<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, 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 April 30, 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 (unaudited) -
March 31, 1999 and December 31, 1998 3
Consolidated Statements of Income-
Three Months Ended March 31, 1999 and 1998
(unaudited) 4
Consolidated Statements of Comprehensive Income-
Three Months Ended March 31, 1999 and 1998
(unaudited) 5
Condensed Consolidated Statement of Cash Flows -
Three Months Ended March 31, 1999 and 1998
(unaudited) 6
Notes to Consolidated Financial Statements 7
Item 2 - Management Discussion and Analysis
of Financial Condition and Results of Operations 8-21
Item 3 - Summary of Average Balances and Interest Rates 22
PART II - OTHER INFORMATION 23-24
Item 4 - Submission of Matters to a Vote of Security Holders
Item 6(a) - Exhibits
Exhibit Number 10 - Material Contract
Exhibit Number 27 - Financial Data Schedule
SIGNATURES
</TABLE>
<PAGE> 3
PART I
FINANCIAL INFORMATION
MAHONING NATIONAL BANCORP INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
<TABLE>
<CAPTION>
(Amounts in thousands, except per share data)
MARCH 31, DECEMBER 31,
ASSETS 1999 1998
-------------- ------------
<S> <C> <C>
Cash and due from banks $ 24,793 $ 30,556
Federal funds sold - 23,700
Investment securities available for sale - at fair value 260,843 241,037
Investment securities held to maturity - at cost
(Market value $8,616 at March 31, 1999
and $24,036 at December 31, 1998) 8,505 23,910
Loans 497,313 490,743
Less allowance for possible loan losses 7,997 7,789
-------- --------
Net loans 489,316 482,954
Bank premises and equipment 9,488 8,844
Other assets 15,746 13,643
-------- --------
Total assets $808,691 $824,644
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Non-interest bearing $ 75,041 $ 84,127
Interest bearing
Savings 267,978 274,641
Time 201,617 196,639
-------- --------
Total deposits 544,636 555,407
Federal funds purchased and securities
sold under agreement to repurchase 139,178 146,144
Short term borrowings 4,346 4,443
Long term borrowings 16,943 17,191
Other liabilities 6,479 5,160
-------- --------
Total liabilities 711,582 728,345
-------- --------
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 45,563 43,477
Unrealized gain on investment securities
available for sale, net of deferred taxes 1,146 2,422
-------- --------
Total stockholders' equity 97,109 96,299
-------- --------
Total liabilities and
stockholders' equity $808,691 $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
MONTHS ENDED MONTHS ENDED
(Amounts in thousands, except per share data) MARCH 31, 1999 MARCH 31, 1998
(UNAUDITED) (UNAUDITED)
-------------------------- -------------------------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 10,564 $ 10,892
Interest on investment securities
Taxable 3,468 3,276
Nontaxable 317 273
Interest on federal funds sold 54 65
-------------------------- -------------------------
14,403 14,506
INTEREST EXPENSE
Interest on deposits 3,487 4,012
Interest on federal funds purchased and
securities sold under agreement to repurchase 1,407 1,684
Interest on short term borrowings 53 80
Interest on long term borrowings 216 62
-------------------------- -------------------------
5,163 5,838
-------------------------- -------------------------
Net interest income 9,240 8,668
PROVISION FOR LOAN LOSSES 675 726
-------------------------- -------------------------
Net interest income after
provision for loan losses 8,565 7,942
OTHER OPERATING REVENUE
Trust department income 808 788
Service charges on deposit accounts 1,048 1,009
Other service charges 218 188
Other revenue 77 66
Gain on sale of loans 68 14
Gain on sale of investment securities
available for sale 5 -
-------------------------- -------------------------
2,224 2,065
-------------------------- -------------------------
OTHER OPERATING EXPENSE
Salaries and employee benefits 2,827 2,834
Expenses of premises and fixed assets 724 720
Other expense 1,699 1,635
-------------------------- -------------------------
5,250 5,189
-------------------------- -------------------------
Income before income taxes 5,539 4,818
INCOME TAX EXPENSE 1,815 1,566
-------------------------- -------------------------
NET INCOME $ 3,724 $ 3,252
========================== =========================
BASIC EARNINGS PER COMMON SHARE $ 0.59 $ 0.52
DIVIDENDS PER SHARE 0.26 0.21
</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
MONTHS ENDED MONTHS ENDED
(Amounts in thousands, except per share data) MARCH 31, 1999 MARCH 31, 1998
(UNAUDITED) (UNAUDITED)
------------------------- ----------------------
<S> <C> <C>
Net Income $ 3,724 $ 3,252
------------------------- ----------------------
Other comprehensive income, before tax:
Unrealized holding gains (losses) arising
during period (1,959) 35
Less: reclassification adjustment for gains
(losses) included in net income 5 -
------------------------- ----------------------
Other comprehensive income, before tax (1,964) 35
Income tax expense (benefit) related to
items of other comprehensive income (688) 12
------------------------- ----------------------
Comprehensive income $ 2,448 $ 3,275
========================= ======================
Comprehensive income per common share $ 0.39 $ 0.52
========================= ======================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 6
MAHONING NATIONAL BANCORP INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
(Amounts in thousands) ENDED ENDED
MARCH 31, 1999 MARCH 31, 1998
(UNAUDITED) (UNAUDITED)
-------------------------------------
<S> <C> <C>
Cash flows from operating activities $ 4,919 $ 5,879
Cash flows from investing activities
Proceeds from maturities of investment securities available for sale 10,992 5,068
Proceeds from maturities of investment securities held to maturity 425 11,315
Sale of investment securities available for sale 5,005 -
Purchase of investment securities available for sale (22,795) (11,320)
Purchase of investment securities held to maturity - -
Net increase in loans (7,380) (7,067)
Proceeds from the sale of other real estate owned 18 57
Net decrease (increase) in federal funds sold 23,700 (4,600)
Capital expenditures (927) (133)
--------------------------------
Net cash provided by (used in) investing activities 9,038 (6,680)
Cash flows from financing activities
Net decrease in deposits (10,771) (6,732)
Net (decrease) increase in federal funds purchased and
securities sold under agreement to repurchase (6,966) 1,609
Net decrease in short term borrowings (97) (2,500)
Proceeds from long term borrowings - 10,000
Payments on long term borrowings (248) (236)
Dividends paid (1,638) (1,323)
--------------------------------
Net cash (used in) provided by financing activities (19,720) 818
Net (decrease) increase in cash and cash equivalents (5,763) 17
Cash and cash equivalents at beginning of year 30,556 29,143
--------------------------------
Cash and cash equivalents at end of quarter $ 24,793 $ 29,160
================================
Supplemental disclosures of cash flow information:
Cash paid during the quarter for:
Interest $ 5,329 $ 5,844
================================
Income taxes $ - $ -
================================
Non-cash transactions:
Transfer from loans to other real estate owned $ 18 $ 40
================================
</TABLE>
<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 - 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 statement. 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 three months of 1999 amounted to $3.724 million or
$0.59 per share. This represents an increase of 15% over net income earned
during the same period in 1998 ($3.252 million or $0.52 per share).
The primary component of the Company's earnings growth in the first three 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
7% in the first three months of 1999 compared to the same period in 1998, while
the provision for loan losses declined 7%. Noninterest expense increased 1% over
that same period.
The Company's Return on Assets (ROA) at March 31, 1999 increased to 1.88% from
1.67% at March 31, 1998. While the Company's stockholders' equity to asset ratio
increased from 11.03% on March 31, 1998 to 12.01% on March 31, 1999, Return on
Equity (ROE) increased to 15.51% from 14.91% for the same period.
