10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the fiscal year ended:
December 31, 2009

Commission File Number: 0-14773

National Bancshares Corporation
(Exact name of registrant as specified in its charter)

Ohio                             	34-1518564
(State or other jurisdiction		(IRS Employer
of incorporation or organization)	Identification No.)

112 West Market Street, Orrville, Ohio  44667
(330) 682-1010
(Address, including zip code, and telephone number,
including area code, of registrant`s principal executive offices)

Securities registered pursuant to section 12(b) of the Act:
none

Securities registered pursuant to section 12(g) of the Act:
common stock, without par value

Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities act.  Yes [ ] No [X]

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

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by sections 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 [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T
during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).  Yes [ ] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (section 229.405 of this chapter) 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. [ ]

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 definition of `large accelerated filer,` `accelerated filer,`
and `smaller reporting company` in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ]		Accelerated filer [ ]
Non-accelerated filer [ ]               Smaller reporting company [X]

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



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 last sold, or the average bid and asked price of such
common equity, as of the last business day of the registrant`s most recently
completed second fiscal quarter:  Based on the average of the bid and asked
prices on June 30, 2009, the aggregate market value of National Bancshares
Corporation stock held by non-affiliates was $27,810,522.

Indicate the number of shares outstanding of each of the registrant`s
classes of common stock as of the latest practicable date: National
Bancshares Corporation`s only class is common stock, without par value,
of which 2,205,973 shares were outstanding on March 5, 2010.

Documents Incorporated by Reference

Portions of the registrant`s annual report to shareholders for the fiscal
year ended December 31, 2009 are incorporated by reference in Part II.
Portions of the registrant`s definitive proxy statements for the 2010
Annual Meeting of Shareholders are incorporated by reference in Part III
of this report.





Table of Contents
Part I						Page
Item 1		Business			2
Item 1B		Unresolved Staff Comments	15
Item 2		Properties			16
Item 3		Legal Proceedings		17
Item 4		Submission of Matters to a
		Vote of Security Holders	17
Part II
Item 5		Market for Registrant`s
		Common Equity, Related
		Stockholder Matters and
		Issuer Purchases of Equity
		Securities			18
Item 6		Selected Financial Data		18
Item 7		Management`s Discussion
		and Analysis of Financial
		Condition and Results of
		Operations			18
Item 7A		Quantitative and Qualitative
		Disclosures About Market Risk	18
Item 8		Financial Statements and
		Supplementary Data		19
Item 9		Changes in and Disagreements
		with Accountants on Accounting
		and Financial Disclosure	19
Item 9A		Controls and Procedures		19
Item 9B		Other Information		19
Part III
Item 10		Directors, Executive Officers
		and Corporate Governance	20
Item 11		Executive Compensation		21
Item 12		Security Ownership of Certain
		Beneficial Owners and
		Management and Related
		Stockholder Matters		21
Item 13		Certain Relationships and
		Related Transactions, and
		Director Independence		21
Item 14		Principal Accountant Fees
		and Services			21
Part IV
Item 15		Exhibits and Financial
		Statement Schedules		22
Signatures					24



ITEM 1  BUSINESS

Forward-looking Statements.  This document contains forward-looking
statements ~ as that term is defined in the Private Securities Litigation
Reform Act of 1995 ~ about National Bancshares Corporation (`National
Bancshares`) and its subsidiary First National Bank. Information
incorporated in this document by reference, future filings by National
Bancshares on Form 10-Q and Form 8-K, and future oral and written
statements by National Bancshares and its management may also contain
forward-looking statements.  Forward-looking statements include statements
about anticipated operating and financial performance, such as loan
originations, operating efficiencies, loan sales, charge-offs and loan
loss provisions, growth opportunities, interest rates and deposit growth.
Words such as `may,` `could,` `should,` `would,` `believe,` `anticipate,`
`estimate,` `expect,` `intend,` `project,` `plan,` and similar expressions
are intended to identify these forward-looking statements.

Forward-looking statements are necessarily subject to many risks and
uncertainties. A number of things could cause actual results to differ
 materially from those indicated by the forward-looking statements. These
include the factors we discuss immediately below, those addressed under
the caption `Financial Review,` other factors discussed elsewhere in this
document or identified in our filings with the Securities and Exchange
Commission, and those presented elsewhere by our management from time to
time. Many of the risks and uncertainties are beyond our control. The
following factors could cause our operating and financial performance to
differ materially from the plans, objectives, assumptions, expectations,
estimates, and intentions expressed in the forward-looking statements:

~ the strength of the United States economy in general and the strength of
   the local economies in which we conduct our operations; general economic
   conditions, either nationally or regionally, may be less favorable than
   we expect, resulting in a deterioration in the credit quality of our
   loan assets, among other things
~ the effects of, and changes in, trade, monetary and fiscal policies and
   laws, including interest-rate policies of the Federal Reserve Board
~ inflation, interest rate, market, and monetary fluctuations
~ the development and acceptance of new products and services of
   National Bancshares and its subsidiary and the perceived overall value
   of these products and services by users, including the features,
   pricing, and quality compared to competitors` products and services
~ the willingness of users to substitute our products and services for
   those of competitors
~ the impact of changes in financial services laws and regulations
   (including laws concerning taxes, banking, securities, and insurance)
~ changes in consumer spending and saving habits

Forward-looking statements are based on our beliefs, plans, objectives,
goals, assumptions, expectations, estimates, and intentions as of the
date the statements are made.  Investors should exercise caution because
we cannot give any assurance that our beliefs, plans, objectives, goals,
assumptions, expectations, estimates, and intentions will be realized.  We
disclaim any obligation to update or revise any forward-looking statements
based on the occurrence of future events, the receipt of new information,
or otherwise.

Company Milestones. National Bancshares and First National Bank`s history
spans more than 125 years.  Some of the milestones are:

1881	First National Bank is chartered under the name `Orrville Banking
         Company`
1902	the Bank`s name is changed to `Orrville National Bank`
1933	the Bank is reorganized and renamed the `National Bank of Orrville`
1965	the Bank opens its first branch at 1320 West High Street, Orrville, Ohio
1968	the Bank merges with the First National Bank of Dalton, becoming
         `First National Bank Orrville-Dalton`
1969	the Bank merges with the Bank of Mt. Eaton Company



1972	the Bank merges with the Farmers and Merchants Bank Company of
         Smithville and renamed to `First National Bank`
1975	the Bank opens its Midway office in Apple Creek
1986	National Bancshares Corporation becomes the holding company for
         First National Bank on June 2
1989	the Bank enters Medina County with the purchase of its Lodi office
1994	the Bank establishes its second Medina County office with the purchase
         of the Seville office
1999	the Bank opens its Cleveland Road office in the city of Wooster
2002	the acquisition of Peoples Financial Corporation and its subsidiary,
         Peoples Federal Savings and Loan Association of Massillon, is
         completed, adding three more banking offices, our first offices in
         Stark County
2005	the Bank closes its Marketplace office in Massillon and opens its
         Burbank Road office in Wooster
2006	First National Bank celebrates its 125 year anniversary
2009	the Bank opens an office in Summit County, located at 3085 West Market
         Street in Fairlawn, Ohio

Market Area.  National Bancshares` sole banking subsidiary is First National
Bank (`Bank`). The Bank operates 14 offices in Wayne, Medina, Stark and
Summit Counties. Wayne County generally, and more specifically the city of
Orrville and its other municipalities in the northeastern quadrant of Wayne
County, constitutes the geographic center of the Bank`s market, extending
from there to most of Wayne County, the southern portion of Medina County
and southwestern part of Summit County to the north, western Stark County
to the east, and the northeastern portion of Holmes County to the south.
With their dense urban populations and wide-ranging industries, including
many service, manufacturing, retail and other establishments of all sizes,
the cities of Cleveland in Cuyahoga County, Akron in Summit County, and
Canton in Stark County lie in a crescent just beyond the northern and
eastern ends of the Bank`s market area.  The Bank occupies a much more
rural area with a significantly lower population density and less
industrial diversity, and with a significantly higher proportion of small
farm and related agricultural enterprises. Wayne County is largely rural.
Holmes County is virtually entirely rural, with a large percentage of
Amish and Mennonite inhabitants. The portions of Stark and Medina Counties
occupied by the Bank are somewhat less urban than the remainder of the
historically urban and industrial Stark County and the remainder of Medina
County, which has been growing very rapidly for many years because of its
increasingly close association with urban centers in Cleveland and Akron.

The April 2002 merger with Peoples Federal Savings and Loan Association of
Massillon added three offices in western Stark County ~ all located in
Massillon ~ to the Bank`s 11 offices in Wayne and Medina Counties. First
National Bank had already been serving western Stark County, but without
a branch presence.  Massillon is the largest urban center in the Bank`s
market, with a population of slightly more than 32,300 according to the
2007 estimate by Ohio Department of Development
(www.odod.state.oh.us/research) data, followed by Wooster in Wayne County,
with a population of approximately 26,000, and the city of Orrville in
Wayne County, with a population just under 8,500. The total population
of the Bank`s market area is estimated to be between 175,000 and 225,000,
but a more precise figure is difficult to determine because the Bank`s
market area does not necessarily correspond with the geographic and
political boundaries employed when population data are compiled and
reported. Of the counties that make up the Bank`s market area, Holmes,
Medina and Wayne benefit from an unemployment rate that is less than the
state average, which was 10.7% according to 2009 Ohio Department of Job
and Family Services (available at lmi.state.oh.us).  The unemployment rates
at December 2009 are 9.9% in Wayne County, 8.2% in Medina County, and
7.4% in Holmes County. Meanwhile, Stark County had an unemployment rate
of 12.2% at December 2009.

In summary, First National Bank believes the market area it has defined as
its own generates economic activity and has demographic trends that should
sustain the Bank for the indefinite future. The Bank is open to the
prospect of expansion beyond its current market area, particularly if a
suitable opportunity arises for expansion either by acquisition or by
internal growth. For purposes of potential expansion either by acquisition
or by internal growth, the more urban and industrial crescent at the
northern and eastern edge of the Bank`s market area offers more competitive
resistance. The Bank`s immediate goal is to achieve a broader and deeper
penetration of its existing market area. We believe that the banking needs
within our market have not been exhausted and that opportunities exist for
a local community bank to achieve market-share gains at the expense of more
distant and larger institutions whose organization-wide profit goals and
credit standards leave less room for flexibility to adjust to local
borrowers and other customers` circumstances.



Competition.  The market in which we operate is intensely competitive.
Offering checking and savings accounts, certificates of deposit, personal
loans, loans to businesses and professionals, installment loans, safety
deposit boxes, and credit cards, we compete with other banks and savings
institutions, many of which are significantly larger than First National
Bank and have greater financial, staff, and other resources and higher
lending limits.  Insurance companies, consumer finance companies, credit
unions, mortgage banking companies, commercial finance and leasing
companies, money market mutual funds, and securities firms also provide
many of the financial services we offer. We face competition both in
making loans and in attracting deposits. Competition generally is based
on interest rates and other credit and service charges, the quality of
services rendered, the ability to react and respond to customer
requirements, the convenience of banking hours and branch locations, the
range and type of products offered and, in the case of loans to larger
commercial borrowers, lending limits, among other factors.  We do not
have trust powers and therefore do not offer trust services.  We seek to
take competitive advantage of First National Bank`s local orientation and
community banking profile, competing for loans principally through our
responsiveness to customers, our ability to communicate effectively with
them, and our ability to understand and address their needs.  We compete
for deposits principally by offering customers personal attention, a
variety of banking services, attractive rates, and strategically located
banking facilities. Our goal is to provide high quality banking service
to professionals, small and mid-sized businesses and individuals,
emphasizing quick and flexible responses to customer demands, while
providing a personalized touch.

The dominant institutions in Wayne, Stark, Medina and Summit Counties are
offices of significantly larger banking institutions, some of which have a
statewide, multi-state, and even national presence.  These competitors are
more geographically diversified than First National Bank, meaning they are
less vulnerable to adverse changes in our local economy. Likewise, some
competitors are not subject to the same kind and amount of regulatory
restrictions and supervision to which a national bank is subject.  Because
First National Bank is smaller than many commercial lenders in its market,
occasionally, we are prevented from making commercial loans in amounts
competitors can offer. First National Bank accommodates loan volumes in
excess of its lending limits from time to time through the sale of loan
participations to other banks.

The share of deposits held by a particular banking institution relative to
all other banking institutions in a particular market is not the only,
but it is perhaps the most readily identifiable, indicator of a bank`s
market share.  As a percent of all deposits held by FDIC-insured banks
and savings associations in the county, according to FDIC data available
on the FDIC`s website (www.fdic.gov) one institution had a market share
exceeding 18% in all three counties as of June 30, 2008. Based on the
FDIC`s June 30, 2009 deposit data, First National Bank had a 12.99% share
of deposits in Wayne County (ranking 4th of 12 FDIC-insured institutions),
0.91% in Stark County (11th of 16), and 1.13% in Medina County
(14th of 18). The Summit County office located in Fairlawn, Ohio was
opened on May 29, 2010. We have no offices in Holmes County.

The banking industry has been changing for many reasons, including
continued consolidation within the banking industry, legislative and
regulatory changes, and advances in technology.  Congress` elimination
in 1994 of many restrictions on interstate branching could increase
competition from large banks headquartered outside of our market.
Congress` repeal in late 1999 of much of the Glass-Steagall Act (which
had separated the commercial and investment banking industries) and
elimination of the barriers between the banking and insurance industries
could make competition even more intense. Because of our smaller size,
we may have less opportunity to take advantage of the flexibility offered
by that new legislation. With frequent introductions of new
technology-driven products and services, the banking industry is
undergoing rapid technological changes. To deliver banking products
and services more effectively and efficiently, banking institutions are
opening in-store branches, installing more automated teller machines
(ATMs), and investing in technology to permit telephone, personal computer,
and internet banking.  In addition to enhancing customer service, the
effective use of technology increases efficiency and enables financial
institutions to reduce costs. A financial institution`s success is
increasingly dependent upon use of technology to provide products and
services that satisfy customer demands and to create additional operating
efficiencies. Many of our competitors have substantially greater resources
to invest in technological improvements, which could enable them to perform
various banking functions at lower costs than First National Bank, or to
provide products and services that we are not able to provide economically.
Although all banks are experiencing the effects of the changing competitive
and technological environment, the manner in which banks choose to compete
is increasing the gap between large national and super-regional banks, on
one hand, and community banks on the other. Large institutions are
committed to becoming national or regional `brand names,` providing a
broad selection of products at low cost and with advanced technology,
while community banks provide most of the same products but with a
commitment to personal service and with local ties to the customers
and communities they serve.



Because of the demand for technology-driven products, banks rely
increasingly on unaffiliated vendors to provide data processing services
and other core banking functions.  The use of technology-related products,
services, delivery channels, and processes exposes banks to various risks,
particularly transaction, strategic, reputation, and compliance risk.

Lending.  Lending practices are governed by the Bank`s Credit Policy, which
is approved annually by the Board of Directors, and by regulations and
policies of the Office of the Comptroller of the Currency (`OCC`), the
principal federal regulator of national banks. The Credit Policy delegates
lending authority to the President & Chief Executive Officer, Senior
Vice President & Senior Loan Officer, and all loan officers. The Credit
Policy also establishes guidelines for credit types, loan mix,
concentration of credit, and credit standards.

First National Bank makes commercial loans, commercial real estate loans,
construction loans, residential mortgage and home equity loans, and secured
and unsecured consumer installment loans.  A substantial portion of our
commercial loans is designated as real estate loans for regulatory
reporting purposes because they are secured by mortgages on real property.
Loans of that type may be made for the purpose of financing commercial
activities, such as accounts receivable, equipment purchases and leasing,
but they are secured by real estate to provide the Bank with an extra
measure of security.  Although these loans might be secured in whole or
in part by real estate, they are treated in the discussions to follow as
commercial loans.  Our consumer installment loans include secured and
unsecured loans to individual borrowers for a variety of purposes,
including personal, home improvements, and revolving credit lines.

A significant portion of the Bank`s lending consists of origination
of conventional loans secured by 1-4 family real estate located in the
Bank`s market area. The Bank`s residential mortgage loans generally are
originated with loan documentation permitting sale to Federal Home Loan
Mortgage Corporation.

The Bank`s commercial loan services include ~

~ accounts receivable, inventory and working capital loans
~ renewable operating lines of credit
~ loans to finance capital equipment
~ term business loans
~ short-term notes
~ selected guaranteed or subsidized loan programs for small businesses
~ loans to professionals
~ commercial real estate loans, including agricultural loans secured by
   farmland
~ loans for agricultural production and other loans to farmers

Commercial real estate loans include commercial properties occupied by
the proprietor of the business conducted on the premises and
income-producing or farm properties. Agricultural loans secured by
farmland are a subset of our commercial real estate loan products, whereas
we also categorize loans for agricultural production and other loans to
farmers as commercial loans (not secured by real estate). The primary
risk of commercial real estate loans is loss of income of the owner or
occupier of the property or the inability of the market to sustain rent
levels. Although commercial and commercial real estate loans generally
bear somewhat more credit risk than single-family residential mortgage
loans, commercial and commercial real estate loans tend to be higher
yielding, tend to have shorter terms, and commonly provide for
interest-rate adjustments as prevailing rates change. Accordingly,
commercial and commercial real estate loans enhance a lender`s interest
rate risk management and, in management`s opinion, promote more rapid
asset and income growth than a loan portfolio comprised strictly of
residential real estate mortgage loans.



Although a risk of nonpayment exists for all loans, certain specific
types of risks are associated with various kinds of loans.  One of the
primary risks associated with commercial loans is the possibility that the
commercial borrower will not generate income sufficient to repay the loan.
The Bank`s loan policy provides that commercial loan applications must be
supported by documentation indicating that there will be cash flow
sufficient for the borrower to service the proposed loan. Financial
statements or tax returns must be submitted, and annual reviews are
undertaken. The fair market value of collateral for collateralized
commercial loans must exceed the Bank`s loan exposure. For this purpose
fair market value is determined by independent appraisal.

Real estate is commonly a material component of collateral for our loans,
including commercial loans. Although the expected source of repayment of
these loans is generally the operations of the borrower`s business or
personal income, real estate collateral provides an additional measure
of security. Risks associated with loans secured by real estate include
fluctuating land values, changing local economic conditions, changes in
tax policies, and a concentration of loans within a limited geographic area.

First National Bank originates several different types of loans that it
categorizes as construction loans, including ~

~ residential construction loans to borrowers who will occupy the premises
   upon completion of construction,
~ residential construction loans to builders,
~ commercial construction loans, and
~ real estate acquisition and development loans.

Because of the complex nature of construction lending, these loans are
generally recognized as having a higher degree of risk than other forms
of real estate lending, including credit risk. The Bank`s fixed-rate and
adjustable-rate construction loans may not provide for the same interest
rate terms on the construction loan and on the permanent mortgage loan that
follows completion of the construction phase of the loan. It is the norm
for the Bank to make residential construction loans with an existing
written commitment for permanent financing.

Our consumer loans include secured and unsecured loans to individual
borrowers for a variety of purposes, including personal, home improvement,
revolving credit lines, autos, boats, and recreational vehicles.
Historically, we have had minimal indirect lending activity, however over
that past year we have become more involved and are looking to increase our
involvement in the indirect lending line of business. Unsecured consumer
loans generally carry significantly higher interest rates than secured
loans.

Loans and extensions of credit to a single borrower may not exceed 15% of
capital, often referred to as the `legal lending limit` or
`loans-to-one-borrower limit.` But an additional margin of 10% of capital
is permitted for loans fully secured by readily marketable collateral.
The Bank can accommodate loan volumes exceeding the legal lending limit by
selling participation interests in loans to other banks. As of
December 31, 2009, the Bank`s legal lending limit for loans to a single
borrower was approximately $4.0 million.

Loan Solicitation and Processing.  Loan originations are developed from a
number of sources, including continuing business with depositors, other
borrowers and real estate builders, solicitations by Bank personnel and
walk-in customers.

When a loan request is made, the Bank reviews the application, credit
bureau reports, property appraisals or evaluations, financial information,
verifications of income, and other documentation concerning the
creditworthiness of the borrower, as applicable to each loan type. The
Bank`s underwriting guidelines are set by senior management and approved by
the board. The loan policy specifies officers` loan approval authority,
requiring approval by the board`s Executive Committee or the full board
for any aggregate borrowing to one customer or related customers of $3.0
million or more or if a loan is rated substandard or below.

Income from Lending Activities.  The Bank earns interest and fee income
from its lending activities. Net of origination costs, loan origination
fees are amortized over the life of a loan.  The Bank also receives loan
fees related to existing loans, including late charges. Income from loan
origination and commitment fees and discounts varies with the volume and
type of loans and commitments made and with competitive and economic
conditions. Note 1 to the Consolidated Financial Statements included
herein contains a discussion of the manner in which loan fees and income
are recognized for financial reporting purposes.



Delinquent Loans ~ Late charges on residential mortgages and consumer
loans are assessed if a payment is not received by the due date plus a
grace period. When an advanced stage of delinquency appears on a
single-family loan and if repayment cannot be expected within a reasonable
time or a repayment agreement is not entered into, a required notice of
foreclosure or repossession proceedings may be prepared by the Bank`s
attorney and delivered to the borrower so that foreclosure proceedings
may be initiated promptly, if necessary. The Bank also collects late
charges on commercial loans.

When the Bank acquires real estate through foreclosure, voluntary deed,
or similar means, it is classified as `other real estate owned` until it
is sold.  When property is acquired in this manner, it is recorded at the
lower of cost (the unpaid principal balance at the date of acquisition) or
fair value.  Any subsequent write-down is charged to expense.  All
costs incurred from the date of acquisition to maintain the property
are expensed. `Other real estate owned` is appraised during the
foreclosure process, before acquisition. Losses are recognized for
the amount by which the book value of the related mortgage loan exceeds
the estimated net realizable value of the property.

Investments ~ Investment securities provide a return on residual funds
after lending activities. Investments may be in corporate securities,
U.S. Government and agency obligations, state and local government
obligations and mortgage-backed securities. The Bank generally does
not invest in securities that are rated less than investment grade by
a nationally recognized statistical rating organization. All
securities-related activity is reported to the Bank`s board of directors.
General changes in investment strategy are required to be reviewed and
approved by the board. The President & Chief Executive Officer can
purchase and sell securities in accordance with the Bank`s stated
Investment Policy.

Sources of Funds ~ Deposit Accounts.  Deposit accounts are a major source
of funds for the Bank.  The Bank offers a number of deposit products to
attract both commercial and regular consumer checking and savings
customers, including regular and money market savings accounts, NOW
accounts, and a variety of fixed-maturity, fixed-rate certificates with
maturities ranging from seven days to 60 months. These accounts earn
interest at rates established by management based on competitive market
factors and management`s desire to increase certain types or maturities
of deposit liabilities. The Bank also provides debit cards, gift cards,
travel cards, travelers` checks, official checks, money orders,
ATM services, and IRA accounts.

Borrowings.  Deposits and repayment of loan principal are the Bank`s
primary sources of funds for lending activities and other general business
purposes.  However, when the supply of lendable funds or funds available
for general business purposes cannot satisfy the demand for loans or
general business purposes, the Bank can obtain funds from the Federal
Home Loan Bank (FHLB) of Cincinnati.  In addition to borrowing from the
FHLB on a term-loan basis, the Bank has a line of credit with the FHLB
that allows the Bank to borrow in an amount based on a percentage of
the Bank`s pledged eligible mortgages.  All or substantially all of
the Bank`s mortgage loans are pledged to the FHLB.  As of
December 31, 2009, the Bank had additional borrowing capacity of
approximately $4.6 million from the FHLB.  Interest is payable monthly,
and the line of credit is secured by a blanket pledge collateral agreement.
First National Bank also has access to credit through the Federal Reserve
Bank of Cleveland and other funding sources.

Personnel ~ As of December 31, 2009, First National Bank had 101 full-time
equivalent employees.  A collective bargaining group represents none of
the employees.  Management considers its relations with employees to be
excellent.

Minority Ownership of a Title Insurance Agency ~ First National Bank owns
49% of the stock of First Kropf Title, L.L.C., a title insurance agency
whose majority owner is Kropf, Wagner, Lutz and VanSickle, L.L.C., a law
firm in which a director and Chairman of the Board of Directors of
National Bancshares and the Bank ~ Mr. John W. Kropf ~ is an owner.
In many mortgage transactions, the Bank selects the firm that will
provide title insurance services, but the mortgage borrower ordinarily
pays the costs. First Kropf Title, L.L.C. is not the only title insurance
agency used by the Bank, but First Kropf Title, L.L.C. derives all or
substantially all of its business through referrals from the Bank.



Available Information ~ The Company makes available, free of charge,
through the Investor Relations section of its Internet website at
www.discoverfirstnational.com, its annual report on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d) of
the Exchange Act as soon as reasonably practicable after the Company
electronically files such reports with or furnishes them to the Securities
and Exchange Commission. Also the Company`s Corporate Governance and
Nominating Committee Charter and Audit Committee Charter are available
under the Investor Relations section on its website.

Supervision and Regulation

The following discussion of bank supervision and regulation is qualified
in its entirety by reference to the statutory and regulatory provisions
discussed. Changes in applicable law or in the policies of various
regulatory authorities could affect materially the business and prospects
of National Bancshares and the Bank.

National Bancshares is a bank holding company within the meaning of the
Bank Holding Company Act of 1956. As such, National Bancshares is subject
to regulation, supervision, and examination by the Board of Governors of
the Federal Reserve System (Federal Reserve), acting primarily through the
Federal Reserve Bank of Cleveland. National Bancshares is required to
file annual reports and other information with the Federal Reserve. First
National Bank is a national bank, regulated primarily by the Office of the
Comptroller of the Currency (`OCC`) and secondarily by the FDIC.

National Bancshares and the Bank are subject to federal banking laws
intended to protect depositors, not shareholders. Federal and state laws
applicable to holding companies and their financial institution
subsidiaries regulate the range of permissible business activities,
investments, reserves against deposits, capital levels, lending activities
and practices, the nature and amount of collateral for loans,
establishment of branches, mergers, dividends, and a variety of other
important matters. The Bank is subject to detailed, complex, and
sometimes overlapping federal and state statutes and regulations affecting
routine banking operations. These statutes and regulations include but are
not limited to state consumer credit laws, the Truth-in-Lending Act and
Regulation Z, the Equal Credit Opportunity Act and Regulation B, the Fair
Credit Reporting Act, the Truth in Savings Act, and the Community
Reinvestment Act. The Bank must comply with Federal Reserve Board
regulations requiring depository institutions to maintain reserves against
their transaction accounts (principally NOW and regular checking accounts).

The Federal Deposit Insurance Corporation Improvement Act of 1991 expanded
significantly the authority of federal agencies to regulate the activities
of federally chartered and state-chartered financial institutions and
their holding companies. The Federal Reserve and the FDIC have extensive
authority to prevent and to remedy unsafe and unsound practices and
violations of applicable laws and regulations by institutions and
holding companies. The agencies may assess civil money penalties, issue
cease-and-desist or removal orders, seek injunctions, and publicly
disclose those actions.

Temporary Liquidity Guarantee Program. On October 14, 2008, the FDIC
announced a new program ~ the Temporary Liquidity Guarantee Program
(`TLGP`) that provides unlimited deposit insurance on funds in
non-interest bearing transaction deposit accounts not otherwise covered
by the existing deposit insurance limit of $250,000. Such non-interest
bearing transaction deposit accounts are initially insured at no cost
to the institution for 30 days, with coverage continuing through
June 30, 2010 at a 10 bps fee on deposit amounts in excess of $250,000.
Eligible institutions were able to opt-out on or before December 5, 2008.
The Bank did not elect to opt-out of the unlimited deposit insurance
provided under the TLGP. Also under TLGP, newly issued senior unsecured
debt issued on or before June 30, 2009 was fully insured in the event the
issuing institution subsequently fails, or its holding company files for
bankruptcy. The Bank has elected not to participate in the debt guarantee
portion of this program.



Regulation of Bank Holding Companies ~ Bank and Bank Holding Company
Acquisitions. The Bank Holding Company Act requires every bank holding
company to obtain approval of the Federal Reserve before ~

~ directly or indirectly acquiring ownership or control of any voting
   shares of another bank or bank holding company, if after the
   acquisition the acquiring company would own or control more than
   5% of the shares of the other bank or bank holding company (unless
   the acquiring company already owns or controls a majority of the
   shares),
~ acquiring all or substantially all of the assets of another bank, or
~ merging or consolidating with another bank holding company.

The Federal Reserve will not approve an acquisition, merger, or
consolidation that would have a substantially anticompetitive result
unless the anticompetitive effects of the proposed transaction are clearly
outweighed by a greater public interest in satisfying the convenience
and needs of the community to be served. The Federal Reserve also
considers capital adequacy and other financial and managerial factors
in its review of acquisitions and mergers.

