Edgar Filing: SECOND BANCORP INC

Second Bancorp Inc. 425


		Second Bancorp, Inc.
[SECOND BANCORP, INC. LOGO]		108 Main Avenue, S.W.
		P.O. Box 1311
		Warren, Ohio 44482-1311

FOR IMMEDIATE RELEASE
		Christopher Stanitz
		Executive Vice President, General Counsel
		and Secretary
		330.841.0234
		Fax: 330.841.0489
		e-mail: cstanitz@secondnationalbank.com
		www.secondbancorp.com

Filed by Second Bancorp Incorporated
pursuant to Rule 425 under the Securities Act of 1933,
as amended, and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934, as amended

Filer: Second Bancorp Incorporated
Subject Company: Second Bancorp Incorporated
Commission File Number: 0-15624

SECOND BANCORP REPORTS EARNINGS FOR
FOURTH QUARTER AND YEAR

Warren, Ohio, January 22, 2004–SECOND BANCORP INCORPORATED (Nasdaq “SECD”, “SECDP”) reported net income for the fourth quarter 2003 of $4,149,000 or $.43 per diluted share compared to $3,428,000 or $.34 per diluted share for the same period last year. For the full year 2003, net income was substantially higher than the prior year’s results finishing at $23,155,000 or $2.41 per diluted share compared to $18,000,000 or $1.79 a year ago, all as computed on a GAAP Basis. For comparison purposes, reported 2003 earnings include a one time $3.65 million (or $.38 per diluted share) after-tax gain on the sale of two banking centers completed during the first quarter. In addition, year-ago earnings for the fourth quarter were restrained by non-operating merger costs and expenses associated with the implementation of subsidiary Second National Bank’s branch reconfiguration strategy.

Returns on average assets (ROA) for the quarter and the year were .79% and 1.18% respectively (compared to .75% and 1.03% a year ago) and returns on average equity (ROE) were 12.42% for the quarter and 17.06% for the full year (compared to 9.99% and 13.42% respectively in 2002). Persistently low interest rates continued to compress the Company’s net interest margin which was 3.00% for the just completed fourth quarter compared to 3.38% during the same period last year. For the year, net interest margin was 3.14% compared to 3.56% for 2002. The Company’s efficiency ratio for the quarter was 69.12% and 59.63% for the year.

Second Bancorp President and Chief Executive Officer R. L. (Rick) Blossom stated “Including the first quarter branch sale, 2003 was the most profitable year in Second Bancorp’s history reflecting the hard work of our highly skilled and dedicated staff of more than 600 associates. Though fourth quarter results were slowed by the combination of a narrowing net interest margin and reduced earnings from mortgage lending as refinancing activity abated, our business footings are solid and we look forward to becoming a significant contributor to our merger partner, Sky Financial Group.”

Second Bancorp announced January 8, 2004 that it has entered with Sky Financial Group, Inc. into a definitive merger agreement under which Sky Financial will acquire all of Second Bancorp’s outstanding shares in a stock-for-stock transaction. Under the agreement, Second Bancorp’s common shareholders will receive 1.26 shares of Sky Financial stock for each of their shares in a $321 million or $33.05 per Second Bancorp common share deal valued as of the date

of the announcement. The transaction, subject to Second Bancorp shareholder and regulatory approval, is expected to be completed at the end of the second quarter of 2004.

The Company also reported that its Board of Directors declared a nineteen cent ($.19) per share common dividend payable January 30, 2004 to shareholders of record on January 15. That dividend is unchanged from the previous quarter and is 5.6% higher than the dividend paid during the same quarter last year.

This announcement contains forward-looking statements that involve risk and uncertainties, including changes in general economic and financial market conditions and the Company’s ability to execute its business plans. Although management believes the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially.

Shareholders are urged to read the joint proxy statement/prospectus regarding the referenced proposed transaction to be filed by Sky Financial Group, Inc. and Second Bancorp Incorporated when it becomes available, because it will contain important information. Shareholders will be able to obtain a free copy of the joint proxy statement/prospectus, as well as other filings containing information about Sky Financial and Second Bancorp, without charge, at the SEC’s Internet site (http://www.sec.gov). Copies of the joint proxy statement/prospectus and the filings with the SEC that will be incorporated by reference in the joint proxy statement/ prospectus also can be obtained, without charge, by directing a request to Sky Financial Group, Inc., 221 South Church Street, Bowling Green, Ohio 43402, Attention: Shareholder Relations (800-576-5007), or to Second Bancorp Incorporated, 108 Main Avenue, S.W., Warren, Ohio 44481, Attention: Executive Vice President and Secretary (330-841-0234).