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
<PAGE> 9
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 quarter of 1999. Due to the liability
sensitive nature of the Company's balance sheet, rate reductions in the fourth
quarter of 1998 are expected to positively impact 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 three months of 1999 was 5.03%
compared to 4.81% for the same period in 1998.
Average earning assets increased $15.420 million for the first three months of
1999 to $761.324 million from $745.904 million for the same period of 1998. The
average earning asset yield decreased to 7.78% in the first three months of
1999, from 7.99% for the same period of 1998.
The Company's investment portfolio average balance for the first quarter of 1999
was $22.173 million greater than the average balance for the same period in 1998
which contributed an additional $330 thousand in tax adjusted net interest
income for the first quarter of 1999. While actual loan balances at March 31,
1999 increased from December 31, 1998 balances, average loan balances for the
first quarter of 1999 declined $6.615 million from the same period in 1998. This
change in volume and a 15 basis point yield reduction caused a decline in tax
adjusted interest income of $330 thousand in the first quarter of 1999 compared
to the same period of 1998 which off-set the volume related increases in
investment portfolio income.
Average interest bearing liabilities decreased $2.896 million for the first
three months of 1999 to $623.454 million from $626.350 million for the same
period of 1998. The cost of interest bearing liabilities decreased to 3.36% for
the first three months of 1999 from 3.78% for the same period in 1998. This
reduction in funding costs is due primarily to the Company reducing its average
saving and interest bearing checking, time deposit and repurchase agreement
rates by 39, 52 and 41 basis points respectively. This lower cost of funds
should continue to positively impact net interest income in 1999 compared to
1998 as many of the rate reductions were implemented in the fourth quarter of
1998 in response to the Federal Reserve rate reductions.
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 22.
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 March 31, 1999, the
<PAGE> 10
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 Company's projected change in NPV for the
various rate shock levels at March 31, 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 $18,492 19.04% 13.93%
- -100 8,877 9.14 12.94
0 (808) -0.83 11.92
+100 (10,549) -10.86 10.86
+200 (20,333) -20.94 10.15
</TABLE>
Other Operating Revenue
Other operating revenue of $2.219 million, exclusive of security transactions,
increased $154 thousand or 7% over the first three months of 1998 total of
$2.065 million. The largest component of other operating revenue in the first
quarter of 1999 was service charges on deposit accounts which increased $39
thousand or 4% over the first quarter of 1998. Other operating revenue,
exclusive of security transactions, as a percentage of average assets was 1.12%
for the first three months of 1999 compared to 1.06 % for the same period in
1998. In the first three months of 1999, service charges on deposit accounts as
a percentage of average deposits increased to .78% from .76% 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 quarter of
1999 are the
<PAGE> 11
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 $808 thousand
in other revenue in the first three months of 1999, an increase of $20 thousand
or 3% over the $788 thousand earned in the same period of 1998. Trust Department
assets totaled $527.118 million with a market value of $783.183 million at March
31, 1999 compared to $435.156 million with a market value of $677.888 million at
March 31, 1998. This increase in assets can be attributed to the growth in;
personal trusts, employee benefit accounts and custody and investment accounts
over the past twelve months.
In 1998, the Company became more active in the origination and sale of
residential mortgages in the secondary market. These sales generated $68
thousand in gains in the first three months of 1999 compared to $14 thousand in
the same period of 1998. The Company expects to continue secondary market sales
throughout 1999.
Provision for loan losses for the first quarter of 1999 amounted to $675
thousand compared to $726 thousand for the comparable period in 1998. This
decrease is discussed in more detail under the Provision for Loan Loss heading
later in this discussion.
Other Operating Expense
Other operating expense for the first quarter increased $61 thousand or
approximately 1% from the comparable period in 1998, to $5.250 million from
$5.189 million. As a percentage of average assets, other operating expense was
2.65% and 2.66% for the first quarter of 1999 and 1998 respectively. 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 247 basis points from 47.59% in 1998 to 45.12% in 1999. This efficiency
ratio places the Company near the top of its peer group.
Salaries and employee benefits expense for the first three months of 1999
decreased $7 thousand from the same period in 1998. Salary expense alone
increased $41 thousand or 2% for the first three months of 1999 when compared to
the same period in 1998. This increase can be attributed to annual merit salary
adjustments which took effect January 1, 1999 and increases in various employee
incentive programs. Health care expense for the first three months of 1999 were
$209 thousand compared to $196 thousand for the same period in 1998, an increase
of $13 thousand or 7%. This increases reflects the increase in health care
renewal rates experienced July 1, 1998. It is unknown at this time what the
Company's health care renewal rates will be for the plan year beginning July 1,
1999. The number of full time equivalent employees decreased from 388 at March
31, 1998 to 374 at March 31, 1999.
In December 1998, the Company opened a new free standing branch facility in
Austintown to replace a previous plaza location. In January 1999, two additional
plaza
<PAGE> 12
branch locations were consolidated into this branch. Expenses to close and
consolidate these offices were not material and the consolidation is expected to
reduce overhead expense beginning in 1999.
Other expenses increased $64 thousand in the first quarter of 1999, to $1.699
million, from $1.635 million for the same period of 1998, a 4% increase. This
increase is the result of increased business activity and general inflationary
increases. Other expenses for the remainder of 1999 are expected to exceed 1998
expenses by approximately 5%.
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
<PAGE> 13
that the renovation 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. At the end
of September 1998, the Awareness and Assessment phases had been completed and
documentation supporting the comprehensive Year 2000 project plan was completed.
The Company is currently at various stages of the Validation and Implementation
phases on those applications or systems identified as mission critical to the
Company. As of April 1, 1999, the Company has renovated all of its
mission-critical applications and systems. The Company's final testing is nearly
complete (estimate 90%). The Company will complete validation of the remaining
applications and systems identified as mission critical by June 30, 1999.
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 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. The Business Resumption Contingency Plan is not static in nature,
and will evolve as the bank progresses into 1999.
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 March 31, 1999, approximately $430
thousand has been expensed on Year 2000 Remediation with the remaining expense
expected to occur over the next 12 months.
<PAGE> 14
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 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 three months of 1999 amounted to $1.815 million
compared to $1.566 million for the same period in 1998. Income tax expense for
1999 is being accrued at an effective rate of approximately 32.8%, which
compares to an effective tax rate of 32.8% for all of 1998.
The Statement of Condition includes approximately $1.772 million and $1.083
million of net deferred tax assets at March 31, 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
three months of 1999 compared to the same time period of 1998:
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Return on Average Assets 1.88% 1.67%
Return on Average Equity 15.51 14.91
Return on Earning Assets
- -Taxable Equivalent 7.78 7.99
Interest Cost as a
percentage of Earnings Assets 2.75 3.18
Net Interest Margin 5.03 4.81
</TABLE>
Statements of Condition
As of March 31, 1999, total assets of the Company amounted to $808.691 million,
a decrease from December 31, 1998 total assets of $824.644 million. Average
assets for
<PAGE> 15
the first quarter of 1999 amounted to $803.996 million compared to $790.729
million for the same quarter of 1998, a 2% increase. Through the first three
months of 1999, total loans increased $6.570 million or 1% from year end while
the investment portfolio increased $4.401 million or 2% in that same period. The
$23.7 million decline in Federal funds sold resulted from a $10.8 million
decrease in deposits and a $21.5 million decrease in the Company's Repurchase
Agreements.
