<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 June 30, 1999
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 July 31, 1999.
<PAGE> 2
MAHONING NATIONAL BANCORP, INC.
INDEX
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Statements of Financial Condition
June 30, 1999 and December 31, 1998
(unaudited) 3
Consolidated Statements of Income-Three and
Six Months Ended June 30, 1999 and 1998
(unaudited) 4
Consolidated Statements of Comprehensive Income-Three and
Six Months Ended June 30, 1999 and 1998
(unaudited) 5
Condensed Consolidated Statement of Cash Flows -
Six Months Ended June 30, 1999 and 1998
(unaudited) 6
Notes to Consolidated Financial Statements 7
Item 2 - Management Discussion and Analysis
of Financial Condition and Results of Operations 8-22
Item 3 - Summary of Average Balances and Interest Rates 23
PART II - OTHER INFORMATION 24
Exhibit Number 27 - Financial Data Schedule
SIGNATURES
</TABLE>
<PAGE> 3
PART I
FINANCIAL INFORMATION
MAHONING NATIONAL BANCORP INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
ASSETS 1999 1998
-------------- -------------
<S> <C> <C>
Cash and due from banks $ 22,583 $ 30,556
Federal funds sold - 23,700
Investment securities available for sale - at fair value 274,523 241,037
Investment securities held to maturity - at cost
(Market value $8,063 at June 30, 1999
and $24,036 at December 31, 1998) 8,010 23,910
Loans 507,546 490,743
Less allowance for possible loan losses 8,063 7,789
--------- ---------
Net loans 499,483 482,954
Bank premises and equipment 9,927 8,844
Other assets 17,041 13,643
--------- ---------
Total assets $ 831,567 $ 824,644
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Non-interest bearing $ 81,750 $ 84,127
Interest bearing
Savings 269,977 274,641
Time 196,668 196,639
--------- ---------
Total deposits 548,395 555,407
Federal funds purchased and securities
sold under agreement to repurchase 151,938 146,144
Short term borrowings 12,647 4,443
Long term borrowings 16,692 17,191
Other liabilities 4,886 5,160
--------- ---------
Total liabilities 734,558 728,345
--------- ---------
STOCKHOLDERS' EQUITY
Common stock (No par value, $1 stated value)
Authorized 15,000,000 shares, Issued
and Outstanding - 6,300,000 shares 6,300 6,300
Additional paid-in capital 44,100 44,100
Retained earnings 47,988 43,477
Unrealized (loss) gain on investment securities
available for sale, net of deferred taxes (1,379) 2,422
--------- ---------
Total stockholders' equity 97,009 96,299
--------- ---------
Total liabilities and
stockholders' equity $ 831,567 $ 824,644
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 4
MAHONING NATIONAL BANCORP INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE THREE FOR THE THREE FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED
(Amounts in thousands, except per share data) JUNE 30, 1999 JUNE 30, 1998 JUNE 30, 1999 JUNE 30, 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $10,797 $10,853 $21,361 $21,745
Interest on investment securities
Taxable 3,565 3,344 7,033 6,620
Nontaxable 337 290 654 563
Interest on federal funds sold 30 239 84 304
------- ------- ------- -------
14,729 14,726 29,132 29,232
INTEREST EXPENSE
Interest on deposits 3,451 3,953 6,938 7,965
Interest on federal funds purchased and
securities sold under agreement to repurchase 1,495 1,551 2,902 3,235
Interest on short term borrowings 63 122 116 202
Interest on long term borrowings 215 167 431 229
------- ------- ------- -------
5,224 5,793 10,387 11,631
------- ------- ------- -------
Net interest income 9,505 8,933 18,745 17,601
PROVISION FOR LOAN LOSSES 675 726 1,350 1,452
------- ------- ------- -------
Net interest income after
provision for loan losses 8,830 8,207 17,395 16,149
OTHER OPERATING REVENUE
Trust department income 831 787 1,639 1,575
Service charges on deposit accounts 1,130 1,067 2,178 2,076
Other service charges 253 201 471 389
Other revenue 95 72 172 138
Gain on sale of loans 52 126 120 140
Gain on sale of investment securities
available for sale - - 5 -
------- ------- ------- -------
2,361 2,253 4,585 4,318
------- ------- ------- -------
OTHER OPERATING EXPENSE
Salaries and employee benefits 2,769 2,671 5,596 5,505
Expenses of premises and fixed assets 704 731 1,428 1,451
Other expense 1,658 1,849 3,357 3,484
------- ------- ------- -------
5,131 5,251 10,381 10,440
------- ------- ------- -------
Income before income taxes 6,060 5,209 11,599 10,027
INCOME TAX EXPENSE 1,997 1,703 3,812 3,269
------- ------- ------- -------
NET INCOME $ 4,063 $ 3,506 $ 7,787 $ 6,758
======= ======= ======= =======
BASIC EARNINGS PER COMMON SHARE $ 0.65 $ 0.55 $ 1.24 $ 1.07
DIVIDENDS PER SHARE $ 0.26 $ 0.21 $ 0.52 $ 0.42
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 5
MAHONING NATIONAL BANCORP INC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
FOR THE THREE FOR THE THREE FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED
(Amounts in thousands, except per share data) JUNE 30,1999 JUNE 30, 1998 JUNE 30, 1999 JUNE 30, 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Net Income $ 4,063 $ 3,506 $ 7,787 $ 6,758
------------- --------------- ---------------- ---------------
Other comprehensive income, before tax:
Unrealized holding gains (losses) arising
during period (3,885) 434 (5,844) 469
Less: reclassification adjustment for gains
(losses) included in net income - - 5 -
------------- --------------- ---------------- ---------------
Other comprehensive income, before tax (3,885) 434 (5,849) 469
Income tax expense (benefit) related to
items of other comprehensive income (1,360) 152 (2,048) 164
------------- --------------- ---------------- ---------------
Comprehensive income $ 1,538 $ 3,788 $ 3,986 $ 7,063
============= =============== ================ ===============
Comprehensive income per common share $ 0.24 $ 0.60 $ 0.63 $ 1.12
============= =============== ================ ===============
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 6