Additionally, the Bank Holding Company Act, the Change in Bank Control
Act and the Federal Reserve`s Regulation Y require advance approval of
the Federal Reserve to acquire `control` of a bank holding company.
Control is conclusively presumed to exist if an individual or company
acquires 25% or more of a class of voting securities of the bank holding
company. If the holding company has securities registered under Section 12
of the Securities Exchange Act of 1934, as National Bancshares does, or
if no other person owns a greater percentage of the class of voting
securities, control is rebuttably presumed to exist if a person acquires
10% or more, but less than 25%, of any class of voting securities.

Nonbanking Activities.  With some exceptions, the Bank Holding Company
Act has for many years also prohibited a bank holding company from
acquiring or retaining direct or indirect ownership or control of more
than 5% of the voting shares of any company that is not a bank or bank
holding company, or from engaging directly or indirectly in activities
other than those of banking, managing or controlling banks, or providing
services for its subsidiaries. The principal exceptions to these
prohibitions involve non-bank activities that, by statute or by Federal
Reserve regulation or order, are held to be closely related to the
business of banking or of managing or controlling banks. In making its
determination that a particular activity is closely related to the
business of banking, the Federal Reserve considers whether the performance
of the activities by a bank holding company can be expected to produce
benefits to the public ~ such as greater convenience, increased
competition, or gains in efficiency in resources ~ that will outweigh
the risks of possible adverse effects such as decreased or unfair
competition, conflicts of interest, or unsound banking practices. Some
of the activities determined by Federal Reserve regulation to be closely
related to the business of banking are: making or servicing loans or
leases; engaging in insurance and discount brokerage activities; owning
thrift institutions; performing data processing services; acting as a
fiduciary or investment or financial advisor; and making investments in
corporations or projects designed primarily to promote community welfare.

Financial Holding Companies.  On November 12, 1999 the Gramm Leach Bliley
Act became law, repealing much of the 1933 Glass-Steagall Act`s separation
of the commercial and investment banking industries and permitting bank
holding companies to become financial holding companies and affiliate with
securities firms and insurance companies, as well as engage in other
activities that are financial in nature. The Gramm Leach Bliley Act
expands the range of nonbanking activities a bank holding company may
engage in, while preserving existing authority for bank holding companies
to engage in activities that are closely related to banking.  The new
legislation creates a new category of holding company called a `financial
holding company.` If each of a bank holding company`s subsidiary banks is
well capitalized under regulatory prompt corrective action provisions, is
well managed, and has at least a satisfactory rating under the Community
Reinvestment Act, the bank holding company may become a financial holding
company by filing a declaration that the bank holding company wishes to
become a financial holding company. No regulatory approval is necessary
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. Financial holding companies may
engage in any activity that is ~



~ financial in nature or incidental to that financial activity, or
~ complementary to a financial activity and that does not pose a
   substantial risk to the safety and soundness of depository
   institutions or the financial system generally.

Activities that are financial in nature include ~

~ acting as principal, agent, or broker for insurance,
~ underwriting, dealing in, or making a market in securities, and
~ providing financial and investment advice.

The Federal Reserve and the Secretary of the Treasury have authority to
decide that other activities are also financial in nature or incidental
to financial activity, taking into account changes in technology,
changes in the banking marketplace, competition for banking services,
and so on.  The Federal Reserve has authority under Rule 225.83
(12 CFR 225.83) to prohibit a company from exercising the enhanced powers
of a financial holding company if the Federal Reserve determines that the
company`s bank subsidiary is not well capitalized or well managed.
National Bancshares is and has been engaged solely in activities that
were permissible for a bank holding company before enactment of the
Gramm Leach Bliley Act.

Holding Company Capital and Source of Strength.  The Federal Reserve
considers the adequacy of a bank holding company`s capital on essentially
the same risk-adjusted basis as capital adequacy is determined by the
 FDIC at the bank subsidiary level.  It is also Federal Reserve policy
that bank holding companies serve as a source of strength for their
subsidiary banking institutions, committing resources to subsidiary
banks when necessary. A holding company might be compelled to provide
support to a subsidiary bank when the holding company does not have the
resources to provide it. Additionally, the National Bank Act gives the
OCC authority to assess a national bank`s stockholders (or the bank`s
holding company) if the bank`s capital becomes impaired. 12 U.S.C. 55.
If the stockholders (or holding company) fail to pay the assessment within
three months, the OCC could order the sale of the bank`s stock to cover the
deficiency.

Under Bank Holding Company Act section 5(e), the Federal Reserve may
require a bank holding company to terminate any activity or relinquish
control of a nonbank subsidiary if the Federal Reserve determines that
the activity or control constitutes a serious risk to the financial
safety, soundness, or stability of a subsidiary bank. And with the
Federal Deposit Insurance Corporation Improvement Act of 1991`s addition
of the prompt corrective action provisions to the Federal Deposit
Insurance Act, section 38(f)(2)(I) of the Federal Deposit Insurance Act
now provides that a federal bank regulatory authority may require a bank
holding company to divest itself of an undercapitalized bank subsidiary
if the agency determines that divestiture will improve the bank`s
financial condition and prospects.

Deposit Insurance. The FDIC insures the deposits of the Bank to the
extent provided by law. Prior to 2007, under the FDIC`s risk-based
insurance system, depository institutions were assessed premiums based
upon the institution`s capital position and other supervisory factors.
Effective January 1, 2007, the FDIC began using a new approach to assess
premiums. The FDIC places each depository institution in one of four risk
categories using a two-step process based first on capital ratios
(the capital group assignment) and then on other relevant information
(the supervisory group assignment). Within the lowest risk category, known
as Risk Category I, rates will vary based on each institution`s CAMELS
component ratings, certain financial ratios (for most institutions), and
long-term debt issuer ratings (for large institutions that have such a
rating). In 2009, rates ranged between 7 and 77.5 cents per $100 in
assessable deposits depending on the risk category to which an insured
depository institution was assigned. Institutions in Risk Category I
were charged a rate between 7 and 24 cents per $100 in assessable
deposits in 2009. The FDIC premium assessment rates have increased
dramatically for the first quarter of 2009 and are anticipated to remain
at increased levels for the next several years.

On February 8, 2006, the Federal Deposit Insurance Reform Act of 2005
(the `Reform Act`) was signed into law as part of the Deficit Reduction
Act of 2005. Among other provisions, the Reform Act provided for the
merger of the two insurance funds, Bank Insurance Fund (BIF) and Savings
Association Insurance Fund (SAIF), into a new single deposit insurance
fund, Deposit Insurance Fund (DIF). Prior to the merger of BIF and SAIF,
the Bank`s primary insurance fund for deposits was BIF. Among other
things, the Reform Act provides for the (i) modification of assessments
under the risk-based assessment system, (ii) replacement of a fixed
designated reserve ratio with a reserve range between 1.15% of estimated
insured deposits and 1.5% of estimated insured deposits, and (iii)
payment by the FDIC of dividends when certain reserve ratios exceed
certain thresholds. Because of recent depository institution failures,
the DIF reserve ratio fell significantly below 1.15%. The Reform Act
requires that the FDIC create and implement a plan to restore the reserve
ratio to at least 1.15% within five years.



On October 16, 2008, the FDIC published a notice in the Federal Register
concerning its establishment of the Federal Deposit Insurance Corporation
Restoration Plan (the `Restoration Plan`). The Restoration Plan is a five
year recapitalization plan for the DIF (subsequently amended to cover
a seven-year time frame, as discussed below) based, in part, on
significantly higher assessed DIF rates. Concurrent with the publication
of the Restoration Plan, the FDIC issued a proposed rule to increase the
DIF assessed rates for the first quarter of 2009 by 7 bps and, effective
April 1, 2009, to make certain other changes regarding risk-based
assessment and to set new deposit insurance rates. On December 22, 2008,
the FDIC issued a final rule in which it invoked the `good cause`
exception of the Administrative Procedures Act to waive the requirement
that once finalized a rule must have a delayed effective date of 30 days
from the publication date and, effective January 1, 2009, raised the first
quarter 2009 DIF assessed rates by 7 bps. Under the final rule, for the
first quarter of 2009, the new rates were expressed to range between 12
and 50 cents per $100 in assessable deposits depending on the risk
category to which an insured depository institution was assigned.
Institutions in Risk Category I were charged a rate between 12 and 14
cents per $100 in assessable deposits for the first quarter of 2009.
Such an increase in the DIF assessed rates more than doubles the previous
applicable rates for Tier I institutions.

On May 22, 2009, the FDIC adopted a rule designed to replenish the deposit
insurance fund. This rule established a special assessment of five basis
points on each FDIC-insured depository institution`s assets minus its
Tier 1 capital with a maximum assessment not to exceed 10 bps of an
institution`s domestic deposits. This special assessment was calculated
based on asset levels at June 30, 2009, and was collected on
September 30, 2009. The Corporation recorded an expense of $162,382
in 2009 in connection with this assessment.

Insured depository institutions are further assessed premiums for
Financing Corporation (`FICO`) bond debt service. The FICO assessment
rate for DIF in 2009 ranged between a high of 1.14 basis points for the
first quarter to a low of 1.02 for the fourth quarter. For the first
quarter of 2010, the FICO assessment rate for DIF is 1.06 basis points
resulting in a premium of $0.0106 per $100 of DIF-eligible deposits.

On November 17, 2009, the FDIC issued a final rule that required insured
institutions to prepay on December 30, 2009 their estimated quarterly
risk-based assessments for the fourth quarter of 2009 and for all of
2010, 2011 and 2012. For the fourth quarter of 2009 and for all of 2010,
the prepaid assessment rate was based on each institution`s total base
assessment rate for the third quarter of 2009, modified to assume that
the assessment rate in effect on September 30, 2009 had been in effect
for the entire third quarter of 2009. The prepaid assessment rates for
2011 and 2012 are equal to the modified third quarter of 2009 total base
assessment rate plus three bps adjusted quarterly for an estimated five
percent annual growth rate in the assessment base through the end of 2012.
As the prepayment related to future periods, it was recorded in other
assets for financial reporting purposes and will be recognized as expense
over the coverage period.

In November 2009, the Federal Reserve issued amendments to Regulation E,
which implement the Electronic Fund Transfer Act (Regulation E). The new
rules have a compliance date of July 1, 2010. These amendments change,
among other things, the way we and other banks may charge overdraft fees;
by limiting our ability to charge an overdraft fee for ATM and one-time
debit card transactions that overdraw a consumer`s account, unless the
consumer affirmatively consents to the bank`s payment of overdrafts for
those transactions. Changes to our overdraft practices will negatively
impact future service charge revenue primarily in Deposits.

Interstate Banking and Branching.  In 1994 the Riegle-Neal Interstate
Banking and Branching Efficiency Act eased restrictions on interstate
banking.  The Riegle-Neal Act allows the Federal Reserve to approve an
application by an adequately capitalized and adequately managed bank
holding company to acquire a bank located in a state other than the
acquiring company`s home state, without regard to whether the transaction
is prohibited by the laws of any state.  The Federal Reserve may not
approve the acquisition of a bank that has not been in existence for the
minimum time period (up to five years) specified by the statutory law of
the acquired, or `target,` bank`s state. The Riegle-Neal Act also
prohibits the Federal Reserve from approving an application if the



applicant (and its depository institution affiliates) controls or would
control more than 10% of the insured deposits in the United States or
30% or more of the deposits in the target bank`s home state or in any
state in which the target bank maintains a branch. The Riegle-Neal Act
does not affect the authority of states to limit the percentage of total
insured deposits in the state that may be held or controlled by a bank or
bank holding company if the limitation does not discriminate against
out-of-state banks or bank holding companies. Individual states may
also waive the 30% statewide concentration limit contained in the
Riegle-Neal Act.


Branching between states may be accomplished by merging commonly
controlled banks located in different states into one legal entity.
Branching may also be accomplished by establishing de novo branches or
acquiring branches in another state.  Under section 24(j) of the Federal
Deposit Insurance Act, a branch of a bank operating out-of-state ~ in a
`host state` in other words ~ is subject to the law of the host state
regarding community reinvestment, fair lending, consumer protection,
and establishment of branches. The Riegle-Neal Act authorizes the FDIC
to approve interstate branching de novo by state-chartered banks solely
in states that specifically allow it. Ohio bank law allows de novo
branching in Ohio by an out-of-state bank. The FDIC has adopted
regulations under the Riegle-Neal Act to prohibit an out-of-state bank
from using the new interstate branching authority primarily for the
purpose of deposit production. These regulations include guidelines
to ensure that interstate branches operated by an out-of-state bank
in a host state are reasonably helping to satisfy the credit needs
of the communities served by the out-of-state bank.

Capital ~ Risk-Based Capital Requirements.  The Federal Reserve Board
and the OCC employ similar risk-based capital guidelines in their
examination and regulation of bank holding companies and national banks.
If capital falls below the minimum levels established by the guidelines,
the bank holding company or bank may be denied approval to acquire or
establish additional banks or non-bank businesses or to open new
facilities. Failure to satisfy capital guidelines could subject a
banking institution to a variety of enforcement actions by federal
bank regulatory authorities, including the termination of deposit
insurance by the FDIC and a prohibition on the acceptance of `brokered
deposits.`

In the calculation of risk-based capital, assets and off-balance sheet
items are assigned to broad risk categories, each with an assigned
weighting (0%, 20%, 50% and 100%).  Most loans are assigned to the
100% risk category, except for first mortgage loans fully secured by
residential property, which carry a 50% rating.  Direct obligations of
or obligations guaranteed by the United States Treasury or United States
Government agencies have a 0% risk-weight. Off-balance sheet items are
also taken into account in the calculation of risk-based capital, with
each class of off-balance sheet item being converted to a balance sheet
equivalent according to established `conversion factors.` From these
computations, the total of risk-weighted assets is derived. Risk-based
capital ratios therefore state capital as a percentage of total
risk-weighted assets and off-balance sheet items. The ratios established
by guideline are minimums only.

Current risk-based capital guidelines require bank holding companies with
more than $500 million in total assets and all banks to maintain a minimum
risk-based total capital ratio equal to 8% and a Tier 1 capital ratio
of 4%.  Intangibles other than readily marketable mortgage servicing
rights are generally deducted from capital. Tier 1 capital includes
stockholders` equity, qualifying perpetual preferred stock (within
limits and subject to conditions, particularly if the preferred stock
is cumulative preferred stock), and minority interests in equity accounts
of consolidated subsidiaries, less intangibles, identified losses,
investments in securities subsidiaries, and certain other assets.
Tier 2 capital includes the allowance for loan losses, up to a maximum
of 1.25% of risk-weighted assets, any qualifying perpetual preferred stock
exceeding the amount includable in Tier 1 capital, mandatory convertible
securities, and subordinated debt and intermediate term preferred stock,
up to 50% of Tier 1 capital. The OCC`s evaluation of an institution`s
capital adequacy takes into account a variety of other factors as well,
including interest rate risks to which the institution is subject, the
level and quality of an institution`s earnings, loan and investment
portfolio characteristics and risks, risks arising from the conduct
of nontraditional activities, and a variety of other factors.

Accordingly, the OCC`s final supervisory judgment concerning an
institution`s capital adequacy could differ significantly from the
conclusions that might be derived from the absolute level of an
institution`s risk-based capital ratios.  Therefore, institutions
generally are expected to maintain risk-based capital ratios that
exceed the minimum ratios discussed above. This is particularly true
for institutions contemplating significant expansion plans and
institutions that are subject to high or inordinate levels of risk.



The banking agencies have also established a minimum leverage ratio of
3%, which represents Tier 1 capital as a percentage of total assets, less
intangibles.  However, for all but the most highly rated banks and bank
holding companies, the banking agencies expect an additional margin of at
least 100 to 200 basis points. At December 31, 2009, the bank was in
compliance with all regulatory capital requirements. Actual and required
capital amounts and ratios are presented elsewhere, specifically in
Note 14 of National Bancshares`s audited financial statements for the
year ended December 31, 2009.

Prompt Corrective Action.  To resolve the problems of undercapitalized
institutions and to prevent a recurrence of the banking crisis of the
1980s and early 1990s, the Federal Deposit Insurance Corporation
Improvement Act of 1991 established a system known as `prompt corrective
action.` Under the prompt corrective action provisions and implementing
regulations, every institution is classified into one of five categories,
depending on its total risk-based capital ratio, its Tier 1 risk-based
capital ratio, its leverage ratio, and subjective factors. The categories
are `well capitalized,` `adequately capitalized,` `undercapitalized,`
`significantly undercapitalized` and `critically undercapitalized.`
A financial institution`s operations can be significantly affected by
its capital classification. For example, an institution 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 institution must guarantee, in part, aspects of the
institution`s capital plan. Financial institution regulatory agencies
generally are required to appoint a receiver or conservator shortly
after an institution enters the category of weakest capitalization.
The Federal Deposit Insurance Corporation Improvement Act of 1991
also authorizes the regulatory agencies to reclassify an institution
from one category into a lower category if the institution is in an
unsafe or unsound condition or engaging in an unsafe or unsound practice.
Undercapitalized institutions are required to take specified actions to
increase their capital or otherwise decrease the risks to the federal
deposit insurance funds.

Limits on Bank Dividends to the Holding Company.  National Bancshares`s
ability to obtain funds for the payment of dividends and for other
cash requirements depends on the amount of dividends that may be paid
to it by the Bank. Under the National Bank Act and OCC Rule 5.64, without
OCC approval a national bank may not pay a cash dividend if the amount
of the dividend exceeds retained net income for the year and for the two
preceding years (after any required transfers to surplus). A national
bank`s ability to pay dividends may be affected also by the OCC`s capital
maintenance requirements. Moreover, regulatory authorities may prohibit
banks and bank holding companies from paying dividends if payment of
dividends would constitute an unsafe and unsound banking practice.

A 1985 policy statement of the Federal Reserve declares that a bank
holding company should not pay cash dividends on common stock unless
the organization`s net income for the past year is sufficient to fully
fund the dividends and the prospective rate of earnings retention appears
consistent with the organization`s capital needs, asset quality, and
overall financial condition.

Transactions with Affiliates.  The Bank must comply with section 23A
and section 23B of the Federal Reserve Act, pertaining to transactions
with affiliates. These statutes are intended to protect banks from abuse
in financial transactions with affiliates, preventing federally insured
deposits from being diverted to support the activities of unregulated
entities engaged in nonbanking businesses.  An affiliate of a bank
includes any company or entity that controls or is under common control
with the bank. Generally, section 23A and section 23B of the Federal
Reserve Act ~


~ limit the extent to which a bank or its subsidiaries may lend to or
   engage in various other kinds of transactions with any one affiliate
   to an amount equal to 10% of the bank`s capital and surplus, limiting
   the aggregate of covered transactions with all affiliates to 20% of
   capital and surplus,
~ impose restrictions on investments by a subsidiary bank in the stock
   or securities of its holding company,
~ impose restrictions on the use of a holding company`s stock as
   collateral for loans by the subsidiary bank, and
~ require that affiliate transactions be on terms substantially the
   same or at least as favorable to the institution or subsidiary as
   those provided to a non-affiliate.



The Bank`s authority to extend credit to insiders ~ meaning executive
officers, directors and greater than 10% stockholders ~ or to entities
those persons control, is subject to section 22(g) and section 22(h) of
the Federal Reserve Act and Regulation O of the Federal Reserve Board.
Among other things, these laws require insider loans to be made on terms
substantially similar to those offered to unaffiliated individuals, place
limits on the amount of loans a bank may make to insiders based in part
on the Bank`s capital position, and require that specified approval
procedures be followed. Loans to an individual insider may not exceed
the legal limit on loans to any one borrower, which in general terms is
15% of capital but can be higher in some circumstances. And the
aggregate of all loans to all insiders may not exceed the Bank`s
unimpaired capital and surplus. Insider loans exceeding the greater
of 5% of capital or $25,000 must be approved in advance by a majority
of the board, with any `interested` director not participating in the
voting. Lastly, loans to executive officers are subject to special
limitations. Executive officers may borrow in unlimited amounts to
finance their children`s education or to finance the purchase or
improvement of their residence, and they may borrow no more than
$100,000 for most other purposes. But loans to executive officers
exceeding $100,000 may be allowed if the loan is fully secured by
government securities or a segregated deposit account.

Community Reinvestment Act.  Under the Community Reinvestment Act of
1977 (`CRA`) and implementing regulations of the banking agencies, a
financial institution has a continuing and affirmative obligation ~
consistent with safe and sound operation ~ to respond to the credit
needs of its entire community, including low- and moderate-income
neighborhoods. The CRA does not establish specific lending requirements
or programs for financial institutions, nor does it limit an institution`s
discretion to develop the types of products and services it believes are
best suited to its particular community. The CRA requires that bank
regulatory agencies conduct regular CRA examinations and provide written
evaluations of institutions` CRA performance. The CRA also requires
that an institution`s CRA performance rating be made public. CRA
performance evaluations are based on a four-tiered rating system:
Outstanding, Satisfactory, Needs to Improve and Substantial Noncompliance.
Since the inception of the CRA, banking institutions ~ particularly the
largest banks and savings associations ~ have faced increasingly difficult
regulatory obstacles and public interest group objections in connection
with their regulatory applications, including institutions that have
received the highest possible CRA ratings.

Although CRA examinations occur on a regular basis, CRA performance
evaluations have been used principally in the evaluation of regulatory
applications submitted by an institution.  CRA performance evaluations
are considered in evaluating applications for such things as mergers,
acquisitions, and applications to open branches. A bank holding company
cannot elect to be a `financial holding company` ~ with the expanded
securities, insurance and other powers that designation entails ~ unless
all of the depository institutions owned by the holding company have a
CRA rating of satisfactory or better. Following a CRA examination as
of May 31, 2007, the Bank`s most recent examination, the Bank received
a rating of `Satisfactory.`

Monetary Policy.  The earnings of financial institutions are affected
by the policies of regulatory authorities, including monetary policy of
the Federal Reserve. An important function of the Federal Reserve System
is regulation of aggregate national credit and money supply. The Federal
Reserve accomplishes these goals with measures such as open market
transactions in securities, establishment of the discount rate on bank
borrowings, and changes in reserve requirements against bank deposits.
These methods are used in varying combinations to influence overall growth
and distribution of financial institutions` loans, investments and
deposits, and they also affect interest rates charged on loans or paid on
deposits. Monetary policy is influenced by many factors, including
inflation, unemployment, short-term and long-term changes in the
international trade balance, and fiscal policies of the United States
government. Federal Reserve monetary policy has had a significant
effect on the operating results of financial institutions in the past,
and it can be expected to influence operating results in the future.

Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act of 2002 addresses
accounting oversight and corporate governance matters, and, among other
things: (a) required executive certification of financial presentations,
(b) increased requirements for board audit committees and their members,
(c) enhanced disclosure of controls and procedures and internal control
over financial reporting, (d) enhanced controls on, and reporting of,
insider trading and (e) increased penalties for financial crimes and
forfeiture of executive bonuses in certain circumstances.



The legislation and its implementing regulations have resulted in
increased costs of compliance, including certain outside professional
costs. To date these costs have had a significant impact on our
operations, which have included costs to add regulatory support
personnel and costs to ensure effectiveness of internal controls
and testing.


ITEM 1B ~ UNRESOLVED STAFF COMMENTS

We have not received any comments from the staff of the Securities
and Exchange Commission about our periodic and current reports within
the last 180 days and, accordingly, we do not have any unresolved
comments from the staff.



ITEM 2 ~ PROPERTIES



First National Bank operates fourteen full service offices in a market
area comprising most of Wayne County, western Stark County, northeastern
Holmes County, southern Medina County and southwestern Summit County.  The
Bank`s offices, all of which are owned by First National Bank except as
indicated, are ~

					    		Net Book Value
Location		     		County		(Dollars in Thousands)

							
Main Office:
112 West Market Street			Wayne		$  499
Orrville, Ohio 44667

Other Full-service Offices:
12 West Main Street			Wayne		$  533
Dalton, Ohio 44618

1320 West High Street			Wayne		$  781
Orrville, Ohio 44667

4934 Kidron Road			Wayne		$  795
Kidron, Ohio 44636

153 East Main Street			Wayne		$  613
Smithville, Ohio 44677

15974 East Main Street			Wayne		$   47
Mt. Eaton, Ohio 44659

7227 Lincoln Way East			Wayne		$  118
Apple Creek, Ohio 44606

1725 Cleveland Road			Wayne		$  528
Wooster, Ohio 44691

4192 Burbank Road			Wayne		$1,194
Wooster, Ohio 44691








					    		Net Book Value
Location		     		County		(Dollars in Thousands)

							
211 Lincoln Way East			Stark		$1,428
Massillon, Ohio 44646

2312 Lincoln Way N.W.			Stark		$  380
Massillon, Ohio 44647


106 Ainsworth Street			Medina		$  292
Lodi, Ohio 44254

4885 Atlantic Drive			Medina		$1,062
Seville, Ohio 44667

3085 West Market Street			Summit		$  122
Fairlawn, OH 44303
(leased location)

Cash ATM Only:

1720 North Main Street			Wayne		$  125
Orrville, OH 44667

51 Massillon Marketplace Drive S.W.	Stark		$    0
Massillon, OH 44646
(leased location)

Operations Center:

1444 North Main Street
Orrville, OH 44667			Wayne		$  516



At December 31, 2009 the net book value of the Bank`s investment in
premises and equipment totaled $9.0 million. The Bank`s electronic data
processing functions are performed under contract with an electronic
data processing services firm that performs services for financial
institutions throughout the Midwest.

ITEM 3 ~ LEGAL PROCEEDINGS

From time to time the Bank is involved in various legal proceedings
that are incidental to its business. In the opinion of management,
based upon information currently available to us, no current legal
proceedings are material to the financial condition of National
Bancshares or the Bank, either individually or in the aggregate
and are not likely to have a material adverse effect on our
consolidated financial position, results of operations or cash flows.
This statement represents a forward-looking statement under the
Private Securities Litigation Reform Act of 1995. Actual results
could differ materially from management`s opinion based on a variety
of factors, including the uncertainties involved in the proof of legal
and factual matters in legal proceedings.

ITEM 4 ~ SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of National Bancshares` shareholders
during the fourth quarter of 2009.



Part II

ITEM 5 ~ MARKET FOR REGISTRANT`S COMMON EQUITY, RELATED STOCKHOLDER
          MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Incorporated by reference to `Price Range of Common Stock` appearing on
page 54 of National Bancshares`s Annual Report 2009.  National Bancshares
had 876 shareholders of record as of March 5, 2010.

Because National Bancshares is dependent on its Bank subsidiary for
earnings and funds necessary to pay dividends, the ability of National
Bancshares to pay dividends to its shareholders is subject to bank
regulatory restrictions. See, `Supervision and Regulation ~ Limits on
Bank Dividends to the Holding Company.`

Incorporated by reference to `Comparison of Five-Year Cumulative Total
Return Of National Bancshares Corporation, S&P 500 Stock Index, and
S&P 500 Bank Index` appearing on page 53 of National Bancshares
Corporation`s Annual Report 2009.



EQUITY COMPENSATION PLAN INFORMATION



Plan Category		Number of securities to  				  	Number of securities
                        be issued upon exercise 	Restricted stock 		remaining available for
			of outstanding options,		awards issued in		future issuance under
			warrants and rights		2009				equity compensation plans
											
Equity compensation
plans approved by
the security holders	53,000 (1)			3,605 (2)			166,843

Equity compensation
plans not approved
by the security
holders			-				-				-

Total			53,000				3,605				166,843
(1) Weighted-average exercise price of outstanding options, warrants and
     rights is $18.03
(2) The fair value of the stock award was determined to be $14.01 per share
     using the closing market price of National Bancshares` common stock on
     the date of grant




A description of the equity compensation plan is incorporated by reference
to `Note 13 ~ Stock-Based Compensation` appearing on page 43 of National
Bancshares Corporation`s Annual Report 2009.

Issuer Purchase and Sales of Equity Securities

No equity securities of National Bancshares were repurchased or sold by
it during 2009.


ITEM 6 ~ SELECTED FINANCIAL DATA

Incorporated by reference to `Selected Financial Data` appearing on pages
6 and 7 of National Bancshares Corporation`s Annual Report 2009.

ITEM 7 ~ MANAGEMENT`S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
	 RESULTS OF OPERATIONS

Incorporated by reference appearing on pages 8 through 25 of National
Bancshares Corporation`s Annual Report 2009.

ITEM 7A ~ QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information concerning the interest-rate risks to which First National
Bank`s assets and liabilities are exposed is contained in `Management`s
Discussion and Analysis of Financial Condition and Results of Operations`
appearing on pages 20 and 21 of National Bancshares Corporation`s Annual
Report 2009.