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 March 31, 1999, the investment portfolio totaled $269.348 million (which
included a $1.763 million unrealized gain on available for sale securities)
which was an increase of $4.410 million from December 31, 1998.
At March 31, 1999, the Company has classified investment securities with
amortized cost and fair market value of $259.080 million and $260.843 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 quarter of 1999, $5.005 million of U.S. Government Securities were
sold. There were no security sales in the first quarter of 1998. No securities
were transferred between categories in the first quarter of 1999.
Loans
Total loans outstanding increased by $6.570 million or 1% from $490.743 million
on December 31, 1998, to $497.313 million on March 31, 1999. This growth,
coupled with a decline in deposits resulted in a loan to deposit ratio of 91.31%
at March 31, 1999, compared to 88.36% at December 31, 1998.
While actual loan balances at March 31, 1999 increased $6.570 million from
December 31, 1998 loan balances, average loan balances for the first three
months of 1999 were down $6.615 million from average loan balances for the same
period in 1998.
The increase in the loan portfolio in the first three months of 1999 is the
result of modest loan demand and good results from business development efforts.
The loan portfolio,
<PAGE> 16
with the exception of residential mortgage loans, experienced modest increases
in the first quarter of 1999.
The area of largest growth in the first three months of 1999 was commercial
loans which increased approximately $7.4 million or 9% from $77.830 million at
December 31, 1998 to $85.195 million at March 31, 1999. Commercial loan balances
are expected to remain at current levels throughout the remainder of 1999. As
competition for commercial loans continues to increase as banks look to continue
past growth trends, the Company does not intend to compromise its credit
standards for the sake of growth.
Consumer loans increased approximately $5.8 million or 4% in the first three
months of 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 three months of 1999 from
year end balances, the Company continues to closely monitor underwriting
criteria due to the change-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 a projected slowdown in
our national economy, consumer loan totals are expected to grow modestly over
the remainder of 1999.
Residential mortgage loans declined approximately $8.0 million or 5% in the
first three 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 $6.0 million in long
term fixed rate mortgages in the first three months of 1999 compared to $1.1
million in the same time period of 1998. The increase in the sale of long term
fixed rate mortgages was the result of an asset liability management strategy of
not adding long term fixed rate assets to the balance sheet. The Company expects
to continue to generate salable loans, with servicing retained throughout 1999.
With the current emphasis on selling long term fixed rate mortgages in the
secondary market and continued refinancing pressures due to the historically low
mortgage interest rate environment, a continued decline in the residential
mortgage loan portfolio is expected over the remainder of 1999.
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> 17
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 March 31, 1999, nonperforming loans, defined as those loans which are on
non-accrual or are 90 days or more past due and still accruing, totaled $2.382
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 collaterallized. Listed below is a
schedule of the Company's nonperforming assets:
<TABLE>
<CAPTION>
(Amounts in thousands) March 31, 1999 December 31, 1998
--------------------- ----------------- -----------------
<S> <C> <C>
Nonaccrual loans $1,531 $1,075
Accruing loans 90 days or
more past due 851 618
----- ------
Nonperforming loans 2,382 1,693
Restructured loans in
compliance with modified
terms 49 51
Other real estate owned -- --
------ ------
Total nonperforming assets $2,431 $1,744
====== ======
Total nonperforming assets to
total assets 0.30% 0.21%
</TABLE>
The following ratios provide additional information on the status on the loan
portfolio:
<TABLE>
<CAPTION>
As of As of
March 31, 1999 March 31, 1998
-------------- ----------------
<S> <C> <C>
Loan deposit ratio 91.31% 92.63%
Nonperforming loans to total
loans .48 .60
Nonperforming loans to
allowance for loan losses 29.78 38.61
Allowance for loan losses to
total loans 1.61 1.55
Net charge-off to average
loans .10 .10
Net charge-offs ($000) $467 $510
</TABLE>
<PAGE> 18
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, 1999 March 31, 1998
- ---------------------- -------------- --------------
<S> <C> <C>
Balance at beginning of period $7,789 $7,524
Provision charged to operating
expense 675 726
Recoveries of loans charged off 189 215
Losses charged to allowance (656) (725)
------ ------
Balance at end of period $7,997 $7,740
====== ======
</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>
1999 1998
---- ----
<S> <C> <C>
Principal amount of impaired loans $535 $1,434
Allowance allocated to impaired loans --- 325
---- ------
Portion for which no allowance is allocated $535 $1,109
==== ======
Average investment in impaired loans for the
quarter ended March 31: $563 $1,145
==== ======
</TABLE>
Total cash collected on impaired loans during the first quarter of 1999 and 1998
was $66 thousand and $23 thousand respectively, $61 thousand of the cash
collected was credited to principal and $5 thousand was credited to interest in
1999. In 1998, $21 thousand of the cash collected was credited to principal and
$2 thousand was credited to interest. Interest that would have been accrued on
impaired loans in the first quarter of 1999 and 1998 was $11 thousand and $39
thousand, respectively. The amount of interest income recognized during the
first quarter of 1999 and 1998 was $5 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,
<PAGE> 19
delinquencies and anticipated charge-offs. As of March 31, 1999, 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.
The provision for loan losses charged to expense during the first quarter of
1999 was $675 thousand, a decrease of $51 thousand from the 1998 first quarter
provision. Net charge-offs declined $43 thousand or 8% in the first three months
of 1999 compared to the same period in 1998. Net charge-offs on consumer loans
and credit card related plans totaled $472 thousand for the first three months
of 1999 compared to $550 thousand for the same period in 1998. This $78 thousand
decrease was the result of stricter underwriting standards adopted over the past
year along with more proactive collection efforts.
It is anticipated that some of the amounts charged-off in the first quarter 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 March 31, 1999, consumer loan delinquencies showed improvement over
delinquencies at December 31, 1998. In addition, the number of bankruptcy
notices received and automobile repossessions were down 38% and 16% respectively
for the first three months of 1999 compared the same period in 1998. This area
will continue to be monitored closely throughout the year as the Company
continues to evaluate the adequacy of the allowance for loan losses with further
provisions to the allowance being dependent upon the growth and quality of the
loan portfolio. The area's largest employer, General Motors' Lordstown, is
currently in negotiations with General Motors (GM) to secure production of the
auto maker's Delta car, scheduled to begin in 2003. The Lordstown plant
currently produces GM's J car, Chevrolet Cavaliers, Pontiac Sunfires and Toyota
Cavaliers, which will cease production with the 2002 model. The local economy
could be significantly impacted if Lordstown were not successful in obtaining
the Delta car project. 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. At March 31, 1999, the allowance
for loan losses totaled $7.997 million or 1.61% of total loans, compared to
$7.740 million or 1.55% of total loans at March 31, 1998.
Deposits
Total deposits at March 31, 1999 decreased $10.771 million or 2% from December
31, 1998 deposit balances of $555.407 million. While actual deposits have
decreased in the first three months of 1999, average deposits for the period
totaled $544.271 million, a $4.614 million increase over average deposits for
the same period in 1998. The decrease in deposits for the first three months of
1999 followed the normal first quarter deposit runoff pattern the Company has
experienced over the years, as deposit customers, mainly commercial enterprises,
build balances over the last quarter of the year and then draw
<PAGE> 20
down those balances in the first quarter of the following year. In addition,
consumers continue to move their funds from the banking industry into mutual
funds or other investment products which 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 March 31, 1999 decreased $21.500 million
from December 31, 1998 balances. This decrease resulted when a local public fund
entity 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 quarter 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 March 31, 1999, and December 31, 1998,
$1.645 million and $3.275 million of residential mortgage loans were designated
as held for sale, respectively. At March 31, 1999, $260.843 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 $40.007 million and funding for
one-to-four family residential mortgage loans and allows the Company to better
manage its interest rate risk. The
<PAGE> 21
Company had $16.943 million outstanding in FHLB borrowings at March 31, 1999,
compared to $17.191 million at December 31, 1998.