Second Bancorp and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of Second Bancorp in connection with the proposed merger transaction. Information about the directors and executive officers of Second Bancorp is available in its proxy statement filed with the SEC on March 5, 2003. Additional information regarding the participants in the proxy solicitation and a description of their direct and indirect interests will be contained in the joint proxy statement/prospectus and other relevant materials to be filed with the SEC when they become available. This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities.

Second Bancorp is a $2.1 billion financial holding company providing a full range of commercial and consumer banking, wealth management, insurance and investment products and services to communities in a nine county area of Northeastern Ohio through subsidiaries Second National Bank and Stouffer-Herzog Insurance Agency, Inc.

Additional information about Second Bancorp and information about products and services offered by Second National Bank can be found on the Web at www.secondnationalbank.com.

CONTACT: Christopher Stanitz, Executive Vice President and Secretary, at 330.841.0234 (phone), 330.841.0489 (fax) or cstanitz@secondnationalbank.com.

# # # # #

Second Bancorp Incorporated and Subsidiaries
Financial Highlights
Quarterly Data
(Dollars in thousands, except per share data)


	Dec. 2003			Sept. 2003			June 2003			March 2003			Dec. 2002

Earnings:
Net interest income	$	14,181		$	13,817		$	13,790		$	14,083		$	13,946
Provision for loan losses		1,486			1,096			2,855			2,173			2,350
Non-interest income		5,581			3,491			10,700			14,211			7,314
Security gains (losses)		967			3,566			0			51			(67	)
Trading account losses		0			0			0			0			0
Non-interest expense		13,998			13,076			14,016			13,673			14,575
Federal income taxes		1,096			1,795			2,181			3,838			840

Net income	$	4,149		$	4,907		$	5,438		$	8,661		$	3,428

Per share:
Basic earnings		0.44			0.52			0.57			0.90			0.35
Diluted earnings		0.43			0.51			0.57			0.89			0.34
Common dividends		0.19			0.19			0.19			0.19			0.18
Book value		14.47			14.34			14.81			14.36			13.91
Tangible book value		12.17			12.05			12.40			11.95			11.69
Market value		26.40			27.24			25.80			22.15			26.50
Weighted average shares outstanding:
Basic		9,471,371			9,474,925			9,484,646			9,620,401			9,835,995
Diluted		9,616,188			9,610,350			9,575,001			9,714,253			9,967,373
Period end balance sheet:
Assets	$	2,116,530		$	2,074,750		$	1,926,233		$	1,909,027		$	1,894,775
Securities		620,696			602,893			556,434			539,309			523,669
Total loans		1,349,820			1,301,618			1,199,630			1,215,481			1,167,791
Allowance for loan losses		18,874			18,372			18,030			17,756			17,595
Deposits		1,215,342			1,165,281			1,172,816			1,121,866			1,195,112
Total shareholders’ equity		137,016			135,799			140,215			136,369			136,334
Tier I capital		146,397			144,583			140,335			137,595			138,000
Tier I ratio		10.2	%		10.4	%		10.8	%		10.5	%		10.8	%
Total capital		164,396			161,946			156,613			154,010			153,925
Total capital ratio		11.4	%		11.7	%		12.0	%		11.7	%		12.1	%
Total risk-adjusted assets		1,439,030			1,388,065			1,300,512			1,311,849			1,272,335
Tier I leverage ratio		7.1	%		7.3	%		7.6	%		7.5	%		7.7	%
Average balance sheet:
Assets	$	2,092,553		$	2,004,789		$	1,908,978		$	1,869,524		$	1,825,714
Earning assets		1,957,682			1,871,145			1,789,611			1,750,900			1,712,604
Loans		1,317,153			1,245,980			1,197,300			1,177,617			1,171,162
Deposits		1,196,389			1,157,817			1,159,719			1,135,681			1,180,609
Shareholders’ equity		133,653			134,844			139,269			135,254			137,229
Key ratios: (%)
Return on average assets (ROA)		0.79			0.98			1.14			1.85			0.75
Return on average shareholders’ equity (ROE)		12.42			14.56			15.62			25.61			9.99
Net interest margin		3.00			3.06			3.19			3.33			3.38
Net overhead		1.72			2.05			0.74			(0.12	)		1.70
Efficiency ratio		69.12			73.49			56.10			47.48			66.94
Credit quality:
Non-accrual loans	$	13,348		$	12,735		$	12,238		$	12,709		$	13,123
Restructured loans		1,017			461			340			374			378
90 day past due and accruing		8,879			8,625			7,231			6,623			5,692

Non-performing loans		23,244			21,821			19,809			19,706			19,193
Other real estate owned		713			753			621			1,270			1,371

Non-performing assets	$	23,957		$	22,574		$	20,430		$	20,976		$	20,564


Charge-offs	$	1,111		$	918		$	2,721		$	2,213		$	2,558
Recoveries		126			165			139			201			360

