Second Bancorp Incorporated 8-K
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report: May 3, 2004

Second Bancorp Incorporated

(Exact name of registrant as specified in its charter)
         
Ohio
  0-15624   34-1547453
 
(State of Incorporation)
  (Commission   (IRS Employer
  File Number)   Identification No.)
 
        
108 Main Avenue S.W., Warren, Ohio
      44482-1311
 
(Address of principal executive offices)
      (Zip Code)

Registrant’s telephone number, including area code: 330-841-0123

 

TABLE OF CONTENTS

Item 5. Other Events
SIGNATURES

Table of Contents

Item 5. Other Events

On April 29, 2004, the Company issued the following press release:

SECOND BANCORP REPORTS
FIRST QUARTER 2004 EARNINGS

Warren, Ohio, April 29, 2004—SECOND BANCORP INCORPORATED (Nasdaq “SECD”, “SECDP”) reported net income for first quarter 2004 of $2,767,000 or $.29 per diluted share compared to $8,661,000 or $.89 per diluted share for the same period last year. Earnings for first quarter 2004 were adversely affected by $1,138,000 in non-recurring expenses associated with Second Bancorp’s pending merger with Sky Financial Group, Inc. Earnings for last year’s first quarter included gains (after tax) of $3.65 million on the sale of two of subsidiary Second National Bank’s banking centers in Jefferson County, Ohio. Absent these items, earnings for the current quarter would have been $3,812,000 or $.39 per diluted share, and last year’s first quarter would have been $5,009,000 or $.52 per diluted share. All results contained in this press release are reported on a GAAP basis unless specifically indicated otherwise.

The Company’s return on average assets (ROA) for the just completed quarter was         .52% compared to 1.85% (or 1.07% on a non-GAAP basis) for the comparable quarter in 2003. Second Bancorp’s return on average equity (ROE) was 7.93% for the quarter compared to 25.61% (or 14.81% on a non-GAAP basis) for the year-ago quarter. Persistently low interest rates continued to compress the Company’s net interest margin which was 2.84% for the just completed quarter compared to 3.33% during the same period last year. Lower non-interest income reflected, in part, slowing secondary market activity in our mortgage lending line of business and higher non-interest expenses (including merger costs) produced a 73.95% efficiency ratio for the quarter compared to 47.48% for the same quarter last year.

Second Bancorp President and Chief Executive Officer R. L. (Rick) Blossom stated “Among the many challenges Second Bancorp and Second National Bank face as we move toward completion of the pending merger with Sky Financial Group have been customer retention and continuing business development. Our charge is to deliver to Sky Financial the bargained-for customer base and accompanying earnings potential. With average total loans for the first quarter 1.6% higher

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than for fourth quarter 2003 and average deposits up 4.6% for the same periods, we’re satisfied that our dedicated, professional staff continues to focus on those things which have historically created value for our shareholders.”

As mentioned, 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 in exchange for each Second Bancorp share. Second Bancorp’s special meeting of shareholders for the purpose of considering and approving the merger will be held on May 18, 2004. Shareholders of record on April 5, 2004 are entitled to vote at that meeting. The transaction, subject also to regulatory approvals, is expected to be completed as of the close of business June 30, 2004.

The Company also reported that its Board of Directors declared a nineteen cent ($.19) per share common dividend payable April 30, 2004 to shareholders of record on April 15. That dividend is unchanged from the previous quarter.

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 filed by Sky Financial Group, Inc. and Second Bancorp Incorporated filed with the SEC because it will contain important information. Shareholders and interested parties can 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 are 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.

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Second Bancorp Incorporated and Subsidiaries
Financial Highlights
Quarterly Data

(Dollars in thousands, except per share data)

                                         
    March 2004
   Dec. 2003
   Sept. 2003
   June 2003
   March 2003
Earnings:
                                        
Net interest income
   $ 13,558     $ 14,181     $ 13,817     $ 13,790     $ 14,083  
Provision for loan losses
     1,350       1,486       1,096       2,855       2,173  
Non-interest income
     6,061       5,581       3,491       10,700       14,211  
Security gains
     498       967       3,566       0       51  
Non-interest expense
     14,849       13,998       13,076       14,016       13,673  
Federal income taxes
     1,151       1,096       1,795       2,181       3,838  
 
    
 		      
 		      
 		      
 		      
 		  
Net income
   $ 2,767     $ 4,149     $ 4,907     $ 5,438     $ 8,661  
 
    
 		      
 		      
 		      
 		      
 		  