ITEM 8 ~ FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Consolidated Financial Statements and the Report of Independent Auditors
are incorporated by reference from pages 26 through 51 of National Bancshares
Corporation`s Annual Report 2009.

ITEM 9 ~ CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
	 FINANCIAL DISCLOSURE

No changes in or disagreements with the independent accountants have
occurred in the two most recent fiscal years or since the end of
December 31, 2009.

ITEM 9AT ~ CONTROLS AND PROCEDURES

With the participation of the President and the Chief Executive Officer,
and the Chief Financial Officer, management carried out an evaluation of
the effectiveness of the design and operation of National Bancshares`s
disclosure controls and procedures as of the end of 2009. Based upon
that evaluation, the President and Chief Executive Officer, and the
Chief Financial Officer concluded that as of December 31, 2009 National
Bancshares`s disclosure controls and procedures were effective (1) to
ensure that information required to be disclosed by National Bancshares
in reports it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms, and (2) in
timely alerting them to material information of National Bancshares
(including First National Bank) required to be included in this annual
report on Form 10-K. During the fourth quarter of 2009 there were no
changes in National Bancshares`s internal controls over financial
reporting that have materially affected or are reasonably likely to
affect National Bancshares`s internal controls over financial reporting.

The report of Management on the Corporation`s Internal Control Over
Financial Reporting is incorporated by reference on page 52 of National
Bancshares`s Annual Report 2009.


ITEM 9B ~ OTHER INFORMATION

None




Part III

ITEM 10 ~ DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information concerning the directors of National Bancshares is
incorporated by reference from pages 4 through 7 of the definitive proxy
statement for the 2010 annual meeting of shareholders, filed or to be
filed with the Securities and Exchange Commission not later than 120
days after December 31, 2009. Disclosure by National Bancshares about
directors` and executive officers` compliance with Section 16(a) of
the Securities Exchange Act of 1934 appears on page 16 of the proxy
statement for the 2010 annual meeting, and it is incorporated herein
by reference.



The executive officers of National Bancshares are ~



Name			Age	Position
				
David C. Vernon		69	President and Chief Executive Officer of National Bancshares
                                Corporation and First National Bank. He served as Chairman
                                Emeritus of Central Federal Corporation from February 28, 2008
                                until April 8, 2009; and its wholly owned subsidiary CFBank,
                                a federally chartered savings association headquartered in
                                Fairlawn in Summit County, Ohio from February 28, 2008 until
                                May 15, 2008. He served as a director and Vice-Chairman of
                                Central Federal Corporation and CFBank from January 1, 2006
                                until February 28, 2008. He served as Chairman of Central
                                Federal Corporation and CFBank from January 2003 until
                                January 1, 2006. He also served as Central Federal Corporation`s
                                and CFBank`s Chief Executive Officer in 2003 and 2004 and as
                                President of both companies from March 2003 to January 2005.
                                Before joining Central Federal and CFBank, he was Chairman,
                                President and Chief Executive Officer of Founders Capital
                                Corporation in Akron, Ohio from September 2002 to February 2003;
                                a Strategic Planning Consultant to Westfield Bank in Westfield, Ohio
                                from May 2000 to July 2002; a Consultant to Champaign National Bank
                                in Urbana, Ohio from July 1999 to April 2002; and a Consultant
                                to First Place Bank in Warren, Ohio from April 1999 to February 2001.
                                In February 1999, Mr. Vernon retired as Chairman, President and
                                Chief Executive Officer of Summit Bank, an Akron-area community
                                bank he founded in January 1991.

James R. VanSickle	39	Senior Vice President and Chief Financial Officer of
				National Bancshares Corporation and Senior Vice President
				and Chief Financial Officer of First National Bank since June 2007.
				Mr. VanSickle is the principal financial and accounting officer.
				Prior to joining First National Bank, he worked with Crowe Chizek
				and Company LLC as and Executive in the firm`s Financial Institutions
				Group. He joined Crowe in 1992 and was promoted to Executive in 2003.

Thomas R. Poe		55	Senior Vice President and Senior Loan Officer of First National Bank
	                        since January 2009. Mr. Poe has worked for National City Bank,
                                National City Commercial Finance, Inc., GMAC Commercial Finance,
                                Structured Finance Division, and MidCap Business Credit, L.L.C.
                                He has over 30 years experience in banking focusing on commercial
                                and asset-based lending.


Steven L. Riddick	61	Vice President and Senior Credit Officer of First National Bank
                                since October 2006. Previously, Mr. Riddick served as Vice President,
                                Commercial Banking and Branch Manager, Seville Office of First
                                National Bank.

Paul G. Kubiak		49	Vice President, Retail Banking for First National Bank since April 2009.
                                Prior to this, Mr. Kubiak was Vice President of Client Services and
                                Operations since 2007 and Vice President of Client Services and a
                                business development officer for the Bank since March 2004. Prior to
                                joining the Bank, he served as Manager of Customer Service for Bekaert
                                Contours and Contours, Ltd., a manufacturing firm in Orrville, Ohio.



There are no family relationships among any of the executive officers.



National Bancshares has adopted a Code of Business Conduct and Ethics
applicable to all of our directors and employees, including the principal
executive officer. We have also adopted a Code of Ethical Conduct for the
Finance Officers and Finance Department Personnel applicable to all finance
department personnel, including our principal executive, financial and
accounting officers.

National Bancshares Corporation`s board of directors has determined that it
has at least one `audit committee financial expert` serving on the Audit
Committee. National Bancshares considers Director John Cook, CPA, Ph.D. to be
an Audit Committee Financial Expert, based on his experience as partner in an
accounting firm. Information regarding the Audit Committee is incorporated by
reference to pages 8 through 10 of National Bancshares` Proxy Statement for
the 2009 annual meeting, under the caption `Audit Committee` and `Audit
Committee Report.`

ITEM 11 ~ EXECUTIVE COMPENSATION

Incorporated by reference from pages 13 and 14 of the definitive Proxy
Statement for the 2010 annual meeting of shareholders, filed or to be filed
with the Securities and Exchange Commission not later than 120 days after
December 31, 2009.

ITEM 12 ~ SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
	  RELATED STOCKHOLDER MATTERS

Incorporated by reference from page 3 of the definitive Proxy Statement for
the 2010 annual meeting of shareholders, filed or to be filed with the
Securities and Exchange Commission not later than 120 days after
December 31, 2009.

ITEM 13 ~ CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Incorporated by reference from page 16 of the definitive Proxy Statement
for the 2010 annual meeting of shareholders, filed or to be filed with the
Securities and Exchange Commission not later than 120 days after
December 31, 2009.

ITEM 14 ~ PRINCIPAL ACCOUNTANT FEES AND SERVICES

Incorporated by reference from page 8 of the definitive Proxy Statement
for the 2010 annual meeting of shareholders, filed or to be filed with the
Securities and Exchange Commission not later than 120 days after
December 31, 2009.



PART IV

ITEM 15 ~ EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1)  	Financial Statements

The following financial statements are included in this document in Item 8:
 	~ Report of Independent Registered Public Accounting Firm
 	~ Consolidated Balance Sheets at December 31, 2009 and 2008
 	~ Consolidated Statements of Income for the Years Ended December 31, 2009,
	  2008, and 2007
 	~ Consolidated Statements of Changes in Shareholders` Equity for the Years
	  Ended December 31, 2009, 2008, and 2007
 	~ Consolidated Statements of Cash Flows for the Years Ended
	  December 31, 2009, 2008, and 2007
 	~ Notes to Consolidated Financial Statements

(a)(2) 	Financial Statement Schedules

Financial Statement Schedules have been omitted because they are not
applicable or the required information is shown elsewhere in the document in
the Financial Statements or Notes thereto, or in the Management`s Discussion
and Analysis of Financial Condition and Results of Operations section.

(a)(3) 	Exhibits

See the list of exhibits below



(b) Exhibits Required by Item 601 of Regulation S-K



 Exhibit
  Number	Description					Location
								
3.1	        Amended Articles of Incorporation		Incorporated by reference to the identically numbered
								exhibit to the Annual Report on Form 10-K for the fiscal
								year ended December 31, 2003, filed on March 26, 2004

3.		Amended By-Laws					Incorporated by reference to the identically numbered
								exhibit to the Annual Report on Form 10-K for the fiscal
								year ended December 31, 2008, filed on March 28, 2008

10.1*	        Directors` Defined Benefit Plan Agreement	Incorporated by reference to the identically numbered
								exhibit to the Annual Report on Form 10-K for the fiscal
								year ended December 31, 2000, filed on March 29, 2001

10.2*		Employment Agreement entered into by		Incorporated by reference on Form 8-K dated
		David C. Vernon and National Bancshares		November 27, 2007.
		and First National Bank

10.3*		Employment Agreement entered into by		Incorporated by reference on Form 8-K dated
		James R. VanSickle and National Bancshares	June 19, 2007.
		and First National Bank

10.4*		Employment Agreement entered into by		Incorporated by reference on Quarterly Report 10-Q
		Thomas R. Poe and National Bancshares		filed November 16, 2009
		and First National Bank

13		2009 Annual Report to Security Holders		Filed herewith

14.1		Code of Business Conduct and Ethics		Filed herewith

14.2		Code of Ethical Conduct for the Finance 	Filed herewith
		Officers And Finance Department	Personnel

21		Subsidiaries					Filed herewith

23		Consent of Crowe Horwath LLP 			Filed herewith

31.1		Certification of Chief Executive Officer under	Filed herewith
		Sarbanes-Oxley Act Section 302

31.2		Certification of Chief Financial Officer under	Filed herewith
		Sarbanes-Oxley Act Section 302

32		Certification pursuant to 18 U.S.C. 		Filed herewith
		Section 1350,as enacted pursuant to
		Section 906 of the Sarbanes-Oxley Act
		of 2002

*  Management contract or compensatory plan or arrangement



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

National Bancshares Corporation

By:/s/ David C. Vernon
David C. Vernon
President and Chief Executive Officer

Date: 	March 30,2010



Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.


							
/s/ David C. Vernon                          		March 30, 2010
David C. Vernon
President, Chief Executive Officer, and Director

/s/ James R. VanSickle                                	March 30, 2010
James R. VanSickle, Sr. Vice President &
Chief Financial Officer
(Principal Accounting and Financial Officer)

/s/ Sara E Steinbrenner Balzarini            		March 30, 2010
Sara E. Steinbrenner Balzarini, Director

/s/ John Cook, CPA, Ph. D.                 		March 30, 2010
John Cook, CPA, Ph. D., Director

/s/ Bobbi E. Douglas                                	March 30, 2010
Bobbi E. Douglas, Director

/s/ John W. Kropf                                	March 30, 2010
John W. Kropf, Director

/s/ John L. Muhlbach, Jr                                March 30, 2010
John L. Muhlbach, Jr., Director

/s/ Victor B. Schantz                                	March 30, 2010
Victor B. Schantz, Director

/s/ Stephen W. Schmid                             	March 30, 2010
Stephen W. Schmid, Director

/s/ James R. Smail					March 30, 2010
James R. Smail, Director

/s/ Howard J. Wenger                           		March 30, 2010
Howard J. Wenger, Director

/s/ Albert W. Yeagley                                  	March 30, 2010
Albert W. Yeagley, Director

EX-13

TABLE OF CONTENTS


3	Message to Shareholders

5	Financial Highlights

6	Selected Financial Data

8	Management`s Discussion and Analysis of Financial Condition and
	Results of Operations

26	Consolidated Balance Sheets

27	Consolidated Statements of Income

28	Consolidated Statements of Changes in Shareholders` Equity

29	Consolidated Statements of Cash Flows

30	Notes to Consolidated Financial Statements December 31, 2008, 2007 and 2006

51	Report of Independent Registered Public Accounting Firm

52	Report of Management on the Coorporation`s Internal Control Over Financial
	Reporting

53	Comparison of Five-Year Cumulative Total Return of National Bancshares
	Corporation, S&P 500 Stock Index, and S&P 500 Bank Index

54	Price Range of Common Stock

54	Shareholder Information

55	Officers

56	Directors

56	First National Bank Offices




MESSAGE TO SHAREHOLDERS


Dear Shareholders:

We continued to make progress in 2009 even though earnings declined 27% from
$1.00 per share to $0.73 per share. Any earnings decline is a disappointment,
but 2009 was a very unusual year. Actually, we could characterize 2009 as the
`exclamation point` on the `bubble decade.` Some have referred to the last
ten years as the lost decade. Whatever we choose to call it, all of us know
we are living in a very challenging economic environment.

When our clients suffer financially, we suffer. In our business, `we feel
your pain` is not a cliche. People without jobs can not make loan payments.
Retail merchants who suffer a decline in business can not make rent or
mortgage payments. Businesses who suffer a decline in sales can not make
loan payments. Millions of people have lost jobs and in some parts of the
United States real estate values have been cut in half.

In 2009, we witnessed a record number of personal bankruptcies and business
failures. As a result we made the prudent decision to increase the provision
for loan losses by over $1 million from $482 thousand in 2008 to $1.8 million
in 2009. This increased provision also directly reduced net income. An end to
the current economic malaise is not in sight and we intend to continue making
an increased provision to the allowance for loan losses in 2010.

In 2009, we witnessed `too big to fail` brokerage firms, insurance companies
and banks being bailed out by the Federal Government. Community banks, on
the other hand, were not treated in similar fashion. Community banks were
allowed to fail and many of them did. The cost of those failures caused the
FDIC to increase the cost for deposit insurance. In 2009, our FDIC insurance
premium increased from $35 thousand in 2008 to $605 thousand, an increase
of $570 thousand. This increase in the cost for FDIC insurance directly
reduces net income. Please take some time to review the financial statements
and footnotes contained in this Annual Report for more details about our
2009 financial results.

Now let`s discuss some good news. In 2009, net interest income increased
nearly $1 million. The volume of new loans in 2009 set a record. New
commercial loans totaled $52 million and commercial loan fee income increased
from $72 thousand in 2008 to $291 thousand in 2009. Our new Fairlawn office
originated $27 million in new commercial loans, many of them in Wayne and
Stark counties, in just seven months. Income from originating mortgage
loans increased from $19 thousand in 2007 and $126 thousand in 2008 to
$353 thousand in 2009. In an effort to underscore the fact that we are
ready and willing to make loans, it is now possible for anyone to apply
for a loan and talk with a loan consultant 24/7.

In 2009, we significantly increased the sale of business cash management
and remote deposit services which make it possible for local businesses to
deposit checks electronically from their offices and eliminate the need to
make a trip to the bank. In the past four months local businesses made
remote electronic deposits totaling $58 million. Hundreds of our business
customers are now using the many new services we have introduced in the
last two years.

In 2009, we introduced Bonus Checking, a service for customers who use our
debit card, make deposits electronically, use our bill pay service and
receive their statement electronically. Bonus Checking earns an annual
percentage yield of 4.02% on the entire balance up to $25 thousand. We also
introduced a Health Savings Account with a Debit Card which makes it much
easier for clients to use the account for medical expenses.

Our new Seville office opened in February, our Fairlawn office opened in
May and the downtown Massillon, West High in Orrville, Smithville and
Dalton offices were remodeled to incorporate all of the design elements of
our office rebranding project.

In many ways, 2009 was a dreadful year but the positives far outweigh the
negatives. This is a tough economic environment, but the difficulties we
face are less severe than what we witness each day in other parts of our
country and the world. We are surely blessed because our Bank is strong.
We have an outstanding and dedicated Board of Directors, and the best
staff and management team any community bank could possibly assemble. Most
importantly, we have the support of you, our shareholders.

Thank you for your interest in National Bancshares Corporation and First
National Bank. All of the Directors, Officers and staff appreciate your
support.


David C. Vernon
President and CEO



Last year at the annual meeting, Donna Dale Davis, one of our long time
shareholders and 2005 Orrville Citizen of the Year, suggested we let
everyone know about our charitable giving. In 2009, the Charitable Giving
Committee of the Board of Directors approved gifts to the following
organizations. Thank you for the great suggestion, Donna Dale.


Boy Scouts of America
Central Christian High School Building
Every Woman`s House
First National Bank Scholarship (Wayne County Community Foundation)
Heartland Education Community, Inc.
ICAN Housing Solutions
Kidron Community Historical Society
Kidron United Fund
Main Street Wooster, Inc.
Massillon Boys and Girls Club
Massillon Chamber of Commerce
Newspapers in Education
Orrville Area Boys and Girls Club
Orrville Chamber of Commerce
Orrville Community Chorus
Orrville-Dalton YMCA
Orrville Public Library
Orrville School Multi-Purpose Facility
Orrville United Way, Inc.
Paint Township Area Fireworks
Smithville Community Historical Society
STEPS (FKA Wayne County Alcoholism Services)
United Way of Wayne and Holmes Counties
United Way of Western Stark County
Village Network (FKA Boy`s Village)
Wayne College Capital Campaign
Wayne Development Council
Wayne/Holmes Soap Box Derby
Wooster Chamber of Commerce
Wooster Jazz Arts Festival
Wooster/Orrville NAACP
Young Life of Wayne County


Special thanks to the following local companies who have helped us with the
rebranding and remodeling of our offices.

Kidron Electric
Marshall Construction
RBS Construction
Northstar Asphalt
Orrville Plumbing and Heating
Benchmark Craftsmen
Adams Signs



FINANCIAL HIGHLIGHTS


These financial highlights are excerpts of and are not a substitute for
National Bancshares Corporation`s consolidated financial statements,
including notes, and other detailed financial information we provide
elsewhere in this document. You should read the entire document,
including the Financial Review and the consolidated financial statements
and notes to the consolidated financial statements.

Financial Position
(Dollar amounts in thousands, except per share data)
								Percentage
At December 31,			2009		2008		Change
								
Total assets			$370,228	$338,002	 9.5 %
Deposits		 	 291,373	 263,642	10.5 %
Loans, net		 	 194,071	 179,831	 7.9 %
Securities		 	 130,241	 127,248	 2.4 %
Shareholders` equity	 	  38,903	  36,881	 5.5 %
Book value per share	 	   17.64	   16.75	 5.3 %


Year ended December 31,						
Net interest income		$ 12,228	$ 11,286	 8.3 %
Income before income taxes	   2,007	   2,964       (32.3)%
Net income			   1,609	   2,194       (26.7)%
Cash dividends declared		     705	   1,404       (49.8)%
Net income per share		    0.73	    1.00       (27.0)%
Cash dividends per share	    0.32       	    0.64       (50.0)%



National Bancshares Corporation is the holding company for First
National Bank, a federally chartered national bank formed in Ohio
in 1881. First National Bank has fourteen offices in Orrville,
Massillon, Wooster, Apple Creek, Dalton, Fairlawn, Kidron, Lodi,
Mt. Eaton, Seville and Smithville. Additional information is available
at www.discoverfirstnational.com.



SELECTED FINANCIAL DATA

(Dollar amounts in thousands, except per share data)

As of or for the years ended December 31,

				2009		2008		2007		2006		2005
												
Income statement data:
Interest income			$16,465		$17,071		$17,832		$17,157		$16,075
Interest expense		  4,237		  5,785		  6,968		  5,995		  4,128
Net interest income		 12,228		 11,286		 10,864		 11,162		 11,947
Provision for loan losses	  1,829		    482		    147  	    160 	    159
Net interest income after
  provision for loan losses	 10,399		 10,804		 10,717		 11,002		 11,788
Noninterest income		  2,972		  2,333		  1,990		  1,653		  1,801
Noninterest expense		 11,364		 10,173		 10,500		 11,354		 10,986
Income before income taxes	  2,007		  2,964		  2,207		  1,301		  2,603
Income taxes			    398		    770		    496		    137		    503
Net income			  1,609		  2,194		  1,711		  1,164		  2,100

Balance sheet data:
Cash and due from banks		$ 8,124		$11,001		$11,842		$ 8,955		$11,985
Federal funds sold		      -		      -		    443		  9,820		  8,780
Securities			130,241		127,248		 84,514		 86,000		 77,009
Loans, net			194,071		179,831		191,488		184,481		191,538
Deposits			291,373		263,642		242,523		247,681		249,488
Borrowings			 36,720		 34,285		 26,374		 22,744		 19,952
Shareholders` equity		 38,903		 36,881		 34,991		 34,680		 34,653
Total assets			370,228		338,002		306,651		308,358		306,881

Share and per share data:
Net income			$  0.73		$  1.00		$  0.77		$  0.52		$  0.94
Cash dividends			   0.32		   0.64		   0.64		   0.64		   0.64
Book value at period end	  17.64		  16.75		  15.85		  15.52		  15.51
Weighted average number
  of shares outstanding	      2,202,457	      2,203,218	      2,231,369	      2,234,488	      2,234,488

Performance ratios:
Return on average equity	  4.21%		  6.20%		  4.94%		  3.29%		  5.90%
Return on average assets	  0.46%		  0.70%		  0.56%		  0.38%		  0.70%
Dividend payout percentage	 43.82%		 64.00%		 83.58%		122.87%		 68.10%
Efficiency ratio (1)		 74.76%		 74.70%		 81.69%		 88.60%		 79.91%
Full-time equivalent staff	   101		   108		   105		   132	           135
Average total assets to
  full-time equivalent staff	$3,491		$2,916		$2,903		$2,296		$2,234

Asset quality ratios:
Allowance for loan losses
  to ending total loans		  1.48%		  0.95%		  1.05%		  1.07%		  0.98%
Net loan charge-offs
  to average loans		  0.35%		  0.41%		  0.06%		  0.03%		  0.01%

Capital ratios:
Average equity to average
assets				 10.84%		 11.24%		 11.35%		 11.66%		 11.81%
Leverage ratio (2)		  7.40%		  7.78%		  8.26%	  	  8.57%		  9.76%
Total risk-based capital
ratio (2)			 12.64%		 12.60%		 12.78%		 13.26%		 14.45%

(1) The efficiency ratio is calculated by dividing noninterest expenses by
the sum of net interest income and noninterest income.
(2) Computed in accordance with Comptroller of the Currency and FDIC guidelines.





SELECTED FINANCIAL DATA

The following table shows quarterly results of operations for 2009 and 2008.

													Basic and
			Interest 	Net interest	Provision for	Income before			diluted earnings
			income		income 		loan losses	income taxes	Net income	per share
(Dollar amounts in thousands)
													
2009
First quarter		$4,208		$2,993		$123		$780		$573		$0.26
Second quarter		 4,149		 3,013		 228		 596		 454		 0.21
Third quarter		 4,026		 3,072		 576		 285		 267		 0.12
Fourth quarter		 4,082		 3,150		 902		 346		 315		 0.14

2008
First quarter		$4,270		$2,744		$187		$660		$491		$0.22
Second quarter		 4,196		 2,763		  71		 685		 514		 0.23
Third quarter		 4,294		 2,843		 126		 778		 574		 0.26
Fourth quarter		 4,311		 2,936		  98		 841		 615		 0.28






MANAGEMENT`S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

This section of the annual report is intended to assist the reader in
evaluating the performance of National Bancshares Corporation for the
years ended December 31, 2009, 2008 and 2007. This information should
be read in conjunction with the consolidated financial statements and
accompanying notes to the financial statements.

Forward Looking Statement
The Private Securities Litigation Reform Act of 1995 contains safe harbor
provisions regarding forward-looking statements. Forward-looking statements
can be identified by terminology such as `believes,` `expects,`
`anticipates,` `estimates,` `intends,` `should,` `will,` `plans,`
`potential` and similar words. Forward-looking statements are also
statements that are not statements of historical fact. Forward-looking
statements necessarily involve risks and uncertainties. They are merely
predictive or statements of probabilities, involving known and unknown
risks, uncertainties and other factors. If one or more of these risks or
uncertainties occurs or if the underlying assumptions prove incorrect,
actual results in 2010 and beyond could differ materially from those
expressed in or implied by the forward-looking statements.

Forward-looking statements are based upon a variety of estimates and
assumptions. The estimates and assumptions involve judgments about a number
of things, including future economic, competitive, and financial market
conditions and future business decisions. These matters are inherently
subject to significant business, economic, and competitive uncertainties,
all of which are difficult to predict and many of which are beyond
National Bancshares Corporation`s control. Although we believe the
estimates and assumptions are reasonable, actual results could vary
materially from those shown. Inclusion of forward-looking information
does not constitute a representation by National Bancshares Corporation
or any other person that the indicated results will be achieved. You are
cautioned not to place undue reliance on forward-looking information.

Management Strategy
The Corporation is a community-oriented financial institution offering a
variety of financial services to meet the needs of the communities it
serves. The Corporation attracts deposits from the general public and
uses such deposits, together with borrowings and other funds, primarily
to originate commercial and commercial real estate loans, single-family
and multi-family residential mortgage loans, home equity loans and lines
of credit and consumer loans.

During 2009, the Corporation continued to execute a plan, which was
implemented in December 2006. The plan focuses on four critical areas.
These areas are first; enhancing services for depositor clients, second;
strengthening regulatory compliance, third; enhancing the Corporation`s
ability to originate loan assets and fourth; reducing costs and increasing
noninterest income.

In the first half of 2008, the Corporation introduced `Platinum Checking`,
a high-interest checking account for clients with balances above $10
thousand. The Platinum Checking account product accounted for $45.0 million
or 15.4% of total deposits at December 31, 2009. In November 2008, the
Corporation introduced `Bonus Checking`, an account that pays bonus
interest to clients that use our Visa debit card, bill pay services,
receive their account statement online, and make at least one electronic
direct deposit. The Bonus Checking account product accounted for $2.1 million
of deposits at December 31, 2009. In 2009, the Corporation introduced `Mobile
Banking`, a program which allows customers to receive text message alerts
regarding account balances and allows clients to access online banking
accounts through the use of a cell phone internet browser.

Loans, net of allowance for loan losses increased $14.3 million from year-end
2008 to year-end 2009. The loan demand in the Bank`s primary market remains
soft. However, the Bank has been able to achieve loan growth by taking
advantage of the opportunity to lend to businesses in search of a bank
that will be responsive to their credit needs as other banks have tightened
lending requirements. The Bank opened a full-service office in Fairlawn,
Ohio in May, 2009. The office is staffed by four business bankers and
one corporate services specialist, who are focused on the sale of
business financial services in Summit and Cuyahoga counties. The Fairlawn
office has generated over $27 million in loans and over $2.2 million in
deposits since opening.

The Corporation initiated an office rebranding project in the second half
of 2008. The Seville Office was moved from a leased location to a new
Bank-owned facility in February 2009 as part of the project. The Corporation
has completed the remodeling of the Burbank Road (Wooster), Smithville,
West High (Orrville), Downtown Massillon and Dalton offices as of
December 31, 2009.

Office of the Comptroller of the Currency (`OCC`) regulations require
banks to maintain certain minimum levels of regulatory capital.
Additionally, the regulations establish a framework for the classification
of banks into five categories: well-capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized. Generally, an institution is considered well-capitalized
if it has a core (Tier 1) capital ratio of at least 5.0% (based on adjusted
total assets); a core (Tier 1) risk-based capital ratio of a least 6.0%; and
a total risk-based capital ratio of at least 10.0%. The Bank had capital
ratios above the well-capitalized levels at December 31, 2009 and
December 31, 2008.

The Corporation is not aware of any market or institutional trends, events
or uncertainties that are expected to have a material effect on liquidity,
capital resources or operations. The Corporation is not aware of any current
recommendations by its regulators which would have a material effect if
implemented. The Corporation has not engaged in sub-prime lending activities
and does not plan to engage in those activities in the future.

Financial Condition
Total assets increased 9.5% to $370.2 million as of December 31, 2009, from
$338.0 million at December 31, 2008. Securities available for sale totaled
$130.2 million as of December 31, 2009, compared to $127.2 million at
December 31, 2008. Loans, net of allowance for loan losses increased $14.3
million to $194.1 million as of December 31, 2009, compared to $179.8 million
at December 31, 2008. Deposits increased 10.5% to $291.4 million as of
December 31, 2009, compared to $263.6 million at December 31, 2008.
Shareholders` equity increased 5.4% to $38.9 million at the end of 2009,
from $36.9 million at the end of 2008. Accumulated other comprehensive
income increased to $2.5 million as of December 31, 2009, compared to
$1.5 million as of December 31, 2008. The change in accumulated other
comprehensive income was a result of an increase in unrealized gains
on securities available for sale.

Loans
Total loans increased by $15.6 million or 8.6% from year-end 2009 to
year-end 2008. The Bank continues to focus its efforts on attracting
commercial loan business. Commercial and commercial real estate loans
increased $18.3 million during 2009. The Bank`s loan portfolio consists
of $154.5 million loans secured by real estate, which represents 78.2% of
total loans as of December 31, 2009.

First National Bank`s loan policy provides for a loan mix up to 60% of total
loans for commercial loans, up to 40% of total loans for consumer loans, up
to 60% of total loans for residential real estate loans and up to 200% of
total capital for commercial real estate loans. The loan to deposit ratio
will not exceed 90%.