Net charge-offs	$	985		$	753		$	2,582		$	2,012		$	2,198


Allowance for loan losses as a percent of period-end loans (%)		1.40			1.41			1.50			1.46			1.51
Net charge-offs (annualized) as a percent of average loans (%)		0.30			0.24			0.86			0.68			0.75
Non-performing loans as a percent of loans		1.72			1.68			1.65			1.62			1.64
Non-performing assets as a percent of assets		1.13			1.09			1.06			1.10			1.09

Second Bancorp Incorporated and Subsidiaries
Financial Highlights
Year-to-Date Data
(Dollars in thousands, except per share data)


	Dec. 2003			Sept. 2003			June 2003			March 2003			Dec. 2002

Earnings:
Net interest income	$	55,871		$	41,690		$	27,873		$	14,083		$	56,460
Provision for loan losses		7,610			6,124			5,028			2,173			6,159
Non-interest income		33,983			28,402			24,911			14,211			22,853
Security gains (losses)		4,584			3,617			51			51			592
Trading account losses		0			0			0			0			(20	)
Non-interest expense		54,763			40,765			27,689			13,673			49,496
Federal income taxes		8,910			7,814			6,019			3,838			6,230

Net income	$	23,155		$	19,006		$	14,099		$	8,661		$	18,000

Per share:
Basic earnings		2.43			1.99			1.48			0.90			1.82
Diluted earnings		2.41			1.97			1.46			0.89			1.79
Common dividends		0.76			0.57			0.38			0.19			0.72
Book value		14.47			14.34			14.81			14.36			13.97
Tangible book value		12.17			12.05			12.40			11.95			11.75
Market value		26.40			27.24			25.80			22.15			26.50
Weighted average shares outstanding:
Basic		9,512,324			9,526,125			9,552,149			9,620,401			9,905,832
Diluted		9,623,388			9,631,663			9,644,621			9,714,253			10,040,001
Period end balance sheet:
Assets	$	2,116,530		$	2,074,750		$	1,926,233		$	1,909,027		$	1,894,775
Securities		620,696			602,893			556,434			539,309			523,669
Total loans		1,349,820			1,301,618			1,199,630			1,215,481			1,167,791
Allowance for loan losses		18,874			18,372			18,030			17,756			17,595
Deposits		1,215,342			1,165,281			1,172,816			1,121,866			1,195,112
Total shareholders’ equity		137,016			135,799			140,215			136,369			136,334
Tier I capital		146,397			144,583			140,335			137,595			138,000
Tier I ratio		10.2	%		10.4	%		10.8	%		10.5	%		10.8	%
Total capital		164,396			161,946			156,613			154,010			153,925
Total capital ratio		11.4	%		11.7	%		12.0	%		11.7	%		12.1	%
Total risk-adjusted assets		1,439,030			1,388,065			1,300,512			1,311,849			1,272,335
Tier I leverage ratio		7.1	%		7.3	%		7.6	%		7.5	%		7.7	%
Average balance sheet:
Assets	$	1,969,670		$	1,928,259		$	1,889,360		$	1,869,524		$	1,754,156
Earning assets		1,842,980			1,804,326			1,770,363			1,750,900			1,642,907
Loans		1,234,926			1,207,216			1,187,513			1,177,617			1,121,777
Deposits		1,162,555			1,151,153			1,147,766			1,135,681			1,159,350
Shareholders’ equity		135,748			136,454			137,273			135,254			134,178
Key ratios: (%)
Return on average assets (ROA)		1.18			1.31			1.49			1.85			1.03
Return on average shareholders’ equity (ROE)		17.06			18.57			20.54			25.61			13.42
Net interest margin		3.14			3.19			3.26			3.33			3.56
Net overhead		1.13			0.91			0.31			(0.12	)		1.62
Efficiency ratio		59.63			56.95			51.48			47.48			60.81
Credit quality:
Non-accrual loans	$	13,348		$	12,735		$	12,238		$	12,709		$	13,123
Restructured loans		1,017			461			340			374			378
90 day past due and accruing		8,879			8,625			7,231			6,623			5,692

Non-performing loans		23,244			21,821			19,809			19,706			19,193
Other real estate owned		713			753			621			1,270			1,371

Non-performing assets	$	23,957		$	22,574		$	20,430		$	20,976		$	20,564


Charge-offs	$	6,963		$	5,852		$	4,934		$	2,213		$	6,584
Recoveries		631			505			340			201			1,325

Net charge-offs	$	6,332		$	5,347		$	4,594		$	2,012		$	5,259


Allowance for loan losses as a percent of period-end loans (%)		1.40			1.41			1.50			1.46			1.51
Net charge-offs (annualized) as a percent of average loans (%)		0.51			0.59			0.77			0.68			0.47
Non-performing loans as a percent of loans		1.72			1.68			1.65			1.62			1.64
Non-performing assets as a percent of assets		1.13			1.09			1.06			1.10			1.09