MAHONING NATIONAL BANCORP INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
(Amounts in thousands) JUNE 30, 1999 JUNE 30, 1998
(UNAUDITED) (UNAUDITED)
-------------------------------
<S> <C> <C>
Cash flows from operating activities $ 8,872 $ 8,817
Cash flows from investing activities
Proceeds from maturities of investment securities available for sale 21,552 10,859
Proceeds from maturities of investment securities held to maturity 920 26,315
Sale of investment securities available for sale 5,005 0
Purchase of investment securities available for sale (50,937) (38,532)
Net increase in loans (18,668) (17,013)
Proceedes from the sale of other real estate owned 18 439
Net decrease in federal funds sold 23,700 8,800
Capital expenditures (1,645) (646)
-------- --------
Net cash used in investing activities (20,055) (9,778)
Cash flows from financing activities
Net (decrease) increase in deposits (7,012) (6,769)
Net increase (decrease) in federal funds purchased and
securities sold under agreement to repurchase 5,794 (4,086)
Net increase in short term borrowings 8,203 4,528
Proceeds from long term borrowings - 10,000
Payments on long term borrowings (499) (474)
Dividends paid (3,276) (2,646)
-------- --------
Net cash provided by financing activities 3,210 553
Net decrease in cash and cash equivalents (7,973) (408)
Cash and cash equivalents at beginning of year 30,556 29,143
-------- --------
Cash and cash equivalents at end of six months $ 22,583 $ 28,735
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the first six months for:
Interest $ 10,572 $ 11,774
======== ========
Income Taxes $ 3,860 $ 3,222
======== ========
Non-cash transactions:
Transfer from loans to other real estate owned $ 18 $ 40
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 7
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, 1999.
NOTE B - PENDING MERGER
On June 7, 1999 Mahoning National Bancorp, Inc. ("Company") announced the
signing of a definitive agreement with Sky Financial Group, Inc. ("Sky"),
whereby the Company will merge with and into Sky, and the Company's sole
subsidiary, The Mahoning National Bank of Youngstown will merge into Sky's
subsidiary, Sky Bank. Under the terms of the agreement, the Company's
stockholders will receive 1.66 shares of Sky common stock for each share of
Company common stock in a tax free exchange. It is expected the transaction will
be accounted for under the pooling-of-interests method of accounting. The merger
is expected to be completed in the fourth quarter of 1999 and is subject to
approvals by various regulatory authorities and by the Company's stockholders.
NOTE C - STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 133
- ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 addresses the accounting for
derivative instruments and certain derivative instruments embedded in other
contracts, and hedging activities. The statement standardizes the accounting for
derivative instruments by requiring that an entity recognize those items as
assets or liabilities in the statement of financial position and measure them at
fair value. This statement is effective for all fiscal years beginning after
June 15, 1999 and is not expected to have a material effect on the Company's
consolidated financial position or results of operation.
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Note regarding forward-looking statements
In addition to the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. When used herein, the terms "anticipates," "plans," "expects,"
"believes," and similar expressions as they relate to the Company or its
management are intended to identify such forward-looking statements. The
Company's actual results, performance or achievements may materially differ from
those expressed or implied in the forward-looking statements. Risks and
uncertainties that could cause or contribute to such material differences
include, but are not limited to, general economic conditions, interest rate
environment, competitive condition in the financial services industry, changes
in law, governmental policies and regulations and rapidly changing technology
affecting financial services.
Earnings Review
Net income for the first six months of 1999 amounted to $7.787 million or $1.24
per share. This represents an increase of 15% over net income earned during the
same period in 1998 ($6.758 million or $1.07 per share). Mahoning National
Bancorp, Inc.'s, (the Company) net income for the current quarter increased 16%
to $4.063 million or $0.65 per share from $3.506 million or $0.55 per share for
the same quarter in 1998.
The primary component of the Company's earnings growth in the first six months
of 1999 compared to the same period of 1998 was an increase in net interest
income which was primarily due to a reduction in funding costs. Net interest
income and noninterest income, exclusive of security transactions, each
increased 6% in the first six months of 1999 compared to the same period in
1998, while the provision for loan losses declined 7%. Noninterest expense
decreased 1% over that same period. Net interest income and noninterest income,
exclusive of security transactions, increased 6% and 5%, respectively for the
current quarter compared to the comparable period in 1998. The Company's
noninterest expense decreased $120 thousand or 2% for the second quarter of 1999
compared to the same quarter in 1998.
The Company's Return on Assets (ROA) at June 30, 1999 increased to 1.94% from
1.71% at June 30, 1998. While the Company's stockholders' equity to asset ratio
increased from 11.31% on June 30, 1998 to 11.67% on June 30, 1999, Return on
Equity (ROE) increased to 16.12% from 15.27% for the same period.
<PAGE> 9
Net Interest Income
Net interest income is the primary component of the Company's earnings and is
the difference between interest and fees earned on loans, investments and other
interest earning assets and the interest expense on deposits and other interest
bearing liabilities which fund those assets.