Per share:
                                        
Basic earnings
     0.29       0.44       0.52       0.57       0.90  
Diluted earnings
     0.29       0.43       0.51       0.57       0.89  
Common dividends
     0.19       0.19       0.19       0.19       0.19  
Book value
     15.10       14.47       14.34       14.81       14.36  
Tangible book value
     12.82       12.17       12.05       12.40       11.95  
Market value
     32.44       26.40       27.24       25.80       22.15  
Weighted average shares outstanding:
                                        
Basic
     9,477,710       9,471,371       9,474,925       9,484,646       9,620,401  
Diluted
     9,702,224       9,616,188       9,610,350       9,575,001       9,714,253  
Period end balance sheet:
                                        
Assets
   $ 2,116,947     $ 2,116,530     $ 2,074,750     $ 1,926,233     $ 1,909,027  
Securities
     620,091       620,696       602,893       556,434       539,309  
Total loans
     1,339,838       1,349,820       1,301,618       1,199,630       1,215,481  
Allowance for loan losses
     19,137       18,874       18,372       18,030       17,756  
Deposits
     1,287,292       1,215,342       1,165,281       1,172,816       1,121,866  
Total shareholders’ equity
     143,139       137,016       135,799       140,215       136,369  
Tier I capital
     147,906       146,397       144,583       140,335       137,595  
Tier I ratio
     10.6 %     10.2 %     10.4 %     10.8 %     10.5 %
Total capital
     165,334       164,396       161,946       156,613       154,010  
Total capital ratio
     11.9 %     11.4 %     11.7 %     12.0 %     11.7 %
Total risk-adjusted assets
     1,392,535       1,439,030       1,388,065       1,300,512       1,311,849  
Tier I leverage ratio
     7.1 %     7.1 %     7.3 %     7.6 %     7.5 %
Average balance sheet:
                                        
Assets
   $ 2,114,043     $ 2,092,553     $ 2,004,789     $ 1,908,978     $ 1,869,524  
Earning assets
     1,977,023       1,957,682       1,871,145       1,789,611       1,750,900  
Loans
     1,338,254       1,317,153       1,245,980       1,197,300       1,177,617  
Deposits
     1,251,016       1,196,389       1,157,817       1,159,719       1,135,681  
Shareholders’ equity
     139,486       133,653       134,844       139,269       135,254  
Key ratios: (%)
                                        
Return on average assets (ROA)
     0.52       0.79       0.98       1.14       1.85  
Return on average shareholders’ equity (ROE)
     7.93       12.42       14.56       15.62       25.61  
Net interest margin
     2.84       3.00       3.06       3.19       3.33  
Net overhead
     1.78       1.72       2.05       0.74       (0.12 )
Efficiency ratio
     73.95       69.12       73.49       56.10       47.48  
Credit quality:
                                        
Non-accrual loans
   $ 14,135     $ 13,348     $ 12,735     $ 12,238     $ 12,709  
Restructured loans
     497       1,017       461       340       374  
90 day past due and accruing
     8,784       8,879       8,625       7,231       6,623  
 
    
 		      
 		      
 		      
 		      
 		  
Non-performing loans
     23,416       23,244       21,821       19,809       19,706  
Other real estate owned
     921       713       753       621       1,270  
 
    
 		      
 		      
 		      
 		      
 		  
Non-performing assets
   $ 24,337     $ 23,957     $ 22,574     $ 20,430     $ 20,976  
 
    
 		      
 		      
 		      
 		      
 		  
Charge-offs
   $ 1,534     $ 1,111     $ 918     $ 2,721     $ 2,213  
Recoveries
     447       126       165       139       201  
 
    
 		      
 		      
 		      
 		      
 		  
Net charge-offs
   $ 1,087     $ 985     $ 753     $ 2,582     $ 2,012  
 
    
 		      
 		      
 		      
 		      
 		  
Allowance for loan losses as a percent of period-end loans (%)
     1.43       1.40       1.41       1.50       1.46  
Net charge-offs (annualized) as a percent of average loans (%)
     0.32       0.30       0.24       0.86       0.68  
Non-performing loans as a percent of loans
     1.75       1.72       1.68       1.65       1.62  
Non-performing assets as a percent of assets
     1.15       1.13       1.09       1.06       1.10  

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Second Bancorp Incorporated and Subsidiaries
Financial Highlights
Year-to-Date Data

(Dollars in thousands, except per share data)

                                         
    March 2004
   Dec. 2003
   Sept. 2003
   June 2003
   March 2003
Earnings:
                                        