Second Bancorp Incorporated and Subsidiaries
Consolidated Statements of Income
Quarterly Data
(Dollars in thousands, except per share data)


	Dec. 2003		Sept. 2003			June 2003		March 2003		Dec. 2002

INTEREST INCOME

Loans (including fees):
Taxable	$	19,286	$	18,950		$	18,814	$	18,605	$	19,637
Exempt from federal income taxes		209		212			206		211		219
Securities:
Taxable		5,819		5,348			5,518		6,234		5,566
Exempt from federal income taxes		703		689			714		728		735
Federal funds sold and other temp. investments		27		30			136		123		154

Total interest income		26,044		25,229			25,388		25,901		26,311
INTEREST EXPENSE

Deposits		5,338		5,118			5,563		5,779		6,771
Federal funds purchased and securities sold under agreements to repurchase		682		613			596		581		700
Note Payable		47		50			54		63		28
Other borrowed funds		3		2			3		3		14
Federal Home Loan Bank advances		4,971		4,895			4,649		4,659		4,119
Debentures and capital securities		822		734			733		733		733

Total interest expense		11,863		11,412			11,598		11,818		12,365

Net interest income		14,181		13,817			13,790		14,083		13,946
Provision for loan losses		1,486		1,096			2,855		2,173		2,350

Net interest income after provision for loan losses		12,695		12,721			10,935		11,910		11,596
NON-INTEREST INCOME

Mortgage banking income		441		(1,157	)		6,550		4,358		2,658
Service charges on deposit accounts		1,628		1,549			1,555		1,527		1,587
Trust fees		757		631			563		609		637
Security gains (losses)		967		3,566			0		51		(67	)
Gain on sale of banking centers		0		0			0		5,619		0
Other operating income		2,755		2,468			2,032		2,098		2,432

Total non-interest income		6,548		7,057			10,700		14,262		7,247
NON-INTEREST EXPENSE

Salaries and employee benefits		7,636		6,701			7,642		7,604		7,217
Net occupancy		1,236		1,180			1,125		1,199		1,099
Equipment		909		1,045			1,059		1,039		742
Professional services		805		707			1,138		767		648
Assessment on deposits and other taxes		222		501			388		392		354
Amortization of intangible assets		124		113			112		118		144
Merger costs		0		0			0		0		10
Banking center reconfiguration		0		0			0		0		2,096
Other operating expenses		3,066		2,829			2,552		2,554		2,265

Total non-interest expense		13,998		13,076			14,016		13,673		14,575

Income before federal income taxes		5,245		6,702			7,619		12,499		4,268
Income tax expense		1,096		1,795			2,181		3,838		840

Net income	$	4,149	$	4,907		$	5,438	$	8,661	$	3,428


NET INCOME PER COMMON SHARE:
Basic	$	0.44	$	0.52		$	0.57	$	0.90	$	0.35
Diluted	$	0.43	$	0.51		$	0.57	$	0.89	$	0.34
Weighted average common shares outstanding:
Basic		9,471,371		9,474,925			9,484,646		9,620,401		9,835,995
Diluted		9,616,188		9,610,350			9,575,001		9,714,253		9,967,373

Note: Fully taxable equivalent adjustment	$	491	$	485		$	495	$	506	$	514

Second Bancorp Incorporated and Subsidiaries
Consolidated Statements of Income
Year-to-Date Data
(Dollars in thousands, except per share data)


	Dec. 2003		Sept. 2003		June 2003		March 2003		Dec. 2002

INTEREST INCOME

Loans (including fees):
Taxable	$	75,655	$	56,369	$	37,419	$	18,605	$	79,671
Exempt from federal income taxes		838		629		417		211		922
Securities:
Taxable		22,919		17,100		11,752		6,234		22,648
Exempt from federal income taxes		2,834		2,131		1,442		728		2,946
Federal funds sold and other temp. investments		316		289		259		123		1,085

Total interest income		102,562		76,518		51,289		25,901		107,272
INTEREST EXPENSE

Deposits		21,798		16,460		11,342		5,779		29,400
Federal funds purchased and securities sold under agreements to repurchase		2,472		1,790		1,177		581		2,499
Note Payable		214		167		117		63		38
Other borrowed funds		11		8		6		3		42
Federal Home Loan Bank advances		19,174		14,203		9,308		4,659		15,900
Debentures and capital securities		3,022		2,200		1,466		733		2,933

Total interest expense		46,691		34,828		23,416		11,818		50,812

Net interest income		55,871		41,690		27,873		14,083		56,460
Provision for loan losses		7,610		6,124		5,028		2,173		6,159