The prime interest rate, which had been at 8.50% from March 1997 until October
1998, declined to 7.75% at December 31, 1998. In the fourth quarter of 1998 the
Federal Reserve Bank took the following actions: (1) October 1, 1998, lowered
the federal funds rate by 25 basis points, (2) October 16, 1998, lowered the
federal funds rate an additional 25 basis points and reduced the discount rate
by 25 basis points and (3) November 17, 1998, lowered the federal funds rate and
discount rate an additional 25 basis points. As a result of these Federal
Reserve rate adjustments, the Company reduced its prime lending rate by 75 basis
points in the fourth quarter of 1998, to 7.75%. As the Company's interest rate
simulations and net economic value analysis indicated, these rate reductions had
a positive impact on net interest income in the first six months of 1999. Due to
the liability sensitive nature of the Company's balance sheet, rate reductions
in the fourth quarter of 1998 have positively impacted net interest income in
1999. As a result of the decline in interest rates in the fourth quarter of
1998, the Company's net interest margin for the first six months of 1999 was
5.03% compared to 4.82% for the same period in 1998.
On June 30, 1999, the Federal Reserve Bank increased the federal funds rate by
25 basis points and on July 1, 1999 the Company reacted by increasing its prime
lending rate by the same. This rate increase had no impact on second quarter
1999 earnings. The Company repriced approximately $80 million in prime rate
based loans on July 1, 1999 which will increase interest income on loans for the
remainder of 1999. Interest expense will increase gradually over the remaining
six months of 1999 compared to the first six months as time deposit and
Corporate Investment Account (overnight "Sweep" Repurchase Agreements) rates are
increased. As a result of repricing strategies the Company expects net interest
income will be positively impacted by this rate change.
Average earning assets increased $16.891 million for the first six months of
1999 to $768.704 million from $751.813 million for the same period of 1998. The
average earning asset yield decreased to 7.75% in the first six months of 1999,
from 7.94% for the same period of 1998.
The Company's investment portfolio average balance for the first six months of
1999 was $24.283 million greater than the average balance for the same period in
1998 which contributed an additional $553 thousand in tax adjusted net interest
income for the first six months of 1999. While actual loan balances at June 30,
1999 increased from December 31, 1998 balances by $16.803 million, average loan
balances for the first six months only increased by $144 thousand over average
balances from the same period in 1998. This slight increase in average loan
balances and a 16 basis point yield reduction resulted in a
<PAGE> 10
decrease of tax adjusted interest income of $393 thousand for the first six
months of 1999 compared to the same period in 1998.
Average interest bearing liabilities were relatively the same over the first six
months of 1999 compared to 1998, increasing to $627.879 million from $627.747.
The cost of interest bearing liabilities decreased by 40 basis points from 3.73%
for the first six months of 1998 to 3.33% for the first six months of 1999. This
reduction in funding costs was primarily due to the Company reducing its average
savings and interest bearing checking, time deposit and repurchase agreement
rates by 35, 57 and 36 basis points, respectively. Through the first six months
of 1999 interest expense was reduced by $1.244 million as a result of lower
funding costs. This lower cost of funds should continue to positively impact net
interest income over the remainder of 1999 compared to the same period in 1998
as many of the rate reductions were implemented in the fourth quarter of 1998 in
response to the Federal Reserve rate reductions. The recent federal funds rate
increase will cause a slight increase in time deposit and repurchase agreement
funding costs over the remainder of 1999. This projected increase in funding
costs should be offset by an increase in yield on prime rate based loans.
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 23.
The Company's primary market risk exposure is interest rate risk. As part of its
effort to monitor and manage interest rate risk the Company uses simulation
analysis and net present value analysis. The simulation analysis monitors
interest rate risk through the impact changes in interest rates can have on net
income. At June 30, 1999, the Company analyzed the effect of a presumed 100 and
200 basis point increase and decrease in interest rates through its simulation
analysis. The results indicated no significant impact on net interest income for
1999, and were within the five percent (5%) change in net interest income
guidelines established by the Company. While the results of the simulation
indicated no significant impact on net interest income over the next twelve
months, they did indicate the Company to be negatively impacted by rising
interest rates and positively impacted by falling interest rates due to the
liability sensitive nature of the balance sheet.
The net present value (NPV) analysis is used to measure the Company's interest
rate risk by computing estimated changes in NPV of its cash flows from assets,
liabilities and off-balance sheet items in the event of a range of assumed
changes in market interest rates. NPV represents the market value of equity and
is equal to the market value of assets minus the market value of liabilities,
with adjustments made for off-balance sheet items. This analysis assesses the
risk of loss in market risk sensitive instruments in the event of a sudden and
sustained 100 to 200 basis point increase or decrease in market interest rates.
The Board of Directors has adopted an interest rate risk policy which
establishes maximum changes in the NPV of 30% in the event of a sudden and
sustained 100 to 200 basis point increase or decrease in market interest rates.
The following table presents the
<PAGE> 11
Company's projected change in NPV for the various rate shock levels at June 30,
1999. There were no significant changes from the analysis prepared December 31,
1998:
<TABLE>
<CAPTION>
Changes In
Interest Rate Change In % Change NPV of Equity/
(basis points) NPV of Equity In NPV NPV of Assets
--------------------------------------------------------------------------
<S> <C> <C> <C>
- -200 $15,835 16.32% 13.27%
- -100 5,684 5.86 12.25
0 (4,533) (4.67) 11.18
+100 (14,804) (15.26) 10.08
+200 (25,114) (25.89) 8.94
</TABLE>
Other Operating Revenue
Other operating revenue for the first six months of 1999, exclusive of security
transactions, was $4.580 million or a 6% increase over the first six months of
1998 total of $4.318 million. Other operating revenue for the current quarter,
exclusive of security transactions, was $2.361 million compared to $2.253
million for the same quarter of 1998, a 5% increase. Other operating revenue,
exclusive of security transactions, as a percentage of average assets was 1.14%
for the first six months of 1999 compared to 1.09% for the same period in 1998.