Net interest income
   $ 13,558     $ 55,871     $ 41,690     $ 27,873     $ 14,083  
Provision for loan losses
     1,350       7,610       6,124       5,028       2,173  
Non-interest income
     6,061       33,983       28,402       24,911       14,211  
Security gains
     498       4,584       3,617       51       51  
Non-interest expense
     14,849       54,763       40,765       27,689       13,673  
Federal income taxes
     1,151       8,910       7,814       6,019       3,838  
 
    
 		      
 		      
 		      
 		      
 		  
Net income
   $ 2,767     $ 23,155     $ 19,006     $ 14,099     $ 8,661  
 
    
 		      
 		      
 		      
 		      
 		  
Per share:
                                        
Basic earnings
     0.29       2.43       1.99       1.48       0.90  
Diluted earnings
     0.29       2.41       1.97       1.46       0.89  
Common dividends
     0.19       0.76       0.57       0.38       0.19  
Book value
     15.10       14.47       14.34       14.81       14.36  
Tangible book value
     12.82       12.17       12.05       12.40       11.95  
Market value
     32.44       26.40       27.24       25.80       22.15  
Weighted average shares outstanding:
                                        
Basic
     9,477,710       9,512,324       9,526,125       9,552,149       9,620,401  
Diluted
     9,702,224       9,623,388       9,631,663       9,644,621       9,714,253  
Period end balance sheet:
                                        
Assets
   $ 2,116,947     $ 2,116,530     $ 2,074,750     $ 1,926,233     $ 1,909,027  
Securities
     620,091       620,696       602,893       556,434       539,309  
Total loans
     1,339,838       1,349,820       1,301,618       1,199,630       1,215,481  
Allowance for loan losses
     19,137       18,874       18,372       18,030       17,756  
Deposits
     1,287,292       1,215,342       1,165,281       1,172,816       1,121,866  
Total shareholders’ equity
     143,139       137,016       135,799       140,215       136,369  
Tier I capital
     147,906       146,397       144,583       140,335       137,595  
Tier I ratio
     10.6 %     10.2 %     10.4 %     10.8 %     10.5 %
Total capital
     165,334       164,396       161,946       156,613       154,010  
Total capital ratio
     11.9 %     11.4 %     11.7 %     12.0 %     11.7 %
Total risk-adjusted assets
     1,392,535       1,439,030       1,388,065       1,300,512       1,311,849  
Tier I leverage ratio
     7.1 %     7.1 %     7.3 %     7.6 %     7.5 %
Average balance sheet:
                                        
Assets
   $ 2,114,043     $ 1,969,670     $ 1,928,259     $ 1,889,360     $ 1,869,524  
Earning assets
     1,977,023       1,842,980       1,804,326       1,770,363       1,750,900  
Loans
     1,338,254       1,234,926       1,207,216       1,187,513       1,177,617  
Deposits
     1,251,016       1,162,555       1,151,153       1,147,766       1,135,681  
Shareholders’ equity
     139,486       135,748       136,454       137,273       135,254  
Key ratios: (%)
                                        
Return on average assets (ROA)
     0.52       1.18       1.31       1.49       1.85  
Return on average shareholders’ equity (ROE)
     7.93       17.06       18.57       20.54       25.61  
Net interest margin
     2.84       3.14       3.19       3.26       3.33  
Net overhead
     1.78       1.13       0.91       0.31       (0.12 )
Efficiency ratio
     73.95       59.63       56.95       51.48       47.48  
Credit quality:
                                        
Non-accrual loans
   $ 14,135     $ 13,348     $ 12,735     $ 12,238     $ 12,709  
Restructured loans
     497       1,017       461       340       374  
90 day past due and accruing
     8,784       8,879       8,625       7,231       6,623  
 
    
 		      
 		      
 		      
 		      
 		  
Non-performing loans
     23,416       23,244       21,821       19,809       19,706  
Other real estate owned
     921       713       753       621       1,270  
 
    
 		      
 		      
 		      
 		      
 		  
Non-performing assets
   $ 24,337     $ 23,957     $ 22,574     $ 20,430     $ 20,976  
 
    
 		      
 		      
 		      
 		      
 		  
Charge-offs
   $ 1,534     $ 6,963     $ 5,852     $ 4,934     $ 2,213  
Recoveries
     447       631       505       340       201  
 
    
 		      
 		      
 		      
 		      
 		  
