<PAGE> 1
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
______________________________________________
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the period ended March 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from
__________to__________
________________________________________
Commission file number 0-20255
I.R.S. Employer Identification Number 34-1692031
Mahoning National Bancorp, Inc.
(an Ohio Corporation)
23 Federal Plaza
Youngstown, Ohio 44501-0479
Telephone: (330) 742-7000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
------- -------
Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date: 6,300,000 shares of the
Company's Common Stock (No par value) were outstanding as of April 30, 1996.
<PAGE> 2
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MAHONING NATIONAL BANCORP, INC.
INDEX
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheet (unaudited) -
March 31, 1996 and
December 31, 1995 3
Consolidated Statements of Income-
Three Months Ended March 31, 1996
and 1995 (unaudited) 4
Consolidated Statement of Cash Flows -
Three Months Ended March 31, 1996 and 1995
(unaudited) 5
Notes to Consolidated Financial Statements 6-7
Item 2 - Management Discussion and Analysis
of Operations and Liquidity and Capital Resources 8-16
Item 3 - Summary of Average Balances and Interest Rates 17
PART II - OTHER INFORMATION 18-19
Exhibit Number 27 - Financial Data Schedule 20
SIGNATURES 21
</TABLE>
<PAGE> 3
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PART I
FINANCIAL INFORMATION
MAHONING NATIONAL BANCORP INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
(Amounts in thousands)
MARCH 31, DECEMBER 31,
1996 1995
------------- -------------
<S> <C> <C>
ASSETS
Cash and due from banks $27,447 $30,731
Federal funds sold - 2,800
Investment securities available for sale - at market value 132,132 128,397
Investment securities held to maturity - at cost
(Market value $95,143 at March 31, 1996
and $82,255 at December 31, 1995) 95,255 81,690
Loans 471,538 462,435
Less allowance for possible loan losses 7,271 7,156
------------- -------------
Net loans 464,267 455,279
Bank premises and equipment 9,417 9,502
Other assets 13,098 11,736
------------- -------------
Total assets $741,616 $720,135
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Non-interest bearing $64,248 $73,432
Interest bearing
Savings 293,296 292,494
Time 210,229 208,882
------------- -------------
Total deposits 567,773 574,808
Federal funds purchased and securities
sold under agreement to repurchase 86,633 65,042
Short term borrowings 6,245 5,424
Long term borrowings 4,721 1,302
Other liabilities 5,539 3,918
------------- -------------
Total liabilities 670,911 650,494
------------- -------------
STOCKHOLDERS' EQUITY (NOTE B)
Common stock (No par value, $1 stated value in 1996,
$10 par value in 1995)
Authorized 15,000,000 shares in 1996 and
7,000,000 shares in 1995, Issued and
Outstanding-6,300,000 shares in 1996 and
3,150,000 shares in 1995 6,300 31,500
Surplus 44,100 15,750
Retained earnings 20,518 21,725
Unrealized (loss) gain on available for sale
investment portfolio (213) 666
------------- -------------
Total stockholders' equity 70,705 69,641
------------- -------------
Total liabilities and
stockholders' equity $741,616 $720,135
============= =============
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 4
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MAHONING NATIONAL BANCORP INC
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE THREE FOR THE THREE
MONTHS ENDED MONTHS ENDED
(Amounts in thousands, except per share data) MARCH 31, 1996 MARCH 31, 1995
--------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $10,451 $9,365
Interest on investment securities
U.S. treasury 1,403 1,787
U.S. government agencies 1,580 1,384
States and political subdivisions 187 171
Other 55 49
Interest on federal funds sold 100 9
-------------- --------------
13,776 12,765
INTEREST EXPENSE
Interest on deposits 4,616 3,948
Interest on federal funds purchased and
securities sold under agreement to repurchase 942 1,046
Interest on short term borrowings 76 94
Interest on long term borrowings 42 92
-------------- --------------
5,676 5,180
-------------- --------------
Net interest income 8,100 7,585
PROVISION FOR LOAN LOSSES 525 450
-------------- --------------
Net interest income after
provision for loan losses 7,575 7,135
OTHER OPERATING REVENUE
Trust department income 602 552
Service charges on deposit accounts 824 666
Other service charges 157 145
Other revenue 80 51
Gain on sale of investment securities
available for sale - 44
-------------- --------------
1,663 1,458
-------------- --------------
9,238 8,593
OTHER OPERATING EXPENSE
Salaries and employee benefits 2,656 2,580
Expenses of premises and fixed assets 809 797
Other expense 1,638 1,730
-------------- --------------
5,103 5,107
-------------- --------------
Income before income taxes 4,135 3,486
APPLICABLE INCOME TAXES 1,343 1,159
-------------- --------------
NET INCOME $2,792 $2,327
============== ==============
EARNINGS PER COMMON SHARE $0.44 $0.37
DIVIDENDS PER SHARE 0.135 $0.11
