fisher	Director	March 11, 2008

/s/ Joseph D. Lane Joseph D. Lane	Director	March 11, 2008

/s/ Ralph D. Macali Ralph D. Macali	Director	March 11, 2008

/s/ Earl R. Scott Earl R. Scott	Director	March 11, 2008

/s/ Frank L. Paden Frank L. Paden	President and Director	March 11, 2008

/s/ Ronald V. Wertz Ronald V. Wertz	Director	March 11, 2008

INDEX TO EXHIBITS

The following exhibits are filed or incorporated by reference as part of this report:

2.		Not applicable.

3(i).		The Articles of Incorporation, including amendments thereto for the Registrant. Incorporated by reference to Exhibit 4.1 to Farmers National Banc Corp’s Form S-3 Registration Statement dated October 3, 2001 (File No. 0-12055).

3(ii).		The Code of Regulations, including amendments thereto for the Registrant. Incorporated by reference to Exhibit 4.2 to Farmers National Banc Corp’s Form S-3 Registration Statement dated October 3, 2001 (File No. 0-12055).

4.		Incorporated by reference to initial filing.

9.		Not applicable.

10.		Information regarding this item is set forth in the registrant’s definitive proxy statement, which will be used in connection with its annual meeting of shareholders to be held March 27, 2008. The proxy statement is incorporated by reference.

11.		Refer to Note N in the annual report incorporated by reference.

12.		Not applicable.

13.		Annual Report to security holders.

14.		The Company has adopted a Code of Ethics that applies to the Chief Executive Officer and Chief Financial Officer and complies with the criteria provided in SEC rules. The Code of Ethics is available by calling Corporate Services at 330-533-3341.

16.		Not applicable.

18.		Not applicable.

21.		Farmers National Bank, Canfield, Ohio.

22.		Not applicable.

23a.		Consent of Crowe Chizek and Company LLC

24.		Not applicable.

31.a		Certification of Chief Executive Officer (Filed herewith)

31.b		Certification of Chief Financial Officer (Filed herewith)

32.a		1350 Certification of Chief Executive Officer (Filed herewith)

32.b		1350 Certification of Chief Financial Officer (Filed herewith)

33.		Not applicable

34.		Not applicable

35.		Not applicable

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.

Position Held

Frank L. Paden

President and Secretary

Carl D. Culp

Executive Vice President and Treasurer

Donald F. Lukas

Senior Vice President