Net charge-offs
   $ 1,087     $ 6,332     $ 5,347     $ 4,594     $ 2,012  
 
    
 		      
 		      
 		      
 		      
 		  
Allowance for loan losses as a percent of period-end loans (%)
     1.43       1.40       1.41       1.50       1.46  
Net charge-offs (annualized) as a percent of average loans (%)
     0.32       0.51       0.59       0.77       0.68  
Non-performing loans as a percent of loans
     1.75       1.72       1.68       1.65       1.62  
Non-performing assets as a percent of assets
     1.15       1.13       1.09       1.06       1.10  

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Second Bancorp Incorporated and Subsidiaries
Consolidated Statements of Income
Quarterly Data

(Dollars in thousands, except per share data)

                                         
    March 2004
   Dec. 2003
   Sept. 2003
   June 2003
   March 2003
INTEREST INCOME
                                        
Loans (including fees):
                                        
Taxable
   $ 19,001     $ 19,286     $ 18,950     $ 18,814     $ 18,605  
Exempt from federal income taxes
     211       209       212       206       211  
Securities:
                                        
Taxable
     5,587       5,819       5,348       5,518       6,234  
Exempt from federal income taxes
     643       703       689       714       728  
Federal funds sold and other temp. investments
     34       27       30       136       123  
 
    
 		      
 		      
 		      
 		      
 		  
Total interest income
     25,476       26,044       25,229       25,388       25,901  
INTEREST EXPENSE
                                        
Deposits
     5,660       5,338       5,118       5,563       5,779  
Federal funds purchased and securities sold under agreements to repurchase
     539       682       613       596       581  
Note Payable
     49       47       50       54       63  
Other borrowed funds
     2       3       2       3       3  
Federal Home Loan Bank advances
     4,912       4,971       4,895       4,649       4,659  
Debentures and capital securities
     756       822       734       733       733  
 
    
 		      
 		      
 		      
 		      
 		  
Total interest expense
     11,918       11,863       11,412       11,598       11,818  
 
    
 		      
 		      
 		      
 		      
 		  
Net interest income
     13,558       14,181       13,817       13,790       14,083  
Provision for loan losses
     1,350       1,486       1,096       2,855       2,173  
 
    
 		      
 		      
 		      
 		      
 		  
Net interest income after provision for loan losses
     12,208       12,695       12,721       10,935       11,910  
NON-INTEREST INCOME
                                        
Mortgage banking income
     1,928       441       (1,157 )     6,550       4,358  
Service charges on deposit accounts
     1,620       1,628       1,549       1,555       1,527  
Trust fees
     687       757       631       563       609  
Security gains
     498       967       3,566       0       51  
Gain on sale of banking centers
     0       0       0       0       5,619  
Other operating income
     1,826       2,755       2,468       2,032       2,098  
 
    
 		      
 		      
 		      
 		      
 		  
Total non-interest income
     6,559       6,548       7,057       10,700       14,262  
NON-INTEREST EXPENSE
                                        
Salaries and employee benefits
     7,729       7,636       6,701       7,642       7,604  
Net occupancy
     1,252       1,236       1,180       1,125       1,199  
Equipment
     1,015       909       1,045       1,059       1,039  
Professional services
     795       805       707       1,138       767  
Assessment on deposits and other taxes
     430       222       501       388       392  
Amortization of intangible assets
     113       124       113       112       118  
Merger costs
     1,138       0       0       0       0  
Other operating expenses
     2,377       3,066       2,829       2,552       2,554  
 
    
 		      
 		      
 		      
 		      
 		  
Total non-interest expense
     14,849       13,998       13,076       14,016       13,673  
 
    
 		      
 		      
 		      
 		      
 		  
Income before federal income taxes
     3,918       5,245       6,702       7,619       12,499  
Income tax expense
     1,151       1,096       1,795       2,181       3,838  
 
    
 		      
 		      
 		      
 		      
 		  
Net income
   $ 2,767     $ 4,149     $ 4,907     $ 5,438     $ 8,661  
 
    
 		      
 		      
 		      
 		      
 		  
NET INCOME PER COMMON SHARE:
                                        
Basic
   $ 0.29     $ 0.44     $ 0.52     $ 0.57     $ 0.90  
Diluted
   $ 0.29     $ 0.43     $ 0.51     $ 0.57     $ 0.89  
Weighted average common shares outstanding:
                                        
Basic
     9,477,710       9,471,371       9,474,925       9,484,646       9,620,401  
Diluted
     9,702,224       9,616,188       9,610,350       9,575,001       9,714,253  
Note: Fully taxable equivalent adjustment
   $ 460     $ 491     $ 485     $ 495     $ 506  