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 5
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MAHONING NATIONAL BANCORP INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
(Amounts in thousands) ENDED ENDED
MARCH 31, 1996 MARCH 31, 1995
-------------------------------
<S> <C> <C>
Cash flows from operating activities $4,621 $4,612
Cash flows from investing activities
Proceeds from maturities of investment securities available for sale 1,003 135
Proceeds from maturities of investment securities held to maturity 8,425 16,226
Sale of investment securities available for sale - 4,933
Purchase of investment securities available for sale (6,257) (1,048)
Purchase of investment securities held to maturity (21,864) (1,047)
Net increase in loans (9,776) (20,164)
Net decrease in federal funds sold 2,800 900
Capital expenditures (182) (741)
----------- -----------
Net cash (used in) provided by investing activities (25,851) (806)
Cash flows from financing activities
Net (decrease) increase in deposits (7,035) (7,855)
Net increase in federal funds purchased and
securities sold under agreement to repurchase 21,592 2,677
Net increase in short term borrowings 822 (1,218)
Proceeds from long term borrowings 3,500 -
Payments on long term borrowings (82) (14)
Dividends paid (851) (693)
----------- -----------
Net cash provided by (used in) financing activities 17,946 (7,103)
Net decrease in cash and cash equivalents (3,284) (3,297)
Cash and cash equivalents at beginning of year 30,731 31,872
----------- -----------
Cash and cash equivalents at end of quarter $27,447 $28,575
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the quarter for:
Interest $5,564 $5,253
=========== ===========
Income Taxes $- $-
=========== ===========
Non-cash transactions:
Transfer from loans to other real estate owned $17 $48
=========== ===========
Increase (decrease) in unrealized loss on available for sale securities $1,352 ($2,023)
Less: Increase (decrease) in deferred taxes 473 (682)
----------- -----------
Net increase (decrease) in unrealized loss on investment portfolio $879 ($1,341)
=========== ===========
</TABLE>
<PAGE> 6
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MAHONING NATIONAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The financial information presented is prepared in accordance with
generally accepted accounting principles and general policies within the
financial service industry. The financial information included herein has been
prepared by management without audit by independent certified public accountants
who do not express an opinion thereon. All significant intercompany balances
and transactions have been eliminated and the information furnished includes
all adjustments consisting of normal recurring accrual adjustments which are in
the opinion of management, necessary for a fair presentation of results for the
interim period. The results of the interim financial information presented are
not necessarily indicative of the results of operations for the full calendar
year ending December 31, 1996.
NOTE B - CAPITAL ACCOUNTS
On April 15, 1996, the Board of Directors of Mahoning National
Bancorp, Inc. approved a 2 for 1 stock split in the form of a 100% stock
dividend payable on May 15, 1996, to shareholders of record on April 30, 1996,
issuable from the Company's authorized shares.
The March 31, 1996, financial statements and all share and per share
data contained in this report have been retroactively adjusted to reflect the
effect of the 2 for 1 stock split in the form of a 100% stock dividend.
On March 19, 1996, at the Annual Shareholders Meeting of Mahoning
National Bancorp, Inc., the shareholders approved increasing the authorized
common shares of the Corporation from 7,000,000 shares to 15,000,000 shares,
and to eliminate "par value" from its authorized common shares. By increasing
the authorized shares of the Corporation, Management and the Board of
Directors will have greater flexibility in paying future share dividends,
negotiating further expansion opportunities and issuing shares for other proper
corporate purposes. The elimination of "par value" from the authorized shares
of the Corporation will provide the Corporation with more flexibility in
structuring its equity accounts and in paying future stock dividends.
NOTE C - STATEMENT OF FINANCIAL STANDARDS NO. 122
ACCOUNTING FOR MORTGAGE SERVICING RIGHTS, AN
AMENDMENT OF FASB STATEMENT NO. 65
On January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 122 (SFAS 122) "Accounting for Mortgage Servicing
Rights, an amendment of FASB Statement No. 65." This new standard requires
that a mortgage banking enterprise recognize as a separate asset rights to
service mortgage loans for others, however those
<PAGE> 7
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servicing rights are acquired. In circumstances where mortgage loans are
originated, separate asset rights to service mortgage loans are only recorded
when the enterprise intends to sell such loans. The adoption of this new
statement did not have a material impact on the Company's consolidated
financial position or results of operations.