The largest component of other operating revenue in the first six months of 1999
was service charges on deposit accounts which totaled $2.178 million, an
increase of $102 thousand or 5% over the first six months of 1998. Service
charges on deposit accounts for the current quarter increased by $63 thousand or
6% over the same period in 1998, $1.130 million from $1.067 million. In the
first six months of 1999, service charges on deposit accounts as a percentage of
average deposits increased to .80% from .77% for the same period in 1998. The
Company annually reviews all of its fee-based products and services for
marketability and profitability. Increases realized in the first six months of
1999 are the result of growth in the number of retail checking accounts over the
past year. Management expects other operating revenue to continue to exceed 1998
levels over the remainder of 1999.
Mahoning National Bank's Trust and Investment Department generated $1.639
million in other revenue in the first six months of 1999, an increase of $64
thousand or 4% over the $1.575 million earned in the same period of 1998. The
Trust Department generated $831 thousand of other operating income in the second
quarter of 1999, a 6% increase from the same period in 1998. Trust Department
assets totaled $517.995 million with a market value of $786.807 million at June
30, 1999, compared to $436.695 million with a market value of $676.344 million
at June 30, 1998. This increase in assets can be attributed to the growth in
custody and investment accounts, personal trusts and employee benefit accounts
over the past twelve (12) months.
<PAGE> 12
In 1998, the Company became more active in the origination and sale of
residential mortgages in the secondary market. These sales generated $120
thousand in gains in the first six months of 1999 compared to $140 thousand in
the same period of 1998. In the second quarter of 1999 the Company realized
gains of $52 thousand compared to $126 thousand for the same period in 1998. As
a result of increases in home mortgage rates over the past six months, the
Company has seen a decline in the number of home purchases and mortgage
refinancings which has reduced the volume of loans processed for secondary
market sale. The company will continue secondary market sales throughout the
remainder of 1999, but under the current rate environment expects volumes to be
well below those experienced for the same period of 1998.
Provision for loan losses for the first six months of 1999 amounted to $1.350
million compared to $1.452 million for the comparable period in 1998. The
provision for the current quarter was $675 thousand compared to $726 thousand
for the same quarter of 1998. This decrease is discussed in more detail under
the Provision For Loan Losses heading later in this discussion.
Other Operating Expense
Other operating expense for the first six months of 1999 decreased $59 thousand
or approximately 1% from the comparable period in 1998 to $10.381 million from
$10.440 million. For the current quarter other operating expense totaled $5.131
million compared to $5.251 million in the same quarter of 1998. As a percentage
of average assets, other operating expense was 2.58% for the first six months of
1999 compared to 2.65% for the same period of 1998. The Company's efficiency
ratio which measures noninterest expense as a percent of noninterest income plus
net interest income on a fully tax equivalent basis declined 344 basis points
from 47.11% for the first six months of 1998 to 43.67% for the first six months
of 1999. This efficiency ratio places the Company near the top of its peer
group.
Salaries and employee benefits expense for the first six months of 1999
increased $91 thousand or approximately 2% and increased $98 thousand or
approximately 4% for the most recent quarter when compared to the same period in
1998. Salary expense alone increased $78 thousand or 2% for the first six months
of 1999 and $38 thousand or 2% for the current quarter when compared to the same
periods in 1998. These increases can be attributed to annual merit salary
adjustments which took effect January 1, 1999 and increases in various employee
incentive programs. Health care expenses for the first six months of 1999
totaling $419 thousand approximated those for the same period of 1998. The
number of full time equivalent employees decreased from 381 at June 30, 1998 to
372 at June 30, 1999.
Expenses of premises and fixed assets for the first six months of 1999 totaled
$1.428 million, a 2% decrease ($23 thousand) from the same period in 1998.
Current quarter expense totaled $704 thousand, a 4% decrease from the same
quarter in 1998.
<PAGE> 13
Other expenses decreased $127 thousand in the first six months of 1999, to
$3.357 million from $3.484 million for the same period in 1998, a 4% decrease.
For the quarter ended June 30, 1999, other expenses decreased $191 thousand or
10% from the same quarter in 1998. The savings realized for the six months and
quarter ended June 30, 1999 compared to the same periods in 1998 were the result
of reduced other real estate owned expenses and Ohio state franchise tax
refunds. Other expenses for the remainder of 1999 are expected to approximate or
be slightly less than those experienced in 1998.
Year 2000
In early 1997, the Company began to address the Year 2000 issue, which covers
the process of converting computer systems to identify the Year 2000. A Year
2000 committee was formed consisting of senior management and selected
representatives from all areas of the Company, with a senior officer appointed
as the project manager. It is the project manager's responsibility to provide
the Board of Directors with quarterly status reports, detailing the Company's
internal Year 2000 corrective efforts and the ability of the Company's major
vendors to provide Year 2000 ready products and services. The reports include at
a minimum, the overall progress of the Year 2000 effort, including new efforts
initiated since the last report, the Company's progress as compared to its
overall Year 2000 project plan and critical benchmarks, status reports regarding
vendors, business partners, and major loan customers, results of internal and
external testing, and contingency planning.
The Year 2000 Committee identified all information technology and noninformation
technology applications and systems that could be impacted by the Year 2000 date
change and identified any third-party vendors that impact the daily operation of
the company. Those applications, systems and vendors that the Company identified
as mission critical were prioritized based on their potential impact to the
ongoing operation of the Company. An application, system or vendor is considered
mission critical if it is vital to the successful continuance of core business
activity or is an application that interfaces with a mission critical system.