Net interest income after provision for loan losses		48,261		35,566		22,845		11,910		50,301
NON-INTEREST INCOME

Mortgage banking revenue		10,194		9,751		10,908		4,358		6,409
Service charges on deposit accounts		6,259		4,631		3,082		1,527		5,823
Trust fees		2,560		1,803		1,172		609		2,715
Trading account losses		0		0		0		0		(20	)
Security gains (losses)		4,584		3,617		51		51		592
Gain on sale of banking centers		5,619		5,619		5,619		5,619		0
Other operating income		9,351		6,598		4,130		2,098		7,906

Total non-interest income		38,567		32,019		24,962		14,262		23,425
NON-INTEREST EXPENSE

Salaries and employee benefits		29,583		21,947		15,246		7,604		26,345
Net occupancy		4,740		3,504		2,324		1,199		4,480
Equipment		4,052		3,143		2,098		1,039		3,898
Professional services		3,417		2,612		1,905		767		2,139
Assessment on deposits and other taxes		1,503		1,281		780		392		1,397
Amortization of intangible assets		467		343		230		118		475
Merger costs		0		0		0		0		134
Banking center reconfiguration		0		0		0		0		2,096
Other operating expenses		11,001		7,935		5,106		2,554		8,532

Total non-interest expense		54,763		40,765		27,689		13,673		49,496

Income before federal income taxes		32,065		26,820		20,118		12,499		24,230
Income tax expense		8,910		7,814		6,019		3,838		6,230

Net income	$	23,155	$	19,006	$	14,099	$	8,661	$	18,000


NET INCOME PER COMMON SHARE:
Basic	$	2.43	$	1.99	$	1.48	$	0.90	$	1.82
Diluted	$	2.41	$	1.97	$	1.46	$	0.89	$	1.79
Weighted average common shares outstanding:
Basic		9,512,324		9,526,125		9,552,149		9,620,401		9,905,832
Diluted		9,623,388		9,631,663		9,644,621		9,714,253		10,040,001

Note: Fully taxable equivalent adjustment	$	1,977	$	1,486	$	1,001	$	506	$	2,083

Second Bancorp Incorporated and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)


	Dec. 31			Sept. 30			June 30			March 31			Dec. 31

	2003			2003			2003			2003			2002

ASSETS

Cash and due from banks	$	40,773		$	57,305		$	42,194		$	43,334		$	60,822
Federal funds sold and other temp. investments		6,529			13,128			44,505			29,523			61,449
Securities available-for-sale (at market value)		620,696			602,893			556,434			539,309			523,669
Loans:
Commercial		631,170			598,762			571,788			558,499			542,693
Consumer		399,137			372,826			339,723			325,819			322,840
Real estate (including loans held for sale)		319,513			330,030			288,119			331,163			302,258

Total loans		1,349,820			1,301,618			1,199,630			1,215,481			1,167,791
Less allowance for loan losses		18,874			18,372			18,030			17,756			17,595

Net loans		1,330,946			1,283,246			1,181,600			1,197,725			1,150,196
Premises and equipment		19,013			17,944			17,048			16,125			16,632
Accrued interest receivable		8,501			8,710			8,289			9,414			8,762
Goodwill and intangible assets		20,047			20,117			20,230			20,343			20,422
Servicing assets		20,936			19,827			14,880			13,743			12,403
Other assets		49,089			51,580			41,053			39,511			40,420

Total assets	$	2,116,530		$	2,074,750		$	1,926,233		$	1,909,027		$	1,894,775


LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Demand - non-interest bearing	$	170,176		$	165,242		$	155,285		$	155,892		$	179,714
Demand - interest bearing		142,709			164,186			204,430			147,747			103,583
Savings		346,851			350,231			347,722			363,443			405,437
Time deposits		555,606			485,622			465,379			454,784			506,378

Total deposits		1,215,342			1,165,281			1,172,816			1,121,866			1,195,112
Federal funds purchased and securities sold under agreements to repurchase		216,761			238,047			175,011			206,069			138,796
Note payable		7,750			7,750			7,750			14,000			7,000
Other borrowed funds		1,301			1,579			1,219			155			3,863
Accrued expenses and other liabilities		14,524			17,562			19,612			20,089			17,331
Federal Home Loan Bank advances		492,299			478,198			379,089			379,971			365,844
Debentures		31,537			0			0			0			0
Corporation-obligated mandatorily redeemable capital securities of subsidiary trust		0			30,534			30,521			30,508			30,495