The Bank purchased $1.2 million of automobile loans from another Ohio bank
during 2009. All of the purchased loans were underwritten individually using
the same underwriting standards used for loans generated in our offices.






Loan portfolio composition at December 31,

			2009		2008		2007		2006		2005
			$	 %	$	 %      $ 	 %	$	 %	$	 %
(Dollar amounts in thousands)
				 		 		 		 		 
Real estate:
Commercial		$65,139	 33%	$48,034	 27%	$51,463	 27%	$45,737	 25%	$47,638	 25%
Residential		 50,390	 26%	 54,924	 30%	 80,113	 41%	 86,652	 46%	 91,592	 47%
Home equity		 26,526	 13%	 24,442	 13%	 20,857	 11%	 19,383	 10%	 19,045	 10%
Construction(1)		 12,395   6%	 12,846	  7%	  8,367	  4%	  6,079	  3%	  6,440	  3%
			154,450	 78%	140,246	 77%	160,800	 83%	157,851	 84%	164,715	 85%

Consumer		 12,343	  6%	 14,354	  8%	 11,988	  6%	  7,522	  4%	  6,205	  3%
Commercial		 26,792	 14%	 25,583	 14%	 17,552	  9%	 18,519	 10%	 20,046	 10%
Credit cards  		      -	  0%	      -	  0%	  1,614	  1%	  1,521	  1%	  1,406	  1%
Other		          3,830	  2%	  1,658	  1%	  1,987	  1%	  1,609	  1%	  1,566   1%
Total Loans		197,415	100%	181,841	100%	193,941	100%	187,022	100%	193,938	100%
Less:
Unearned and
  deferred income	   (438)	   (292)	   (425)	   (548)	   (496)
Allowance for
  loan losses		 (2,906)	 (1,718)  	 (2,028)	 (1,993)	 (1,903)
Net loans		$194,071	$179,831	$191,488        $184,481        $191,539
Net loans as
  a percent of
  total assets		  52.42%	  53.20%	  62.45%	  59.83%	  62.41%

(1) ~ Includes land development.


Ranked by North American Industry Classification System ~ or NAICS ~ codes,
the industries most represented by First National Bank`s commercial
borrowers include lessors of residential buildings and dwellings and lessors
of non-residential buildings, in that order, accounting for 10.5% and 9.5%
of the total loans at year-end 2009, respectively.

Approximately 53% of the conventional mortgage loans secured by 1-4 family
real estate are long term fixed interest rate loans. The majority of loans
added to First National Bank`s portfolio, by the 2002 acquisition of
Peoples Federal, were fixed-rate residential mortgage loans, but the number
of such loans has declined since the merger as the fixed-rate mortgages have
been refinanced or paid off. Approximately 47% of the portfolio of
conventional mortgage loans secured by 1-4 family and multifamily real estate
at year-end 2009 consisted of adjustable rate loans. First National Bank`s
fixed-rate conventional mortgage loans are originated with loan
documentation that permits their sale in the secondary market. The Bank`s
policy is to classify all fixed-rate mortgage loans as `Held for Sale` or
`Held for Portfolio` at the time the loans are originated within various
scenarios and classifications set by the Bank. The classification is based
upon several factors such as the Bank`s interest rate risk position, the
loan`s interest rate and term, the Bank`s liquidity position, the interest
rate environment and general economic conditions.

Allowance for Loan Losses
As explained in Note 1 of the consolidated financial statements, the
allowance for loan losses is a valuation allowance for probable incurred
credit losses, increased by the provision for loan losses and recoveries,
and decreased by charge-offs. The allowance for loan losses is the sum
of components recognized and measured either: (1) according to Accounting
Standards Codification (ASC) 450-10-05, `Accounting for Contingencies,`
for pools of homogenous loans, or (2) according to ASC 310-10-35,
`Accounting by Creditors for Impairment of a Loan,` for loans the Bank
considers impaired based upon individual loan review. Management determines
the necessary allowance balance using the Bank`s loan loss experience, the
nature and volume of the portfolio, information about specific borrower
situations and estimated collateral values, economic conditions, and other
factors. Loan losses are charged against the allowance when management
believes the uncollectibility of a loan balance is confirmed.

Loans Analyzed Individually
Determining the loan loss allowance begins with the Bank`s assessment of
credit risk for loans analyzed individually. Individual loans are assigned
credit-risk grades based on the Bank`s assessment of conditions affecting
a borrower`s ability to satisfy its contractual obligation under the loan
agreement. The assessment process includes reviewing a borrower`s current
financial information, historical payment experience, credit documentation,
public information, and other information specific to each borrower. Loans
reviewed individually are reviewed at least annually or more frequently if
management becomes aware of information affecting a borrower`s ability to
fulfill its obligation. All loans over $250 thousand or to customers whose
aggregate total borrowing exceeds $250 thousand are reviewed individually,
except for first mortgage loans on a borrower`s personal residence. Loans
or customers with balances under $250 thousand may also be reviewed
individually if considered necessary by the board and management. All
commercial lending relationships over $100 thousand are ranked according
to risk at least annually. Risk rankings also change at any point during
the year if the creditworthiness of a borrower changes. In addition,
risk ratings are reviewed annually by a qualified independent third party.
The independent third party reviews all aggregate loan relationships of
$250 thousand or greater along with a sampling of loan relationships
between $100 thousand and $250 thousand. Loans analyzed individually are
ranked as follows:

Loans Graded 1, 2, 3 and 4 are loans that are considered satisfactory,
with lower than average risk and low probability of serious financial
deterioration on the borrower`s part.

Loans Graded 5 (`Watch`) are performing according to the terms of the
loan agreement but that nevertheless require enhanced management
supervision because of factors such as an unusual payment history or
a deterioration in the borrower`s financial condition.

Loans Graded 6 (`Special Mention`) have more than average risk, with
identified potential weaknesses that deserve management`s close attention.
Left uncorrected, the potential weaknesses could result in deterioration
of repayment prospects. In the case of a commercial borrower, for
example, potential weaknesses could include adverse trends in the
borrower`s operations or adverse economic or market conditions that
could affect the borrower in the future.

Loans Graded 7 (`Substandard`) are inadequately protected by the current
financial condition and paying capacity of the borrower or by the
collateral securing the loan. Substandard loans have a well-defined
weakness or weaknesses jeopardizing collection of the debt in full,
with a distinct possibility of loss if the weakness or weaknesses are
not corrected. Loans may be classified substandard even if payments are
not 90 days or more past due. Loans 90 days or more past due are
classified as substandard or lower unless the loan is adequately
collateralized and in the process of collection.



Loans Graded 8 (`Doubtful`) have all the weaknesses inherent in those
classified as substandard, with the added characteristic that existing
facts, conditions and values make collection or liquidation in full highly
questionable and improbable. The possibility of loss is extremely high,
but because of factors that could work to the borrower`s advantage
classification of the `doubtful` loan as `loss` is deferred.

Loans Graded 9 (`Loss`) are those considered uncollectible or portions of
loans that are considered uncollectable. Loans in this category are
charged-off by management.

If it is probable that the Bank will be unable to collect all principal and
interest due on a commercial or non-homogenous loan then that loan is
considered impaired. Management measures the amount of impairment using the
loan`s expected future cash flows (discounted at the loan`s effective
interest rate), or the fair value of the underlying collateral if loan
repayment is expected to come from the sale or operation of the collateral.
First National Bank considers commercial or non-homogenous loans graded
doubtful or loss to be impaired. Some loans graded substandard are
considered impaired. Special mention and watch loans are not considered to
be impaired. Impairment is evaluated in total for smaller-balance loans
of similar type and purpose ~ such as residential mortgage and consumer,
~ and on an individual loan basis for other loans (other loans consists
of loans to non-profit organizations and loans collateralized with cash).
If a loan is impaired, a portion of the loan loss allowance is allocated
so that the loan is reported net, at the present value of estimated future
cash flows using the loan`s existing rate or at the fair value of collateral
if repayment is expected solely from the collateral. Increases in the
allowance for loan losses are made by expensing a provision for loan losses.
No specific provision for loan losses expense would result if an
individually reviewed loan is graded higher than `watch`, but such loans are
included in the pools of loans analyzed under ASC 450-10-05. Loans
classified `special mention` or `substandard`, and smaller-balance loans
classified `doubtful` are assigned a provision based upon a historical
migration analysis performed on classified loans. The migration analysis
identifies the percentage of classified loans by category that has
historically been ultimately charged-off. The migration percentages are
reviewed and adjusted by management to reflect various factors such as
the growth and change in mix of the loan portfolio and the regulator`s
guidelines. Loans ranked `loss` are charged off in their entirety because
at that point the unconfirmed loss that the loan loss allowance is
intended to approximate is considered to be confirmed.




As of December 31, 2009, 2008 and 2007 classified assets were as follows:

Classified assets at December 31,

				    2009		    2008		    2007
					Percent of		Percent of		Percent of
				Amount  total loans	Amount  total loans	Amount  total loans
(Dollar amounts in thousands)
											
Classified Loans:
  Special mention		$2,841	1.4%		$3,294	1.8%		$  401	0.2%
  Substandard			11,783	6.0%		 3,874	2.1%		 4,839	2.5%
  Doubtful		   	     -	0.0%		     -	0.0%		    79	0.0%
  Loss			   	     -	0.0%		     -	0.0%		     -	0.0%
    Total classified loans	14,624	7.4%		 7,168	3.9%		 5,319	2.7%
    Other classified assets	   104	0.1%		   354	0.2%		   194	0.1%
    Total classified assets	14,728	7.5%		 7,522	4.1%		 5,513	2.8%



Pools of Loans Analyzed under ASC 450
The total loan loss allowance is derived both from analysis of
individual impaired loans under ASC 310-10-35 and analysis of
aggregated pools of loans under ASC 450. Smaller balance loans
(such as automobile or home equity loans, for example), groups of
loans (such as residential mortgage loans), and less severely
classified loans reviewed individually may be analyzed on an
aggregated or pooled basis under ASC 450.

Under ASC 450, loans are segmented into groups of loans having
similar risk characteristics based on purpose, loan type, and
collateral, for example residential mortgage loans, home equity
loans, and consumer loans. Losses inherent in pools of loans are
estimated using average historical losses over a period of years
for loans of those types, but with adjustments to account for changes
in loan policies, changes in underwriting or loan recovery practices,
changes in prevailing economic conditions, changes in the nature or
volume of the loan portfolio, and changes in other internal and external
factors. Loans secured by real estate ~ particularly residential mortgage
loans ~ generally have less credit risk than other types of loans.

Changes in the Allowance for Loan Losses and Classified Assets
An effective loan review function is vital to the establishment of
an appropriate loan loss allowance. Loan officers and the Bank`s credit
analysts are responsible for the assignment of risk ratings for loans
reviewed individually. Each quarter, a committee consisting of the Bank`s
Chief Financial Officer and Senior Credit Officer evaluates the loan loss
allowance and reports the results of its evaluation to senior management
and the Bank`s board. The Bank adjusts its loan loss allowance
methodologies retrospectively as well, making adjustments in its
estimates and assumptions as necessary to account for variances of estimated
loan losses from actual loan loss experience. The Bank`s determination
about classification of its assets and the amount of its allowances is
subject to review by the Office of the Comptroller of the Currency (OCC),
which may order the establishment of additional loss allowances.

First National Bank`s allowance for loan losses increased $1.2 million
during the year to $2.9 million as of December 31, 2009. The allowance
for loan losses to total loans was 1.48% at December 31, 2009. This is
an increase of 53 basis points when compared to December 31, 2008. The
percentage of the allowance for loan losses to total loans was 0.95% at
December 31, 2008. Total nonperforming loans have increased from
$2.0 million as of December 31, 2008 to $5.2 million at December 31, 2009.
In 2009, total classified loans increased from $7.2 million to $14.6 million
or 102.8%. A stagnant local economy and marginal deterioration of the
financial position of some of the Bank`s commercial borrowers led to more
loans being classified.

Loan review and monitoring is integral to effective credit administration
and risk management. In order to minimize the credit risk inherent in the
lending process, management and the Board of Directors has adopted a more
formal and systematic approach with credit administration and loan review.
As part of this systematic approach, a qualified independent third party
was engaged to perform loan reviews in both 2009 and 2008. Management
intends to continue this practice on an annual basis.



Loans deemed uncollectible are charged against the allowance for loan
losses. After a loan is charged off, the Bank continues its efforts to
recover the loss. Recoveries of previously charged-off amounts are
credited to the allowance for loan losses. The Bank recorded a $400
thousand partial charge-off of a $1.6 million commercial real estate
loan in 2009. The Bank recorded a $676 thousand partial charge-off of
a $1.7 million commercial real estate loan in 2008. Transactions in the
allowance for loan losses are summarized in following table:



				  Year ended December 31,

				  2009		  2008		  2007		  2006		  2005
(Dollar amounts in thousands)
				  		  		  		  		  
Balance, beginning of period	  $1,718	  $2,028	  $1,993	  $1,903	  $1,763
Loans charged off:
Collateralized by real estate:
     Commercial			       -	     688	       -	      39	       -
     Residential		      38	      16	      12	      42	       -
     Home equity		      25	       9	       -	       -	       -
     Construction and land
       development		     400	       -	       -	       -	       -
Consumer			     195	      69	      72	      43	       8
Commercial			       -	      32	      67	      17	      33
Credit cards		       	       1	      21	       -	      21	      16
Other		                       -	      10	       -	       -	       -
     Total loans charged off         659	     845	     151	     162	      57
Recoveries of loans
  previously charged off:
Collateralized by real estate:
     Commercial			       -	       5	       -	       -	       -
     Residential		       -	      14	       1	      14	       -
     Home equity		       2	       2	       -	       -	       -
     Construction and land
      development		       -	       -	       -	      55	      32
Consumer			      15	      11	      37	      16	       5
Commercial		     	       1	       -	       -	       1	       1
Credit cards		               -	       1	       1	       6	       -
Other			               -	      20	       -	       -	       -
     Total recoveries	              18	      53	      39	      92	      38
Net loans charged off		    (641)	    (792)	    (112)	     (70)	     (19)
Provision charged to operations	   1,829	     482	     147	     160	     159

Balance, end of period		  $2,906	  $1,718	  $2,028	  $1,993	  $1,903
Loans outstanding:
          Average		$184,965	$192,472	$187,888	$186,146	$197,064
          End of period		 196,977	 181,549	 193,941	 187,022	 193,937
Ratio of allowance for loan
  losses to total loans
  outstanding at end of period	   1.48%	   0.95%	   1.05%	   1.07%	   0.98%
Net charge offs to average loans   0.35%	   0.41%	   0.06%	   0.04%	   0.01%




The allowance for loan losses is allocated among loan categories as shown in
the following table. Although the Bank considers inherent losses in
individual loans and categories of similar loans when it establishes
the loan loss allowance, the allowance is a general reserve available
to absorb all credit losses in the portfolio. No part of the allowance
is segregated for or dedicated to any particular asset or group of assets.


			Allocation of the allowance for loan losses at December 31,
			2009			2008			2007			2006			2005
			Amount	Percent(1)	Amount	 Percent(1)	 Amount	Percent(1)	Amount	Percent(1)	Amount	Percent(1)
(Dollar amounts in thousands)
																
Real estate:
     Commercial		$  810	33%		$  501	27%		$  779	27%		$  654	25%		$  720	25%
     Residential	    97	26%		   169	30%		   321	41%		    88	46%		   186	47%
     Home equity	    78	13%		   121	13%		   115	11%		     9	10%		     8	10%
     Construction(2)	   446	 6%		    26	 7%	 	     -	 4%		     -	 3%		     -	 3%
Consumer		   261	 6%		   280	 8%		   116	 6%		    89	 4%		    40	 3%
Commercial		 1,206	14%		   579	14%		   552	 9%		 1,064	10%		   826	10%
Credit cards		     -	 0%		     -	 0%		    48	 1%		    31	 1%		    47	 1%
Other			     5	 2%		    10	 1%		     -	 1%		    58	 1%		    76	 1%
Unallocated		     3	n/a		    32	n/a		    97	n/a		     -	n/a		     -	n/a
	Total		$2,906  100%		$1,718	100%		$2,028	100%		$1,993	100%		$1,903	100%

(1) ~ Percent of loans in each category to total loans.
(2) ~ Includes land development.





Management reviews nonperforming assets on a regular basis and assesses the
requirement for specific reserves on those assets. Any loan past due 90 days
or more and any loan on non-accrual is considered to be a nonperforming
asset. Any loan 90 days or more past due that is not both adequately
collateralized and in a positive cash-flow position and any loan to a
borrower experiencing serious financial deterioration may be placed on
non-accrual by the Senior Credit Officer with the concurrence of senior
management. Interest received on non-accrual loans ~ also referred to as
nonperforming loans ~ is recorded as a reduction of principal. The table
to follow summarizes nonperforming assets and other nonperforming assets
by category.


				        Problem assets at December 31,
					2009		2008		2007		2006		2005

(Dollar amounts in thousands)
													
Real estate:
Commercial:
	Non-accrual			$  2,432	$  1,306	$  2,106	$    454	$      -
	Past due 90 days or more	       -	       -	       -	       -	       -
Residential:
	Non-accrual			     503	      60	     209	     223	     599
	Past due 90 days or more	     362	     173	     142	     217	     198
Home equity:
	Non-accrual			     386	     386	       -	       8	       5
	Past due 90 days or more	      86	      34	       9	       -	       -
Construction and land development:
	Non-accrual			   1,200	       -	       - 	     276	       -
	Past due 90 days or more	       -	       -	       -	       -	       -
Not collateralized by real estate:
Consumer and other:
	Non-accrual			       -	       -	       -	       -	       4
	Past due 90 days or more	      10	      24	       1               8	       5
Commercial:
	Non-accrual			     195	       -	     330	   1,100	   1 472
	Past due 90 days or more	       -	      30	       -	      22    	      36
Credit cards:
	Non-accrual			       -	       -	       -	       -	       -
	Past due 90 days or more	       -	       -	       6   	       -	       6
	Total nonperforming loans	   5,174	   2,013	   2,803	   2,308	   2,325
Other real estate owned			     104	     354	     194	     103	     103
     Total nonperforming assets		$  5,278	$  2,367	$  2,997	$  2,411	$  2,428
Loans outstanding, net			$194,071	$179,831	$191,488	$184,481	$191,538
Nonperforming loans
  to total net loans			    2.67%	   1.12%	   1.46%	   1.25%	   1.21%
Nonperforming assets
  to total assets			    1.43%	   0.70%	   0.98%	   0.78%	   0.79%
Allowance for loan losses
  to total loans			    1.48%	   0.95%	   1.05%	   1.07%	   0.98%
Allowance for loan losses
  to nonperforming loans   		   56.17%	  85.35%	  72.35%	  86.38%	  81.86%





Securities
Total securities increased $3.0 million or 2.4% at December 31, 2009 when
compared to December 31, 2008. Securities are primarily comprised of
mortgage-backed securities, municipal securities and securities issued by
corporations. The Bank actively purchases bonds issued by local
municipalities, school systems and other public entities when opportunities
arise. Securities are classified either as held to maturity or as available
for sale. The Bank does not hold any securities for trading purposes. If
management has the intent and the Bank has the ability at the time of
purchase to hold a security until maturity, the security is classified as
held to maturity and it is reflected on the balance sheet at amortized
cost. Securities to be held for indefinite periods and not intended to be
held to maturity or on a long-term basis are classified as available for
sale, and they are reflected on the balance sheet at their fair value.
Management generally believes that all securities should be classified
as available for sale but makes that determination at the time of purchase.
In order to more effectively manage securities and to be in a better
position to react to market conditions, at December 31, 2009, all securities
were classified as available for sale. At year-end 2009 and 2008 there was
no single issuer of securities where the total book value of such securities
exceeded 10% of shareholders` equity except for U.S. government and agency
obligations.




The following table shows the amortized cost and estimated fair values of
the corporation`s securities portfolio at the date indicated.

							Gross		Gross
					Amortized	unrealized	unrealized	Fair
					cost		gains		losses		value

(Dollar amounts in thousands)
											
December 31, 2009
Available for sale:
U.S. Government and federal agency	$    819	$     -		$      -	$    819
State and municipal			  28,019	    763		     (99)	  28,683
Corporate bonds and notes	   	   7,640	    137		       -	   7,777
Mortgage-backed: residential         	  89,972	  3,058		     (87)	  92,943
Equity securities			      23	      -		      (4)	      19
	Total securities		$126,473	$ 3,958		$   (190)	$130,241

December 31, 2008
Available for sale:
State and municipal			$ 16,173	$   234		$   (193)	$ 16,214
Corporate bonds and notes		   7,630	      5		    (453)	   7,182
Mortgage-backed: residential		 101,220	  2,616		       -	 103,836
Equity securities		 	      23	      -		      (7)	      16
	Total securities		$125,046	$ 2,855		$   (653)	$127,248

December 31, 2007
Available for sale:
U.S. Government and federal agency	$ 10,107	$   161		$      -	$ 10,268
State and municipal		  	  15,786	    295		     (13)	  16,068
Corporate bonds and notes	  	  17,864	     26		    (295)	  17,595
Mortgage-backed: residential	  	  40,310	    294		     (21)	  40,583
	Total securities		$ 84,067	$   776		$   (329)	$ 84,514







The contractual maturity of securities available for sale at
December 31, 2009 is shown below.

	 		One year	More than one	More than five	More than
			or less		to five years	to ten years	ten years	Total securities

			Carrying value	Carrying value	Carrying value	Carrying value	Carrying value		Market
			Average yield	Average yield	Average yield	Average yield	Average yield		value
(Dollar amounts in thousands)
														
U.S. Government and 	$     -		$      -	$    819	$      -	$    819		$    819
  federal agency	      -		       -	   4.40%	       -	   4.40%

State and municipal	    784		   1,873	  13,727	  12,299	  28,683		  28,683
			  4.09%		   4.27%	   3.93%	   3.98%	   3.97%
Corporate bonds
  and notes		  5,242	   	   2,535	       -	       -    	   7,777	   	   7,777
			  4.94%	   	   5.05%	       -	       -	   4.98%

Mortgage-backed:
  residential   	      -    	   5,201	  36,474  	  51,268  	  92,943		  92,943
			      -	       	   1.62%	   4.68%	   4.56%	   4.44%

Total 		        $ 6,026	        $  9,609	$ 51,020	$ 63,567	$130,222		$130,222
			  4.83%	           3.04%	   4.47%	   4.45%	   4.37%



Restricted Equity Securities
As of December 31, 2009, the Bank held 24,855 shares of $100 par value
Federal Home Loan Bank of Cincinnati stock, which are restricted-equity
securities. FHLB stock represents an equity interest in the FHLB, but it
does not have a readily determinable fair value. The stock can be sold
at its par value only, and only to the FHLB or to another member
institution. Member institutions are required to maintain a minimum stock
investment in the FHLB, based on total assets, total mortgages, and total
mortgage-backed securities.

Total Liabilities
Total liabilities increased by $30.2 million or 10.0% from 2008 to 2009.
This increase is primarily a result of a $19.6 million increase in
interest-bearing deposits and an increase of $6.0 million in Federal
Home Loan Bank advances.

Deposits
Deposits increased during 2009 by $27.7 million or 10.5%. The increase
is primarily attributed to a growth in interest-bearing demand deposits
of $25.3 million. This increase was partially offset by decreases in
savings and time deposits. Savings accounts decreased by $3.3 million
or 6.6% from the end of 2008 to the end of 2009. This was primarily
due to customers moving to higher yielding demand accounts. Time deposits
decreased by $2.5 million or 3.3%. This decrease is a result of the
success of our premium money market and interest-bearing checking accounts,
and management`s decision to maintain a reasonable time deposit rate
structure. Interest-bearing demand deposits, which include negotiable order
of withdrawal accounts and money market demand accounts, increased $25.3
million or 27.4% during 2009. Much of the increase in this category is
attributed to the Bank`s success in marketing our `Platinum Checking`
account. First National Bank has not solicited brokered deposits.





Maturity of time deposits of $100,000 or more at December 31, 2009

(Dollar amounts in thousands)

Time Remaining to Maturity			Amount      	Percent of Total
     							
     Three months or less			$ 6,244		39.7%
     Over three through 12 months		  5,400		34.4%
     Over one year through 3 years		  3,386		21.6%
     Over 3 years				    682		 4.3%
     Total					$15,712	       100.0%



Liquidity and Capital Resources
A Bank`s liquidity risk is the risk associated with having to satisfy
current and future financial obligations in a timely manner. Both short-
and long-term liquidity needs are addressed by maturities and sales of
unpledged securities, loan repayments and maturities, sales of loans that
are not pledged as security for FHLB borrowings, and transactions in cash
and cash equivalents, such as federal funds purchased. The use of these
resources, combined with access to credit, provide funds for satisfying
depositor and borrower needs. Management considers the Bank to have
satisfactory liquidity, with the ability to satisfy the demands of customers
and the local economy. Liquidity may be adversely affected by unexpected
deposit outflows, which can be caused by higher interest rates paid by
competitors. Management continually monitors projected liquidity needs and
establishes a desirable level based in part on the Bank`s commitment to
make loans as well as management`s assessment of the Bank`s ability to
generate funds.



The most liquid assets are cash and cash equivalents, which at year-end 2009
consisted of $8.1 million in cash and due from banks. At year-end 2008 cash
and cash equivalents consisted of $11.0 million in cash and due from banks.
Federal funds sold are overnight investments with correspondent banks, an
investment and liquidity tool used to maximize earning assets. Securities
classified as available for sale that are not pledged are another source of
liquidity. We consider the Bank`s loans-to-deposits ratio to assess
liquidity, seeking to cap the ratio of loans to deposits at 90%. The ratio
of total loans to deposits at year-end 2009 was 67.6%. At the end of 2009
the fair value of securities available for sale was approximately $130.2
million, while the total carrying value of securities pledged was
approximately $45.9 million, representing securities pledged to secure
public deposits and repurchase agreements.

The Corporation`s operating activities, as described in the Consolidated
Statements of Cash Flows in the attached consolidated financial statements,
include net cash provided of $1.4 million in 2009, $2.3 million in 2008 and
$1.8 million in 2007, generated principally from net income in those years.
The Bank reported $16.8 million in originations and proceeds from sales of
mortgage loans held for sale as operating activities in 2009.

The Corporation`s investing activities, as described in the Consolidated
Statements of Cash Flows in the attached consolidated financial statements,
consist primarily of loan originations and repayments, along with securities
purchases, sales and maturities. In 2009, net cash used in investing
activities was $33.6 million. The increase in loans over the year and the
purchase of loans utilized $16.3 million of cash. Net cash used to purchase
time deposits with other financial institutions was $13.6 million in 2009.
Purchases of property and equipment, primarily related to our office
rebranding project, were $3.4 million. In 2008, net cash used in investing
activities was $31.1 million. The increase in loans over the year and the
purchase of loans utilized $11.3 million of cash. Net cash used from
activity in securities available for sale totaled $20.3 million in 2008.
Management continued the reallocation of the investment portfolio started
in 2007 by primarily purchasing seasoned 15 and 20 year discount agency
mortgage-backed securities in 2008.

The Corporation`s financing activities, as described in the Consolidated
Statements of Cash Flows in the attached consolidated financial statements,
include the solicitation and repayment of customer deposits, borrowings
and repayments, treasury stock activity, and the payment of dividends.
In 2009, net cash provided by financing activities was $29.3 million.
The increase in deposits and short-term borrowings over the year provided
$24.2 million of cash. At December 31, 2009, the Bank had $27.0 million
of borrowings outstanding with FHLB, maturing in the years 2010, 2011,
2012 and 2014. This amount represents a $6.0 million increase from the
$21.0 million that was owed at the end of 2008.



First National Bank has approximately $13.6 million available in short-term
funding arrangements with its correspondent banks and the FHLB as of
December 31, 2009. Additional information concerning FHLB borrowings and
bank obligations under repurchase agreements is contained in Notes 8 and 9
of the consolidated financial statements of National Bancshares Corporation.
The outstanding balances and related information about short-term
borrowings, which consists almost entirely of securities sold under
agreements to repurchase are summarized as follows:


						Year ended December 31,
					2009		2008		2007
(Dollar amounts in thousands)
									
Balance at year-end			$ 6,105		$10,469		$ 8,831
Average balance outstanding		  7,442		 10,134		  8,642
Maximum month-end balance		  8,965		 11,136		 10,956
Weighted-average rate at year-end	  0.25%		  0.50%		  2.85%
Weighted-average rate during the year	  0.26%		  1.42%		  3.86%



The Bank is subject to federal regulations imposing minimum capital
requirements. Total risk-based capital, tier I risk-based capital, and
tier I leverage capital ratios are monitored to assure compliance with
regulatory capital requirements. At December 31, 2009, the Bank exceeded
minimum risk-based and leverage capital ratio requirements. The Bank`s ratio
of total capital to risk-based assets was 12.46% on December 31, 2009. The
minimum required ratio to be considered adequately capitalized is 8%.
Additional information concerning capital ratios at year-end 2009 and 2008
is contained in Note 14 of the consolidated financial statements.