A project plan has been developed based on the five (5) phases outlined by the
Federal Financial Institutions Examination Council (FFIEC): Awareness,
Assessment, Renovation, Validation and Implementation. The Awareness Phase
encompasses establishing a budget and project plan for dealing with the Year
2000 issue. The Assessment Phase is the actual process of identifying and
preparing an inventory of all its systems and individual components of those
systems. During this phase all system components were reviewed for Year 2000
compliance, and through a risk analysis process, were identified as to whether
they were mission critical. The Renovation Phase is when changes are made to
systems. This phase deals primarily with the technical issues of converting
existing systems, or switching to compliant systems. During this phase,
decisions are made on how to make the systems or processes Year 2000 compliant,
and the required system changes are made. The Validation Phase is when a
determination is made that no errors were introduced during the conversion
process and that the renovation
<PAGE> 14
was successful. The development of test data and test scripts, the running of
test scripts, and the review of test results are crucial for this phase of the
conversion process to be successful. If testing results show anomalies, the
testing area is corrected and retested. The Implementation Phase is when a
tested Year 2000 compliant system is ready for use.
As of June 30, 1999, the Bank has renovated and tested all of its mission
critical operating systems, software applications and hardware in order to meet
the processing standards for the Year 2000. The testing indicates the Bank is
now Year 2000 ready.
During the first quarter of 1998, the Company initiated a vendor management
process that ascertains the Year 2000 readiness of third party relationships.
The Company has established monitoring procedures to verify that the service
provider and/or software vendor is taking appropriate action to achieve Year
2000 readiness. In addition, the Company has established a process for testing
remediated services and products in the Company's own environment whenever
possible. At this point in time, the greatest concern the Company has with third
parties is with the possible interruption of electrical power, which is
certainly a concern that all businesses face due to the interdependencies within
the nations power grid. The Company has evaluated alternatives and has developed
procedures to operate in the event there are interruptions to the electrical
power supply.
Remediation contingency plans have been developed and alternative vendors
identified for each issue listed as mission critical. These plans include
various dates, which if certain requirements have not been met by current
vendors to validate their Year 2000 readiness, will require a switch to an
alternative vendor identified as Year 2000 compliant. The Company has developed
a Business Resumption Contingency Plan for the Year 2000 in order to mitigate
the risks associated with; (1) the failure to successfully complete renovation,
validation, or implementation of the Company's Remediation Contingency Plan, and
(2) failure of systems at critical dates. In Business Resumption Contingency
Planning, risks associated with the failure of core business processes are
evaluated. These are groups of related tasks that must be performed in a
cohesive manner to ensure that the Company remains viable. Evaluation of these
risks compare costs, time, and resources needed to implement the contingency
alternatives. In addition, the Bank has developed a "Testing Methodology Plan"
and will test its Business Resumption Contingency Plan to demonstrate the
viability of the Plan.
The estimated cost for the Company's Year 2000 Remediation project is
approximately $765 thousand. These costs include various hardware and software
purchases and modification, employee training, professional services and
additional employee man hours. Through June 30, 1999, approximately $547
thousand has been expensed on Year 2000 Remediation with the remaining expense
expected to occur over the next nine months.
An additional area under review by the Company is the Year 2000 risk arising
from relationships with three broad categories of customers: fund takers
(borrowers), fund
<PAGE> 15
providers (depositors), and capital market/asset management counterparties
(brokers). The potential risks associated with these customers and
counterparties include increased credit, liquidity or counterparty trading risk
when a customer encounters Year 2000 related problems. The Company has
implemented a due diligence process that has identified, assessed and
established controls for Year 2000 risk by customers. This process was completed
by September 30, 1998, with appropriate risk controls in place to manage and
mitigate Year 2000 customer risk. The Company will continue this due diligence
process throughout 1999.
Income Taxes
Income tax expense for the first six months of 1999 amounted to $3.812 million
compared to $3.269 million for the same period in 1998. Income tax expense for
1999 is being accrued at an effective rate of approximately 32.9%, which
compares to an effective tax rate of 32.8% for all of 1998.
The Statement of Condition includes approximately $3.131 million and $1.083
million of net deferred tax assets at June 30, 1999 and December 31, 1998
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.
The following annualized ratios reflect the earnings performance for the first
six months of 1999 compared to the same time period of 1998.
<TABLE>
<CAPTION>
For the six For the six
months ended months ended
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Return on Average Assets 1.94% 1.71%
Return on Average Equity 16.12 15.27
Return on Earnings Assets
- -Taxable Equivalent 7.75 7.94
Interest Cost as a percentage of
Earning Assets 2.72 3.12
Net Interest Margin 5.03 4.82
</TABLE>
Statements of Condition
As of June 30, 1999, total assets of the Company amounted to $831.567 million,
an increase from December 31, 1998 total assets of $824.644 million. Average
assets for the first six months of 1999 amounted to $810.938 million compared to
$795.964 million for the same period in 1998, a 2% increase. Through the first
six months of 1999, the investment portfolio increased $17.586 million or 7%
from year end while total loans increased $16.803 million or 3% in that same
period. The increase in investments and loans allowed for the reduction of $23.7
million in federal funds sold. Total deposits
<PAGE> 16
decreased $7.012 million from December 31, 1998 to June 30, 1999 while short
term borrowings and federal funds purchased and securities sold under agreement
to repurchase increased $8.204 million and $5.794 million respectively.