<PAGE> 8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
On April 15, 1996, the Board of Directors of Mahoning National
Bancorp, Inc. approved a 2 for 1 stock split in the form of a 100% stock
dividend payable on May 15, 1996 to shareholders of record on April 30, 1996,
issuable from the Company's authorized shares.
The March 31, 1996 financial statements and all share and per share
data contained in this report have been retroactively adjusted to reflect the
effect of the 2 for 1 stock split in the form of a 100% stock dividend.
Earnings Review
Net income for the first three months of 1996 amounted to $2.792
million or $0.44 per share. This represents an increase of 20% over net income
earned during the same period in 1995 ($2.327 million or $0.37 per share).
The primary component of earnings is net interest income. Net
interest income for the first three months of 1996 was $8.100 million compared
with $7.585 million or a 7% increase from the comparable period in 1995.
Interest and fees on loans increased $1.086 million in the first
quarter of 1996 compared to the first quarter of 1995. This increase was the
result of a $31.896 million increase in average loan balances for the first
quarter of 1996 compared to 1995; $469.994 million compared to $438.098. In
addition the yield of the loan portfolio for the first quarter of 1996 was
8.98% compared to 8.76% for the same period of 1995, a 22 basis point increase.
Interest expense increased $496 thousand for the first quarter of 1996 compared
to the same period in 1995. This increase in interest expense can be
attributed to time deposit growth as consumers shifted funds from savings
products into the higher yielding time deposits. The average balances of time
deposits for the first quarter of 1996, increased $27.099 million over the
average balances for the same period in 1995. The cost of these funds also
increased significantly, from 4.85% for the first quarter of 1995 to 5.52% for
the first quarter of 1996, a 67 basis point increase. While time deposit costs
for 1996 will be higher than 1995 costs, they should decline throughout the
year as maturing certificates reprice at lower rates.
For a detailed analysis of the Company's net interest margin, on a tax
equivalent basis, refer to the Summary of Average Balances and Interest Rates;
Item 3 of this report on page 17.
In January of 1996 the Federal Reserve Bank reduced the discount rate
and Mahoning National lowered its prime lending rate by 25 basis points. With
this reduction a significant portion of the Company's loan portfolio was
repriced downward immediately, while rates on interest bearing deposits and
borrowings continued to decline more deliberately, with existing certificates
of deposit repricing at lower rates than previously experienced. While these
developments are expected to increase pressures on the Company's net interest
margin for the
<PAGE> 9
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remainder of 1996 it is projected that volume increases in the loan portfolio
and deposit pricing strategies will help mitigate those pressures.
Other operating revenue of $1.663 million, exclusive of security
transactions, increased $249 thousand or 18% over the first three months of
1995 total of $1.414 million.
The largest component of other operating revenue in the first quarter
of 1996 was service charges on deposit accounts which increased $158 thousand
or 24% over the first quarter of 1995. Mahoning National annually reviews all
of its fee-based products and services for marketability and profitability. A
2% growth in the number of checking accounts since March of 1995, accompanied
by adjustments to fees for the Company's products and services and the
strengthening of controls for the collections of such fees are the reasons for
the significant increase.
Mahoning National Bank's Trust Department generated $602 thousand in
other revenue in the first three months of 1996, an increase of $50 thousand or
9% over the $552 thousand earned in the same period of 1995. This increase can
be attributed to two factors; an influx of new trust accounts and market value
based fees which increased due to the significant increase in account market
values due to rises in the stock market over the past year.
In March of 1995 the Company realized a $44 thousand gain when $4.933
million of U.S. Government Securities were sold from the available for sale
portfolio. There were no security sales in the first three months of 1996.
Provision for loan losses for the first quarter of 1996 amounted to
$525 thousand compared to $450 thousand for the comparable period in 1995.
This increase is discussed in more detail under the Provision for Loan Loss
heading later in this discussion.
Other operating expense for the first quarter decreased $4 thousand or
less than 1% from the comparable period in 1995, $5.103 million from $5.107
million. As a percentage of average assets, other operating expense was 2.79%
for the first quarter of 1996 compared to 2.93% in the same period of 1995.