Contractual Obligations
As discussed in the notes to National Bancshares Corporation`s consolidated
financial statements, obligations exist to make payments under contracts,
including borrowings. At December 31, 2009, the aggregate contractual
obligations are outlined below:




Payment due by period

(Dollar amounts in thousands)

						One year	More than one	More than three		More than
Contractual Obligations		Total		or less	 	to three years	to five years		five years
													
Time deposits			$ 72,850	$48,537		$18,141		$ 6,172			$    -
Long-term obligations		  27,000	 12,000		 10,000		  5,000		             -
Information system
  contract obligations		   5,230	  1,086		  2,162		  1,776			   206
Operating lease obligations	      25	     16		      9		      -		             -
	Total			$105,105	$61,639		$30,312		$12,948			$  206



Off-Balance Sheet and Contingent Liabilities
Financial instruments, such as loan commitments, credit lines, and letters
of credit are issued to satisfy customers` financing needs. Ordinarily
having fixed expiration dates, these commitments are agreements to provide
credit or to support the credit of others, as long as conditions established
in the contracts are satisfied. Off-balance-sheet risk in the form of
potential credit loss exists up to the face amount of these instruments,
although we do not expect losses. Since these commitments are viewed as
loans, the same credit policies used for loans are used to evaluate making
the commitments. These funding commitments by expiration period were as
follows at year-end 2009:



Expiration of funding commitments

				One year	More than
				or less		one year	Total
(Dollar amounts in thousands)
								
Unused loan commitments		$36,195		$24,372		$60,567
Commitment to make loans	  2,531		      -		  2,531
Letters of credit		    308		      -		    308
	Total			$39,034		$24,372		$63,406



Of the unused loan commitments, $9,974 are fixed-rate commitments and
$50,593 are variable-rate commitments. Rates on unused fixed-rate loan
commitments range from 6.25% to 21.9%. The funding commitments shown in
the table above do not necessarily represent future cash requirements
since experience demonstrates that a large percentage of funding
commitments expire unused or partially used.

The Bank is required by regulations of the Federal Reserve Board to
maintain cash reserves on hand or on deposit with the Federal Reserve
Bank. Reserve requirements vary according to the amount of a Bank`s
transaction accounts, checking accounts principally. First National
Bank was required to maintain cash reserve balances with the Federal
Reserve Bank of $100 thousand at year-end 2009 and $100 thousand at
year-end 2008.

The Bank sells some of the loans it originates, particularly conventional
fixed-rate residential mortgage loans. The loans are sold without recourse.
The Bank has retained mortgage-servicing rights on approximately $29.3
million of residential mortgage loans sold.

Shareholders` Equity
The $2.0 million or 5.4% increase in shareholders` equity from year-end 2008
to year-end 2009 was caused by an increase in retained earnings of $884
thousand and an increase in accumulated other comprehensive income, which
results from improvement in the fair value of securities available for
sale and earnings greater than the dividend payout. Accumulated other
comprehensive income represents the unrealized appreciation or depreciation
(net of taxes) in the fair value of securities available for sale.
Interest rate volatility, economic and interest rate conditions could
cause material fluctuations in accumulated other comprehensive income.
The dividend payout ratio for 2009 was 43.82% versus 64.00% in 2008.



National Bancshares Corporation is dependent on the Bank for earnings
and funds necessary to pay dividends, and the payment of dividends, by
the Bank to National Bancshares Corporation, is subject to bank
regulatory restrictions. According to the National Bank Act and Office
of the Comptroller of the Currency (OCC) Rule 5.64, a national bank
may never pay a cash dividend without advance OCC approval if the
amount of the dividend exceeds retained net income for the year and
for the two preceding years (after any required transfers to surplus).
The Bank could, without prior approval, pay dividends to the holding
company of approximately $437 as of December 31, 2009.

Interest Rate Sensitivity
Asset-liability management is the active management of a bank`s balance
sheet to maintain a mix of loans and deposits consistent with its goals
for long-term growth and risk management. Banks, in the normal course of
business, assume financial risk by making loans at interest rates that
differ from rates paid on deposits. Deposits often have shorter maturities
than loans and adjust to current market rates faster than loans. The
result is a balance sheet mismatch between assets (loans) and liabilities
(deposits).

The function of asset-liability management is to measure and control three
levels of financial risk: interest rate risk (the pricing difference between
loans and deposits), credit risk (the probability of default), and liquidity
risk (occurring when loans and deposits have different maturities).

A primary objective in asset-liability management is managing net interest
margin, that is, the net difference between interest earning assets (loans)
and interest paying liabilities (deposits) to produce consistent growth in
the loan portfolio and shareholder earnings, regardless of short-term
movement in interest rates. The dollar difference between assets (loans)
maturing or repricing and liabilities (deposits) is known as the rate
sensitivity gap (or maturity gap). Banks attempt to manage this
asset-liability gap by pricing some of their loans at variable interest
rates.

A more precise measure of interest rate risk is duration, which measures
the impact of changes in interest rates on the expected maturities of both
assets and liabilities. In essence, duration takes the gap report data and
converts that information into present-value worth of deposits and loans,
which is more meaningful in estimating maturities and the probability that
either assets or liabilities will reprice during the period under review.

Interest rate risk is the result of such risks as repricing risk, option
risk and basis risk. Repricing risk is caused by the differences in the
maturity, or repricing, of assets and liabilities. Most residential
mortgage and consumer loans give consumers the right to prepay with
little or no prepayment penalty, and because of competitive pressures,
it may not be advisable to enforce prepayment penalties on commercial
loans. First National Bank`s fixed-rate conventional mortgage loans are
originated with loan documentation that permits such loans to be sold in
the secondary market. The Bank`s policy is to classify these loans as
`Held for Sale` or `Held in Portfolio` at the time the loans are originated
based on such factors as the Bank`s liquidity position, interest rate
environment and general economic conditions.

Option risk is the risk that a change in prevailing interest rates will
lead to an adverse impact on earnings or capital caused by changes in the
timing of cash flows from investments, loans and deposits. Cash flows may
be received earlier than expected as a result of the exercise of the option
to prepay or withdraw early embedded in the financial contracts. The option
a borrower has to prepay a loan is similar to the option a depositor has
to make an early withdrawal from a deposit account. This form of embedded
option, which gives the customer the opportunity to benefit when interest
rates change in their favor, ordinarily occurs at the Bank`s expense in
the form of higher interest expense or lower interest income. Residential
mortgage loans tend to have higher option risk because of the borrower`s
option to prepay the loan, primarily through refinancing when rates
decline, and higher interest rate risk because of the longer term
associated with residential mortgage loans. Option risk in the form of
prepayments also affects the value of mortgage-backed securities.

Basis risk is the risk that changes in interest rates will cause
interest-bearing deposit liabilities to reprice at a different rate than
interest-bearing assets, creating an asset-liability mismatch. If for
example, a bank lends at a rate which changes as the prime rate changes
and finances the loan with deposits not tied to the prime rate as an index;
it faces basis risk due to the possibility that the prime rate-deposit
rate spread might change.

Economic Value of Equity
The economic value of equity (EVE) is the difference between the net present
value of the assets and the net present value of liabilities. EVE can be
thought of as the liquidation value of the Bank on the date the calculation
is made. Calculating EVE involves using a discount rate to calculate the
net present value of assets and liabilities after making assumptions about
the duration of assets and liabilities. As interest rates change, the
discount rate changes and the change in interest rates effects the duration
of assets and liabilities. If interest rates fall, for example, the duration
of loans shortens since borrowers tend to prepay by refinancing their loans.
Conversely, the duration of loans increases if interest rates rise since
borrowers are inclined to hold on to the favorable rate they were able to
obtain in the lower interest rate environment.



The Board of Directors has established limits on the fluctuation of EVE
and EAR given changes in interest rates. These limits are that EVE shall
not decline by more than 10%, 20% and 30% given a 100 basis point, 200
basis point and 300 basis point increase or decrease in interest rates
respectively and that EAR shall not be greater than 8%, 16% or 24% given
a 100 basis point, 200 basis point or 300 basis point increase or decrease
in interest rates respectively.  The following illustrates our equity at
risk in the economic value of equity model:



December 31, 2009

														
Basis Point Change in Rates	+300 bp		+200 bp		+100 bp		-100 bp		-200 bp		-300 bp
Increase (decrease) in EVE	(13.4)%		(7.4)%		(2.3)%		(4.4)%		(10.9)%		(19.9)%



The Bank is in compliance with the interest rate risk policy limits related
to EVE as of December 31, 2009.

Earnings at Risk
Earnings at risk (EAR), is the amount by which net interest income will be
affected given a change in interest rates. The interest income and interest
expense for each category of earning assets and interest bearing liabilities
is recalculated after making up and down assumptions about the change in
interest rates. Changes in prepayment speeds and repricing speeds are also
taken into account when computing earnings at risk, given a change in
interest rates.

The following illustrates the effect on earnings or EAR, given rate
increases of 100 to 300 basis points and decreases in interest rates of
100 to 300 basis points.




December 31, 2009

														
Basis Point Change in Rates	+300 bp		+200 bp		+100 bp		-100 bp		-200 bp		-300 bp
Increase (decrease) in Earnings	(1.6)%		(1.1)%		(0.3)%		(0.1)%		(1.9)%		(4.0)%



The Bank is in compliance with the interest rate risk policy limits related
to EAR as of December 31, 2009.

One way to minimize interest rate risk is to maintain a balanced or matched
interest-rate sensitivity position. However, matched funding does not
generally maximize profits. To increase net interest income, the Bank
mismatches asset and liability repricing to take advantage of interest rate
conditions. The magnitude of the mismatch depends on management`s
assessment of the risks presented by the interest rate environment.

Interest rate risk can significantly affect income and expense on interest
sensitive assets and liabilities, and can also affect the underlying value
of the Bank`s assets. The goal in managing interest rate sensitivity is to
maintain an appropriate balance between interest sensitive assets and
liabilities in order to minimize the impact of volatility in market
interest rates.

Management of maturity distributions of assets and liabilities between
the most and least sensitive extremes is as important as the balances on
hand. Management of maturity distributions involves matching interest rate
maturities as well as principal maturities, which can influence net
interest income significantly. In periods of rapidly changing interest
rates, a negative or positive gap can cause major fluctuations in net
interest income and earnings. Managing asset and liability sensitivities,
and insulating net interest income from changes in market and interest
rate conditions is one of the objectives of the Bank`s asset/liability
management strategy.

Management attempts to maintain consistent net interest income and net
income while managing interest rate risk within Board approved policy
limits. Evaluating the Bank`s exposure to changes in interest rates is
the responsibility of Bank management which reports directly to the Board
of Directors. Bank management assesses both the adequacy of the management
process used to control interest rate risk and the quantitative level of
exposure, monitoring and managing interest rate risk to control the effect
of changing interest rates on net interest income and net income.
Evaluating the quantitative level of interest rate risk exposure
requires assessment of existing and potential effects of changes in
interest rates on the Bank`s financial condition, including capital
adequacy, earnings, liquidity and asset quality. Bank management
also monitors the Bank`s liquidity levels. Interest rate risk
..exposure is reviewed quarterly with the Board of Directors. Risk
is mitigated by matching maturities or repricing opportunities.




Results of Operations
First National Bank derives substantially all of its income from banking
and bank-related services, including interest earnings on residential real
estate, commercial real estate, commercial and consumer loans and investment
securities along with fee income from deposit services. National Bancshares
Corporation`s business consists almost exclusively of acting as holding
company for the Bank. First National Bank`s business is not complex: the
Bank gathers deposits and it makes loans, principally in Wayne, Stark,
Summit, Medina and Holmes counties, Ohio.

Average Balances, Interest Rates and Yields
The average balances of our interest-earning assets and interest-bearing
liabilities, interest earned on assets and interest cost of liabilities for
the periods indicated, and the average yields earned and rates paid are
presented in the following table. Yields are derived by dividing income or
expense by the average balance of assets or liabilities, respectively,
for the periods presented. Average balances are daily averages.



Year ended December 31,

(Dollars amounts in thousands)
					2009			    2008		       2007
					Average		  Yield/    Average	      Yield/   Average 		 Yield/
					Balance	 Interest Cost	    Balance  Interest Cost     Balance	Interest Cost
						 	  	    	                       	 
Assets
Interest earning assets:
     Securities:
       Taxable				$113,608   5,397   4.88%   $ 79,522    4,095   5.14%   $ 68,787	  3,585	  5.18%
       Nontaxable (1)			  20,557   1,226   6.09%     16,491      991   6.07%	 16,757	  1,059	  6.39%
     Federal funds sold			   6,063      12   0.20%      3,353       63   1.88%	  6,447	    335	  5.20%
     Interest bearing deposits		   1,906      25   1.31%      1,019       18   1.77%	  1,319	     69	  5.23%
     Net loans (including
       nonaccrual loans)		 183,001  10,222   5.59%    192,472   12,241   6.36%	187,888  13,144	  7.00%
Total interest-earning assets		 325,135  16,882   5.19%    292,857   17,408   5.94%	281,198	 18,192	  6.34%
All other assets			  27,502		     22,059			 23,645
     Total assets			$352,637		   $314,916		       $304,843
Liabilities and
Shareholder`s Equity
Interest-bearing liabilities:
     Interest-bearing checking		$109,400   1,026   0.94%   $ 73,243    1,342   1.83%   $ 58,148	  1,341	  2.31%
     Savings				  48,198     123   0.26%     51,963      291   0.56%	 56,690	    615	  1.08%
     Time, $100,000 and over		  13,901     340   2.45%     13,197	 497   3.77%	 14,087	    641	  4.55%
     Time, other			  58,822   1,627   2.77%     65,248    2,527   3.87%	 72,584	  3,231	  4.45%
Other funds purchased			  34,166   1,121   3.28%     31,138    1,128   3.62%	 23,838	  1,140	  4.78%
     Total interest-bearing liabilities	 264,487   4,237   1.60%    234,789    5,785   2.46%	225,347	  6,968	  3.09%
Demand deposits				  46,265		     42,004			 42,225
Other liabilities			   3,662 		      2,741			  2,666
Shareholders` equity			  38,223		     35,382			 34,605
     Total liabilities and
       shareholders` equity		$352,637		   $314,916		       $304,843
Net interest income (1)		 		 $12,645		     $11,623			$11,224
Interest rate spread (2)				   3.59%		       3.48%			  3.25%
Net yield on interest-
  earning assets (3)					   3.89%		       3.97%			  3.99%
Ratio of average interest-
  earning assets to average
  interest-bearing liabilities				 122.93%		     124.73%			124.78%


(1)	Tax-equivalent basis
(2)	Interest rate spread represents the difference between the average yield
	on interest-earning assets and the average cost of interest-bearing
	liabilities.
(3)	Net yield on interest-earning assets represents net interest income as a
	percentage of average interest-earning assets.






Rate/Volume Analysis
Changes in interest income and interest expense attributable to (1) changes
in volume (changes in average volume multiplied by prior year rate), and
(2) changes in rates (changes in rate multiplied by prior year average
volume) are shown in the table to follow. Increases and decreases have been
allocated proportionally to the change due to volume and the change due to
rate.


					2009 over 2008 			2008 over 2007
(Dollar amounts in thousands)
					Volume	Rate	 Net change	Volume	 Rate	  Net change
							 			 	  
Interest Income
Securities:
	Taxable				$1,516	$  (214)  $1,302	$   557	 $   (47) $   510
	Nontaxable			   221	     14      235	    (27)     (41)     (68)
	(tax-equivalent basis)
Federal funds sold			     5	    (56)     (51)	    (58)    (214)    (272)
Interest bearing deposits		    12	     (5)       7	     (5)     (46)     (51)
Loans (including
  nonaccrual loans)			  (529)  (1,490)  (2,019)	    292	  (1,195)    (903)
	Total interest income
	(tax-equivalent basis)		$1,225	$(1,751)  $ (526)	$   759	 $(1,543) $  (784)
Interest Expense
Deposits
	Interest bearing checking	$  339	$  (655)  $  (316)	$   277	 $  (276) $     1
	Savings		  		   (10)	   (158)     (168)	    (26)    (298)    (324)
	Time, $100,000 and over		    17	   (174)     (157)	    (34)    (110)    (144)
	Time, other		 	  (178)    (722)     (900)	   (284)    (420)    (704)
Other funds purchased			    99	   (106)       (7)	    264	    (276)     (12)
	Total interest expense		$  267	$(1,815)  $(1,548)	$   197	 $(1,380) $(1,183)
Change in net
  interest income
(tax-equivalent basis)*      		$  958	$    64   $ 1,022	$   562 $   (163)  $  399

*Tax equivalence based on highest statutory tax rates of 34%.



2009 versus 2008
During 2009, net income decreased $585 thousand or 26.7% to $1.6 million.
Accordingly, basic and diluted earnings per share decreased from $1.00 per
share in 2008 to $0.73 per share in 2009. Earnings for 2009 were negatively
impacted by a $1.3 million increase in the provision for loan loss and a
$570 increase in FDIC insurance expense, partially offset by an increase in
net interest income of $942 thousand. Returns on average equity (ROE) and
average assets (ROAA) for the year ending December 31, 2009, were 4.21% and
0.46%, respectively, compared to 6.20% and 0.70% for the year ending
December 31, 2008.

Total interest and dividend income decreased $606 thousand or 3.5% in 2009.
Interest and fees on loans decreased $2.0 million or 16.5%, due to the
decrease in interest rates during the year, and the mortgage loan
securitization transaction with the Federal Home Loan Mortgage Corporation
in December 2008 which decreased loans by $20.9 million. Securities
interest and dividend income increased $1.5 million or 30.7% over 2008.
Much of this increase is attributable to an increase in the average
balance of securities related to the aforementioned mortgage loan
securitization.

Interest expense decreased by $1.5 million or 26.8% during 2009, as the
Bank`s deposits and short-term borrowings were affected by the falling
interest rate environment. Interest expense on deposits decreased $1.5
million or 33.1% in 2009. Deposit customers continued moving funds
from lower-rate deposit accounts to higher-yielding accounts, such as
premium money market accounts and high interest checking accounts during
2009. Interest expense for short-term borrowings decreased by $119 thousand
or 72.6%, primarily due to the significant decrease in short-term market
interest rates during 2009. Federal Home Loan Bank advances interest
expense increased $112 thousand or 11.6% as the amount of advances
increased from $21 million to $27 million during 2009.

The provision for loan losses was $1.8 million in 2009, compared to $482
thousand in 2008. The allowance for loan losses and the related provision
for loan losses is based on management`s judgment and evaluation of the
loan portfolio. Net charge-offs were $641 thousand for 2009, compared to
$792 thousand for 2008. The allowance as a percentage of loans increased
from 0.95% at December 31, 2008 to 1.48% at December 31, 2009. Classified
loans have increased from $7.2 million as of December 31, 2008 to $14.6
million as of December 31, 2009 as some of our borrowers have struggled
with the challenging business environment created by the current economic
recession. Total nonperforming loans have increased from $2.0 million as
of December 31, 2008 to $5.2 million as of December 31, 2009. Management
believes the current allowance for loan losses is adequate, however
changing economic and other conditions may require future adjustments to
the allowance for loan losses.



Noninterest income increased $639 thousand or 27.4% during 2009. The
increase is primarily related to net gains recorded on the sale of
securities of $770 thousand. Income from mortgage banking activities
increased from $126 thousand in 2008 to $310 thousand in 2009 as the
Corporation originated $16.8 million in mortgage loans for sale on the
secondary market. The 2009 originations represent an amount significantly
higher than the $7.1 million originated in 2008.

Noninterest expense was $11.4 million for the year ended December 31, 2009
compared to $10.2 million for 2008, an increase of 11.7%. The increase in
noninterest expense was due primarily to an increase in the FDIC deposit
insurance premium from $35 thousand in 2008 to $605 thousand in 2009.
Salaries and employee benefits, occupancy and professional and consulting
fees were slightly higher in 2009 compared to 2008 levels.

Income tax expense was $398 thousand for the year ended December 31, 2009,
representing a decrease of $372 thousand or 48.3% compared to 2008. The
change is primarily related to a decrease in income before income taxes
and an increase in interest income from nontaxable securities.


2008 versus 2007
During 2008, net income increased $483 thousand or 28.2% to $2.2 million.
Accordingly, basic and diluted earnings per share increased from $0.77
per share in 2007 to $1.00 per share in 2008. The increase in net income
is the result of a relatively stable net interest margin, an increase in
noninterest income and a decrease in noninterest expenses. Returns on
average equity (ROE) and average assets (ROAA) for the year ending
December 31, 2008, were 6.20% and 0.70%, respectively, compared to 4.94%
and 0.56% for the year ending December 31, 2007.

Total interest and dividend income decreased $761 thousand or 4.3% in 2008.
Interest and fees on loans decreased $903 thousand or 6.9%, due primarily
to the decrease in interest rates during the year, partially offset by the
$4.6 million increase in average loans. Management has focused on
aggressively attracting commercial loan business and purchasing loan
participations from other Ohio banks (commercial real estate and consumer
loans). Securities interest and dividend income increased $465 thousand
or 10.9% over 2007. Much of this increase is attributable to an increase
in the average balance of securities.

Interest expense decreased by $1.2 million or 17.0% during 2008, as the
Bank`s deposits and short-term borrowings were affected by the falling
interest rate environment. Interest expense on deposits decreased $1.2
million or 20.1% in 2008. Deposit customers continued moving funds from
lower-rate deposit accounts to higher-yielding accounts, such as premium
money market accounts and high interest checking accounts during 2008.
Interest expense for short-term borrowings decreased by $196 thousand or
54.4%, primarily due to the significant decrease in short-term market
interest rates during 2008. Federal Home Loan Bank advances interest
expense increased $184 thousand or 23.6% as the amount of advances
increased from $17 million to $21 million during 2008.

The provision for loan losses was $482 thousand in 2008, compared to
$147 thousand in 2007. The allowance for loan losses and the related
provision for loan losses is based on management`s judgment and
evaluation of the loan portfolio. Net charge-offs were $792 thousand
for 2008, compared to $112 thousand for 2007. The increase in 2008
charge-offs were primarily related to a $676 thousand partial charge-off
of a $1.7 million Summit County commercial real estate loan. The allowance
as a percentage of loans declined from 1.05% at December 31, 2007 to 0.95%
at December 31, 2008. Classified loans have increased from $5.3 million as
of December 31, 2007 to $7.2 million as of December 31, 2008. Total
nonperforming loans have decreased from $2.8 million as of December 31, 2007
to $2.0 million as of December 31, 2008, a decrease of 28.2%. Management
believes the current allowance for loan losses is adequate, however changing
economic and other conditions may require future adjustments to the allowance
for loan losses.

Noninterest income increased $343 thousand or 17.2% during 2008. The increase
is related to the Bank`s enhancement of the deposit and service charge fee
structure, improvements in mortgage banking operations and marketing
activities and an increase in customer utilization of Visa check card
transactions. The Bank sold its $1.5 million credit card portfolio in July
2008. The transaction generated a $435 thousand gain on sale. During 2008,
the Corporation recorded an other than temporary impairment of $444 thousand
for the FHLMC preferred stock owned by the holding company.

Noninterest expense was $10.2 million for the year ended December 31, 2008
compared to $10.5 million for 2007, a decrease of 3.1%. The decrease is
primarily due to lower data processing expenses, professional and consulting
fees and maintenance and repairs expense. Data processing expense decreased
$158 thousand during 2008 as a result of a new contract entered into in
January of 2008 with the provider of the Bank`s core processing solution.
The decrease in professional and consulting fees was the result of a higher
level of services utilized in 2007. The Corporation engaged a consulting
firm to review the key business processes and procedures of First National
Bank in 2007.



Income tax expense was $770 thousand for the year ended December 31, 2008,
representing an increase of $274 thousand or 55.2% compared to 2007.

Critical Accounting Policies
National Bancshares Corporation`s consolidated financial statements are
prepared in accordance with accounting principles generally accepted in
the United States of America ~ GAAP ~ and follow general practices within
the industry in which it operates. Application of these principles requires
management to make estimates, assumptions, and judgments based on
information available as of the date of the consolidated financial
statements, affecting the amounts reported in the financial statements and
accompanying notes. Certain policies necessarily require greater reliance on
the use of estimates, assumptions, and judgments. Estimates, assumptions,
and judgments are necessary when assets and liabilities are required to be
recorded at fair value, when a decline in the value of an asset not carried
on the consolidated financial statements at fair value warrants an
impairment write-down or valuation reserve to be established, or when an
asset or liability needs to be recorded contingent upon a future event.
Carrying assets and liabilities at fair value inherently results in more
financial statement volatility. The fair values and the information used to
record valuation adjustments for certain assets and liabilities are based
either on quoted market prices or are provided by other third-party sources,
when available. When third-party information is not available, valuation
adjustments are estimated in good faith by management, including the use of
internal cash-flow modeling techniques. National Bancshares Corporation`s
most significant accounting policies are presented in Note 1 of the
consolidated financial statements. Management considers the allowance for
loan losses, valuation of securities and goodwill and other intangible
assets to be the most subjective and the most susceptible to change as
circumstances and economic conditions change.

Allowance for Loan Losses
An allowance for loan losses recorded under generally accepted accounting
principles is a valuation allowance for probable incurred credit losses,
based on current information and events, increased by the provision for
loan losses and decreased by charge-offs less recoveries. The amount of
the allowance is a product of management`s judgment and it is inevitably
imprecise. Estimating the allowance requires significant judgment and the
use of estimates related to many factors, including the amount and timing
of future cash flows on problem loans, estimated losses on pools of loans
based on historical loss experience, and consideration of current economic
trends and conditions, all of which are susceptible to significant change.
Although management believes that the allowance for loan losses was
adequate at December 31, 2009, future adjustments could be necessary if
circumstances or economic conditions differ substantially from the
assumptions used in making the initial determinations. A downturn in the
local economy and employment could result in increased levels of
non-performing assets and charge-offs, increased loan loss provisions, and
reductions in income. Additionally, as an integral part of the examination
process, bank regulatory agencies periodically review a bank`s loan loss
allowance. The Office of the Comptroller of the Currency (OCC) could
require the recognition of additions to the loan loss allowance based on
the OCC`s judgment of information available to it at the time of its
examination of First National Bank.

Valuation of Securities
The portfolio of available for sale securities is reported at fair value.
The fair value of a security is determined based on quoted market prices.
If quoted market prices are not available, fair value is determined based
on quoted prices of similar instruments. Available for sale and held to
maturity securities are reviewed quarterly for possible other than temporary
impairment. The review includes an analysis of the facts and circumstances
of each individual investment, such as the length of time the fair value has
been below cost, the expectation for that security`s performance, the credit
worthiness of the issuer, and the bank`s ability to hold the security to
maturity. A decline in value that is considered to be other than temporary
and related to a deterioration of the credit worthiness of the issuer would
be recorded as a loss within noninterest income in the consolidated
statements of income.

Goodwill and Other Intangible Assets
Goodwill results from business acquisitions and represents the excess of
the purchase price over the fair value of acquired tangible assets and
liabilities and identifiable intangible assets. Goodwill is assessed at
least annually for impairment and any such impairment will be recognized
in the period identified. Other intangible assets consist of core deposit
and acquired customer relationship intangible assets arising from whole
bank and branch acquisitions. They are initially measured at fair value
and then are amortized on a straight line or accelerated method over their
estimated useful lives, which is 7 to 10 years.

The Corporation performed a goodwill impairment analysis as of
September 30, 2009. The fair value of the single reporting unit was
determined to be greater than the carrying value. The fair value was
determined by using estimated sales price multiples based on recent
observable market transactions.

New Accounting Pronouncements
See Note 1 of the consolidated financial statements for details on new
accounting pronouncements.