Investment Portfolio
The deposits and other borrowings of the Company, in excess of required reserves
and operating funds of the Mahoning National Bank of Youngstown, are invested in
loans, investment securities and federal funds sold. The objective of the
investment portfolio is to combine liquidity, earnings, and safety of the
investment in a prudent manner so as to protect the depositor, fulfill
responsibility to borrowers and offer a favorable return to the stockholders.
At June 30, 1999, the investment portfolio totaled $282.533 million (which
included a $2.122 million unrealized loss on available for sale securities)
which was an increase of $17.586 million from December 31, 1998.
At June 30, 1999, the Company has classified investment securities with
amortized cost and fair market value of $276.645 million and $274.523 million
respectively, or 97% of the portfolio as available for sale, with the remainder
of the portfolio classified as held to maturity. 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. The Company did not hold any on or off balance sheet derivatives during
1998, and does not expect to in 1999.
In the first six months of 1999, $5.005 million of U.S. Government Securities
were sold. There were no security sales in the first six months of 1998. No
securities were transferred between categories in the first six months of 1999.
Loans
Total loans outstanding increased by $16.803 million or 3% from $490.743 million
on December 31, 1998, to $507.546 million on June 30, 1999. This growth, coupled
with a decline in deposits resulted in a loan to deposit ratio of 92.55% at June
30, 1999, compared to 88.36% at December 31, 1998.
While actual loan balances at June 30, 1999 increased $16.803 million from
December 31, 1998 loan balances, average loan balances for the first six months
of 1999 increased only $144 thousand from average loan balances for the same
period in 1998.
The increase in the loan portfolio in the first six months of 1999 is the result
of modest loan demand and good results from business development efforts. The
loan portfolio, with the exception of residential mortgage loans, experienced
growth in the first six months of 1999.
<PAGE> 17
The area of largest growth in the first six months of 1999 was Consumer loans,
which increased approximately $13.4 million or 10% from $134.424 million at
December 31, 1998 to $147.821 million at June 30, 1999. Consumer loan balances
are primarily dependent on the level of indirect automobile financing purchased
by the Company. To effectively compete in this market, the Company must continue
to provide the dealer network with a very high level of quality service that can
help offset lower rate alternatives. While the automobile financing market
remains highly competitive, the Company was able to increase market share
through the development of new dealer relationships and incentive plans for the
dealer network. In addition the Company has benefited from regional bank
competitors consolidating operations out of the market area, which has not
allowed them to service the dealer network as efficiently as Mahoning National.
The Company currently purchases indirect auto loans from approximately 100
dealers throughout the Company's market area. While consumer loan balances
increased in the first six months of 1999 from year end balances, the Company
continues to closely monitor underwriting criteria due to the charge-off and
delinquency trends of the past few years. Given the rapid amortization of the
automobile loan portfolio, which has a short average maturity, competition in
the market area, and stricter underwriting guidelines, the consumer loan
portfolio should show very modest growth during the second half of 1999.
Commercial loan and commercial real estate loan growth trends experienced in
1998 continued in the first six months of 1999. Commercial loans, which totaled
$88.401 million, increased approximately $10.6 million or 14% in the first six
months of 1999, while commercial real estate loans increased approximately $4.4
million or 4% to $121.435 million at June 30, 1999 from December 31, 1998
balances of $117.013 million. The dollar fluctuation of commercial loans and
commercial real estate loans can be more volatile than other loan products due
to the nature of the product and larger dollar amounts of individual loans. As
the competition for commercial loans increases throughout 1999, with banks
looking to continue past growth trends in their loan portfolios, the Company
does not intend to compromise its credit standards for the sake of loan growth.
Residential mortgage loans declined approximately $9.1 million or 6% in the
first six months of 1999, from December 31, 1998 balances. This follows a 7%
decline in residential mortgages for all of 1998. The Company, which became more
active in the secondary market in 1998, sold approximately $10.7 million in long
term fixed rate mortgages in the first six months of 1999 compared to $10.2
million in the same time period of 1998. The Company expects to continue to
generate salable loans, with servicing retained throughout 1999 but due to the
increase in mortgage rates over the past few months does not expect volumes
experienced over the last six months of 1998.
The loan portfolio with the exception of residential mortgages is expected to
experience modest growth over the remainder of 1999 through continued business
development efforts and increased market share of indirect lending through the
dealer network. The lending arena is expected to remain very competitive in
terms of loan pricing and loan terms as a result of the flat yield curve and
shrinking interest margins. While modest loan
<PAGE> 18
growth is expected over the remainder of 1999, the Company will not chase loan
volume with rates or terms that would jeopardize the quality of the loan
portfolio.