Total capital accounts have grown $810 thousand or 1% in the first three months
of 1999. This increase reflects retained earnings less dividends paid and also
reflects a $1.276 million unrealized loss, net of deferred taxes, on the
available for sale investment portfolio for the first three months of 1999.
Dividends paid in 1999 year to date were $1.638 million or $.26 per share
compared to $1.323 million or $.21 per share for the same period in 1998. Book
value per share as of March 31, 1999 was $15.41 per share compared to $15.29 on
December 31, 1998.
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 March 31, 1999, the
Company's leverage, Tier 1 and total risk-based capital ratios were 11.93%,
18.88% and 20.13%, 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 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 to maintain the "well capitalized" classification.
<PAGE> 22
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, 1999 MARCH 31, 1998
(Amounts in thousands) AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE% BALANCE INTEREST RATE%
---------------------------------------- -------------------------------------
INTEREST YIELDS
<S> <C> <C> <C> <C> <C> <C>
Loans $ 491,419 $ 10,600 8.75% $ 498,034 $ 10,930 8.90%
Investment securities 265,376 3,955 6.04% 243,203 3,697 6.16%
Other earning assets 4,529 54 4.77% 4,667 65 5.57%
---------------------------------------- -------------------------------------
Total return on earning assets 761,324 14,609 7.78% 745,904 14,692 7.99%
INTEREST COSTS
Interest bearing deposits:
Savings deposits 270,577 1,180 1.77% 272,595 1,454 2.16%
Time deposits 196,920 2,307 4.75% 196,881 2,558 5.27%
---------------------------------------- -------------------------------------
Total interest bearing deposits 467,497 3,487 3.02% 469,476 4,012 3.47%
Federal funds purchased 9,981 122 4.90% 8,593 119 5.56%
Repurchase agreements 123,903 1,285 4.21% 137,219 1,565 4.62%
Short term borrowings 4,971 53 4.27% 6,327 80 5.06%
Long term borrowings 17,102 216 5.12% 4,735 62 5.30%
---------------------------------------- -------------------------------------
Total interest bearing liabilities $ 623,454 $ 5,163 3.36% $ 626,350 $ 5,838 3.78%
Interest spread $ 9,446 4.42% $ 8,854 4.21%
========================== =======================
AS A PERCENT OF AVERAGE EARNING ASSETS
Total return on earning assets 7.78% 7.99%
Total interest cost 2.75% 3.18%
------------ ---------
Net Interest Margin 5.03% 4.81%
============ =========
</TABLE>
<PAGE> 23
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
The Annual Shareholders meeting of Mahoning National Bancorp,
Inc. was held March 16, 1999 for the purpose of:
1) To elect three (3) directors to Class II of the Corporation's
staggered Board of Directors to serve a two-year term or until
their successors shall have been elected and qualified.
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>
Charles J. McCrudden, Jr. II 4,790,963 47,402
Gregory L. Ridler II 4,781,886 56,479
Daniel B. Roth II 4,782,902 55,463
</TABLE>
The following are the Directors whose terms in office as
Directors continued after the meeting:
<TABLE>
<CAPTION>
Director Class
-------- -----
<S> <C>
William J. Bresnahan I
Frank A. Kramer I
Warren P. Williamson, III I
</TABLE>
Item 5 - Other Information
None
<PAGE> 24
Item 6(a) - Exhibits
(10) Material Contracts
(10a) Executive Phantom Stock Bonus Plan -
J. David Sabine
(27) Financial Data Schedule
Item 6(b) - None
<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 three
months ended March 31, 1999 to be signed on its behalf by the undersigned
thereunto duly authorized.
DATE: May 7, 1999 Mahoning National Bancorp, Inc.
--------------------------
/s/Gregory L. Ridler
---------------------------------------
Gregory L. Ridler
Chairman of the Board,
President and Chief
Executive Officer
DATE: May 7, 1999 /s/Norman E. Benden, Jr.
--------------------------- --------------------------------------
Norman E. Benden, Jr.
Secretary and Treasurer
<PAGE> 1
MAHONING NATIONAL BANCORP, INC.
FORM 10-Q
Item 6(a)
Exhibit 10(a)
Change-In-Control Protective Agreement
J. David Sabine
<PAGE> 2
MAHONING NATIONAL BANCORP, INC.
--------------------------
Guarantee Agreement
--------------------------
AGREEMENT entered into this 19th day of January, 1999 (the "Effective
Date"), by and between Mahoning National Bancorp, Inc. (the "Company") and J.
David Sabine (the "Executive").
WHEREAS, the Executive is currently employed by the Bank in an
executive capacity, and has, as of January 19, 1999, entered into an agreement
(the "Bank Agreement") with The Mahoning National Bank of Youngstown (the
"Bank") under its Executive Phantom Stock Bonus Plan; and
WHEREAS, the Board of Directors of the Company has determined that it
is in the best interests of the Company to enter into this Agreement in order to
assure continuity of the Bank's management through encouraging the long-term
retention of the Executive; and
WHEREAS, the parties desire by this writing to set forth the Company's
commitment to guarantee the Bank's obligations under the Bank Agreement.
NOW, THEREFORE, it is AGREED as follows:
1. The Company shall be jointly and severally liable with the Bank for
its obligations under the Bank Agreement.
2. This Agreement shall have a term that coincides with the term of the
Bank Agreement (including any and all extensions thereunder), shall be binding
on any successors to the interest of the parties, shall be amended only through
a written instrument executed by both parties, and shall be governed by the laws
of the State of Ohio.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first written above.
MAHONING NATIONAL BANCORP, INC.
Witnessed by:
/s/ Norman E. Benden, Jr By /s/ Daniel B. Roth
- ----------------------------- ---------------------------------
Secretary Its duly authorized Director
Witnessed by:
/s/ Kathleen A. Rish /s/ J. David Sabine
- ----------------------------- ---------------------------------
J. David Sabine
<PAGE> 3
EXECUTIVE PHANTOM STOCK BONUS PLAN
AGREEMENT made this 19th day of January, 1999 (the "Effective Date"),
between The Mahoning National Bank of Youngstown (hereinafter referred to as the
"Bank"), and Mr. J. David Sabine (hereinafter referred to as "Executive").
In consideration of the mutual covenants, terms, conditions, and
agreements herein contained the parties hereby agree to enter into this
Executive Phantom Stock Bonus Plan (hereinafter sometimes referred to as the
"Plan"), as follows:
ARTICLE I
PURPOSES
The purposes of this Plan are: (a) to enable the Bank to retain the
Executive in its employ; and (b) to reward the Executive for the time and effort
he expends in his job and for the success achieved.
ARTICLE II
DEFINITIONS
The terms used in this Plan shall have the following meanings:
(a) "Aggregate Phantom Stock Account Value" shall mean the sum of the
Phantom Stock Account Value plus all distributions made to the
Executive pursuant to Article VII, Section (c), prior to the date said
Executive terminates his employment with the Bank.