CONSOLIDATED BALANCE SHEETS
December 31, 2009 and 2008
(Dollar amounts in thousands, except per share data)


                                                2009	 		2008
									
ASSETS
Cash and due from banks				$  8,124         	$ 11,001
Federal funds sold				       -		       -
	Total cash and cash equivalents		   8,124	   	  11,001
Time deposits with other financial institutions   13,580		       -
Securities available for sale			 130,241	    	 127,248
Restricted equity securities			   3,218	      	   3,217
Loans held for sale				     316		       -
Loans, net of allowance for loan losses:
	2009 ~ $2,906
	2008 ~ $1,718				 194,071	  	 179,831
Premises and equipment, net 			   9,033	     	   6,197
Goodwill 					   4,723	      	   4,723
Identified intangible assets			     197	             422
Accrued interest receivable 			   1,334	      	   1,230
Bank owned life insurance			   2,771	      	   2,677
Other assets					   2,620		   1,456

						$370,228	 	$338,002

LIABILITIES AND SHAREHOLDERS` EQUITY
Liabilities
Deposits
	Non-interest bearing			$ 54,290		$ 46,159
	Interest bearing			 237,083		 217,483
		Total deposits			 291,373	  	 263,642
Repurchase agreements				   6,105	     	  10,469
Federal funds purchased				   3,300                   1,830
Federal Reserve note account			     315            	     986
Federal Home Loan Bank advances			  27,000	   	  21,000
Accrued interest payable			     408		     690
Accrued expenses and other liabilities		   2,824		   2,504
	Total liabilities			 331,325	 	 301,121

Commitments and contingent liabilities

Shareholders` equity
Common stock, no par value; 6,000,000
shares authorized;
         2,289,528 shares issued		  11,447	    	  11,447
Additional paid-in capital		           4,752	      	   4,718
Retained earnings				  21,856	    	  20,972
Treasury stock, at cost (83,555 and
87,160 shares)					  (1,639)	    	  (1,709)
Accumulated other comprehensive income (loss)	   2,487		   1,453
Total shareholders` equity			  38,903		  36,881

						$370,228		$338,002






CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 2009, 2008 and 2007
(Dollar amounts in thousands, except per share data)



						2009		2008		2007
										
Interest and dividend income
	Loans, including fees			$ 10,222	$ 12,241	$ 13,144
	Securities:
	  Taxable				   5,397	   4,095	   3,585
	  Nontaxable				     809	     654	     699
	Federal funds sold and other		      37	      81 	     404
        Total interest and dividend income	  16,465	  17,071	  17,832

Interest expense
	Deposits		 		   3,116	   4,657	   5,828
	Short-term borrowings			      45	     164	     360
	Federal Home Loan Bank advances		   1,076	     964	     780
	  Total interest expense		   4,237	   5,785	   6,968

Net interest income				  12,228	  11,286	  10,864

Provision for loan losses			   1,829	     482	     147

Net interest income after provision for
loan losses					  10,399	  10,804	  10,717

Noninterest income
	Checking account fees			   1,070	   1,218	   1,191
	Visa check card interchange fees	     353	     326	     269
	Deposit and miscellaneous service fees	     135	     171	     176
	Mortgage banking activities		     310	     126	      19
	Gain on sale of credit card portfolio	       -	     435	       -
	Loss on sales of other real estate owned    (112)	     (15)	     (33)
	Securities gains (losses), net		     770	    (344)	      14
	Other					     446	     416	     354
Total noninterest income			   2,972	   2,333	   1,990

Noninterest expense
	Salaries and employee benefits		   5,279	   5,118	   5,182
	Data processing				     909	     947	   1,105
	Net occupancy 				   1,056	     915	     859
	FDIC assessment				     605              35              29
	Professional and consulting fees	     546	     412	     593
	Franchise tax				     327	     326	     336
	Maintenance and repairs			     187	     212	     327
	Amortization of intangibles		     225	     232	     237
	Telephone				     216	     194	     243
	Marketing				     233	     144	     127
	Director fees and pension		     224	     312	     212
	Other					   1,557	   1,326	   1,250
Total noninterest expense			  11,364	  10,173	  10,500

Income before income taxes			   2,007	   2,964	   2,207

Income tax expense				     398	     770	     496

Net income					$  1,609	$  2,194	$  1,711

Weighted average common shares outstanding     2,202,457       2,203,218       2,231,369
Basic and diluted earnings per common share    $    0.73       $    1.00       $    0.77





CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS` EQUITY
Years ended December 31, 2009, 2008 and 2007
(Dollar amounts in thousands, except per share data)

												Accumulated
							 Additional				Other		Total
						Common	 Paid-In    Retained	Treasury	Comprehensive	Shareholders`
						Stock	 Capital    Earnings	Stock		Income (Loss)	Equity
							 	    						
Balance at January 1, 2007			$11,447	 $4,690	    $19,901	$(1,189)	$ (169)		$34,680

Comprehensive income:
	Net income					      	      1,711					  1,711
	Other comprehensive income (loss)		   				   	   464		    464
		Total comprehensive income								          2,175

Cash dividends declared ($.64 per share)		             (1,430)				     	 (1,430)
Purchase of 27,103 common stock                                                    (434)                           (434)

Balance at December 31, 2007		         11,447	  4,690	     20,182	 (1,623)	   295		 34,991

Comprehensive income:
	Net income					              2,194					  2,194
	Other comprehensive income (loss)						         1,158		  1,158
	  	Total comprehensive income                                                                        3,352												2,175

Cash dividends declared ($.64 per share)		             (1,404)					 (1,404)
Purchase of 5,017 common stock						            (86)		            (86)
Compensation expense under stock-based
compensation plans			                     28                                                      28

Balance at December 31, 2008		         11,447	  4,718	     20,972	 (1,709)	 1,453		 36,881

Comprehensive income
	Net income					              1,609					  1,609
	Other comprehensive income (loss)						         1,034		  1,034
		Total comprehensive income						  		          2,643

Cash dividends declared ($.32 per share)		               (705)					   (705)
Stock awards issued from Treasury Shares
  (3,605 shares)                                                        (20)         70                              50
Compensation expense under stock-based
compensation plans				             34 						     34

Balance at December 31, 2009		        $11,447	 $4,752	    $21,856	$(1,639)	$2,487		$38,903






CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2009, 2008 and 2007
(Dollar amounts in thousands except per share data)


								2009		2008		2007
												
Cash flows from operating activities
     Net income							$1,609		$ 2,194		$ 1,711
     Adjustments to reconcile net income
       to net cash from operating activities
          Provision for loan losses		   	 	 1,829		    482		    147
	  Deferred income taxes			    	  	  (382)		     40	   	    (19)
	  Depreciation, amortization and accretion   	   	   877		    271		    442
	  Earnings on Bank owned life insurance 	   	   (94)		    (90)	    (88)
	  Restricted equity securities dividends   	    	    (1)		    (96)	      -
	  Origination of mortgage loans held for sale          (16,751)		 (7,080)	 (1,826)
	  Proceeds from sales of mortgage loans held
	    for sale				        	16,745	          7,187		  1,826
          Gain on sale of loans					  (310)	           (114)	    (19)
          Net security (gains) losses				  (770)		   (100)	    (14)
          Securities impairment loss recognized in earnings          -              444               -
          Gain on sale of credit card portfolio		   	     -             (435)	      -
          (Gain) loss on sale/write-down of other real
            estate owned 					   112               24              33
          Compensation expense under stock-based
            compensation plans	     				    84               28		      -
          Change in other assets and liabilities	        (1,503)	           (498)	   (353)
	    Net cash from operating activities		         1,445		  2,257		  1,840

Cash flows from investing activities
     Purchases of time deposits with other financial
       institutions	     				       (13,580)	              -		      -
     Securities available for sale
	  Proceeds from maturities and repayments		36,757		 28,426		 15,753
	  Proceeds from sales				        23,084		 25,417		 22,662
	  Purchases					       (60,353)         (74,179)        (36,083)
     Purchases of property and equipment			(3,437)   	 (1,462)	   (325)
     Proceeds from sale of credit card portfolio		     -		  1,871		      -
     Proceeds from sale of property and equipment		     -		     13		    211
     Proceeds from sale of other real estate owned		   191		    179		      -
     Purchase of loans					        (1,151)	         (6,130)	 (6,408)
     Net change in loans to customers			       (15,118)	         (5,210)	   (747)
	Net cash from investing activities		       (33,607)	        (31,075)	 (4,937)

Cash flows from financing activities
	Net change in deposits					27,731	         21,119	         (5,158)
	Net change in short-term borrowings		        (3,565)		  3,911		    629
	Proceeds from Federal Home Loan Bank advances		10,000		  4,000		  3,000
	Repayments Federal Home Loan Bank advances		(4,000)		      -	              -
	Dividends paid						  (881)	         (1,410)	 (1,430)
	Purchase of common stock    				     -	            (86)	   (434)
		Net cash from financing activities		 29,285		 27,534	         (3,393)

	Net change in cash and cash equivalents			 (2,877)	 (1,284)	 (6,490)
	Beginning cash and cash equivalents			 11,001		 12,285 	 18,775
	Ending cash and cash equivalents			$ 8,124		$11,001		$12,285

	Supplemental cash flow information:
		Interest paid					$ 4,519		$ 6,070		$ 7,022
		Income taxes paid				    400		    970		    662
	Supplemental noncash disclosures:
         Transfer from loans to securities available for sale	$     -		$20,810		$     -
	 Transfer from loans to other real estate owned	             54		    354		    124






NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2009, 2008 and 2007
(Dollar amounts in thousands, except per share data)

NOTE 1 ~ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Principles of Consolidation: The consolidated
financial statements include National Bancshares Corporation and its
wholly-owned subsidiary, First National Bank, Orrville, Ohio (Bank),
together referred to as `the Corporation.` The Bank has a minority
interest in First Kropf Title, LLC, which is immaterial to the
consolidated financial statements. Intercompany transactions and
balances are eliminated in consolidation.

The Corporation provides financial services through its main and
branch offices in Orrville, Ohio, and branch offices in surrounding
communities in Wayne, Medina, Stark and Summit counties. Its primary
deposit products are checking, savings, and term certificate accounts,
and its primary lending products are commercial and residential mortgage,
commercial and consumer installment loans. Most loans are secured by
specific items of collateral including business assets, consumer assets
and real estate. Commercial loans are expected to be repaid from cash
flow from operations of businesses. Real estate loans are secured by both
residential and commercial real estate. Other financial instruments, which
potentially represent concentrations of credit risk, include investment
securities, deposit accounts in other financial institutions and federal
funds sold. There are no significant concentrations of loans to any one
industry or customer. However, the customer`s ability to repay their loans
is dependent on the real estate and general economic conditions of the
Corporation`s market area.

Segments: As noted above, the Corporation provides a broad range of
financial services to individuals and companies in northern Ohio. While
the Corporation`s chief decision makers monitor the revenue streams of
the various products and services, operations are managed and financial
performance is evaluated on a Corporation-wide basis. Accordingly, all
of the Corporation`s financial service operations are considered by
management to be aggregated in one reportable operating segment.

Use of Estimates: To prepare financial statements in conformity with U. S.
generally accepted accounting principles, management makes estimates and
assumptions based on available information. These estimates and assumptions
affect the amounts reported in the financial statements and the disclosures
provided, and actual results could differ. The allowance for loan losses,
fair values of financial instruments and carrying value of intangible
assets are particularly subject to change.

Cash Flows: Cash and cash equivalents include cash, deposits with other
banks with original maturities under 90 days, and federal funds sold. Net
cash flows are reported for customer loan and deposit transactions,
interest bearing deposits with other banks, repurchase agreements and
other short-term borrowings.

Time Deposits with Other Financial Institutions: Interest-bearing deposits
in other financial institutions mature within eighteen months and are
carried at cost.

Securities: Debt securities are classified as held to maturity and carried
at amortized cost when management has the positive intent and ability to
hold them to maturity. Debt securities are classified as available for sale
when they might be sold before maturity. Equity securities with readily
determinable fair values are classified as available for sale. Securities
available for sale are carried at fair value, with unrealized holding
gains and losses reported in other comprehensive income, net of tax.

Interest income includes amortization of purchase premium or discount.
Premiums and discounts on securities are amortized on the level-yield
method without anticipating prepayments, except for mortgage-backed
securities where prepayments are anticipated. Gains and losses on sales
are recorded on the trade date and determined using the specific
identification method.

Management evaluates securities for other than temporary impairment
(`OTTI`) at least on a quarterly basis, and more frequently when economic
or market conditions warrant such an evaluation.

Loans Held for Sale: Mortgage loans originated and intended for sale
in the secondary market are carried at the lower of aggregate cost or
market, as determined by outstanding commitments from investors. Net
unrealized losses, if any, are recorded as a valuation allowance and
charged to earnings.

Mortgage loans held for sale may be sold with servicing rights retained
or released.  The carrying value of mortgage loans sold is reduced by the
amount allocated to the servicing right for loans sold with servicing
retained. Gains and losses on sales of mortgage loans are based on the
difference between the selling price and the carrying value of the related
loan sold.




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2009, 2008 and 2007
(Dollar amounts in thousands except per share data)


NOTE 1 ~ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Loans: Loans that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are reported at the
principal balance outstanding, net of unearned and deferred income and
an allowance for loan losses. Interest income is accrued on the unpaid
principal balance. Loan origination fees, net of certain direct
origination costs, are deferred and recognized in interest income using
the level-yield method without anticipating prepayments.

Interest income on mortgage and commercial loans is discontinued at the
time the loan is 90 days delinquent unless the loan is well-secured and
in process of collection.  Consumer loans are typically charged off no
later than 120 days past due. Past due status is based on the contractual
terms of the loan.  In all cases, loans are placed on nonaccrual or
charged-off at an earlier date if collection of principal or interest is
considered doubtful.

All interest accrued but not received for loans placed on nonaccrual is
reversed against interest income.  Interest received on such loans is
recorded as a reduction in principal, until qualifying for return to
accrual.  Loans are returned to accrual status when all the principal and
interest amounts contractually due are brought current and future payments
are reasonably assured.

Concentration of Credit Risk:  Most of the Corporation`s business activity
is with customers located within Wayne, Stark, Summit, Holmes and Medina
Counties. Therefore, the Corporation`s exposure to credit risk is
significantly affected by changes in the economy in the Wayne, Stark,
Summit, Holmes and Medina County area.

Purchased Loans: The Corporation purchases individual loans and groups of
loans. Purchased loans that show evidence of credit deterioration at the
time of purchase are recorded at the amount paid, such that there is no
carryover of the seller`s allowance for loan losses.  After acquisition,
incurred losses are recognized by an increase in the allowance for loan
losses.

Allowance for Loan Losses: The allowance for loan losses is a valuation
allowance for probable incurred credit losses, increased by the provision
for loan losses and decreased by charge-offs less recoveries. Loan losses
are charged against the allowance when management believes the
uncollectibility of a loan balance is confirmed. Management estimates the
allowance balance required using past loan loss experience, the nature and
volume of the portfolio, information about specific borrower situations
and estimated collateral values, economic conditions, and other factors.
Allocations of the allowance may be made for specific loans, but the entire
allowance is available for any loan that, in management`s judgment, should
be charged-off.

The allowance consists of specific and general components. The specific
component relates to loans that are individually classified as impaired or
loans otherwise classified as substandard or doubtful. The general
component covers non classified loans and is based on historical loss
experience adjusted for current factors.

A loan is impaired when, based on current information and events, it is
probable that the Corporation will be unable to collect all amounts due
according to the contractual terms of the loan agreement. Loans, for
which the terms have been modified, and for which the borrower is
experiencing financial difficulties, are considered troubled debt
restructurings and classified as impaired. Commercial and commercial real
estate loans are individually evaluated for impairment.  If a loan is
impaired, a portion of the allowance is allocated so that the loan is
reported, net, at the present value of estimated future cash flows using
the loan`s existing rate or at the fair value of collateral if repayment is
expected solely from the collateral.  Large groups of smaller balance loans,
such as consumer and residential real estate loans, are collectively
evaluated for impairment, and accordingly, they are not separately
identified for impairment disclosures.

Servicing Rights: Servicing rights are recognized separately when they are
acquired through sales of loans. When mortgage loans are sold, servicing
rights are initially recorded at fair value with the income statement
effect recorded in gains on sales of loans. Fair value is based on market
prices for comparable mortgage servicing contracts, when available, or
alternatively, is based on a valuation model that calculates the present
value of estimated future net servicing income. The valuation model
incorporates assumptions that market participants would use in estimating
future net servicing income, such as the cost to service, the discount
rate, the custodial earnings rate, an inflation rate, ancillary income,
prepayment speeds and default rates and losses. The Corporation compares
the valuation model inputs and results to published industry data in order
to validate the model results and assumptions. All classes of servicing
assets are subsequently measured using the amortization method which
requires servicing rights to be amortized into non-interest income in
proportion to, and over the period of, the estimated future net servicing
income of the underlying loans.




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2009, 2008 and 2007
(Dollar amounts in thousands, except per share data)

NOTE 1 ~ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

At December 31, 2009 and 2008, the servicing assets of the Corporation
totaled $115 and $173, respectively, and are included with other assets
on the consolidated balance sheets. Fair value is determined using prices
for similar assets with similar characteristics, when available, or based
upon discounted cash flows using market-based assumptions. Servicing assets
are evaluated for impairment based upon the fair value of the assets
compared to carrying amount. Any impairment is reported as a valuation
allowance, to the extent that fair value is less than the capitalized
amount for a grouping.

Servicing fee income is recorded when earned for servicing loans based on
a contractual percentage of the outstanding principal or a fixed amount per
loan. The amortization of mortgage servicing rights is netted against loan
servicing fee income.

Other Real Estate Owned:  Assets acquired through or instead of loan
foreclosure are initially recorded at the lower of cost or fair value less
costs to sell when acquired, establishing a new cost basis.  If fair value
declines subsequent to foreclosure, a valuation allowance is recorded
through expense.  Operating costs after acquisition are expensed.

Premises and Equipment: Land is carried at cost. Premises and equipment
are stated at cost less accumulated depreciation. Buildings and related
components are depreciated using the straight-line method with useful
lives ranging from 7 to 39 years. Furniture, fixtures and equipment are
depreciated using the straight-line method with useful lives ranging from
3 to 7 years.

Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) Stock: The Bank
is a member of the FHLB and FRB systems. FHLB members are required to own a
certain amount of stock based on the level of borrowings and other factors,
and may invest in additional amounts. The stocks are carried at cost,
classified as a restricted security, and periodically evaluated for
impairment based on ultimate recovery of par value.  Both cash and stock
dividends are reported as income.

Bank Owned Life Insurance: The Corporation has purchased life insurance
policies on its directors. Life insurance is recorded at the amount that
can be realized under the insurance contract at the balance sheet date,
which is the cash surrender value adjusted for other amounts due that are
probable at settlement.

Goodwill and Other Intangible Assets: Goodwill resulting from business
combinations prior to January 1, 2009 represents the excess of the
purchase price over the fair value of the net assets of businesses
acquired. Goodwill resulting from business combinations after
January 1, 2009 represents the future economic benefits arising from
other assets acquired that are not individually identified and separately
recognized. Goodwill and intangible assets acquired in a purchase business
combination and determined to have an indefinite useful life are not
amortized, but tested for impairment at least annually. The Corporation
has selected September 30 as the date to perform the annual impairment
test. Intangible assets with definite useful lives are amortized over
their estimated useful lives to their estimated residual values. Goodwill
is the only intangible asset on the Corporation`s balance sheet with an
indefinite life.

Other intangible assets consist of core deposit and acquired customer
relationship intangible assets arising from whole bank and branch
acquisitions. They are initially measured at fair value and then are
amortized on an accelerated method over their estimated useful lives,
which range from 7 to 10 years.

Long-term Assets: These assets are reviewed for impairment when events
indicate their carrying amount may not be recoverable from future
undiscounted cash flows. If impaired, the assets are recorded at fair value.

Repurchase Agreements: Substantially all repurchase agreement liabilities
represent amounts advanced by various customers. Securities are pledged
to cover these liabilities, which are not covered by federal deposit
insurance.

Benefit Plans: Retirement plan expense is the amount of required matching
contributions plus any discretionary contributions to the Corporation`s
401(k) plan as determined by Board decision. Director retirement plan
expense allocates the benefits over the estimated years of service.

Stock-Based Compensation: Compensation cost is recognized for stock options
and restricted stock awards issued to employees, based on the fair value of
these awards at the date of grant. A Black-Scholes model is utilized to
estimate the fair value of stock options, while the market price of the
Corporation`s common stock at the date of grant is used for restricted
stock awards. Compensation cost is recognized over the required service
period, generally defined as the vesting period, on an accelerated basis.
For awards with graded vesting, compensation cost is recognized on a
straight-line basis over the requisite service period for the entire award.




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2009, 2008 and 2007
(Dollar amounts in thousands, except per share data)


NOTE 1 ~ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes: Income tax expense is the total of the current year income
tax due or refundable and the change in deferred tax assets and liabilities.
Deferred tax assets and liabilities are the expected future tax amounts
for the temporary differences between carrying amounts and tax bases of
assets and liabilities, computed using enacted tax rates. A valuation
allowance, if needed, reduces deferred tax assets to the amount expected
to be realized.

The Corporation adopted guidance by the Financial Accounting Standards Board
(FASB) with respect to accounting for uncertainty in income taxes as of
January 1, 2007.  A tax position is recognized as a benefit only if it is
`more likely than not` that the tax position would be sustained in a tax
examination, with a tax examination being presumed to occur.  The amount
recognized is the largest amount of tax benefit that is greater than 50%
likely of being realized on examination.  For tax positions not meeting the
`more likely than not` test, no tax benefit is recorded. The adoption had no
affect on the Corporation`s financial statements.

The Corporation recognizes interest and/or penalties related to income tax
matters in income tax expense.

Transfers of Financial Assets: Transfers of financial assets are accounted
for as sales, when control over the assets has been relinquished. Control
over transferred assets is deemed to be surrendered when the assets have
been isolated from the Corporation, the transferee obtains the right
(free of conditions that constrain it from taking advantage of that right)
to pledge or exchange the transferred assets, and the Corporation does
not maintain effective control over the transferred assets through an
agreement to repurchase them before their maturity.

Loan Commitments and Related Financial Instruments: Financial instruments
include off-balance sheet credit instruments, such as commitments to make
loans and commercial letters of credit, issued to meet customer-financing
needs. The face amount for these items represents the exposure to loss,
before considering customer collateral or ability to repay. Such financial
instruments are recorded when they are funded.

Earnings Per Common Share: Earnings per common share is net income divided
by the weighted average number of shares outstanding during the period.
Diluted earnings per share includes the dilutive effect of additional
potential common shares issuable under stock options. 53,000 and 58,000
stock options were not considered in computing diluted earnings per common
share for 2009 and 2008 because they were antidilutive. No options were
outstanding prior to 2008.

Comprehensive Income: Comprehensive income consists of net income and
other comprehensive income. Other comprehensive income includes unrealized
gains and losses on securities available for sale, which is also recognized
as a separate component of equity.

Loss Contingencies: Loss contingencies, including claims and legal actions
arising in the ordinary course of business, are recorded as liabilities
when the likelihood of loss is probable and an amount or range of loss can
be reasonably estimated. Management does not believe there now are such
matters that will have a material effect on the financial statements.

Restrictions on Cash: Cash on hand or on deposit with the Federal Reserve
Bank of $100 and $100 was required to meet regulatory reserve and clearing
requirements at year-end 2009 and 2008. These balances do not earn interest.

Dividend Restriction: Banking regulations require maintaining certain
capital levels and limit the dividends paid by the Bank to the holding
company or by the holding company to shareholders. Dividends paid by the
Bank to the holding company are the primary source of funds for dividends
by the holding company to its shareholders.

Fair Value of Financial Instruments: Fair values of financial instruments
are estimated using relevant market information and other assumptions,
as more fully disclosed in a separate note. Fair value estimates involve
uncertainties and matters of significant judgment regarding interest rates,
credit risk, prepayments, and other factors, especially in the absence of
broad markets for particular items. Changes in assumptions or in market
conditions could significantly affect the estimates.

Reclassifications: Certain items in the prior year financial statements
were reclassified to conform to the current presentation.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2009, 2008 and 2007
(Dollar amounts in thousands, except per share data)


NOTE 1 ~ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Adoption of New Accounting Standards: In September 2006, the FASB issued
guidance that defines fair value, establishes a framework for measuring
fair value and expands disclosures about fair value measurements. This
guidance also establishes a fair value hierarchy about the assumptions
used to measure fair value and clarifies assumptions about risk and the
effect of a restriction on the sale or use of an asset.  The guidance
was effective for fiscal years beginning after November 15, 2007. In
February 2008, the FASB issued guidance that delayed the effective date
of this fair value guidance for all nonfinancial assets and nonfinancial
liabilities, except those that are recognized or disclosed at fair value
on a recurring basis (at least annually) to fiscal years beginning after
November 15, 2008, and interim periods within those fiscal years. The
effect of adopting this new guidance was not material.

In December 2007, the FASB issued guidance that establishes principles and
requirements for how an acquirer recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, and
any noncontrolling interest in an acquiree, including the recognition and
measurement of goodwill acquired in a business combination. The guidance
is effective for fiscal years beginning on or after December 15, 2008. The
effect of adopting this new guidance was not material.

In December 2007, the FASB issued guidance that changes the accounting and
reporting for minority interests, which is recharacterized as
noncontrolling interests and classified as a component of equity within
the consolidated balance sheets. The guidance was effective as of the
beginning of the first fiscal year beginning on or after December 15, 2008.
The effect of adopting this new guidance was not material.

In March 2008, the FASB issued guidance that amends and expands the
disclosure requirements for derivative instruments and hedging activities.
The guidance requires qualitative disclosure about objectives and strategies
for using derivative and hedging instruments, quantitative disclosures
about fair value amounts of the instruments and gains and losses on such
instruments, as well as disclosures about credit-risk features in derivative
agreements. The guidance was effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008, with
early application encouraged. The Corporation has expanded its disclosures
related to derivative instruments and hedging activities.

In June 2009, the FASB replaced The Hierarchy of Generally Accepted
Accounting Principles, with the FASB Accounting Standards Codification TM
(The Codification) as the source of authoritative accounting principles
recognized by the FASB to be applied by nongovernmental entities in the
preparation of financial statements in conformity with GAAP. Rules and
interpretive releases of the Securities and Exchange Commission under
authority of federal securities laws are also sources of authoritative
GAAP for SEC registrants. The Codification was effective for financial
statements issued for periods ending after September 15, 2009.

In April 2009, the FASB amended existing guidance for determining whether
impairment is other than temporary for debt securities. The guidance
requires an entity to assess whether it intends to sell, or it is more
likely than not that it will be required to sell, a security in an
unrealized loss position before recovery of its amortized cost basis.
If either of these criteria is met, the entire difference between amortized
cost and fair value is recognized as impairment through earnings.
For securities that do not meet the aforementioned criteria, the amount
of impairment is split into two components as follows: 1) other than
temporary impairment (OTTI) related to other factors, which is recognized
in other comprehensive income and 2) OTTI related to credit loss, which
must be recognized in the income statement. The credit loss is defined
as the difference between the present value of the cash flows expected to
be collected and the amortized cost basis. Additionally, disclosures about
other than temporary impairments for debt and equity securities were
expanded. This guidance was effective for interim and annual reporting
periods ending after June 15, 2009, with early adoption permitted for
periods ending after March 15, 2009. The effect of adopting this new
guidance was not material.

In April 2009, the FASB issued guidance that emphasizes the objective of
a fair value measurement does not change even when market activity for the
asset or liability has decreased significantly. Fair value is the price
that would be received for an asset sold or paid to transfer a liability
in an orderly transaction (that is, not a forced liquidation or distressed
sale) between market participants at the measurement date under current
market conditions. When observable transactions or quoted prices are not
considered orderly, then little, if any, weight should be assigned to the
indication of the asset or liability`s fair value. Adjustments to those
transactions or prices should be applied to determine the appropriate fair
value. The guidance, which was applied prospectively, was effective for
interim and annual reporting periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009. The effect of
adopting this new guidance was not material.



In August 2009, the FASB amended existing guidance for the fair value
measurement of liabilities by clarifying that in circumstances in which
a quoted price in an active market for the identical liability is not
available, a reporting entity is required to measure fair value using
a valuation technique that uses the quoted price of the identical
liability when traded as an asset, quoted prices for similar liabilities
or similar liabilities when traded as assets, or that is consistent with
existing fair value guidance. The amendments in this guidance also clarify
that both a quoted price in an active market for the identical liability
at the measurement date and the quoted price for the identical liability
when traded as an asset in an active market when no adjustments to the
quoted price of the asset are required are Level 1 fair value measurements.
The guidance was effective for the first reporting period beginning after
issuance. The effect of adopting this new guidance was not material.

Newly Issued Not Yet Effective Standards: In June 2009, the FASB amended
previous guidance relating to transfers of financial assets and eliminates
the concept of a qualifying special purpose entity. This guidance must be
applied as of the beginning of each reporting entity`s first annual
reporting period that begins after November 15, 2009, for interim periods
within that first annual reporting period and for interim and annual
reporting periods thereafter. This guidance must be applied to transfers
occurring on or after the effective date. Additionally, on and after the
effective date, the concept of a qualifying special-purpose entity is no
longer relevant for accounting purposes. Therefore, formerly qualifying
special-purpose entities should be evaluated for consolidation by reporting
entities on and after the effective date in accordance with the applicable
consolidation guidance. The disclosure provisions were also amended and
apply to transfers that occurred both before and after the effective date
of this guidance.  Management is in the process of assessing the impact of
adopting this new guidance and the effect on the Corporation`s results of
operations or financial position.