In September 1995 the Federal Deposit Insurance Corporation (FDIC)
determined that the Bank Insurance Fund (BIF) was fully recapitalized as of the
end of May 1995. As a result, the FDIC reduced Mahoning National's deposit
insurance premium from $.23 per $100 of deposits to $.04 per $100 of deposits
for the period June 1, 1995 thru December 31, 1995. Beginning January 1, 1993,
a risk weighted insurance premium schedule was implemented by the FDIC, which
bases assessment rates on capital levels and bank regulator's ratings of the
institution as required by the Federal Deposit Insurance Corporation
Improvement Act of 1991 (FDICIA). For the first six months of 1996 the Company
will not be assessed a deposit insurance premium, which will result in a
savings of approximately $500 thousand over the same period in 1995. The
premium for the second six months of 1996 is unknown at this time. Through the
first three months of 1996, Mahoning National's FDIC Insurance totaled $1
thousand compared to $308 thousand for the same time period in 1995.
<PAGE> 10
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Salaries and employee benefits expense for the first three months of
1996 increased $76 thousand or 3% from the same period in 1995. Salary expense
increased $95 thousand or 5% for the first three months of 1996 when compared
to the same period in 1995. This increase can be attributed to annual merit
salary adjustments which took effect January 1, 1996 and increases in various
employee incentive programs. Health care expenses for the first three months
of 1996 were $168 thousand compared to $169 thousand for the same period in
1995, a decrease of $1 thousand or 1%. It is unknown at this time what the
Company's health care renewal rates will be for the plan year beginning July 1,
1996.
Expenses of premises and fixed assets for the first quarter of 1996
totaled $809 thousand, a 2% increase ($12 thousand) from the first quarter of
1995 total of $797 thousand.
Net occupancy expense, which represents various facility management
expenses decreased $27 thousand in the first three months of 1996 to $385
thousand from $412 thousand in the same period in 1995. This decrease was the
result of increased rental income from Main Office tenants.
Equipment rental, depreciation and maintenance of $424 thousand
increased $39 thousand from the first three months of 1995 as a result of
increased depreciation expense on equipment, furniture and fixtures purchased
in the second half of 1995. Other expenses, exclusive of the FDIC insurance
assessment, increased $215 thousand in the first quarter of 1996, to $1.637
million from $1.422 million for the same period of 1995, a 15% increase. This
increase is the result of additional software amortization on software
purchased late in the second quarter of 1995, state franchise tax increases,
increased business activity and the rising costs associated with doing
business. Overhead expenses, exclusive of FDIC insurance assessments, for 1996
are expected to exceed 1995 expenses by approximately 15% throughout 1996.
The following annualized ratios reflect the earnings performance for
the first three months of 1996 compared to the same time period of 1995:
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
Return on Average Assets 1.52% 1.34%
Return on Average Equity 15.73 15.25
Return on Earnings Assets
- - -Taxable Equivalent 8.07 7.88
Interest Cost 3.28 3.15
Net Interest Margin 4.79 4.73
</TABLE>
Income Taxes
Income tax expense for the first three months of 1996 amounted to
$1.343 million compared to $1.159 million for the same period in 1995. Income
tax expense for 1996 is
<PAGE> 11
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being accrued at an effective rate of approximately 32.5%, which compares to an
effective tax rate of 31.6% for all of 1995.
The Statement of Condition includes approximately $2.780 million and
$2.288 million of net deferred tax assets at March 31, 1996 and December 31,
1995 respectively. It is management's belief that the Company has adequate
taxable income to realize the deferred tax asset and accordingly no valuation
reserve has been established.
Balance Sheet Analysis
As of March 31, 1996, total assets of Mahoning National amounted to
$741.616 million, an increase from December 31, 1995 total assets of $720.135
million. Average assets for the first quarter of 1996 amounted to $734.551
million compared to $706.909 million for the same quarter of 1995, a 4%
increase. Through the first three months of 1996 total deposits have decreased
by $7.035 million while securities sold under agreement to repurchase and
federal funds purchased have increased by $21.591 million.
Investment Portfolio
The deposits of Mahoning National, in excess of required reserves and
operating funds of the Bank are invested in loans, investments and federal
funds sold. The objective of the investment portfolio is to combine liquidity,
earnings, safety and legality of the investment in a prudent manner so as to
protect the depositor, fulfill responsibility to borrowers and to offer a
favorable return to the stockholders.