Total liabilities		1,979,514			1,938,951			1,786,018			1,772,658			1,758,441
Shareholders’ equity:
Common stock, no par value; 30,000,000 shares authorized;		42,973			42,815			41,750			41,745			41,763
Treasury stock		(36,173	)		(36,173	)		(34,771	)		(33,740	)		(27,180	)
Other comprehensive income		(834	)		457			7,642			6,410			6,656
Retained earnings		131,050			128,700			125,594			121,954			115,095

Total shareholders’ equity		137,016			135,799			140,215			136,369			136,334

Total liabilities and shareholders’ equity	$	2,116,530		$	2,074,750		$	1,926,233		$	1,909,027		$	1,894,775


Miscellaneous data:
Common shares issued		10,991,460			10,990,460			10,936,760			10,922,720			11,041,263
Treasury shares		1,520,089			1,520,089			1,468,541			1,426,841			1,279,009
Bank owned life insurance (in other assets)	$	34,742		$	34,149		$	33,769		$	33,489		$	33,086

Loans serviced for others	$	1,750,733		$	1,692,880		$	1,631,790		$	1,463,926		$	1,320,316

Goodwill	$	16,700		$	16,647		$	16,647		$	16,647		$	16,708
Other intangibles		3,347			3,470			3,583			3,696			3,714

Total goodwill and intangible assets	$	20,047		$	20,117		$	20,230		$	20,343		$	20,422


Mortgage servicing rights (net of allowance)	$	20,512		$	19,378		$	14,429		$	13,299		$	11,967
Other servicing assets		424			449			451			444			436

	$	20,936		$	19,827		$	14,880		$	13,743		$	12,403


Valuation allowance for mortgage servicing rights included above	$	(2,393	)	$	(2,774	)	$	(6,304	)	$	(4,783	)	$	(3,794	)

Second Bancorp Incorporated and Subsidiaries
Consolidated Average Balance Sheets
For the Quarter Ended
(Dollars in Thousands)


ASSETS	Dec. 2003			Sept. 2003			June 2003			March 2003			Dec. 2002

Cash and demand balances due from banks	$	40,524		$	43,675		$	37,686		$	38,392		$	35,454
Federal funds sold and other temp. investments		12,219			14,697			50,390			44,849			47,197
Securities:
Trading		0			0			0			0			0
Available-for-sale		628,310			610,468			541,921			528,434			494,245

Total securities		628,310			610,468			541,921			528,434			494,245
Loans:
Commercial		613,183			584,553			562,499			551,882			533,996
Consumer		389,303			353,299			336,303			324,729			323,939
Real estate (including loans held for sale)		314,667			308,128			298,498			301,006			313,227

Total loans		1,317,153			1,245,980			1,197,300			1,177,617			1,171,162
Allowance for loan losses		18,463			18,137			17,787			17,566			17,345

Net loans		1,298,690			1,227,843			1,179,513			1,160,051			1,153,817
Premises and equipment		19,020			17,666			16,828			16,508			16,611
Goodwill and intangible assets		20,076			20,166			20,282			20,461			19,676
Servicing assets		20,105			17,377			14,859			13,310			11,832
Other		53,609			52,897			47,499			47,519			46,882

Total assets	$	2,092,553		$	2,004,789		$	1,908,978		$	1,869,524		$	1,825,714



LIABILITIES AND SHAREHOLDERS’ EQUITY


Liabilities:
Demand deposits (non-interest bearing)	$	167,689		$	161,281		$	159,636		$	153,223		$	156,607
Demand deposits (interest bearing)		152,202			187,231			183,323			117,469			100,240
Savings		353,391			346,965			356,281			382,673			411,109
Time deposits		523,107			462,340			460,479			482,316			512,653

Total deposits		1,196,389			1,157,817			1,159,719			1,135,681			1,180,609
Federal funds purchased and securities sold under agreements to repurchase		230,115			208,549			178,618			164,329			165,504
Note payable		7,749			7,750			8,369			9,733			4,107
Borrowed funds		370			563			186			455			1,281
Accrued expenses and other liabilities		15,693			17,626			18,243			17,863			14,306
Federal Home Loan Bank advances		478,044			447,116			374,061			375,710			291,957
Debentures and capital securities		30,540			30,524			30,513			30,499			30,721

Total liabilities		1,958,900			1,869,945			1,769,709			1,734,270			1,688,485
Shareholders’ equity:
Common stock		42,839			42,506			41,747			41,757			41,153
Treasury shares		(36,172	)		(35,646	)		(34,127	)		(30,666	)		(25,050	)
Other comprehensive income		(2,128	)		939			7,434			6,778			7,032
Retained earnings		129,114			127,045			124,215			117,385			114,094

Total shareholders’ equity		133,653			134,844			139,269			135,254			137,229

Total liabilities and shareholders’ equity	$	2,092,553		$	2,004,789		$	1,908,978		$	1,869,524		$	1,825,714