Page 5 of 12

 

Table of Contents

Second Bancorp Incorporated and Subsidiaries
Consolidated Statements of Income
Year-to-Date Data

(Dollars in thousands, except per share data)

                                         
    March 2004
   Dec. 2003
   Sept. 2003
   June 2003
   March 2003
INTEREST INCOME
                                        
Loans (including fees):
                                        
Taxable
   $ 19,001     $ 75,655     $ 56,369     $ 37,419     $ 18,605  
Exempt from federal income taxes
     211       838       629       417       211  
Securities:
                                        
Taxable
     5,587       22,919       17,100       11,752       6,234  
Exempt from federal income taxes
     643       2,834       2,131       1,442       728  
Federal funds sold and other temp. investments
     34       316       289       259       123  
 
    
 		      
 		      
 		      
 		      
 		  
Total interest income
     25,476       102,562       76,518       51,289       25,901  
INTEREST EXPENSE
                                        
Deposits
     5,660       21,798       16,460       11,342       5,779  
Federal funds purchased and securities sold under agreements to repurchase
     539       2,472       1,790       1,177       581  
Note Payable
     49       214       167       117       63  
Other borrowed funds
     2       11       8       6       3  
Federal Home Loan Bank advances
     4,912       19,174       14,203       9,308       4,659  
Debentures and capital securities
     756       3,022       2,200       1,466       733  
 
    
 		      
 		      
 		      
 		      
 		  
Total interest expense
     11,918       46,691       34,828       23,416       11,818  
 
    
 		      
 		      
 		      
 		      
 		  
Net interest income
     13,558       55,871       41,690       27,873       14,083  
Provision for loan losses
     1,350       7,610       6,124       5,028       2,173  
 
    
 		      
 		      
 		      
 		      
 		  
Net interest income after provision for loan losses
     12,208       48,261       35,566       22,845       11,910  
NON-INTEREST INCOME
                                        
Mortgage banking revenue
     1,928       10,194       9,751       10,908       4,358  
Service charges on deposit accounts
     1,620       6,259       4,631       3,082       1,527  
Trust fees
     687       2,560       1,803       1,172       609  
Security gains
     498       4,584       3,617       51       51  
Gain on sale of banking centers
     0       5,619       5,619       5,619       5,619  
Other operating income
     1,826       9,351       6,598       4,130       2,098  
 
    
 		      
 		      
 		      
 		      
 		  
Total non-interest income
     6,559       38,567       32,019       24,962       14,262  
NON-INTEREST EXPENSE
                                        
Salaries and employee benefits
     7,729       29,583       21,947       15,246       7,604  
Net occupancy
     1,252       4,740       3,504       2,324       1,199  
Equipment
     1,015       4,052       3,143       2,098       1,039  
Professional services
     795       3,417       2,612       1,905       767  
Assessment on deposits and other taxes
     430       1,503       1,281       780       392  
Amortization of intangible assets
     113       467       343       230       118  
Merger costs
     1,138       0       0       0       0  
Other operating expenses
     2,377       11,001       7,935       5,106       2,554  
 
    
 		      
 		      
 		      
 		      
 		  
Total non-interest expense
     14,849       54,763       40,765       27,689       13,673  
 
    
 		      
 		      
 		      
 		      
 		  
Income before federal income taxes
     3,918       32,065       26,820       20,118       12,499  
Income tax expense
     1,151       8,910       7,814       6,019       3,838  
 
    
 		      
 		      
 		      
 		      
 		  
Net income
   $ 2,767     $ 23,155     $ 19,006     $ 14,099     $ 8,661  
 
    
 		      
 		      
 		      
 		      
 		  
NET INCOME PER COMMON SHARE:
                                        
Basic
   $ 0.29     $ 2.43     $ 1.99     $ 1.48     $ 0.90  
Diluted
   $ 0.29     $ 2.41     $ 1.97     $ 1.46     $ 0.89  
Weighted average common shares outstanding:
                                        
Basic
     9,477,710       9,512,324       9,526,125       9,552,149       9,620,401  
Diluted
     9,702,224       9,623,388       9,631,663       9,644,621       9,714,253  
Note: Fully taxable equivalent adjustment
   $ 460     $ 1,977     $ 1,486     $ 1,001     $ 506  

Page 6 of 12

 