At March 31, 1996 the investment portfolio totaled $227.387 million
(net of a $328 thousand unrealized loss on available for sale securities) which
was an increase of $17.300 million from December 31, 1995.
At March 31, 1996 the Company has classified investment securities
with amortized cost and fair market value of $132.460 and $132.132 million
respectively, or 58% of the portfolio as available for sale, with the
remainder of the portfolio classified as held to maturity. Included in the
available for sale portfolio is a multi-step-up callable bond with a book value
of $5.000 million and a market value of $4.997 million. This bond has a fixed
annual step-up rate and will be called in the second quarter. The adoption of
SFAS 115 has resulted in a decrease in the carrying amount of investment
securities of $328 thousand with a decrease in stockholders' equity of $213
thousand net of deferred income taxes. Those securities classified as
available for sale will afford the Company's Asset/Liability Committee the
necessary flexibility to manage the portfolio to meet liquidity needs that may
arise.
In the first quarter of 1995, $4.933 million of U.S. Government
Securities were sold from the available for sale portfolio and were used to
fund loan demand. There were no security sales in the first quarter of 1996.
No securities were transferred between categories in the first three months of
1996.
<PAGE> 12
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Loans
Total loans outstanding increased by $9.103 million or 2% from
$462.435 million on December 31, 1995, to a historical high of $471.538 million
on March 31, 1996, with a loan to deposit ratio of 83.05%. This increase is
the result of continued loan demand coupled with an emphasis on business
development by Mahoning National in the consumer and commercial loan areas.
The areas of largest growth over the first three months of 1996 have been; the
Commercial loan portfolio which increased by $3.880 million from $80.299
million to $84.179 million, Consumer loans which increased $3.240 million from
$130.366 million to $133.606 million and Commercial mortgages which increased
$2.245 million from $80.645 million to $82.890 million.
The Consumer loan portfolio consists mostly of automobile loans;
accordingly any increase or decrease in the portfolio is directly related to
trends in that industry. The growth in the first quarter of 1996 was the
result of a relatively strong local automobile market along with the Company's
strong commitment to providing efficient service to the local dealer network
and offering competitive rates. Competition from leasing by captive automobile
finance companies (i.e. GMAC, Ford Motor Credit) will impact future growth and
necessitate a commitment to providing the dealer network with a very high level
of service. Given the substantial monthly paydowns of the automobile loan
portfolio and a projected slow down in our national economy, growth in consumer
loan totals will likely slow over the remainder of 1996. While competitive
pressures for commercial loans are presently greater than have been experienced
in the past several years, loan growth continues to be the result of increased
market share by generating new customer relationships. Substantial resources
are also committed to servicing existing commercial loan customers to protect
against the loss of relationships to competitors.
As of March 31, 1996, non-performing loans, defined as those loans
which are on non-accrual or are 90 days or more past due and still accruing,
totaled $2.034 million compared to $2.258 million at December 31, 1995. Listed
below is a schedule of the Company's non-performing assets:
<TABLE>
<CAPTION>
(Amounts in thousands) March 31, 1996 December 31, 1995
- - ------------------------ -------------- -----------------
<S> <C> <C>
Non accrual loans $1,616 $1,322
Accruing loans 90 days
or more past due 418 936
------ ------
Non performing loans 2,034 2,258
Restructured loans in
compliance with modified
terms 614 690
Other real estate owned 37 36
------ ------
Total problem assets $2,685 $2,984
====== ======
Total problem assets to
total assets 0.36% 0.41%
</TABLE>
<PAGE> 13
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The following ratios will provide additional information on the status
of the loan portfolio:
<TABLE>
<CAPTION>
As of As of
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
Loan to deposit ratio 83.05% 81.36%
Non performing loans to
total loans .43 .44
Non performing loans to
allowance for loan losses 27.98 28.07
Allowance for loan losses
to total loans 1.54 1.56
Net charge-offs to average
loans .09 .05
Net charge-offs ($000) $410 $208
</TABLE>
Provision for Loan Losses
The policies of Mahoning National provide for loan loss reserves to
adequately protect the Company against potential and/or identified loan losses
consistent with sound and prudent banking practice.
In determining the monthly provision for loan losses and the adequacy
of the loan loss reserve, management reviews the current and forecasted
economic conditions and portfolio trends. The primary focus is placed on
current problem loans, delinquencies and anticipated charge-offs. As of March
31, 1996, all loans classified for regulatory purposes do not represent or
result from trends or uncertainties which management reasonably expects will
materially impact future operating results, liquidity, or capital resources.