Second Bancorp Incorporated and Subsidiaries
Consolidated Average Balance Sheets
For the Year-to-date period ended:
(Dollars in Thousands)


ASSETS	Dec. 2003			Sept. 2003			June 2003			March 2003			Dec. 2002

Cash and demand balances due from banks	$	40,085		$	39,937		$	38,037		$	38,392		$	34,606
Federal funds sold		30,406			36,535			47,635			44,849			68,503
Securities:
Trading		0			0			0			0			40
Available-for-sale		577,648			560,575			535,215			528,434			452,587

Total securities		577,648			560,575			535,215			528,434			452,627
Loans:
Commercial		578,215			566,431			557,220			551,882			517,185
Consumer		351,092			338,215			330,548			324,729			313,760
Real estate (including loans held for sale)		305,619			302,570			299,745			301,006			290,832

Total loans		1,234,926			1,207,216			1,187,513			1,177,617			1,121,777
Allowance for loan losses		17,991			17,832			17,677			17,566			16,992

Net loans		1,216,935			1,189,384			1,169,836			1,160,051			1,104,785
Premises and equipment		17,513			17,005			16,669			16,508			16,602
Goodwill and intangible assets		20,245			20,302			20,371			20,461			19,018
Servicing assets		16,434			15,197			14,089			13,310			10,520
Other		50,404			49,324			47,508			47,519			47,495

Total assets	$	1,969,670		$	1,928,259		$	1,889,360		$	1,869,524		$	1,754,156



LIABILITIES AND SHAREHOLDERS’ EQUITY


Liabilities:
Demand deposits (non-interest bearing)	$	160,499		$	158,076		$	156,447		$	153,223		$	146,598
Demand deposits (interest bearing)		160,226			162,930			150,578			117,469			101,222
Savings		359,712			361,842			369,404			382,673			374,313
Time deposits		482,118			468,305			471,337			482,316			537,217

Total deposits		1,162,555			1,151,153			1,147,766			1,135,681			1,159,350
Federal funds purchased and securities sold under agreements to repurchase		195,619			183,994			171,513			164,329			136,041
Note payable		8,393			8,610			9,047			9,733			1,335
Borrowed funds		394			402			320			455			1,726
Accrued expenses and other liabilities		17,351			17,910			18,054			17,863			12,000
Federal Home Loan Bank advances		419,091			399,224			374,881			375,710			278,998
Debentures and capital securities		30,519			30,512			30,506			30,499			30,528

Total liabilities		1,833,922			1,791,805			1,752,087			1,734,270			1,619,978
Shareholders’ equity:
Common stock		42,216			42,006			41,752			41,757			39,177
Treasury shares		(34,172	)		(33,498	)		(32,406	)		(30,666	)		(20,590	)
Net unrealized holding gains		3,225			5,029			7,108			6,778			5,996
Retained earnings		124,479			122,917			120,819			117,385			109,595

Total shareholders’ equity		135,748			136,454			137,273			135,254			134,178

Total liabilities and shareholders’ equity	$	1,969,670		$	1,928,259		$	1,889,360		$	1,869,524		$	1,754,156

Second Bancorp Incorporated and Subsidiaries
Financial Highlights — Non-GAAP Operating Results
Quarterly Data
(Dollars in thousands, except per share data)


	Dec. 2003		Sept. 2003		June 2003		March 2003		Dec. 2002

Earnings:
Net interest income	$	14,181	$	13,817	$	13,790	$	14,083	$	13,946
Provision for loan losses		1,486		1,096		2,855		2,173		2,350
Non-interest income		5,581		3,491		10,700		8,592		7,314
Security gains (losses)		967		3,566		0		51		(67	)
Trading account losses		0		0		0		0		0
Non-interest expense		13,998		13,076		14,016		13,673		12,469
Federal income taxes		1,096		1,795		2,181		1,871		1,577

Net income	$	4,149	$	4,907	$	5,438	$	5,009	$	4,797


Per share:
Basic earnings	$	0.44	$	0.52	$	0.57	$	0.52	$	0.49

Diluted earnings		0.43		0.51		0.57		0.52		0.48
Key ratios: (%)

Return on average assets (ROA)		0.79		0.98		1.14		1.07		1.05
Return on average shareholders’ equity (ROE)		12.42		14.56		15.62		14.81		13.98
Net interest margin		3.00		3.06		3.19		3.33		3.38
Net overhead		1.72		2.05		0.74		1.16		1.20
Efficiency ratio		69.12		73.49		56.10		58.98		57.27

Second Bancorp Incorporated and Subsidiaries
Reconciliation of GAAP vs. Non-GAAP Operating Results
Quarterly Data