Table of Contents

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

                                         
    March 31
   December 31
   September 30
   June 30
   March 31
    2004
   2003
   2003
   2003
   2003
ASSETS
                                        
Cash and due from banks
   $ 40,046     $ 40,773     $ 57,305     $ 42,194     $ 43,334  
Federal funds sold and other temp. investments
     18,065       6,529       13,128       44,505       29,523  
Securities available-for-sale (at market value)
     620,091       620,696       602,893       556,434       539,309  
Loans:
                                        
Commercial
     649,767       631,170       598,762       571,788       558,499  
Consumer
     420,031       399,137       372,826       339,723       325,819  
Real estate
     270,040       319,513       330,030       288,119       331,163  
 
    
 		      
 		      
 		      
 		      
 		  
Total loans
     1,339,838       1,349,820       1,301,618       1,199,630       1,215,481  
Less allowance for loan losses
     19,137       18,874       18,372       18,030       17,756  
 
    
 		      
 		      
 		      
 		      
 		  
Net loans
     1,320,701       1,330,946       1,283,246       1,181,600       1,197,725  
Premises and equipment
     19,257       19,013       17,944       17,048       16,125  
Accrued interest receivable
     8,214       8,501       8,710       8,289       9,414  
Goodwill and intangible assets
     19,935       20,047       20,117       20,230       20,343  
Servicing assets
     18,808       20,936       19,827       14,880       13,743  
Other assets
     51,830       49,089       51,580       41,053       39,511  
 
    
 		      
 		      
 		      
 		      
 		  
Total assets
   $ 2,116,947     $ 2,116,530     $ 2,074,750     $ 1,926,233     $ 1,909,027  
 
    
 		      
 		      
 		      
 		      
 		  
LIABILITIES AND SHAREHOLDERS’ EQUITY
                                        
Deposits:
                                        
Demand — non-interest bearing
   $ 156,302     $ 170,176     $ 165,242     $ 155,285     $ 155,892  
Demand — interest bearing
     133,592       142,709       164,186       204,430       147,747  
Savings
     350,702       346,851       350,231       347,722       363,443  
Time deposits
     646,696       555,606       485,622       465,379       454,784  
 
    
 		      
 		      
 		      
 		      
 		  
Total deposits
     1,287,292       1,215,342       1,165,281       1,172,816       1,121,866  
Federal funds purchased and securities sold under agreements to repurchase
     179,327       216,761       238,047       175,011       206,069  
Note payable
     13,000       7,750       7,750       7,750       14,000  
Other borrowed funds
     661       1,301       1,579       1,219       155  
Accrued expenses and other liabilities
     15,587       14,524       17,562       19,612       20,089  
Federal Home Loan Bank advances
     446,391       492,299       478,198       379,089       379,971  
Debentures
     31,550       31,537       0       0       0  
Corporation-obligated mandatorily redeemable capital securities of subsidiary trust
     0       0       30,534       30,521       30,508  
 
    
 		      
 		      
 		      
 		      
 		  
Total liabilities
     1,973,808       1,979,514       1,938,951       1,786,018       1,772,658  
Shareholders’ equity:
                                        
Common stock, no par value; 30,000,000 shares authorized;
     43,160       42,973       42,815       41,750       41,745  
Treasury stock
     (36,173 )     (36,173 )     (36,173 )     (34,771 )     (33,740 )
Other comprehensive income
     4,136       (834 )     457       7,642       6,410  
Retained earnings
     132,016       131,050       128,700       125,594       121,954  
 
    
 		      
 		      
 		      
 		      
 		  
Total shareholders’ equity
     143,139       137,016       135,799       140,215       136,369  
 
    
 		      
 		      
 		      
 		      
 		  
Total liabilities and shareholders’ equity
   $ 2,116,947     $ 2,116,530     $ 2,074,750     $ 1,926,233     $ 1,909,027  
 
    
 		      
 		      
 		      
 		      
 		  
Miscellaneous data:
                                        
Common shares issued
     10,999,230       10,991,460       10,990,460       10,936,760       10,922,720  
Treasury shares
     1,520,089       1,520,089       1,520,089       1,468,541       1,426,841  
Bank owned life insurance (in other assets)
   $ 35,117     $ 34,742     $ 34,149     $ 33,769     $ 33,489  
Loans serviced for others
   $ 1,809,713     $ 1,750,733     $ 1,692,880     $ 1,631,790     $ 1,463,926  
Goodwill
   $ 16,701     $ 16,700     $ 16,647     $ 16,647     $ 16,647  
Other intangibles
     3,234       3,347       3,470       3,583       3,696  
 