Management is not aware of any information which causes serious doubts as to
the ability of such borrowers to comply with the loan repayment terms. These
remaining classified loans were either paying as agreed under original contract
or were sufficiently collateralized to prevent a material loss in the event the
loans were to default.
The provision for loan losses charged to expense during the first
quarter of 1996 was $525 thousand, an increase of $75 thousand from the 1995
first quarter provision. This increase was the result of the growth in the
loan portfolio and increase in consumer charge-offs. Net charge-offs on
consumer loans and credit card and related plans totaled $383 thousand for the
first three months of 1996 compared to $181 thousand for the same period in
1995. The national trend of a high level of consumer debt and delinquencies is
beginning to show locally. This trend will continue to be monitored closely
during the year as the Company evaluates the adequacy of the allowance for loan
losses. While future provisions to the loan loss reserve are dependent upon
the growth and quality of the loan portfolio, it is estimated that for the
remainder of 1996, quarterly provisions will approximate first quarter levels.
<PAGE> 14
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Shown below is a summary of the allowance for loan losses:
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
(Amounts in thousands) March 31, 1996 March 31, 1995
- - ------------------------ -------------- --------------
<S> <C> <C>
Balance at beginning of period $7,156 $6,694
Provision charged to operating
expense 525 450
Recoveries of loans charged off 131 113
Losses charged to allowance (541) (321)
----- ------
Balance at end of period $7,271 $6,936
====== =======
</TABLE>
Information required under Statement of Financial Accounting Standards
No. 114 "Accounting by Creditors for Impairment of a Loan" and No. 118
"Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosure" is as follows for the quarter ended March 31;
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Principal amount of impaired loans $522 $609
Allowance allocated to impaired loans 125 125
---- ----
Portion for which no allowance is allocated $397 $484
==== ====
Average investment in impaired loans for
the quarter ended March 31; $555 $663
==== ====
</TABLE>
SFAS 114 and SFAS 118 were adopted on January 1, 1995. At that date,
a valuation for credit losses was established. The activity in the allowance
was as follows for the three months ended March 31;
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Valuation allowance at beginning of period $125 $134
Direct write downs - 9
---- ----
Valuation allowance at end of period $125 $125
==== ====
</TABLE>
Total cash collected on impaired loans during the first quarter of 1996 and
1995 was $108 thousand and $54 thousand respectively, all of which was credited
to the principal balance outstanding. Interest that would have been accrued on
impaired loans in the first quarter of 1996 and 1995 was $14 thousand and $17
thousand respectively. No interest income was recognized during the first
quarter of 1996 or 1995.
<PAGE> 15
Page 15 of 21
Liquidity and Capital
It is a primary objective of Mahoning National Bancorp, Inc. to
maintain a level of liquidity deemed adequate to meet the expected and
potential funding needs of loan and deposit customers. It is the Company's
policy to manage its affairs so that liquidity needs are fully satisfied
through normal bank operations. Short-term investments (Federal funds sold)
and short-term borrowings (Federal funds purchased and Repurchase agreements,
U.S. Treasury Demand Notes and Federal Home Loan Bank advances) are used as
primary cash management and liquidity tools. Short term Federal fund lines
totaling $57 million have been established at Mahoning National's correspondent
banks. When loan demand increases at a faster rate than deposit growth it may
be necessary to manage the available for sale portion of the investment
portfolio to meet that demand, or to sell conforming Residential mortgages on
the secondary market. At March 31, 1996 and December 31, 1995, $70 thousand
and $0 loans were designated as available for sale respectively. At March 31,
1996, $132.132 million of the investment portfolio was classified as available
for sale. This classification will afford the Company's Asset/Liability
Committee the flexibility to manage the portfolio to meet any liquidity needs
that may arise.
An additional source of liquidity was added when Mahoning National
Bank was accepted as a member of the Federal Home Loan Bank of Cincinnati
(FHLB) in the fourth quarter of 1993. The FHLB will provide, if needed, short
term funding alternatives with a line of credit of $17.6 million, or the
necessary match funding for one to four family residential mortgage loans and
will allow the Company to better manage its interest rate risk. Mahoning
National had $4.721 million outstanding in FHLB borrowings at March 31, 1996
compared to $1.302 million at December 31, 1995.