(b) "Change in Control" shall mean:
(i) the acquisition of ownership, holding or power to vote more than
30% of the Bank's or the Company's voting stock; or
(ii) the acquisition of the ability to control the election of a
majority of the Bank's or the Company's directors; or
(iii) the acquisition of a controlling influence over the management or
policies of the Bank or the Company by any person or by persons acting
as a "group" (within the meaning of Section 13(d) of the Securities
Exchange Act of 1934); or
(iv) during any period of two consecutive years, individuals (the
"Continuing Directors") who at the beginning of such period constitute
the Board of Directors of the Bank or the Company (the "Existing
Board") cease for any reason to constitute at least two-thirds
<PAGE> 4
thereof, provided that any individual whose election or nomination for
election as a member of the Existing Board was approved by a vote of at
least two-thirds of the Continuing Directors then in office shall be
considered a Continuing Director.
Notwithstanding the foregoing, in the case of (i), (ii) and (iii)
hereof, ownership or control of the Bank by the Company itself shall
not constitute a Change in Control. For purposes of this paragraph
only, the term "person" refers to an individual or a corporation,
partnership, trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization or any other form of entity
not specifically listed herein.
Notwithstanding the foregoing, no trust department or other designated
fiduciary or other trustee of such trust department of the Bank or a
subsidiary of the Bank, or other similar fiduciary capacity of the Bank
with direct voting control of the stock shall be included or
considered. Further, no profit-sharing, employee stock ownership,
employee stock purchase and savings, employee pension, or other
employee benefit plan of the Bank or any of its subsidiaries, and no
trustee of any such plan in its capacity as such trustee, shall be
included or considered.
(c) "Change-in-Control Account Value" shall equal the sum of (i) the Net
Vested Account Value reasonably estimated as of the closing date of the
Change in Control, and (ii) the present value, which shall in no event
be less than zero, of the difference between (a) and (b) hereof,
assuming a discount at the current long-term applicable federal rate,
compounded monthly, for a period of 15 years.
(a) The future value determined by assuming that the Net
Vested Account Value determined in accordance with clause (i)
above appreciates for 15 years at a rate equal to 8%.
(b) The future value determined by assuming that the Net
Vested Account Value determined in accordance with clause (i)
above appreciates for 15 years at a rate equal to the current
long-term applicable federal rate (compounded monthly).
(d) "Committee" means the members of the Executive Committee of the Board
of Directors of the Bank who are not participants in this Plan.
(e) "Common Stock" and/or "Shares" shall mean shares of common stock of
Mahoning National Bancorp, Inc.
(f) "Election Form" shall mean the form attached hereto as Exhibit "A-1".
(g) "Holding Company" means Mahoning National Bancorp, Inc., which owns all
of the issued and outstanding shares of Bank.
(h) "Net Vested Account Value" shall mean the Vested Account Value minus
the aggregate of all distributions to the Participant pursuant to
Article VII, Section (c).
<PAGE> 5
(i) "Permanent Disability" shall mean a situation in which the Executive is
permanently physically or mentally unable to perform his customary
and/or required duties at the Bank. The determination as to whether or
not an Executive is permanently disabled shall be made by the
Committee, and such determination shall be conclusive. Provided,
however, if the Executive is disabled for purposes of the Bank's
disability insurance plan, he shall be conclusively determined to be
disabled under this Plan.
(j) "Phantom Stock Account Value" means the number of Phantom Shares
credited to a Participant's account multiplied by the average fair
market value, over the 10 business days preceding the date of any
valuation, of the Common Stock of Mahoning National Bancorp, Inc.
Notwithstanding the foregoing, in the event of the sale or merger of
the Holding Company, the sale or merger price of the Common Stock shall
determine the Executive's Phantom Stock Account Value.
(k) "Retirement" means a severance from the employment of the Bank under
the Bank's qualified benefit plan as constituted at present or as may
be amended hereafter.
(l) "Salary" and/or "Pay" shall mean the Executive's annual base
compensation, but does not include other compensation, including, but
not limited to hospitalization, pension benefits, etc.
(m) "Termination Date" means the date of Executive's severance from
employment with the Bank by reason of death, disability, retirement,
resignation, or otherwise.
(n) "Vested Account Value" shall equal the Aggregate Phantom Stock Account
Value multiplied by the applicable Vesting Percentage set forth in
Schedule A attached hereto.
(o) "Vesting Percentage" shall mean that percentage listed on Schedule A,
which is attached hereto, which corresponds with the age of the
Executive, at any given time. However, advances and or changes in the
vesting schedule with respect to a change in the age of the Executive
shall be made only on December 31 of each calendar year during which
Executive attained the stated age.
ARTICLE III
ADMINISTRATION
(a) The complete and sole administration of this Plan is the responsibility
of those members of the Committee who are not Participants. No member
of the Committee shall be liable for any act done or determination made
in good faith.
(b) The construction and interpretation by the Committee of any provisions
of this Plan shall be final and conclusive. The Committee shall
determine, from time to time, subject to the provisions of this Plan,
the Executives who shall participate in the Plan (sometimes hereinafter
called "Participants").
<PAGE> 6
(c) The Committee may, at its discretion, delegate its duties to the
outside auditors of the Bank, but may not delegate its authority to
apply or interpret the provisions of this Plan or to make
determinations specified in Section (b) of this Article III.
ARTICLE IV
ESTABLISHMENT OF PHANTOM STOCK ACCOUNT
The Bank shall set up an appropriate record (hereinafter called the
"Phantom Stock Account") in the name of each Executive under the Plan, and shall
record all activities of this agreement in the respective Phantom Stock Accounts
of each Executive.
ARTICLE V
CREDITS TO ACCOUNTS OF EXECUTIVES
(a) As of December 31st of each year that the Executive is a full-time
employee of the Bank, the Bank shall credit a number of Phantom Shares
of the Holding Company to the account of each Executive. The number of
Phantom Shares to be credited each year shall be determined by dividing
the Bank's contribution by the fair market value of the Holding
Company's Common Stock as of the date of crediting (December 31). The
contribution by the Bank each year shall be a percentage of the
Executive's salary as determined by the return on equity of the Bank
for the year pursuant to a schedule to be established by the Committee
no later than the close of the first quarter of that year.
The ultimate computation of the number of Phantom Shares to be credited
each year will be determined by interpolation for performance between
the three levels established (i.e., threshold, target, and
distinguished), and return on equity will be calculated after projected
expense attributable to the incentive pay out. Determination of the
number of Phantom Shares shall be solely by the Committee and shall be
final and binding on all parties. Provided, however, if the ROE is
below the threshold for the year, then no crediting based on a
percentage of pay for the year shall be made.
(b) So long as this Plan remains in effect, the Bank shall credit each
Participant's account in the special ledger throughout the term of his
employment with the Bank. Phantom Shares equivalent to dividends
payable in cash or property paid from time to time on issued and
outstanding shares of Common Stock, so that the amount of each such
credit will be equivalent to dividends which the Participant would have
received had he been the owner of the number of shares of Common Stock
equal to the number of Phantom Shares in his account. No such credit
shall be made with respect to any dividend paid after a Participant's
termination of employment or after any date of termination of this
Plan, even though the record date is prior thereto.
(c) In the event of any stock dividend on the Common Stock or any split-up
or combination of shares of the Common Stock, appropriate adjustments
shall be made by the Committee
<PAGE> 7
in the aggregate number of Phantom Shares in the account of the
Participant. However, the Committee shall not be required to establish
any fractional Phantom Shares.