As of June 30, 1999, nonperforming loans, defined as those loans which are on
non-accrual or are 90 days or more past due and still accruing, totaled $1.873
million compared to $1.693 million at December 31, 1998. This increase in
nonperforming loans is mainly due to increases in nonaccrual and past due
residential mortgages which are sufficiently collateralized. Listed below is a
schedule of the Company's nonperforming assets:
<TABLE>
<CAPTION>
(Amounts in thousands) June 30, 1999 December 31, 1998
- -------------------------- ------------- -----------------
<S> <C> <C>
Non accrual loans $1,259 $1,075
Accruing loans 90 days
or more past due 614 618
------- -------
Non performing loans 1,873 1,693
Restructured loans in
compliance with modified
terms 46 51
Other real estate owned -- --
------- -------
Total nonperforming assets $1,919 $1,744
======= =======
Total nonperforming assets to
total assets 0.23% 0.21%
</TABLE>
The following ratios provide additional information on the status of the loan
portfolio:
<TABLE>
<CAPTION>
As of As of
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Loan deposit ratio 92.55% 94.24%
Non performing loans to
total loans .37 .46
Non performing loans to
allowance for loan losses 23.24 31.08
Allowance for loan losses
to total loans 1.59 1.49
Net charge-off to average
loans .22 .29
Net charge-offs ($000) $1,076 $1,428
</TABLE>
<PAGE> 19
Shown below is a summary of the allowance for loan losses:
<TABLE>
<CAPTION>
For the six For the six
months ended months ended
(Amounts in thousands) June 30, 1999 June 30, 1998
- ------------------------ ------------- -------------
<S> <C> <C>
Balance at the beginning of period $7,789 $7,524
Provision charged to operating expense 1,350 1,452
Recoveries of loans charged off 414 353
Losses charged to allowance (1,490) (1,781)
------ ------
Balance at end of period $8,063 $7,548
====== ======
</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 six months ended June 30:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Principal amount of impaired loans $506 $928
Allowance allocated to impaired loans -- 351
---- ----
Portion for which no allowance is allocated $506 $577
==== ====
Average investment in impaired loans for
the six months ended June 30: $544 $1,150
==== ======
</TABLE>
Total cash collected on impaired loans during the first six months of 1999 and
1998 was $71 thousand and $55 thousand, respectively; $65 thousand was credited
to the principal balance outstanding and $6 thousand was credited to interest in
the first six months of 1999, while $53 thousand was credited to the principal
balance outstanding and $2 thousand was credited to interest in the same time
period in 1998. Interest that would have been accrued on impaired loans in the
first six months of 1999 and 1998 was $21 thousand and $67 thousand,
respectively. The amount of interest income recognized during the first six
months of 1999 and 1998 was $6 thousand and $2 thousand, respectively.
Provision for Loan Losses
The policies of the company provide for loan loss reserves to adequately protect
the Company against reasonably probable 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 June
30, 1999, all loans classified for
<PAGE> 20
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.
The provision for loan losses charged to expense during the first six months of
1999 was $1.350 million, a decrease of $102 thousand from the 1998 first six
month provision. Net charge-offs declined $351 thousand or 25% in the first six
months of 1999 compared to the same period in 1998. Net charge-offs on
commercial loans totaled $19 thousand for the first six months of 1999 compared
to $474 thousand for the same period in 1998. Net charge-offs on residential
real estate loans increased by $113 thousand in the first six months of 1999
compared to the same period in 1998 while consumer loan net charge-offs were
approximately the same for each period.
It is anticipated that some of the amounts charged-off in the first six months
will be collected in the future and will be added to the allowance for loan
losses. The timing and amounts of these collections are uncertain at this time.
As of June 30, 1999 the allowance for loan losses totaled $8.063 million or
1.59% of total loans, compared to $7.789 million or 1.59% of total loans at
December 31, 1998. While the allowance for loan losses has increased $274
thousand in the first six months of 1999 the $16.803 million increase in loans
has resulted in the allowance to loan ratio remaining at 1.59%. This area will
continue to be monitored closely over the remainder of the year as the Company
continues to evaluate the adequacy of the allowance for loan losses with future
provisions to the allowance being dependent upon the growth and quality of the
loan portfolio. As a result of possible changes in economic conditions there can
be no guarantee that the level of the provision or allowance for loan losses
will not be increased by the Company.
Deposits
Total deposits at June 30, 1999 decreased $7.012 million or 1% from December 31,
1998 deposit balances of $555.407 million. While actual deposits have decreased
in the first six months of 1999, average deposits for the period totaled
$547.688 million, a $4.554 million increase over average deposits for the same
period in 1998. The decrease in deposits was the result of consumers continuing
to move their funds from the banking industry into stocks, mutual funds or other
investment products that tend to offer higher returns. Competitive pressures
from within the banking and savings and loan industries to increase market share
are making it much more difficult to retain deposits. To address these
competitive pressures the Company intends to focus on customer retention and
deposit growth over the remainder of 1999 through marketing promotions,
competitive deposit pricing, customer service initiatives and customer Year 2000
awareness.
The Company's repurchase agreements at June 30, 1999 decreased $21.500 million
from December 31, 1998 balances. This decrease resulted when a local public fund
entity
<PAGE> 21
reinvested a portion of their funds through the Company's Trust department and
withdrew the remainder to cover various operating needs.
Balances in the Company's Corporate Investment accounts, which are overnight
"Sweep" repurchase agreements remained a stable source of funds throughout the
first six months of 1999. While these type of accounts are considered more
volatile than traditional deposit liabilities, management believes they provide
a strong base of funds, which allows the Company to support loan growth and
expand its investment security portfolio. Corporate Investment accounts are
expected to remain a stable source of funds for the Company throughout 1999 as
existing relationships expand and new customers are solicited.
Liquidity and Capital
It is a primary objective of the Company 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 the
liquidity needs are fully satisfied through normal bank operations. Short term
investments (Federal funds sold) and short term borrowings (Federal funds
purchased, repurchase agreements, U.S. Treasury demand notes and Federal Home
Loan Bank advances) are used primarily as cash management and liquidity tools.
Short term Federal fund lines totaling $60 million have been established at the
Company'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 June 30, 1999, and December 31, 1998,
$1.658 million and $3.275 million of residential mortgage loans were designated
as held for sale, respectively. At June 30, 1999, $274.523 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 is derived from the Federal Home Loan Bank of
Cincinnati (FHLB). The FHLB provides short term funding alternatives with a
remaining available line of credit of $41.250 million and funding for
one-to-four family residential mortgage loans and allows the Company to better
manage its interest rate risk. The Company had $16.692 million outstanding in
FHLB borrowings at June 30, 1999, compared to $17.191 million at December 31,
1998.