    
 		      
 		      
 		      
 		      
 		  
Total goodwill and intangible assets
   $ 19,935     $ 20,047     $ 20,117     $ 20,230     $ 20,343  
 
    
 		      
 		      
 		      
 		      
 		  
Mortgage servicing rights (net of allowance)
   $ 18,369     $ 20,512     $ 19,378     $ 14,429     $ 13,299  
Other servicing assets
     439       424       449       451       444  
 
    
 		      
 		      
 		      
 		      
 		  
 
   $ 18,808     $ 20,936     $ 19,827     $ 14,880     $ 13,743  
 
    
 		      
 		      
 		      
 		      
 		  
Valuation allowance for mortgage servicing rights included above
   $ (5,302 )   $ (2,393 )   $ (2,774 )   $ (6,304 )   $ (4,783 )
 
    
 		      
 		      
 		      
 		      
 		  

Page 7 of 12

 

Table of Contents

Second Bancorp Incorporated and Subsidiaries
Consolidated Average Balance Sheets
For the Quarter Ended

(Dollars in Thousands)

                                         
ASSETS
   March 2004
   Dec. 2003
   Sept. 2003
   June 2003
   March 2003
Cash and demand balances due from banks
   $ 39,963     $ 40,524     $ 43,675     $ 37,686     $ 38,392  
Federal funds sold and other temp. investments
     14,480       12,219       14,697       50,390       44,849  
Securities available-for-sale
     624,289       628,310       610,468       541,921       528,434  
Loans:
                                        
Commercial
     640,009       613,183       584,553       562,499       551,882  
Consumer
     407,658       389,303       353,299       336,303       324,729  
Real estate
     290,587       314,667       308,128       298,498       301,006  
 
    
 		      
 		      
 		      
 		      
 		  
Total loans
     1,338,254       1,317,153       1,245,980       1,197,300       1,177,617  
Allowance for loan losses
     18,909       18,463       18,137       17,787       17,566  
 
    
 		      
 		      
 		      
 		      
 		  
Net loans
     1,319,345       1,298,690       1,227,843       1,179,513       1,160,051  
Premises and equipment
     19,326       19,020       17,666       16,828       16,508  
Goodwill and intangible assets
     19,967       20,076       20,166       20,282       20,461  
Servicing assets
     21,202       20,105       17,377       14,859       13,310  
Other assets
     55,471       53,609       52,897       47,499       47,519  
 
    
 		      
 		      
 		      
 		      
 		  
Total assets
   $ 2,114,043     $ 2,092,553     $ 2,004,789     $ 1,908,978     $ 1,869,524  
 
    
 		      
 		      
 		      
 		      
 		  
LIABILITIES AND SHAREHOLDERS’ EQUITY
                                        
Liabilities:
                                        
Demand deposits (non-interest bearing)
   $ 162,275     $ 167,689     $ 161,281     $ 159,636     $ 153,223  
Demand deposits (interest bearing)
     137,631       152,202       187,231       183,323       117,469  
Savings
     349,693       353,391       346,965       356,281       382,673  
Time deposits
     601,417       523,107       462,340       460,479       482,316  
 
    
 		      
 		      
 		      
 		      
 		  
Total deposits
     1,251,016       1,196,389       1,157,817       1,159,719       1,135,681  
Federal funds purchased and securities sold under agreements to repurchase
     184,141       230,115       208,549       178,618       164,329  
Note payable
     8,212       7,749       7,750       8,369       9,733  
Other borrowed funds
     790       370       563       186       455  
Accrued expenses and other Liabilities
     14,791       15,693       17,626       18,243       17,863  
Federal Home Loan Bank advances
     484,065       478,044       447,116       374,061       375,710  
Debentures and capital securities
     31,542       30,540       30,524       30,513       30,499  
 
    
 		      
 		      
 		      
 		      
 		  
Total liabilities
     1,974,557       1,958,900       1,869,945       1,769,709       1,734,270  
Shareholders’ equity:
                                        
Common stock
     43,120       42,839       42,506       41,747       41,757  
Treasury shares
     (36,173 )     (36,172 )     (35,646 )     (34,127 )     (30,666 )
Other comprehensive income
     1,917       (2,128 )     939       7,434       6,778  
Retained earnings
     130,622       129,114       127,045       124,215       117,385  
 
    
 		      
 		      
 		      
 		      
 		  
Total shareholders’ equity
     139,486       133,653       134,844       139,269       135,254  
 