(d) On or before January 31st of each year, the Bank shall provide to each
Executive a detail of his Phantom Share Account as of December 31 of
the previous year. This detail shall include the number of Phantom
Shares in the Executive's account, and the Net Vested Account Value.
ARTICLE VI
VESTING
So long as the Executive remains an employee of the Bank, he shall
continue to advance in the vesting schedule attached as Schedule A. Upon the
Executive's termination of employment with the Bank, he shall be permanently
vested according to the percentage given on Schedule A on the same line as his
age on the date of his termination of employment. Provided, however, if the
Executive, while in the employ of the Bank, dies or becomes permanently
disabled, he shall become permanently 100% vested. Moreover, if a Change in
Control shall occur while the Executive remains in the employ of the Bank, the
Executive shall also become permanently 100% vested.
ARTICLE VII
PAYMENTS OF BENEFITS
(a) Upon termination of any Participant's employment with the Bank, there
shall be paid to him, or in the event of his death to his beneficiary
or beneficiaries designated under Section (b) of this Article VII, an
amount equal to the Net Vested Account Value of such Participant,
determined in accordance with the valuation formula set forth in
Article II, Section (j) as of the date of termination of employment of
such Participant. Such amounts will be reduced by any amounts required
by law to be withheld by the Bank. Such amounts with interest at the
rate of eight percent (8%) per annum shall be distributed in the manner
elected by the Executive on an Election Form accepted by the Bank. The
Executive may elect (1) to begin receiving distributions from his
account on either the first day of the second month after termination
of service with the Bank or the first day of second month of the
calendar year immediately after termination of service with the Bank
and (2) to receive his benefits in either a lump sum or in
substantially equal monthly installments over a period up to 15 years.
In order to be effective with respect to the timing of distributions,
the Executive's Election Form must be submitted to the Bank either more
than one year before the date on which the Executive's service with the
Bank terminates for any reason or within 30 days of the Plan's
Effective Date (or more than 90 days before a Change in Control,
provided the Executive files a duly executed "Special Election of
Payment Method after a Change in Control" in the form attached hereto
as Schedule "B"). In the absence of a validly completed Election Form,
the Executive's account shall be paid in 60 substantially
<PAGE> 8
equal monthly payments beginning on the first day of the second month
after termination of service with the Bank.
(b) Each person shall file an Election Form with the Bank's Employee
Benefits Plan Administrator designating one or more beneficiaries to
whom payments otherwise due the Executive shall be made in the event of
his death while in the employ of the Bank or after termination
therefrom. The beneficiary or beneficiaries so designated shall be one
or more persons or entities, including a trust or estate, other than
his creditors, or the creditors of his estate, or an entity in which
any of the foregoing may have an interest. The Executive shall have the
right to change the beneficiary or beneficiaries from time to time
whether before or after termination of employment; provided, however,
that any change shall not become effective until an Election Form is
received by the Employee Benefits Plan Administrator.
If the Executive dies before receiving all amounts payable of his Net
Vested Account Value, then the remaining balance of the Executive's
account shall be distributed in a lump sum to the Executive's
designated beneficiary (or estate, in the absence of a validly named or
living beneficiary) as soon as administratively practicable following
the Executive's death; provided that the Executive may direct on an
Election Form that any death benefits payable pursuant to this
Agreement shall instead be distributed over a distribution period that
effectuates the monthly installment payments selected by the Executive
(with payments made as though the Executive survived to collect all
payments, and terminated service on the date of his death if payments
had not previously begun).
(c) At the time of the college education of a child of an Executive, an
amount of money equal to the actual expenses associated with such
child's education may, upon application of the Executive, be disbursed
for such purposes by the Committee, in the Committee's sole discretion,
from the Net Vested Account Value of the Executive's Phantom Stock
Account.
ARTICLE VIII
RESTRICTIONS UPON FUNDING
(a) The Bank shall have no obligation to set aside, earmark or entrust any
fund or money with which to pay its obligations under this Agreement.
The Executive, his beneficiaries or any successor in interest to him
shall be and remain simply a general creditor of the Bank in the same
manner as any other creditor having a general claim for matured and
unpaid compensation.
(b) Subject to subsection (d) hereof, the Bank reserves the absolute right
in its sole discretion to either fund the obligations undertaken by
this Agreement or to refrain from funding the same and to determine the
extent, nature, and method of such funding. Should the Bank elect to
fund this Agreement, in whole or in part, through the purchase of life
insurance, mutual funds, disability policies or annuities, the Bank
reserves the absolute right, in its sole discretion, to terminate such
funding at any time, in whole or in part. At no time
<PAGE> 9
shall Executive be deemed to have any lien nor right, title or interest
in or to any specific funding investment or to any assets of the Bank.
(c) If Bank elects to invest in a life insurance, disability or annuity
policy upon the life of Executive, then Executive shall assist the Bank
by freely submitting to a physical exam and supplying such additional
information necessary to obtain such insurance or annuities.
(d) Not later than ten business days before the closing date of a Change in
Control, the Bank shall --
(i) deposit in a grantor trust (the "Trust") that is designed in
accordance with Revenue Procedure 92-64 and has a trustee independent
of the Bank and the Company an amount equal to the Change-in-Control
Account Value, unless the Executive has previously provided a written
release of any claims under this Agreement, and
(ii) provide the trustee of the Trust with a written direction to hold
said amount and any investment return thereon in a segregated account
for the benefit of the Executive, and to follow the payment schedule to
be provided by the Executive, based on this Agreement and the
Executive's Election Form, as to the payment of amounts from the Trust.
Upon the Trust's final payment of all amounts due under this Section
(d) of Article VIII, the trustee of the Trust shall pay to the Bank the
entire balance remaining in the segregated account maintained for the
benefit of the Executive. The Executive shall thereafter have no
further interest in the Trust.
ARTICLE IX
MISCELLANEOUS
(a) Neither Executive, his widow nor any other beneficiary under this
Agreement shall have any power or right to transfer, assign,
anticipate, hypothecate, mortgage, commute, modify or otherwise
encumber in advance any of the benefits payable hereunder, nor shall
any of said benefits be subject to seizure for the payment of any
debts, judgments, alimony or separate maintenance owed by the Executive
or his beneficiary, nor be transferable by operation of law in the
event of bankruptcy, insolvency or otherwise. In the event Executive or
any beneficiary attempts assignment, commutation, hypothecation,
transfer or disposal of the benefits hereunder, the Bank's liabilities
shall forthwith cease and terminate. However, in such event, the
Committee may, in its sole discretion, from time to time, make payments
of amounts which would otherwise be due the Executive hereunder, to
such Executive.
(b) The Bank expressly agrees that it shall not merge or consolidate into
or with another Bank or sell substantially all of its assets to another
corporation, firm or person until such corporation, firm or person
expressly agrees, in writing, to assume and discharge the duties and
obligations of the Bank under this Agreement. This Agreement shall be
<PAGE> 10
binding upon the parties hereto, their successors, beneficiaries, heirs
and personal representatives.
(c) It is agreed by and between the parties hereto that, during the
lifetime of the Executive, this Agreement may be amended or revoked at
any time or times, in whole or in part, by the mutual written assent of
the Executive and the Bank.
(d) Whenever in this Agreement words are used in the masculine or neuter
gender, they shall be read and construed as in the masculine, feminine
or neuter gender, whenever they should so apply.
(e) Nothing contained in this Agreement shall affect the right of the
Executive to participate in or be covered by any qualified or
non-qualified pension, profit sharing, group, bonus or other
supplemental compensation or fringe benefit plan constituting a part of
the Bank's existing or future compensation structure.