In June 2009, the FASB amended guidance for consolidation of  variable
interest entity guidance by replacing the quantitative-based risks and
rewards calculation for determining which enterprise, if any, has a
controlling financial interest in a variable interest entity with an
approach focused on identifying which enterprise has the power to direct
the activities of a variable interest entity that most significantly
impact the entity`s economic performance and (1) the obligation to absorb
losses of the entity or (2) the right to receive benefits from the entity.
Additional disclosures about an enterprise`s involvement in variable
interest entities are also required. This guidance is effective as of the
beginning of each reporting entity`s first annual reporting period that
begins after November 15, 2009, for interim periods within that first
annual reporting period, and for interim and annual reporting periods
thereafter. Early adoption is prohibited. Management is in the process of
assessing the impact of adopting this new guidance and the effect on the
Corporation`s results of operations or financial position.

NOTE 2 ~ SECURITIES


The amortized cost, fair value and the related gross unrealized gains and
losses of available for sale securities recognized in accumulated other
comprehensive income (loss) were as follows:


								Gross		Gross
						Amortized	Unrealized	Unrealized	Fair
						Cost		Gains		Losses		Value
												
2009
	U.S. Treasury and federal agency	$    819	$      -	$    -		$    819
     	State and municipal			  28,019             763           (99)           28,683
	Corporate bond and notes	  	   7,640	     137	     -		   7,777
	Mortgage backed: residential	 	  89,972	   3,058	   (87)		  92,943
	Equity securities		  	      23	       -	    (4)		      19
		Total debt securities		 126,473	$  3,958	$ (190)		$130,241





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2009, 2008 and 2007
(Dollar amounts in thousands, except per share data)



NOTE 2 ~ SECURITIES (Continued)


								Gross		Gross
						Amortized	Unrealized	Unrealized	Fair
						Cost		Gains		Losses		Value
												
2008
	State and municipal			$ 16,173	$  234		$ (193)		$ 16,214
	Corporate bond and notes		   7,630	     5		  (453)		   7,182
 	Mortgage-backed: residential		 101,220	 2,616		     -		 103,836
	Equity securities			      23	     -		    (7)	     	      16
		Total debt securities		$125,046	$2,855		$ (653)		$127,248





Sales of available for sale securities were as follows:

						2009		2008		2007
										
	Proceeds				$23,084		$25,471		$22,662
	Gross gains				    949		    330		    132
	Gross losses				   (179)	   (230)	   (121)
	Gross gains from calls			      -		      -		      3
Other than temporary impairment loss		      -	     	   (444)	      -



The tax provision (benefit) related to these net realized gains and losses
was $262, $(34), and $5, respectively.



The amortized cost and fair value of securities at year-end 2009 by
contractual maturity were as follows. Securities not due at a single
maturity date, primarily mortgage backed securities and equity securities,
are shown separately.
					Amortized
						Cost		Fair Value
								
	Due in one year or less			$  5,964	$  6,026
	Due from one to five years		   4,245	   4,408
	Due from five to ten years		  14,135          14,546
	Due after ten years			  12,134          12,299
	Mortgage-backed: residential		  89,972          92,943
	Equity securities			      23              19
		Total				$126,473  	$130,241



Securities pledged at year-end 2009 and 2008 had a carrying amount of
$45,882 and $30,679 and were pledged to secure public deposits and
repurchase agreements.

At year-end 2009 and 2008, there were no holdings of securities of any
one issuer, other than the U.S. Government, and its agencies and
corporations, in an amount greater than 10% of shareholders` equity.

All mortgage-backed securities are issued by the United States government
or any agency or corporation thereof, except for $1,535 of private label
mortgage-backed securities as of December 31, 2009.



Securities with unrealized losses at year-end 2009 and 2008, aggregated by
investment category and length of time that individual securities have been
in a continuous unrealized loss position, are as follows:


					Less Than 12 Months	12 Months or More	Total
					Fair	 Unrealized	Fair	Unrealized	Fair	 Unrealized
2009					Value	 Loss		Value	Loss		Value	 Loss
						 						 
State and municipal			$ 4,375	 $ (60)		$455	$ (39)		$ 4,830	 $ (99)
Mortgage-backed: residential		 11,761    (87)	  	   -	    -	    	 11,761	   (87)
Equity securities		    	     19	    (4)	  	   -	    -	    	     19	    (4)
   Total temporarily impaired		$16,155	 $(151)		$455	$ (39)	 	$16,610	 $(190)




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2008, 2007 and 2006
(Dollar amounts in thousands, except per share data)


NOTE 2 ~ SECURITIES (Continued)


					Less Than 12 Months	12 Months or More	Total
					Fair	 Unrealized	Fair	 Unrealized	Fair	Unrealized
					Value	 Loss		Value	 Loss		Value	Loss
2008
						 			 			
State and municipal			$3,406	 $(193)		$    -	 $    -		$3,406	$(193)
Corporate bonds and notes	 	 5,166    (453)	 	     -	      -		 5,166	 (453)
Equity securities	 		    16	    (7)		     -	      -		    16	   (7)
   Total temporarily impaired		$8,588	 $(653)		$    -	 $    -		$8,588	$(653)



Unrealized losses have not been recognized into income because the
securities are of high credit quality, management has the intent and
ability to hold for the foreseeable future, and the decline in fair value
is largely due to changes in market interest rates or normally expected
market pricing fluctuations. The fair value of debt securities is expected
to recover as the securities approach their maturity date.

National Bancshares Corporation purchased $467 of FHLMC preferred stock in
the first quarter of 2008. During 2008, management determined this
preferred stock was other than temporarily impaired. Management recorded
$84 and $360 of other than temporary impairment write-downs in the second
and third quarter of 2008 related to this investment security. The loss has
been recorded in Securities gains (losses), net in the Consolidated
Statements of Income. The fair value of these securities at
December 31, 2009 and 2008 was $19 and $16 compared to an adjusted cost
basis of $23.


NOTE 3 ~ LOANS

Loans at year-end were as follows:

						2008		2007
								
Collateralized by real estate:
	Commercial				$ 65,139	$ 48,034
	Residential	     		  	  50,390	  54,924
	Home equity	     		  	  26,526	  24,442
	Construction and land development	  12,395	  12,846
					 	 154,450	 140,246
Other:
      Consumer				  	  12,343	  14,354
      Commercial			  	  26,792	  25,583
      Other			   	           3,830   	   1,658
      					 	 197,415	 181,841
	Unearned and deferred income	    	    (438)     	    (292)
	Allowance for loan losses	  	  (2,906)	  (1,718)
	   Total    				$194,071	$179,831





Activity in the allowance for loan losses was as follows:


					2009		2008		2007
									
	Beginning balance		$1,718		$2,028		$1,993
	Provision for loan losses	 1,829		   482		   147
	Loans charged-off		  (659)		  (845)		  (151)
	Recoveries		            18		    53		    39
		Ending balance		$2,906		$1,718		$2,028





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2009, 2008 and 2007
(Dollar amounts in thousands, except per share data)


NOTE 3 ~ LOANS (Continued)

Individually impaired loans were as follows:


							2009		2008
									
	Year-end loans with no allocated allowance
	  for loan losses				$2,069		$  396
	Year-end loans with allocated allowance
	  for loan losses				 3,692		   940
	Amount of the allowance for loan losses
	allocated					   916		    75





							2009		2008		2007
											
	Average of individually impaired
loans during year					$2,897		$1,846		$2,500


The impact on interest income of impaired loans was not significant to
the consolidated statements of income.


Nonaccrual loans and loans past due 90 days still on accrual were as follows:


							2009		2008
									
	Loans past due over 90 days still on accrual	$  458		$  261
	Nonaccrual loans				 4,716		 1,752



Nonaccrual loans and loans past due 90 days still on accrual include both
smaller balance homogeneous loans that are collectively evaluated for
impairment and individually classified impaired loans.

The Bank sold its $1,486 credit card portfolio to Elan Financial Services
(Elan), a subsidiary of U.S. Bank National Association ND in July, 2008.
Under the agreement, Elan purchased the Bank`s existing credit card
portfolio, and subsequently will issue credit cards for the Bank utilizing
the First National Bank name and logo. First National Bank will continue to
earn certain fees from ongoing portfolio activity and new accounts. The
transaction generated a $435 gain recorded in the third quarter of 2008.

The Bank securitized $20,897 single-family residential mortgage loans
formerly held in its mortgage loan portfolio, with Freddie Mac in
December, 2008 as a guaranteed mortgage securitization and retained the
resulting securities as available for sale. The Bank has recorded the
securities as available for sale and continues to service the loans.
The securitization increased the Bank`s liquidity as the securities are
readily marketable, eliminated credit risk on the loans and increased the
Bank`s risk-based capital ratio. As a result of the securitization,
single-family residential mortgage loan balances net of unamortized loan
origination fees declined $20,810, the loan servicing asset increased $132
and securities available for sale increased $21,532. The unrealized gain
on the securities at December 31, 2008 was $840 which increased the Bank`s
accumulated other comprehensive income and capital by $554. During 2009,
the Corporation sold a portion of the securities created by the
securitization resulting in proceeds of $3.3 million and a gross gain on
sale of $152. The Corporation continues to service all of the underlying
loans of the guaranteed mortgage securitization, including the portion of
the securitization sold during 2009.


NOTE 4 ~ LOAN SERVICING


Mortgage loans serviced for others are not reported as assets. The
principal balances of these loans at year-end are as follows:


							2009		2008
									
	Mortgage loan portfolios serviced for:
		FHLMC					$29,255		$38,011



There were no custodial escrow balances maintained in connection with
serviced loans at year-end 2009 and 2008.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2009, 2008 and 2007
(Dollar amounts in thousands, except per share data)


NOTE 4 ~ LOAN SERVICING (Continued)


Activity for mortgage servicing rights and the related valuation allowance
follows:


							2009		2008		2007
											
	Servicing rights:
		Beginning balance			$ 173		$  67		$  86
		Additions				    2		  139	  	   19
 		Amortized to expense			  (60)		  (33)		  (38)
		     Ending balance			$ 115		$ 173		$  67


NOTE 5 ~ PREMISES AND EQUIPMENT


Year-end premises and equipment were as follows:


							2009		2008
									
	Land						$ 1,571		$ 1,528
	Buildings					  8,518		  6,380
	Furniture, fixtures and equipment		  4,997		  4,764
	Construction in progress			    183		    275
							 15,269		 12,947
	Less:  Accumulated depreciation			 (6,236)	 (6,750)
							$ 9,033		$ 6,197



Depreciation expense was $588, $442 and $457 in 2009, 2008 and 2007.

Rent expense under operating leases included in occupancy was $39, $39
and $38 for the years ended December 31, 2009, 2008 and 2007. Future lease
payments are not material.

NOTE 6 ~ INTANGIBLE ASSETS


During 2002, the Corporation acquired Peoples Financial Corporation and
merged the Corporation`s banking operations into the Bank. Identified
intangible assets totaling $1,791 were recognized and have useful lives
of 7 to 10 years. Goodwill of $4,723 was realized from this transaction.
Identified intangible assets at year-end were as follows:


							2009				2008
							Gross				Gross
							Carrying	Accumulated	Carrying	Accumulated
							Amount		Amortization	Amount		Amortization
													
Amortized intangible assets:
	Core deposit intangibles			$1,063		$  866		$1,063		$  772
	Branch acquisition intangible			   760		   760		   760		   733
	Customer relationship intangibles		   728		   728		   728		   624
Total							$2,551		$2,354		$2,551		$2,129



Aggregate amortization expense was $225, $232 and $237 for 2009,
2008 and 2007.




Estimated amortization expense for the next three years:

				
			2010	$ 89
			2011	  86
			2012	  22



Goodwill impairment exists when a reporting unit`s carrying value of
goodwill exceeds its fair value, which is determined through a two-step
impairment test. Step 1 includes the determination of the carrying value
of our single reporting unit, including the existing goodwill and
intangible assets, and estimating the fair value of the reporting unit.
We determined the fair value of our reporting unit and compared it to its
carrying amount. If the carrying amount of a reporting unit exceeds its
fair value, we are required to perform a second step to the impairment test.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2009, 2008 and 2007
(Dollar amounts in thousands, except per share data)

NOTE 6 ~ INTANGIBLE ASSETS (Continued)

Our annual impairment analysis as of September 30, 2009, indicated that the
Step 2 analysis was not necessary. Step 2 of the goodwill impairment test
is performed to measure the impairment loss. Step 2 requires that the
implied fair value of the reporting unit goodwill be compared to the
carrying amount of that goodwill. If the carrying amount of the reporting
unit goodwill exceeds the implied fair value of that goodwill, an
impairment loss shall be recognized in an amount equal to that excess.

NOTE 7 ~ DEPOSITS


							2009		2008
									
	Demand, noninterest-bearing			$ 54,290	$ 46,159
	Demand, interest-bearing			 117,862	  92,515
	Savings						  46,371	  49,642
	Time, $100,000 and over				  15,712	  12,937
	Time, other					  57,138	  62,389
							$291,373	$263,642





A summary of time deposits at year-end 2009 by maturity follows:


						
			2010			$48,537
			2011			 16,211
			2012			  1,930
			2013			  5,576
			2014			    596
						$72,850



NOTE 8 ~ FEDERAL HOME LOAN BANK ADVANCES



At year-end, advances from the Federal Home Loan Bank were as follows:


							2009		2008
									
Maturity in 2010, fixed rate at 6.26%, 			$ 1,000		$ 1,000
onvertible to variable rate if 3-month LIBOR is
at or above predetermined conversion rate level

Maturities in 2010 and 2011, fixed rate at 4.93% 	 13,000		 13,000
to 5.79% at December 31, 2009 and 2008,
convertible to variable if 1-month LIBOR is at
or above fixed rate

Maturities in 2009, fixed rate at 3.95% to 4.10%  	      -		  3,000
Maturities in 2010, fixed rate at 3.19%			  1,000		  1,000
Maturities in 2011, fixed rate at 2.31% to 2.88%	  4,000		  3,000
Maturities in 2012, fixed rate at 2.00%			  3,000		      -
Maturities in 2014, fixed rate at 2.86% to 2.88%	  5,000		      -
     Total						$27,000		$21,000




Each advance is payable at its maturity date; advances may be paid prior
to maturity subject to a prepayment penalty. As collateral for the
advances, the Bank has approximately $45,626 and $49,769 of first mortgage
loans available under a blanket lien arrangement at year-end 2009 and 2008.



Required payments over the next four years are:

						
2010                    3.19 to 6.26%		$12,000
2011                    2.31 to 5.12%		  7,000
2012                    2.00%		  	  3,000
2014			2.86 to 2.88%		  5,000





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2009, 2008 and 2007
(Dollar amounts in thousands, except per share data)

NOTE 9 ~ REPURCHASE AGREEMENTS


Repurchase agreements generally mature within 30 days from the transaction
date.  Information concerning repurchase agreements is summarized as
follows:


								2009		2008		2007
												
	Average balance during the year                         $ 7,442		$10,134		$ 8,642
	Average interest rate during the year			   0.26%	   1.42%	   3.86%
	Maximum month-end balance during the year               $ 8,965		$11,136		$10,956
	Weighted average rate at year-end			   0.25%	   0.50%	   2.85%



NOTE 10 ~ BENEFIT PLANS

The Corporation has a 401(k) retirement plan that covers substantially all
employees.  The plan allows employees to contribute up to a predetermined
amount, subject to certain limitations. Matching contributions may be made
in amounts and at times determined by the Corporation. Total matching and
discretionary contributions made by the Corporation during 2009, 2008 and
2007 amounted to $73, $81 and $83.

The Corporation has an Employee Stock Purchase Incentive Plan for full-time
and most part-time employees. Under the Plan, each employee is entitled
to receive a cash payment equal to 20% of the purchase price of Corporation
common stock acquired by the employee on the open market, up to a maximum
of 100 shares per calendar year. Expenses recognized in 2009, 2008 and
2007 amounted to $2, $1, and $2.

The Corporation has a director retirement and death benefit plan for the
benefit of all members of the Board of Directors.  The plan is designed to
provide an annual retirement benefit to be paid to each director upon
retirement from the Board and attaining age 70. The retirement benefit
provided to each director is an annual benefit equal to $1 for each year
of service on the Board from and after August 24, 1994 until August 2007,
when the Board voted to cease further benefits. In addition, each director
has the option of deferring any portion of directors` fees to a maximum
of $5 per month until retirement.

Interest credited to participant accounts associated with the deferrals
was $9, $12 and $29 in 2009, 2008 and 2007. The deferred directors` fee
liability was $224 at December 31, 2009 and $374 at December 31, 2008.
Expense recognized in 2009, 2008 and 2007 for the director retirement and
death benefit plan was $25, $117 and $59. The liability related to the
plan was $670 at December 31, 2009 and $680 at December 31, 2008.

NOTE 11 ~ INCOME TAXES


The components of deferred taxes were as follows:


								2009		2008
										
Deferred tax assets:
		Bad debts					$  828		$  424
		Deferred compensation				   321		   382
		Deferred loan fees				   223		   192
		FHLMC preferred stock impairment loss		   151		   151
		Deferred income					    43               -
		Real estate owned write-down                        26               -
		Non-accrual loan interest income		    17		    45
		Stock-based compensation		            19		    10
		Core deposit intangibles		             -		     7
		Other						     1		     5
			Total					$1,629		$1,216




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2009, 2008 and 2007
(Dollar amounts in thousands, except per share data)

NOTE 11 ~ INCOME TAXES (Continued)
 								2009		2008
										
Deferred tax liabilities:
		Unrealized security gains, net			$1,281		$  749
		Federal Home Loan Bank stock dividends		   542		   542
		Depreciation					   432		   321
		Purchase accounting adjustments			   137		   206
		Mortgage servicing rights			    50		    59
		Prepaid expenses				    25		    44
		Securities accretion				    47		    31
		Partnership income				     2		     1
		   Total					 2,516		 1,953
	Net deferred tax asset (liability)			$ (887)		$ (737)



Federal income tax laws provided that the 2002 acquired entity could claim
additional bad debt deductions through 1987, totaling $1.9 million.
Accounting standards do not require a deferred tax liability to be
recorded on this amount, which liability otherwise would total $646 at
December 31, 2009.  If the Bank were liquidated or otherwise ceases to be
a bank or if tax laws were to change, this amount would be expensed.


The components of income tax expense are as follows:


								2009		2008		2007
												
	Currently payable					$ 780		$ 730		$ 515
	  Deferred						 (382)		   40		  (19)

		Total						$ 398		$ 770		$ 496





The following is a reconciliation of income tax at the federal statutory
rate to the effective rate of tax on the financial statements:

						2009			2008			2007

      					       	Rate	Amount		Rate	Amount		Rate	Amount
      												
      Tax at federal statutory rate		34%	$  682		34%	$1,008		34%	$ 750
      Tax-exempt income			       (13)	  (270)	        (7)	  (214)		(10)	 (228)
      Other					(1)	   (14)		(1)	   (24)		 (2)      (26)
      Income tax expense			20%	$  398		26%	$  770		 22%	$ 496



As of December 31, 2008 and December 31, 2009, the Corporation had no
unrecognized tax benefits or accrued interest and penalties recorded.
The Corporation does not expect the amount of unrecognized tax benefits
to significantly increase within the next twelve months. The Corporation
will record interest and penalties as a component of income tax expense.

The Corporation and its subsidiaries are subject to U.S. federal income
tax as well as income tax in the state of Ohio for National Bancshares.
The Bank is subject to tax in Ohio based upon its net worth. The Company
is no longer subject to examination by state taxing authorities for years
prior to 2006.

NOTE 12 ~ RELATED-PARTY TRANSACTIONS


Loans to principal officers, directors, and their affiliates during 2009
were as follows:


								
	Beginning balance					$3,776
	Effect of changes in composition of related parties	    99
	New loans						 3,002
	Repayments						  (516)
	     Ending balance					$6,361





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2009, 2008 and 2007
(Dollar amounts in thousands, except per share data)

NOTE 12 ~ RELATED-PARTY TRANSACTIONS (Continued)

Unused commitments to these related parties totaled $3,762 and $969 at
year-end 2009 and 2008.  Related party deposits totaled $4,749 and
$2,050 at year-end 2009 and 2008.

The Corporation has minority ownership in a title agency affiliated
with a Director resulting in fee income to the Corporation of $32,
$11 and $16 for 2009, 2008 and 2007, respectively.

NOTE 13 ~ STOCK-BASED COMPENSATION

The Corporation`s 2008 Equity Incentive Plan (`the Plan`), which is
shareholder-approved, permits the grant of stock options or restricted
stock awards, to its officers, employees, consultants and non-employee
directors for up to 223,448 shares of common stock.

Stock Option Awards

Option awards are granted with an exercise price equal to the market price
of the Corporation`s common stock at the date of grant; those option
awards have vesting periods determined by the Corporation`s compensation
committee and have terms that shall not exceed 10 years.

On May 20, 2008, the Corporation granted options to purchase 58,000 shares
of stock to directors and certain key officers, all of which remained
outstanding at December 31, 2008. The exercise price of the options is
$18.03 per share. The options vest in five equal installments over a
five-year period and have a term of 10 years. 5,000 options were forfeited
during 2009 leaving 53,000 outstanding at December 31, 2009. All options
are expected to vest.

The fair value of each option award is estimated on the date of grant
using a closed form option valuation (Black-Scholes) model that uses the
assumptions noted in the table below. Expected volatilities are based on
historical volatilities of the Corporation`s common stock. The Corporation
has estimated the option exercise and post-vesting termination behavior
and expected term of options granted due to the lack of historical data.
The expected term of options granted represents the period of time that
options granted are expected to be outstanding, which takes into account
that the options are not transferrable. The risk-free interest rate for the
expected term of the option is based on the U.S. Treasury yield curve in
effect at the time of the grant.



The fair value of options granted of $1.83 per option was determined using
the following weighted-average assumptions as of grant date.


						
	Risk-free interest rate			 3.19%
	Expected term (years)			 6.5
	Expected stock price volatility		13.76%
	Dividend yield 				 3.60%



The total compensation cost that has been charged against income for the
plan was $34 and $28 for 2009 and 2008. The total income tax benefit was
$12 and $10 for 2009 and 2008. There was $38 and $78 of total unrecognized
compensation cost related to nonvested stock options granted under the
Plan as of December 31, 2009 and 2008. The cost is expected to be
recognized over a weighted-average period of 3.4 years. At
December 31, 2009, 10,600 options are vested and the outstanding options
have no intrinsic value. The weighted average remaining contractual term
is 8.4 years.

Restricted Stock Awards

On December 23, 2009, the Company issued restricted stock awards for 3,605
shares of the Corporation`s common stock to certain officers.

The awards vested immediately and the compensation expense related to the
awards of $50 was recorded in 2009. The fair value of the stock was
determined using closing market price of the Corporation`s common stock on
the date of the grant.




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2009, 2008 and 2007
(Dollar amounts in thousands, except per share data)


NOTE 14 ~ REGULATORY CAPITAL MATTERS

Banks are subject to regulatory capital requirements administered by
federal banking agencies. Capital adequacy guidelines and prompt
corrective action regulations involve quantitative measures of assets,
liabilities, and certain off balance sheet items calculated under
regulatory accounting practices. Capital amounts and classifications
are also subject to qualitative judgments by regulators. Failure to meet
capital requirements can initiate regulatory action. Management believes
as of December 31, 2009, the Bank meets all capital adequacy requirements
to which it is subject.

Prompt corrective action regulations provide five classifications:
well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized, although these terms
are not used to represent overall financial condition.  If adequately
capitalized, regulatory approval is required to accept brokered deposits.
If undercapitalized, capital distributions are limited, as is asset growth
and expansion, and capital restoration plans are required.  At year-end
2009 and 2008, the most recent regulatory notifications categorized the
Bank as well capitalized under the regulatory framework for prompt
corrective action. There are no conditions or events since that
notification that management believes have changed the institution`s
category.



Actual and required capital amounts and ratios for the Bank are presented
below at year-end.


											To Be Well
								Required		Capitalized Under
								For Capital		Prompt Corrective
					Actual			Adequacy Purposes	Action Regulations
					Amount	 Ratio		Amount	 Ratio		Amount	 Ratio
						 			 			 
2009
Total capital to risk
  weighted assets			$29,842	 12.46%		$19,161	 8.00%		$23,952	 10.00%
Tier 1 capital to risk
  weighted assets			 26,936	 11.25%		  9,581	 4.00%		 14,371	  6.00%
Tier 1 capital to
  average assets			 26,936	  7.40%		 14,562  4.00%		 18,202	  5.00%

2008
Total capital to risk
  weighted assets			$26,730	 12.60%		$16,971	 8.00%		$21,213	  10.00%
Tier 1 capital to risk
  weighted assets			 25,012	 11.79%		  8,485	 4.00%		 12,728	   6.00%
Tier 1 capital to
  average assets			 25,012	  7.78%		 12,853	 4.00%		 16,066	   5.00%



Dividend Restrictions ~ The Corporation`s principal source of funds for
dividend payments is dividends received from the Bank. Banking regulations
limit the amount of dividends that may be paid without prior approval of
regulatory agencies. Under these regulations, the amount of dividends
that may be paid in any calendar year is limited to the current year`s
net profits, combined with the retained net profits of the preceding two
years, subject to the capital requirements described above. The Bank could,
without prior approval, pay dividends to the holding Corporation of
approximately $437 as of December 31, 2009.


NOTE 15 ~ LOAN COMMITMENTS AND OTHER RELATED ACTIVITIES

Some financial instruments, such as loan commitments, credit lines, letters
of credit, and overdraft protection, are issued to meet customer financing
needs. These are agreements to provide credit or to support the credit of
others, as long as conditions established in the contract are met, and
usually have expiration dates. Commitments may expire without being used.
Off balance sheet risk to credit loss exists up to the face amount of
these instruments, although material losses are not anticipated. The same
credit policies are used to make such commitments as are used for loans,
including obtaining collateral at exercise of the commitment.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2009, 2008 and 2007
(Dollar amounts in thousands, except per share data)

NOTE 15 ~ LOAN COMMITMENTS AND OTHER RELATED ACTIVITIES (Continued)


The contractual amounts of financial instruments with off balance sheet risk
at year-end were as follows:


						2009		2008
								
	Commitments to make loans		$ 2,531		$ 2,382
	Unused lines of credit			 60,567		 49,389
	Letters of credit			    308		    109



Of the above unused instruments at December 31, 2009, approximately $9,974
pertains to fixed-rate commitments and variable-rate commitments account
for approximately $53,432. At year-end 2008, approximately $10,065 of
total commitments were fixed-rate and approximately $41,815 were variable
rate. Rates on fixed-rate unused lines of credit ranged from 6.25% to
21.90% at December 31, 2009 and 6.25% to 19.80% at December 31, 2008.

NOTE 16 - FAIR VALUE

Statement 157 establishes a fair value hierarchy which requires an entity
to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. The standard describes three
levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities
in active markets that the entity has the ability to access as of the
measurement date.

Level 2: Significant other observable inputs other than Level 1 prices
such as quoted prices for similar assets or liabilities; quoted prices
in markets that are not active; or other inputs that are observable or
can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity`s
own assumptions about the assumptions that market participants would use
in pricing an asset or liability.

The fair value of securities available for sale is determined by obtaining
quoted prices on nationally recognized securities exchanges (Level 1
inputs) or matrix pricing, which is a mathematical technique widely used
in the industry to value debt securities without relying exclusively on
quoted prices for the specific securities but rather by relying on the
securities relationship to other benchmark quoted securities (Level 2
inputs).

The fair value of servicing rights is based on market prices for comparable
mortgage servicing contracts, when available, or alternatively based on a
valuation model that calculates the present value of estimated net
servicing income. The valuation model incorporates assumptions that market
participants would use in estimating future net servicing income. The
Corporation is able to compare the valuation model inputs and results to
widely available published industry data for reasonableness (Level 2 inputs).

The fair value of derivatives is based on valuation models using observable
market data as of the measurement date (Level 2 inputs).

The fair value of impaired loans with specific allocations of the allowance
for loan losses is generally based on recent real estate appraisals. These
appraisals may utilize a single valuation approach or a combination of
approaches including comparable sales and the income approach. Adjustments
are routinely made in the appraisal process by the appraisers to adjust for
differences between the comparable sales and income data available. Such
adjustments are typically significant and result in a Level 3 classification
of the inputs for determining fair value.

Nonrecurring adjustments to certain commercial and residential real estate
properties classified as other real estate owned are measured at the lower
of carrying amount or fair value, less cost to sell. Fair Values are
generally based on third party appraisals of the property, resulting in a
Level 3 classification. In cases where the carrying amount exceeds the fair
value, less costs to sell, an impairment loss is recognized.