	Dec. 2003		Sept. 2003		June 2003		March 2003			Dec. 2002

Net income	$	4,149	$	4,907	$	5,438	$	8,661		$	3,428
Adjustments to GAAP to reflect
Non-GAAP Operating Basis:
Add non-recurring costs:
Sale of banking centers		0		0		0		(5,619	)		0
Merger costs		0		0		0		0			10
Banking center reconfiguration		0		0		0		0			2,096

Total adjustments		0		0		0		(5,619	)		2,106
Federal income taxes (benefit)		0		0		0		(1,967	)		737

Net income	$	4,149	$	4,907	$	5,438	$	5,009		$	4,797

Note: Recap of Income from Mortgage Banking Activities


	Dec. 2003			Sept. 2003			June 2003			March 2003			Dec. 2002

Gross income from servicing	$	947		$	1,052		$	986		$	903		$	764
Amortization of MSRs		(790	)		(2,723	)		(2,101	)		(1,549	)		(2,322	)

(Excess amortization) / net servicing income		157			(1,671	)		(1,115	)		(646	)		(1,558	)
Change in valuation allowance MSRs		381			3,530			(1,522	)		(989	)		(707	)
Net derivative gain (loss) — non hedging		(834	)		(6,759	)		3,035			1,805			(425	)

Income (loss) from mortgage servicing		(296	)		(4,900	)		398			170			(2,690	)

Gain on sale of mortgage loans		737			3,743			6,152			4,188			5,348

Net mortgage banking revenue (loss)	$	441		$	(1,157	)	$	6,550		$	4,358		$	2,658

Second Bancorp Incorporated and Subsidiaries
Financial Highlights — Non-GAAP Operating Results
Year-to-Date Data
(Dollars in thousands, except per share data)


	Dec. 2003		Sept. 2003		June 2003		March 2003		Dec. 2002

Earnings:
Net interest income	$	55,871	$	41,690	$	27,873	$	14,083	$	56,460
Provision for loan losses		7,610		6,124		5,028		2,173		6,159
Non-interest income		28,364		22,783		19,292		8,592		22,853
Security gains (losses)		4,584		3,617		51		51		592
Trading account losses		0		0		0		0		(20	)
Non-interest expense		54,763		40,765		27,689		13,673		47,266
Federal income taxes		6,943		5,847		4,052		1,871		7,011

Net income	$	19,503	$	15,354	$	10,447	$	5,009	$	19,449


Per share:
Basic earnings	$	2.05	$	1.61	$	1.09	$	0.52	$	1.96
Diluted earnings		2.03		1.59		1.08		0.52		1.94

Key ratios: (%)

Return on average assets (ROA)		0.99		1.06		1.11		1.07		1.11
Return on average shareholders’ equity (ROE)		14.37		15.00		15.22		14.81		14.49
Net interest margin		3.14		3.19		3.26		3.33		3.56
Net overhead		1.43		1.33		0.95		1.16		1.49
Efficiency ratio		63.52		61.80		57.49		58.98		58.07

Second Bancorp Incorporated and Subsidiaries
Reconciliation of GAAP vs. Non-GAAP Operating Results
Year-to-Date Data


	Dec. 2003			Sept. 2003			June 2003			March 2003			Dec. 2002

Net income	$	23,155		$	19,006		$	14,099		$	8,661		$	18,000
Adjustments to GAAP to reflect
Non-GAAP Operating Basis:
Add non-recurring costs:
Sale of banking centers		(5,619	)		(5,619	)		(5,619	)		(5,619	)		0
Merger costs		0			0			0			0			134
Banking center reconfiguration		0			0			0			0			2,096

Total adjustments		(5,619	)		(5,619	)		(5,619	)		(5,619	)		2,230
Federal income taxes (benefit)		(1,967	)		(1,967	)		(1,967	)		(1,967	)		781

Net income	$	19,503		$	15,354		$	10,447		$	5,009		$	19,449

Note: Recap of Income from Mortgage Banking Activities


	Dec. 2003			Sept. 2003			June 2003			March 2003			Dec. 2002

Gross income from servicing	$	3,888		$	2,941		$	1,889		$	903		$	2,691
Amortization of MSRs		(7,163	)		(6,373	)		(3,650	)		(1,549	)		(4,335	)

(Excess amortization) / net servicing income		(3,275	)		(3,432	)		(1,761	)		(646	)		(1,644	)
Change in valuation allowance MSRs		1,400			1,019			(2,511	)		(989	)		(2,984	)
Net derivative gain (loss) — non hedging		(2,753	)		(1,919	)		4,840			1,805			567

Income (loss) from mortgage servicing		(4,628	)		(4,332	)		568			170			(4,061	)

Gain on sale of mortgage loans		14,822			14,083			10,340			4,188			10,470

Net mortgage banking revenue	$	10,194		$	9,751		$	10,908		$	4,358		$	6,409