(f) Headings and Subheadings in this Agreement are inserted for reference
and convenience only and shall not be deemed a part of this Agreement.
(g) The validity and interpretation of this Agreement shall be governed by
the laws of the State of Ohio.
ARTICLE X
ERISA PROVISIONS
(a) The "Named Fiduciary and Plan Administrator" of this Plan shall be the
Bank's Employee Benefits Plan Administrator until his resignation or
removal by the Committee. As named Fiduciary and Administrator, the
Employee Benefits Plan Administrator shall be responsible for the
management, control and administration of the Executive Phantom Stock
Bonus Plan as established herein. He may delegate to others certain
aspects of the management and operation responsibilities of the Plan
including the employment of advisors and the delegation of ministerial
duties to qualified individuals.
(b) In the event that benefits under this Plan Agreement are not paid to
the Executive (or to his beneficiary in the case of the Executive's
death) and such claimants feel they are entitled to receive such
benefits, then a written claim must be made to the Named Fiduciary and
Plan Administrator named above within sixty (60) days from the date
payments are refused. The Named Fiduciary and Plan Administrator and
the Bank shall review the written claim and if the claim is denied, in
whole or in part, they shall provide in writing within ninety (90) days
of receipt of such claim their specific reasons for such denial,
reference to the provisions of this Agreement upon which the denial is
based and any additional material or information necessary to perfect
the claim. Such written notice shall further indicate the additional
steps to be taken by claimants for a further review of the claim denial
if the Named Fiduciary and Plan Administrator fails to take any actions
within the aforesaid ninety-day period.
<PAGE> 11
If claimants desire a second review, they shall notify the Named
Fiduciary and Plan Administrator in writing within sixty (60) days of
the first claim denial. Claimants may review the Plan Agreement or any
documents relating thereto and submit any written issues and comments
they may feel appropriate. In its sole discretion, the Named Fiduciary
and Plan Administrator shall then review the second claim and provide a
written decision within sixty (60) days of receipt of such claim. This
decision shall likewise state the specific reasons for the decision,
and shall include reference to specific provisions of the Plan
Agreement upon which the decision is based.
If claimants continue to dispute the benefit denial based upon
completed performance of the Agreement or the meaning and effect of the
terms and conditions thereof, then claimants may submit the dispute to
a Board of Arbitration for final arbitration. Said Board shall consist
of one member selected by the claimant, one member selected by the Bank
and the third member selected by the first two members. The Board shall
operate under any generally recognized set of arbitration rules. The
parties hereto agree that they and their heirs, personal
representatives, successors and assigns shall be bound by the decision
of such Board with respect to any controversy properly submitted to it
for determination.
ARTICLE XI
REIMBURSEMENT OF EXECUTIVE FOR ENFORCEMENT PROCEEDINGS
In the event that any dispute arises between the Executive and the Bank
as to the terms or interpretation of this Agreement, whether instituted by
formal legal proceedings or otherwise, including any action that the Executive
takes to defend against any action taken by the Bank or the Company, the Bank
shall reimburse the Executive for all costs and expenses, including reasonable
attorneys' fees, arising from such dispute, proceedings or actions, provided
that the Executive obtains either a written settlement or a final judgement by a
court of competent jurisdiction substantially in his favor. Such reimbursement
shall be paid within ten days of Executive's furnishing to the Bank written
evidence, which may be in the form, among other things, of a cancelled check or
receipt, of any costs or expenses incurred by the Executive.
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto acknowledge that each has
carefully read this Agreement and executed the originals thereof on the day and
year first hereinabove written.
THE MAHONING NATIONAL BANK
OF YOUNGSTOWN
WITNESS:
/s/ Norman E. Benden, Jr. By /s/ Daniel B. Roth
- -------------------------------- ------------------------------------
Its duly authorized Director
WITNESS:
/s/ Kathleen A. Rish /s/ J. David Sabine
- -------------------------------- ------------------------------------
J. David Sabine
<PAGE> 13
SCHEDULE "A"
THE MAHONING NATIONAL BANK OF YOUNGSTOWN
EXECUTIVE PHANTOM STOCK BONUS PLAN
-------------------------------------
VESTING SCHEDULE FOR J. DAVID SABINE
-------------------------------------
<TABLE>
<CAPTION>
------------------------------------ -----------------------------------------------------
DATE ON WHICH PHANTOM SHARES VESTING THAT OCCURS, UNLESS MR. SABINE
WERE CREDITED TERMINATES EMPLOYMENT BEFORE A
PARTICULAR VESTING DATE
------------------------------------ -----------------------------------------------------
<S> <C>
On or After January 1, 1999 100% on the third annual anniversary date of the
date on which the award is made; provided that
vesting shall accelerate to 100% on the date of Mr.
Sabine's 65th birthday, and all awards made after
that date shall become 100% vested on December 31st
of the year in which the award is made.
------------------------------------ -----------------------------------------------------
</TABLE>
<PAGE> 14
EXHIBIT "A-1"
THE MAHONING NATIONAL BANK OF YOUNGSTOWN
EXECUTIVE PHANTOM STOCK BONUS PLAN
-------------------------------
ELECTION FORM
-------------------------------
AGREEMENT, made this ____ day of ________, 19__, by and between the
undersigned executive (the "Executive") and The Mahoning National Bank of
Youngstown (the "Bank") with respect to distribution of the benefits pursuant to
The Mahoning National Bank of Youngstown Executive Phantom Stock Bonus Plan (the
"Plan") entered into by the parties on January 19, 1999.
NOW THEREFORE, it is mutually agreed as follows:
1. FORM OF PAYMENT. The Executive elects to have his account
distributed as follows:
____ in one lump sum payment.
____ in substantially equal monthly payments over a period of _____
years (no more than 15).
The Executive must make this election either at least one year before
terminating his service with the Bank or by February 1, 1999 in order for it to
be valid and supersede a prior election.
2. The Executive elects to have distributions from his account begin:
____ on the first day of the second month immediately following the
date in which the Executive ceases service with the Bank.
____ on the first day of the second month of the calendar year
immediately following the year in which the Executive ceases
service with the Bank.
3. In the event of the Executive's death, his account shall be
distributed:
____ in one lump sum payment.
____ in accordance with the payment schedule selected in paragraph
1 hereof (with payments made as though the Executive survived
to collect all benefits, and as though the Executive
terminated service on the date of his death, if payments had
not already begun).
<PAGE> 15
Election Form
Page 2
4. PRIMARY BENEFICIARY. The Executive hereby designates the person(s)
named below to be his primary beneficiary and to receive any distributions that
become payable, after the Executive's death, under the Plan:
<TABLE>
<CAPTION>
============================== ===================================== ===========================
Name of Mailing Address Percentage of
Primary Beneficiary Death Benefit
------------------------------ ------------------------------------- ---------------------------
<S> <C> <C>
%
------------------------------ ------------------------------------- ---------------------------
%
============================== ===================================== ===========================
</TABLE>
5. Contingent Beneficiary. In the event that the primary beneficiary or
beneficiaries named above are not living at the time any distributions become
payable to them under the Plan, the Executive hereby designates the following
person(s) to be his contingent beneficiary:
<TABLE>
<CAPTION>
============================== ===================================== ===========================
Name of Mailing Address Percentage of
Contingent Beneficiary Death Benefit
------------------------------ ------------------------------------- ---------------------------
<S> <C> <C>
%
------------------------------ ------------------------------------- ---------------------------
%
============================== ===================================== ===========================
</TABLE>
6. EFFECT OF ELECTION. The elections made in paragraph 1 hereof shall
become IRREVOCABLE one year prior to the Executive's termination of service. The
Executive may, by submitting an effective superseding Election Form at any time
and from time to time, prospectively change the beneficiary designation and the
manner of payment to a beneficiary. Such elections shall, however, become
irrevocable upon the Executive's death.