Loans held for sale are carried at the lower of cost or fair value, as
determined by outstanding commitments, from third party investors.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2009, 2008 and 2007
(Dollar amounts in thousands, except per share data)

NOTE 16 ~ FAIR VALUE (Continued)

Assets and Liabilities Measured on a Recurring Basis


Assets and liabilities measured at fair value on a recurring basis are
summarized below:

						Fair Value Measurements
						At December 31, 2009 Using
						Quoted Prices in	Significant
						Active Markets		Other		Significant
						for Identical		Observable	Unobservable
						Assets		        Inputs		Inputs
						(Level 1)		(Level 2)	(Level 3)
											
Assets:
	Available for sale securities
	U.S. Government and federal agency	$      -		$    819	$      -
	State and municipal			       -		  28,683               -
	Corporate bonds and notes		       -                   7,777               -
	Mortgage-backed securities: residential        -                  92,943               -
	Equity securities			      19                       -               -
	Interest rate swaps			       -		       4	       -







						Fair Value Measurements
						At December 31, 2009 Using
						Quoted Prices in	Significant
						Active Markets		Other		Significant
						for Identical		Observable	Unobservable
						Assets			Inputs		Inputs
						(Level 1)		(Level 2)	(Level 3)
											

Liabilities:
	Interest rate swaps			$      -		$      4	$      -





						Fair Value Measurements
						At December 31, 2008 Using
						Quoted Prices in	Significant
						Active Markets		Other		Significant
						for Identical		Observable	Unobservable
						Assets			Inputs		Inputs
						(Level 1)		(Level 2)	(Level 3)
											
Assets:
	Available for sale securities		$     16		$127,232	$      -



Assets and Liabilities Measured on a Non-Recurring Basis

Assets and liabilities measured at fair value on a non-recurring basis
are summarized below:



						Fair Value Measurements
						At December 31, 2009 Using
						Quoted Prices in	Significant
						Active Markets		Other		Significant
						for Identical		Observable	Unobservable
						Assets			Inputs		Inputs
						(Level 1)		(Level 2)	(Level 3)
											

Assets:
	Impaired loans				$      -		$      -	$  3,626
	Other real estate owned			       -                       -              58





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2009, 2008 and 2007
(Dollar amounts in thousands, except per share data)

NOTE 16 - FAIR VALUE (Continued)



						Fair Value Measurements
						At December 31, 2008 Using
						Quoted Prices in	Significant
						Active Markets		Other		Significant
						for Identical		Observable	Unobservable
						Assets			Inputs		Inputs
						(Level 1)		(Level 2)	(Level 3)
											
Assets:
	Impaired loans				$      -		$      -	$   865



Impaired loans, which are measured for impairment using the fair value of
the collateral for collateral dependent loans, had a principal amount of
$4,542, with a valuation allowance of $916, resulting in an additional
provision for loan loss of $1,091.

Other real estate owned measured at fair value less costs to sell, had a
net carrying amount of $58, which is made up of the outstanding balance of
$133, net of a valuation allowance of $75 at December 31, 2009, resulting
in a write-down of $75 for the year ending December 31, 2009.


Carrying amount and estimated fair values of financial instruments at
year-end were as follows:


						2009				2008
						Carrying	Fair		Carrying	Fair
						Amount		Value		Amount		Value
												
Financial assets
	Cash and cash equivalents		$  8,124	$  8,124	$ 11,001	$ 11,001
	Time deposits with other financial
          institutions				  13,580          13,580               -               -
	Securities available for sale		 130,241	 130,241	 127,248	 127,248
	Restricted equity securities               3,218              na           3,217              na
	Loans, net				 194,071	 194,103	 179,831	 179,586
	Accrued interest receivable		   1,334	   1,334	   1,230	   1,230
	Interest rate swaps                            4               4               -               -

Financial liabilities
	Deposits				 291,373	 292,045	 263,642	 264,731
	Short-term borrowings			   9,720	   9,720	  13,285	  13,285
	Federal Home Loan Bank advances		  27,000	  27,779	  21,000	  21,239
	Accrued interest payable		     408	     408	     690	     690
	Interest rate swaps                            4               4               -               -



The methods and assumptions used to estimate fair value are described
as follows:

Carrying amount is the estimated fair value for cash and cash equivalents,
time deposits with other financial institutions, interest bearing deposits,
accrued interest receivable and payable, demand deposits, short term debt,
and variable rate loans or deposits that reprice frequently and fully.
Security fair values are based on market prices or dealer quotes, and if
no such information is available, on the rate and term of the security
and information about the issuer.  For fixed rate loans or deposits and
for variable rate loans or deposits with infrequent repricing or repricing
limits, fair value is based on discounted cash flows using current market
rates applied to the estimated life and credit risk.  Fair values for
impaired loans are estimated using discounted cash flow analysis or
underlying collateral values. Fair value of debt is based on current
rates for similar financing.  It was not practicable to determine the
fair value of restricted equity securities due to restrictions placed on
its transferability. The fair value of off balance sheet items is not
considered material.

NOTE 17 ~ DERIVATIVES

The Corporation utilizes interest rate swap agreements as part of its
asset liability management strategy to help manage its interest rate
risk position.  The notional amount of the interest rate swaps does
not represent amounts exchanged by the parties. The amount exchanged
is determined by reference to the notional amount and the other terms
of the individual interest rate swap agreements.

The Corporation implemented a program whereby it lends to its borrowers
at a fixed rate with the loan agreement containing a two-way yield
maintenance provision in the first quarter of 2009. If the borrower
prepays the loan, the yield maintenance provision will result in a
prepayment penalty or benefit depending on the interest rate environment
at the time of the prepayment. This provision represents an embedded
derivative which is required to be bifurcated from the host loan contract.
As a result of bifurcating the embedded derivative, the Corporation
records the transaction with the borrower as a floating rate loan and
a pay floating~receive fixed interest-rate swap. To offset the risk of
the interest-rate swap with the borrower, the Corporation enters
interest-rate swaps with outside counterparties that mirror the terms
of the interest-rate swap between the Corporation and the borrower.
Both interest-rate swaps are carried as freestanding derivatives with
their changes in fair value reported in current earnings. The change
in the fair value of the interest-rate swap with borrowers was a decrease
of $4 for the year ended December 31, 2009, which was offset by an equal
increase in value during the year ended December 31, 2009 on the
interest-rate swaps with outside parties, with the result that there was
no impact on income as of December 31, 2009.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2009, 2008 and 2007
(Dollar amounts in thousands, except per share data)

NOTE 17 ~ DERIVATIVES (Continued)


Summary information about the interest-rate swap between the Corporation
and its borrower as of year-end is as follows:


					
Notional amount				$ 1,544
Weighted average receive rate		   5.33%
Weighted average pay rate	           3.88%
Weighted average maturity (years)	   4.0
     Fair value of interest-rate swap	     4






					
Notional amount				$ 1,544
Weighted average receive rate		   5.33%
Weighted average pay rate	           3.88%
Weighted average maturity (years)	   4.0
     Fair value of interest-rate swap	    (4)



NOTE 18 ~ OTHER COMPREHENSIVE INCOME (LOSS)


Other comprehensive income (loss) components and related tax effects
were as follows:

						2009		2008		2007
										
Unrealized holding gains (loss) on
  available for sale securities			$2,337		$  571		$  714
Reclassification adjustment for losses (gains)
  later recognized in income			  (770)		   344		   (14)
Net unrealized gains 				 1,567		   915		   703
Initial unrealized gain on mortgage-backed
securities received in securitization		     -		   840 		     -
Tax effect 					  (533)		  (597)		  (239)
  Other comprehensive income  			$1,034		$1,158		$  464





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2009, 2008 and 2007
(Dollar amounts in thousands, except per share data)

NOTE 19 ~ PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION


Condensed financial statements for National Bancshares Corporation
(parent only) are as follows:


BALANCE SHEETS					December 31,
						2009		2008
								
ASSETS
Cash and cash equivalents			$ 4,438		$ 5,237
Investment in Bank subsidiary			 34,389		 31,675
Securities available for sale		     	     19		     16
Other assets		 			    234		    215
   Total assets					$39,080		$37,233



LIABILITIES AND SHAREHOLDERS` EQUITY
Dividends payable				$   177		$   352
Shareholders` equity				 38,903		 36,881
   Total liabilities and shareholders` equity	$39,080		$37,233




STATEMENTS OF INCOME                            Years ended December 31,

						2009		2008		2007
										
INCOME
Dividends from Bank subsidiary			$    -		$2,500		$3,000
Securities gains (losses), net			     -		  (444)		     1
Dividend income                                	     -		    16		     -
  Total Income					     -	 	 2,072		 3,001

EXPENSES
Miscellaneous expense				   (59)		   (72)		   (85)
Income (loss) before income tax and
  undistributed	subsidiary income		   (59)		 2,000		 2,916
Income tax benefit				    20		   170		    29
Undistributed equity in (distributions in excess
   of) net income of Bank subsidiary		 1,648		    24		(1,234)

Net income					$1,609		$2,194		$1,711





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2009, 2008 and 2007
(Dollar amounts in thousands, except per share data)


NOTE 19 ~ PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (Continued)


STATEMENTS OF CASH FLOWS             			Years ended December 31,

							2009		2008		2007
											
Cash flows from operating activities
	Net income					$1,609		$2,194		$1,711
	Adjustments to reconcile net income
	   to net cash from operating activities:
		Distributions in excess of (equity
		in undistributed net income)
		of Bank subsidiary			(1,648)	           (24)		 1,234
            Net security (gains) loss			     -		   444		    (1)
	     Change in other assets and liabilities	    31	          (170)		   (14)
	       	Net cash from operating activities	    (8)		 2,444		 2,930
Cash flows from investing activities
	Proceeds from sale of securities		     -		     -		     1
	Purchase of security available for sale		     -		  (467)		     -
		Net cash from investing activities	     -		  (467)	    	     1

Cash flows from financing activities
	Dividends paid					  (881)		(1,410)		(1,430)
	Purchase of common stock			     -		   (86)		  (434)
		Net cash from financing activities	  (881)		(1,496)		(1,864)

Net change in cash 					  (889)		   481		 1,067
Beginning cash and cash equivalents			 5,327		 4,846		 3,779

Ending cash and cash equivalents			$4,438		$5,327		$4,846





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors and Shareholders
National Bancshares Corporation
Orrville, Ohio

We have audited the accompanying consolidated balance sheets of National
Bancshares Corporation as of December 31, 2009 and 2008, and the related
consolidated statements of income, changes in shareholders` equity and
cash flows for each of the three years in the period ended
December 31, 2009. These financial statements are the responsibility of
the Corporation`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
Corporation Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free of material
misstatement. The Corporation is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting.
Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the Corporation`s internal control over financial
reporting. Accordingly, we express no such opinion. 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
National Bancshares Corporation as of December 31, 2009 and 2008, and the
results of its operations and its cash flows for each of the three years
in the period ended December 31, 2009 in conformity with U.S. generally
accepted accounting principles.



Crowe Horwath LLP
Cleveland, Ohio
March 19, 2010



REPORT OF MANAGEMENT ON THE COMPANY`S INTERNAL CONTROL OVER
FINANCIAL REPORTING


March 1, 2010

Management of National Bancshares Corporation is responsible for
establishing and maintaining adequate internal control over financial
reporting. Internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with accounting principles generally
accepted in the United States. Internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of assets; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures are made only in accordance
with authorizations of management and directors; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of assets that could have a material
effect on the financial statements.

Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. A control system,
no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met.
Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and
instances of fraud, if any, have been detected. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies and procedures may deteriorate.

Management of National Bancshares Corporation, including the Chief Executive
Officer and the Chief Financial Officer, has assessed the Corporation`s
internal control over financial reporting as of December 31, 2009, based
on criteria for effective internal control over financial reporting described
in `Internal Control ~ Integrated Framework` issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on this
assessment, management has concluded that the Corporation`s internal
control over financial reporting was effective as of December 31, 2009,
based on the specified criteria.

This annual report does not include an audit report of the Corporation`s
registered public accounting firm regarding internal control over financial
reporting. Management`s report was not subject to audit by the
Corporation`s registered public accounting firm pursuant to temporary
rules of the Securities and Exchange Commission that permit the Corporation
to provide only management`s report in this annual report.



David C. Vernon
Chief Executive Officer



James R. VanSickle
Chief Financial Officer






COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN OF NATIONAL BANCSHARES
CORPORATION, S&P 500 STOCK INDEX, AND S&P 500 BANK INDEX


			   	2004	   2005      2005      2007      2008      2009
					   	            	 	   
National Bancshares Corp	$100.00	    85.42     90.24     64.67     52.85	    61.11
S&P 500 Stock Index~		$100.00	   104.91    121.48    128.16	  80.74	   102.11
S&P 500 Banks Index~		$100.00	    98.54    114.41     80.33	  42.18	    39.40




~ National Bancshares Corporation is not included in the S&P 500 Bank Index
or S&P 500 Stock Index.



PRICE RANGE OF COMMON STOCK


National Bancshares Corporation common stock is traded on the OTC Bulletin
Board under the symbol `NBOH.`	The OTC Bulletin Board is a regulated
quotation service that displays real-time quotes, last-sale prices, and
volume information in over-the-counter equity securities. A summary of
the high and low prices of and cash dividends paid on National Bancshares
Corporation common stock in 2009 and 2008 follows. This information does not
reflect retail mark-up, markdown or commissions, and does not necessarily
represent actual transactions.


					High		Low		Dividends per share
									
2008
First Quarter				$14.65		$11.96		$.08
Second Quarter				 14.64		 13.02	 	 .08
Third Quarter				 14.08		 12.90		 .08
Fourth Quarter				 17.90		 13.52		 .08

2007
First Quarter				$18.10		$16.20		$.16
Second Quarter				 18.50		 14.50		 .16
Third Quarter				 16.69		 14.30	 	 .16
Fourth Quarter				 16.00		 11.60	 	 .16



SHAREHOLDER INFORMATION

Corporate Office
National Bancshares Corporation
112 West Market Street, PO Box 57
Orrville, OH 44667
www.discoverfirstnational.com

Stock Trading Information
The shares of common stock of National Bancshares Corporation are
traded on the OTC Bulletin Board. The ticker symbol for National
Bancshares Corporation is `NBOH.` The Corporation had 876 shareholders
of Record as of December 31, 2009.

Form 10-K
A copy of the Corporation`s 2009 Annual Report on Form 10-K as filed
with the SEC will be furnished free of charge to shareholders upon
written request to the Company.

Shareholder Assistance
National Bancshares Corporation
Shareholder Services Department
Ellen Gerber, Shareholder Relations
330-765-0609
egerber@discoverfirstnational.com

Transfer Agent
Registrar and Transfer Company
10 Commerce Drive
Cranford, NJ 07016
1-800-368-5948
info@rtco.com
www.rtco.com

National Bancshares Corporation has a Dividend Reinvestment Plan and a
Dividend Direct Deposit Plan available at no cost. Please contact
Registrar and Transfer Company for enrollment.



OFFICERS

NATIONAL BANCSHARES CORPORATION

David C. Vernon, President and Chief Executive Officer
James R. VanSickle, Senior Vice President and Chief Financial Officer
Paul G. Kubiak, Senior Vice President and Secretary

FIRST NATIONAL BANK

David C. Vernon, President and Chief Executive Officer

Business Banking

Thomas R. Poe, 	Senior Vice President, Senior Loan Officer
John L. Falatok, Senior Vice President, Market Manager
John R. Macks, Vice President
Paul A. Manghillis, Vice President
Robert C. McConnell, Vice President
John D. Shultz, Jr., Vice President
Darrell L. Smucker, Vice President
Laura R. Yoder, Assistant Vice President

Mortgage Banking

Cynthia A. Wagner, Assistant Vice President
Matthew M. Miller, Assistant Vice President, Mortgage Consultant

Credit Administration

Richard A. White, Vice President, Senior Credit Officer
Kathryn J. Barnes, Assistant Vice President, Credit Officer
Dallas W. Falb, Credit Officer

Loan Operations, Consumer Lending and Managed Assets

Steven L. Riddick, Vice President
Lisa M. Bryant, Loan Operations Officer
Mindy L. Henderson, Loan Operations Officer
Patricia J. Massaro, Loan Officer

Retail Banking

Paul G. Kubiak, Senior Vice President, Retail Banking
John P. Hall, Vice President, Wooster Market Manager
Harold D. Berkey, Vice President, Relationship Manager
Amberly M. Wolf, Assistant Vice President, Retail Banking
Paul J. Bayus, Assistant Vice President, Relationship Manager
Dean M. Karhan, Assistant Vice President, Relationship Manager
Heather L. Kiner, Assistant Vice President, Relationship Manager
Jill R. Wachtel, Assistant Vice President, Relationship Manager

Corporate

James R. VanSickle, Senior Vice President, Chief Financial Officer
James T. Griffith, Vice President, Information Technology
Pamela S. Null, Vice President, Compliance, BSA, CRA and Security
Michael G. Oberhaus, Vice President, Financial Analyst, Risk Manager
Maria A. Roush, Vice President, Auditor
Angela L. Smith, Controller
Jodi R. Blair, Deposit Operations Officer




BOARD OF DIRECTORS					FIRST NATIONAL BANK OFFICES
NATIONAL BANCSHARES CORPORATION &
FIRST NATIONAL BANK

Sara Steinbrenner Balzarini				Orrville
     Partner,						112 W. Market St.
     Paramount Tennis, LLC.				330-682-1010

John P. Cook, CPA, Ph.D					1320 W. High St.
	Shareholder,					330-682-2881
	Long, Cook & Samsa, Inc.
							1720 N. Main St.
Bobbi E. Douglas					CASH ATM ONLY
	Executive Director,
	STEPS at Liberty Center				Apple Creek
	Every Woman`s House				7227 E. Lincoln Way
							330-264-8070
John W. Kropf
	Chairman of the Board,				Dalton
	National Bancshares Corporation			12 W. Main St.
	First National Bank				330-828-2227
	Attorney,
	Kropf, Wagner, Lutz				Fairlawn
	& VanSickle, L.L.P.				3085 West Market Street
							330-475-1363
John L. Muhlbach, Jr.
	Vice President,					Kidron
	A.A. Hammersmith, Inc.				4950 Kidron Rd.
							330-857-3101
Victor B. Schantz
	President,					Lodi
	Schantz Organ Company				106 Ainsworth St.
							330-948-1414
Steve Schmid
	President,					Massillon
	Dairy Enterprises, Inc.				211 Lincoln Way E.
							330-832-7441
James R. Smail
	Chairman/Director				2312 Lincoln Way N.W.
	J.R. Smail, Inc.				330-833-1622
	Poulson Drilling, Inc.
	Monitor Ranch, Inc.				51 Massillon Marketplace Dr. S.W.
	Monitor Bancorp, Inc.				CASH ONLY ATM

David C. Vernon	Mt. Eaton
	President & CEO,				15974 E. Main St.
	National Bancshares Corporation			330-359-3105 or 330-857-4301
     	First National Bank
							Seville
Howard J. Wenger					4885 Atlantic Dr.
	President,					330-769-3105
      	Wenger Excavating, Inc.
      	Lake Region Oil, Inc.				Smithville
	Northstar Asphalt, Inc.				153 E. Main St.
	Massillon Materials, Inc.			330-669-2611
	Stark Materials, Inc.
							Wooster
Albert W. Yeagley					4192 Burbank Rd.
	Vice President, Industry & Government Affairs	330-263-5303
	The J. M. Smucker Company
							1725 Cleveland Rd.
							330-263-1725

EX-14

Exhibit 14.1

CODE OF BUSINESS CONDUCT AND ETHICS


PURPOSE

National Bancshares Corporation (the `Company`) requires that all
directors, officers and employees abide by the fundamental principles
of ethical behavior listed here in performing their duties.


GENERAL OBJECTIVE

This Code of Business Conduct and Ethics (`Code`) for the Company sets
forth basic principles and guidelines for directors, officers and employees
which are intended to assist them in conducting the Company`s affairs and
business in accordance with law and business ethics. It is impossible,
however, to anticipate all the situations in which legal and business
ethical questions might arise. The best overall guidelines are individual
conscience, common sense and a careful, knowing compliance with law.

The Company has designated the President/Chief Executive Officer (`CEO`)
and the VP Compliance to assist employees in resolving questions they
may have regarding the interpretation and application of the Code.
Employees should not hesitate to take advantage of this help and
assistance.


POLICY ELEMENTS

AUTHORITY

Personal Responsibility

Every director, officer, and employee has the personal responsibility to
read, know and comply with the principles contained in this Code. For
employees, compliance with these principles is a condition of employment,
and failure to comply will result in discipline up to and including
termination. The Board of Directors (the `Board`) shall determine the
actions to be taken in the event of violations of the Code by senior
management. Such actions shall be reasonably designed to deter wrongdoing
and to promote accountability for adherence to the Code. Every director,
officer and employee has the duty to bring to the attention of the Chairs
of the Audit or Corporate Governance and Nominating Committees of the Board
any activity that in his judgment would violate the principles of this Code.


SPECIFIC GOALS

Reporting Ethical, Legal or Financial Integrity Concerns

Any person may report any ethical concern or any potential or actual legal
or financial violation, including any fraud, accounting, auditing, tax, or
record keeping matter directly to the Chair of the Audit Committee, the
President and CEO, or the Chief Financial Officer, or anonymously using the
Company`s website based Compliance Hotline.

The Company will not permit retaliation against any employee who reports an
ethical, legal or financial concern nor will it discipline any employee for
making a report in good faith.


Integrity of Recording and Reporting our Financial Results

We properly maintain accurate and complete financial and other business
records, and communicate full, fair, accurate, timely and understandable
financial results. In addition, we recognize that various officers and
employees of the Company must meet these requirements for the content of
reports to the U.S. Securities and Exchange Commission (`Commission`), and
for the content of other public communications made by the Company.

Avoiding Conflicts of Interest

We avoid relationships or conduct that might compromise judgment or
create actual or apparent conflicts between our personal interests and
our loyalty to the Company. We do not use our position with the Company
to obtain improper benefits for others or ourselves. We do not compete
with the Company.

Insider Trading

We follow the Company`s Insider Trading Policy and understand that the
securities laws impose severe sanctions upon any individual who uses
`inside information` for his own benefit or discloses it to others for
their use.

Obeying the Law

We respect and obey the laws, rules and regulations applying to our
business.


Offering/Accepting Gifts, Entertainment, Bribes or Kickbacks

We do not offer or accept gifts or entertainment of substantial value.
We do not offer or accept bribes or kickbacks.

Protecting Our Assets and Confidentiality

We use the Company`s property, information and opportunities for the
Company`s business purposes and not for unauthorized use. We properly
maintain the confidentiality of information entrusted to us by the
Company, its suppliers and its customers.

Selling to Governments

We comply with the special laws, rules and regulations that relate to
government contracts and relationships with government personnel.

Political Contributions

We do not make contributions on behalf of the Company to political
candidates or parties even where lawful.

Competing Ethically

We gain competitive advantage through superior performance. We do not
engage in unethical or illegal trade practices. Our business records
and communications involving our products and services are truthful and
accurate.

Respecting Diversity and Fair Employment Practices

We are committed to respecting a culturally diverse workforce through
practices that provide equal access and fair treatment to all employees
on the basis of merit. We do not tolerate harassment or discrimination
in the workplace.


RISK MANAGEMENT

Waivers of the Code

Any waiver of this Code shall be made only by the Board, and shall be
promptly publicly disclosed as required by the Commission rules.

EX-14

Exhibit 14.2

CODE OF ETHICAL CONDUCT
FOR FINANCE PERSONNEL AND OFFICERS


PURPOSE

The financial officers of National Bancshares Corporation (`Company`),
being the President and Chief Executive Officer, Chief Financial Officer
and persons in like positions (collectively, `Finance Officers`), as well
as the `Finance Department personnel` (as defined herein) for the Company,
bear a special responsibility both inside and outside of the Company for
promoting integrity. They have a special role both to elaborate these
principles and to ensure that a culture exists throughout the Company that
ensures fair and timely reporting of the Company`s financial results and
condition.


DEFINITIONS

For purposes of this Code of Ethical Conduct for Finance Personnel and
Officers (`Financial Code of Ethics`), `Finance Department personnel`
include all of the following positions within the Company: (1) controller,
(2) assistant controller(s), (3) treasurer, (4) assistant treasurer(s),
(5) risk manager, (6) tax manager, and (7) the principal accounting
personnel at any subsidiary company or division.


SPECIFIC GOALS

Because of their special role, the Finance Officers and the Finance
Department personnel are bound by this Financial Code of Ethics and
each must:

~ Act honestly and ethically to conduct themselves in an honest and
   ethical manner in their professional duties, including their handling
   of actual or apparent conflicts of interest between personal and
   professional relationships.

~ Provide information that is accurate, complete, objective, relevant,
   and timely to ensure full, fair, accurate, and timely disclosure in
   reports and documents that the Company files with, or submits to, the
   Securities and Exchange Commission and in other public communications.

~ Comply with applicable financial rules and regulations.

~ Promptly report in writing, by e-mail or telecopy, to the Chair of the
   Company`s Audit Committee and the President and Chief Executive Officer,
   any conduct that the individual believes to be a violation of law or
   business ethics or of any provision of the Financial Code of Ethics,
   including any transaction or relationship that reasonably could be
   expected to give rise to such a conflict.  Anonymity will be maintained.



Violations of the Financial Code of Ethics, including failures to report
potential violations by others, will be viewed as a severe disciplinary
matter that may result in personnel action, including termination of
employment.

It is against Company policy to retaliate against any employee for good
faith reporting of violations of this Financial Code of Ethics.

EX-21

Exhibit 21

Subsidiaries of National Bancshares Corporation

First National Bank, a national bank, is 100% owned by National
Bancshares Corporation. NBOH Properties, L.L.C., an Ohio L.L.C., is 100%
owned by National Bancshares Corporation. First Kropf Title, L.L.C., an
Ohio limited liability company, is 49% owned by First National Bank.

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement
No. 033-63005 on Form S-3D of our report dated March 19, 2010, which report
is incorporated by reference in Form 10-K for the National Bancshares
Corporation for the year ended December 31, 2009.



/s/ Crowe Horwath LLP
Crowe Horwath LLP

Cleveland, Ohio
March 30,2010

EX-31

Exhibit 31.1

CERTIFICATION

I, David C. Vernon, certify that:
1. 	I have reviewed this Annual Report on Form 10-K of National Bancshares
Corporation (the `registrant`);

2. 	Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;

3. 	Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;

4. 	The registrant`s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:

a) 	Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) 	Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our
supervision,to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c) 	Evaluated the effectiveness of the registrant`s disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
d) 	Disclosed in this report any change in the registrant`s internal
control over financial reporting that occurred during the registrant`s most
recent fiscal quarter (the registrant`s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant`s internal control over financial
reporting; and

5. 	The registrant`s other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial reporting,
to the registrant`s auditors and the audit committee of the registrant`s
board of directors (or persons performing the equivalent functions):

a) 	All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant`s ability to record, process,
summarize and report financial information; and
b) 	Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant`s internal
control over financial reporting.

Date: March 30, 2010

/s/ David C. Vernon
David C. Vernon
President and Chief Executive Officer

EX-31

Exhibit 31.2

CERTIFICATION

I, James R. VanSickle, certify that:
1. 	I have reviewed this Annual Report on Form 10-K of National
Bancshares Corporation (the `registrant`);

2. 	Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;

3. 	Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;

4. 	The registrant`s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
a) 	Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) 	Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c) 	Evaluated the effectiveness of the registrant`s disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
d) 	Disclosed in this report any change in the registrant`s internal control
over financial reporting that occurred during the registrant`s most recent
fiscal quarter (the registrant`s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant`s internal control over financial
reporting; and

5. 	The registrant`s other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial reporting,
to the registrant`s auditors and the audit committee of the registrant`s
board of directors (or persons performing the equivalent functions):
a) 	All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant`s ability to record, process,
summarize and report financial information; and
b) 	Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant`s internal
control over financial reporting.

Date: March 30, 2010

/s/ James R. VanSickle
James R. VanSickle
Senior Vice President and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ENACTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of National Bancshares
Corporation (the `Corporation`) for the period ending December 31, 2009
as filed with the Securities and Exchange Commission on the date hereof
(the `Report`), we, David C. Vernon, President and Chief Executive Officer
of the Corporation, and James R. VanSickle, Senior Vice President and Chief
Financial Officer of the Corporation, certify, pursuant to 18 U.S.C.
Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:

(1)	The Report fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and

(2)  	The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of
the Corporation.

This Certification is executed as of March 30, 2010.

/s/ David C. Vernon
David C. Vernon
President and Chief Executive Officer


/s/ James R. VanSickle
James R. VanSickle
Sr. Vice President and Chief Financial Officer