Total capital accounts have grown $710 thousand or 1% in the first six months of
1999. This increase reflects retained earnings less dividends paid and also
reflects a $3.801 million unrealized loss, net of deferred taxes, on the
available for sale investment portfolio for the first six months of 1999.
Dividends paid in 1999 year to date were $3.276 million or $.52 per share
compared to $2.646 million or $.42 per share for the same period in 1998. Book
value per share as of June 30, 1999 was $15.40 per share compared to $15.29 on
December 31, 1998.
<PAGE> 22
Under regulations issued by federal banking agencies, 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 June 30, 1999, the Company's
leverage, Tier 1 and total risk-based capital ratios were 12.13%, 18.59% and
19.84%, respectively, compared to 11.78%, 18.91% and 20.16%, respectively, at
December 31, 1998. The Company has exceeded all required regulatory capital
ratios for each period presented and is considered "well capitalized" under all
federal banking agency regulations. The Company's risk-based capital ratios are
well above the regulatory minimums due to the capital strength and low risk
nature of the 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
approximately 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 to
maintain the "well capitalized" classification.
<PAGE> 23
MAHONING NATIONAL BANCORP INC.
SUMMARY OF AVERAGE BALANCES AND INTEREST RATES
TAX EQUIVALENT BASIS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, 1999 JUNE 30, 1998
(Amounts in thousands) AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE% (2) BALANCE INTEREST RATE% (2)
---------------------------------------- --------------------------------------------
INTEREST YIELDS
<S> <C> <C> <C> <C> <C> <C>
Loans $ 495,600 $ 21,430 8.72 $ 495,456 $ 21,823 8.88
Investment securities(1) 269,611 8,039 6.01 245,328 7,486 6.15
Other earning assets 3,493 84 4.76 11,029 304 5.48
---------------------------------------- --------------------------------------------
Total return on earning assets 768,704 29,553 7.75 751,813 29,613 7.94
INTEREST COSTS
Interest bearing deposits:
Savings deposits 271,804 2,386 1.77 274,004 2,885 2.12
Time deposits 196,940 4,552 4.66 195,988 5,080 5.23
---------------------------------------- --------------------------------------------
Total interest bearing deposits 468,744 6,938 2.98 469,992 7,965 3.42
Federal funds purchased 8,166 202 4.92 4,514 126 5.57
Repurchase agreements 128,684 2,700 4.23 136,695 3,109 4.59
Short term borrowings 5,308 116 4.36 7,740 202 5.17
Long term borrowings 16,977 431 5.12 8,806 229 5.24
---------------------------------------- --------------------------------------------
Total interest bearing liabilities $ 627,879 $ 10,387 3.33 $ 627,747 $ 11,631 3.73
Interest spread $ 19,166 4.42 $ 17,982 4.21
====================== ==========================
AS A PERCENT OF AVERAGE EARNING ASSETS
Total return on earning assets 7.75 7.94
Total interest cost 2.72 3.12
---------- ----------
Net Interest Margin 5.03 4.82
========== ==========
</TABLE>
(1) Investment securities average balance is based on average carrying value
while the average rate is calculated using average historical cost.
(2) Annualized average rate
<PAGE> 24
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
Item 5 - Other Information
None
Item 6(a) - Exhibits
(27) Financial Data Schedule
Item 6(b) - Reports on Form 8-K
Form 8-K dated June 14, 1999 announced the Agreement and Plan
of Merger dated June 6, 1999 by and between Sky Financial
Group, Inc. and Mahoning National Bancorp, Inc.
<PAGE> 25
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 six months
ended June 30, 1999 to be signed on its behalf by the undersigned thereunto duly
authorized.
DATE: August 9, 1999 Mahoning National Bancorp, Inc.
--------------------------
/s/ Gregory L. Ridler
----------------------------------
Gregory L. Ridler
Chairman of the Board,
President and Chief
Executive Officer
DATE: August 9, 1999 /s/ Norman E. Benden, Jr.
-------------------------- ----------------------------------
Norman E. Benden, Jr.
Secretary and 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 JUNE 30, 1999 AND
THE CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 22,583
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 274,523
<INVESTMENTS-CARRYING> 8,010
<INVESTMENTS-MARKET> 8,063
<LOANS> 507,546
<ALLOWANCE> 8,063
<TOTAL-ASSETS> 831,567
<DEPOSITS> 548,395
<SHORT-TERM> 164,585
<LIABILITIES-OTHER> 4,886
<LONG-TERM> 16,692
0
0
<COMMON> 6,300
<OTHER-SE> 90,709
<TOTAL-LIABILITIES-AND-EQUITY> 831,567
<INTEREST-LOAN> 21,361
<INTEREST-INVEST> 7,687
<INTEREST-OTHER> 84
<INTEREST-TOTAL> 29,132
<INTEREST-DEPOSIT> 6,938
<INTEREST-EXPENSE> 10,387
<INTEREST-INCOME-NET> 18,745
<LOAN-LOSSES> 1,350
<SECURITIES-GAINS> 5
<EXPENSE-OTHER> 10,381
<INCOME-PRETAX> 11,599
<INCOME-PRE-EXTRAORDINARY> 7,787
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,787
<EPS-BASIC> 1.24
<EPS-DILUTED> 1.24
<YIELD-ACTUAL> 7.75
<LOANS-NON> 1,259
<LOANS-PAST> 614
<LOANS-TROUBLED> 46
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 7,789
<CHARGE-OFFS> 1,490
<RECOVERIES> 414
<ALLOWANCE-CLOSE> 8,063
<ALLOWANCE-DOMESTIC> 8,063
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 893
</TABLE>