Total Capital Accounts have grown $1.064 million or 2% in the first
three months of 1996. This increase reflects retained earnings less dividends
paid and also reflects an $879 thousand unrealized loss on the available for
sale investment portfolio for the first three months of 1996. Dividends paid
in 1996 year to date were $851 thousand or $.135 per share compared to $693
thousand or $.11 per share for the same period in 1995. Book value per share
as of March 31, 1996 was $11.22 compared to $11.05 on December 31, 1995, (as
adjusted for two for one stock split).
In order to facilitate a wider distribution of the common stock of the
Company and to make it more readily available for investment purposes, thereby
broadening investor interest, the Board of Directors of the Company, on April
15, 1996 approved a 2 for 1 stock split in the form of a 100% stock dividend
payable on May 15, 1996 to shareholders of record on April 30, 1996, issuable
from the Company's authorized shares.
After payment of a 100% stock dividend the Company will have 6,300,000
shares of its 15,000,000 authorized shares of no par value common stock issued
and outstanding.
On March 19, 1996 at the Annual Shareholders Meeting of Mahoning
National Bancorp, Inc., the shareholders approved increasing the authorized
common shares of the Corporation from 7,000,000 shares to 15,000,000 shares,
and to eliminate "par value" from its
<PAGE> 16
Page 16 of 21
authorized common shares. By increasing the authorized shares of the
Corporation, Management and the Board of Directors will have greater
flexibility in paying future share dividends, negotiating further expansion
opportunities and issuing shares for other proper corporate purposes. The
elimination of "par value" from the authorized shares of the Corporation will
provide the Corporation with more flexibility in structuring its equity
accounts and in paying future stock dividends.
Under regulations issued by the Federal Reserve and the Comptroller of
the Currency, banks and bank holding companies are required to maintain certain
minimum capital ratios known as the risk-based capital ratio and the leverage
ratio. At March 31, 1996, Mahoning Nationals' leverage, Tier I and risk-based
capital ratios were 9.65%, 15.85% and 17.10% respectively, compared to 9.62%,
15.69% and 16.94% at December 31, 1995. The Company has exceeded all required
regulatory capital ratios for each period presented and is considered "well
capitalized" under all FDIC regulations. Mahoning National's risk-based
capital ratios are well above the regulatory minimums due to the capital
strength and low risk nature of Mahoning's balance sheet and off-balance sheet
commitments. The structure of the Company's balance sheet is such that nearly
all of the investment portfolio is invested in U.S. Government obligations or
other low risk categories, and over 20% of the loan portfolio is invested in
one to four family residential mortgage loans which have a 50% risk weight
assessment. It is the Company's intent to prudently manage the capital base in
an effort to increase return on equity performance while maintaining necessary
capital requirements and maintaining the FDIC "well capitalized" classification
to ensure the lowest deposit insurance premium assessment.
<PAGE> 17
Page 17 of 21
MAHONING NATIONAL BANCORP, INC.
SUMMARY OF AVERAGE BALANCES AND INTEREST RATES
TAX EQUIVALENT BASIS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE THREE MONTHS ENDED
MARCH 31, 1996 MARCH 31, 1995
(Amounts in thousands) AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE% BALANCE INTEREST RATE%
-------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST YIELDS
Loans $469,994 $10,526 8.98 $438,098 $9,466 8.76
Investment securities 215,883 3,326 6.18 228,445 3,483 6.18
Other earning assets 7,455 100 5.31 647 9 5.47
-------------------------------- --------------------------------
Total return on earning assets 693,332 13,952 8.07 667,190 12,958 7.88
INTEREST COSTS
Interest bearing deposits:
Savings deposits 294,017 1,728 2.36 300,314 1,764 2.38
Time deposits 209,821 2,888 5.52 182,722 2,184 4.85
-------------------------------- --------------------------------
Total interest bearing deposits 503,838 4,616 3.67 483,036 3,948 3.31
Federal funds purchased 975 13 5.28 12,059 180 5.98
Repurchase agreements 81,820 929 4.55 69,988 866 5.02
Short term borrowings 6,038 76 4.96 6,678 94 5.62
Long term borrowings 3,026 42 5.58 5,935 92 6.31
-------------------------------- --------------------------------
Total interest bearing liabilities $595,697 $5,676 3.82 $577,696 $5,180 3.64
Interest spread $8,276 4.25 $7,778 4.24
======================= ======================
AS A PERCENT OF AVERAGE EARNING ASSETS
Total return on earning assets 8.07 7.88
Total interest cost 3.28 3.15
----------- -----------
Net Interest Margin 4.79 4.73
=========== ===========
</TABLE>
<PAGE> 18
Page 18 of 21
PART II
OTHER INFORMATION
Mahoning National Bancorp, Inc.