7. MUTUAL COMMITMENTS. The Bank agrees to make payment of all amounts
due the Executive in accordance with the terms of the Plan regarding the
elections made by the Executive herein. The Executive agrees to be bound by the
terms of the Plan, as in effect on the date hereof or properly amended
hereafter.
<PAGE> 16
Election Form
Page 3
IN WITNESS WHEREOF, the parties hereto acknowledge that each has
carefully read this Agreement and executed the originals thereof on the day and
year first hereinabove written.
WITNESS: THE MAHONING NATIONAL BANK
OF YOUNGSTOWN
By
- ------------------------------ ---------------------------------
Its duly authorized Director
WITNESS:
- ------------------------------ ---------------------------------
Executive
<PAGE> 17
SCHEDULE "B"
THE MAHONING NATIONAL BANK OF YOUNGSTOWN
EXECUTIVE PHANTOM STOCK BONUS PLAN
-------------------------------
Special Election of Payment Method
after a Change in Control
-------------------------------
AGREEMENT, made this ____ day of ________, 199__, by and between
______________ (the "Participant") and The Mahoning National Bank of Youngstown
(the "Bank"), with respect to any distribution of the Participant's entire
account ("Account"), under the Bank's Executive Phantom Stock Bonus Plan (the
"Plan"), that occurs on or after a "Change in Control" (within the meaning of
the Plan).
NOW THEREFORE, it is mutually agreed as follows:
1. FORM OF PAYMENT. The Participant's Account shall be distributed in
cash that is paid --
[ ] in one lump sum.
[ ] in substantially equal payments over a period of _____ years
(no more than 15), with interest accruing according to the
Plan, on the unpaid present value of his Account.
2. TIME OF PAYMENT. Distribution of the Participant's Account shall
begin as soon as practicable after --
[ ] a Change in Control closes.
[ ] the January 1st after a Change in Control closes.
[ ] the _________ annual anniversary of the January 1st after a
Change in Control closes.
3. FREQUENCY OF PAYMENT. The Participant shall receive installment
payments, if elected as a form of payment, on a ______ monthly, ______
quarterly, _____ semi-annual, or _____ annual basis.
<PAGE> 18
Executive Phantom Stock Bonus Plan
Special Election Form
for Change in Control
Page 2
4. FORM OF PAYMENT TO BENEFICIARY. In the event of the Participant's
death, any unpaid balance credited to his Account shall be distributed to his
designated beneficiary --
[ ] in one lump sum payment, determined in the manner described in
paragraph 1 hereof.
[ ] in accordance with the payment schedule selected in paragraphs 1,
2, and 3 hereof (with payments made as though the Participant
survived to collect all benefits, and as though the Participant
terminated service on the date of his death, if payments had not
already begun).
5. DESIGNATION OF BENEFICIARY. In the event of the Participant's death
before he has collected all of the benefits payable under the Plan, the
Participant hereby directs that any amounts unpaid under the Plan be distributed
to the beneficiary or beneficiaries designated under subparagraphs a and b of
this paragraph 5 in the manner elected pursuant to paragraph 4 above:
a. PRIMARY BENEFICIARY. The Participant hereby designates the
person(s) named below to be his primary beneficiary and to receive the balance
of any unpaid benefits under the Plan:
<TABLE>
<CAPTION>
============================== ===================================== ===========================
Name of Percentage of
Primary Beneficiary Mailing Address Death Benefit
------------------------------ ------------------------------------- ----------------------------
<S> <C> <C>
%
------------------------------ ------------------------------------- ----------------------------
%
============================== ===================================== ===========================
</TABLE>
b. CONTINGENT BENEFICIARY. In the event that the primary beneficiary or
beneficiaries named above are not living at the time of the Participant's death,
the Participant hereby designates the following person(s) to be his contingent
beneficiary for purposes of the Plan:
<TABLE>
<CAPTION>
=============================== ===================================== ==========================
Name of Percentage of
Contingent Beneficiary Mailing Address Death Benefit
------------------------------ ------------------------------------- ----------------------------
<S> <C> <C>
%
------------------------------ ------------------------------------- ----------------------------
%
=============================== ===================================== ==========================
</TABLE>
6. EFFECT OF ELECTION. The elections made in paragraphs 1, 2, and 3
hereof shall become irrevocable on the date 90 days before the closing of a
Change in Control. The Participant may at any time and from time to time change
his designation of, and manner of payment to, a beneficiary. Such election
shall, however, become irrevocable upon the Participant's death.
<PAGE> 19
Executive Phantom Stock Bonus Plan
Special Election Form
for Change in Control
Page 3
7. MUTUAL COMMITMENTS. The Bank agrees to make payment of all amounts
due the Participant in accordance with the terms of the Plan and the elections
made by the Participant herein. The Participant agrees to be bound by the terms
of the Plan, as in effect on the date hereof and as properly amended hereafter.
The parties recognize and agree that this Agreement supersedes and nullifies any
prior distribution election to the extent it is inconsistent herewith.
IN WITNESS WHEREOF, the parties hereto acknowledge that each has
carefully read this Agreement and executed the originals thereof on the day and
year first above-written.
PARTICIPANT
Witnessed by:
- ------------------------- ----------------------------------
THE MAHONING NATIONAL BANK OF
YOUNGSTOWN
Witnessed by:
By
- ------------------------- Its
-----------------------------
-----------------------------
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MAHONING
NATIONAL BANCORP, INC., CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AT MARCH
31, 1999 AND THE CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED
MARCH 31, 1999 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 24,793
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 260,843
<INVESTMENTS-CARRYING> 8,505
<INVESTMENTS-MARKET> 8,616
<LOANS> 497,313
<ALLOWANCE> 7,997
<TOTAL-ASSETS> 808,691
<DEPOSITS> 544,636
<SHORT-TERM> 143,524
<LIABILITIES-OTHER> 6,479
<LONG-TERM> 16,943
0
0
<COMMON> 6,300
<OTHER-SE> 90,809
<TOTAL-LIABILITIES-AND-EQUITY> 97,109
<INTEREST-LOAN> 10,564
<INTEREST-INVEST> 3,785
<INTEREST-OTHER> 54
<INTEREST-TOTAL> 14,403
<INTEREST-DEPOSIT> 3,487
<INTEREST-EXPENSE> 5,163
<INTEREST-INCOME-NET> 9,240
<LOAN-LOSSES> 675
<SECURITIES-GAINS> 5
<EXPENSE-OTHER> 5,250
<INCOME-PRETAX> 5,539
<INCOME-PRE-EXTRAORDINARY> 3,724
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,724
<EPS-PRIMARY> 0.59
<EPS-DILUTED> 0.59
<YIELD-ACTUAL> 7.78
<LOANS-NON> 1,531
<LOANS-PAST> 851
<LOANS-TROUBLED> 49
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 7,789
<CHARGE-OFFS> 656
<RECOVERIES> 189
<ALLOWANCE-CLOSE> 7,997
<ALLOWANCE-DOMESTIC> 7,997
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,074
</TABLE>