Item 1 - Legal Proceedings
None
Item 2 - Changes in the Rights of the Company's Security Holders
None
Item 3 - Default Upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
None
The Annual Shareholders meeting of Mahoning National Bancorp,
Inc. was held March 19, 1996 for the purpose of:
1) To elect three (3) directors to Class I of the Corporation's
staggered Board of Directors to serve a two-year term or until
their successors shall have been elected and qualified.
2) To approve the amendment to Article Fourth of the
Corporation's Articles of Incorporation to increase the total
number of the Corporation's authorized common shares from
7,000,000 to 15,000,000 and to eliminate "par value" from the
shares of the Corporation.
The following Directors were elected to the Company's Board
of Directors:
<TABLE>
<CAPTION>
Withhold
Authority
Nominee Class For to Vote
------- ----- --- ----------
<S> <C> <C> <C>
Dominic A. Bitonte I 2,321,519 10,458
Frank A. Kramer I 2,323,005 8,972
Warren P. Williamson, III I 2,322,550 9,427
</TABLE>
<PAGE> 19
Page 19 of 21
The following are the Directors whose terms in office as
Directors continued after the meeting:
<TABLE>
<CAPTION>
Director Class
-------- -----
<S> <C>
Charles J. McCrudden, Jr. II
Gregory L. Ridler II
Daniel B. Roth II
</TABLE>
The following were the results of the voting on increasing the
Corporation's authorized common shares from 7,000,000 to
15,000,000 and to eliminate "par value" from the shares of the
corporation.
<TABLE>
<CAPTION>
For Against Withheld
--- ------- --------
<S> <C> <C>
2,250,742 30,678 50,557
</TABLE>
Item 5 - Other Information
None
Item 6(a) - Exhibits
(27) Financial Data Schedule
Item 6(b) - Reports on Form 8-K
(1) Form 8-K dated March 19, 1996, disclosing
shareholder approval of increasing the authorized
common shares of the Corporation from 7,000,000 to
15,000,000 shares and to eliminate "par value" from
the shares of the corporation.
(2) Form 8-K dated April 15, 1996, disclosing the
declaration of a two for one (2:1) stock split in
the form of a 100% stock dividend to all Registrant
stockholders of record April 30, 1996, payable
May 15, 1996.
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report on Form 10-Q for the three
months ended March 31, 1996 to be signed on its behalf by the undersigned
thereunto duly authorized.
DATE: May 6, 1996 Mahoning National Bancorp, Inc.
--------------------
/s/ Gregory L. Ridler
-------------------------------
Gregory L. Ridler
Chairman of the Board,
President and Chief
Executive Officer
DATE: May 6, 1996 /s/ Norman E. Benden, Jr.
-------------------- -------------------------------
Norman E. Benden, Jr.
Treasurer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MAHONING
NATIONAL BANCORP, INC., CONSOLIDATED STATEMENT OF CONDITION AT MARCH 31, 1996
AND THE CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 27,447
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 132,132
<INVESTMENTS-CARRYING> 95,255
<INVESTMENTS-MARKET> 95,143
<LOANS> 471,538
<ALLOWANCE> 7,271
<TOTAL-ASSETS> 741,616
<DEPOSITS> 567,773
<SHORT-TERM> 92,878
<LIABILITIES-OTHER> 5,539
<LONG-TERM> 4,721
<COMMON> 6,300
0
0
<OTHER-SE> 64,405
<TOTAL-LIABILITIES-AND-EQUITY> 741,616
<INTEREST-LOAN> 10,451
<INTEREST-INVEST> 3,225
<INTEREST-OTHER> 100
<INTEREST-TOTAL> 13,776
<INTEREST-DEPOSIT> 4,616
<INTEREST-EXPENSE> 5,676
<INTEREST-INCOME-NET> 8,100
<LOAN-LOSSES> 525
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,103
<INCOME-PRETAX> 4,135
<INCOME-PRE-EXTRAORDINARY> 2,792
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,792
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0.44
<YIELD-ACTUAL> 8.07
<LOANS-NON> 1,616
<LOANS-PAST> 418
<LOANS-TROUBLED> 614
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 7,156
<CHARGE-OFFS> 541
<RECOVERIES> 131
<ALLOWANCE-CLOSE> 7,271
<ALLOWANCE-DOMESTIC> 6,422
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 849
</TABLE>