    
 		      
 		      
 		      
 		      
 		  
Total liabilities and shareholders’ equity
   $ 2,114,043     $ 2,092,553     $ 2,004,789     $ 1,908,978     $ 1,869,524  
 
    
 		      
 		      
 		      
 		      
 		  

Page 8 of 12

 

Table of Contents

Second Bancorp Incorporated and Subsidiaries
Consolidated Average Balance Sheets
For the Year-to-date period ended:

(Dollars in Thousands)

                                         
ASSETS
   March 2004
   Dec. 2003
   Sept. 2003
   June 2003
   March 2003
Cash and demand balances due from banks
   $ 39,963     $ 40,085     $ 39,937     $ 38,037     $ 38,392  
Federal funds sold
     14,480       30,406       36,535       47,635       44,849  
Securities available-for-sale
     624,289       577,648       560,575       535,215       528,434  
Loans:
                                        
Commercial
     640,009       578,215       566,431       557,220       551,882  
Consumer
     407,658       351,092       338,215       330,548       324,729  
Real estate
     290,587       305,619       302,570       299,745       301,006  
 
    
 		      
 		      
 		      
 		      
 		  
Total loans
     1,338,254       1,234,926       1,207,216       1,187,513       1,177,617  
Allowance for loan losses
     18,909       17,991       17,832       17,677       17,566  
 
    
 		      
 		      
 		      
 		      
 		  
Net loans
     1,319,345       1,216,935       1,189,384       1,169,836       1,160,051  
Premises and equipment
     19,326       17,513       17,005       16,669       16,508  
Goodwill and intangible assets
     19,967       20,245       20,302       20,371       20,461  
Servicing assets
     21,202       16,434       15,197       14,089       13,310  
Other assets
     55,471       50,404       49,324       47,508       47,519  
 
    
 		      
 		      
 		      
 		      
 		  
Total assets
   $ 2,114,043     $ 1,969,670     $ 1,928,259     $ 1,889,360     $ 1,869,524  
 
    
 		      
 		      
 		      
 		      
 		  
LIABILITIES AND SHAREHOLDERS’ EQUITY
                                        
Liabilities:
                                        
Demand deposits (non-interest bearing)
   $ 162,275     $ 160,499     $ 158,076     $ 156,447     $ 153,223  
Demand deposits (interest bearing)
     137,631       160,226       162,930       150,578       117,469  
Savings
     349,693       359,712       361,842       369,404       382,673  
Time deposits
     601,417       482,118       468,305       471,337       482,316  
 
    
 		      
 		      
 		      
 		      
 		  
Total deposits
     1,251,016       1,162,555       1,151,153       1,147,766       1,135,681  
Federal funds purchased and securities sold under agreements to repurchase
     184,141       195,619       183,994       171,513       164,329  
Note payable
     8,212       8,393       8,610       9,047       9,733  
Other borrowed funds
     790       394       402       320       455  
Accrued expenses and other Liabilities
     14,791       17,351       17,910       18,054       17,863  
Federal Home Loan Bank advances
     484,065       419,091       399,224       374,881       375,710  
Debentures and capital securities
     31,542       30,519       30,512       30,506       30,499  
 
    
 		      
 		      
 		      
 		      
 		  
Total liabilities
     1,974,557       1,833,922       1,791,805       1,752,087       1,734,270  
Shareholders’ equity:
                                        
Common stock
     43,120       42,216       42,006       41,752       41,757  
Treasury shares
     (36,173 )     (34,172 )     (33,498 )     (32,406 )     (30,666 )
Net unrealized holding gains
     1,917       3,225       5,029       7,108       6,778  
Retained earnings
     130,622       124,479       122,917       120,819       117,385  
 
    
 		      
 		      
 		      
 		      
 		  
Total shareholders’ equity
     139,486       135,748       136,454       137,273       135,254  
 
    
 		      
 		      
 		      
 		      
 		  
Total liabilities and shareholders’ equity
   $ 2,114,043     $ 1,969,670     $ 1,928,259     $ 1,889,360     $ 1,869,524  
 
    
 		      
 		      
 		      
 		      
 		  

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Table of Contents

Second Bancorp Incorporated and Subsidiaries

Financial Highlights – Non-GAAP Operating Results
Quarterly Data

(Dollars in thousands, except per share data)

                                         
    March 2004
   Dec. 2003
   Sept. 2003
   June 2003
   March 2003
Non-GAAP earnings:
                                        
Net interest income
   $ 13,558     $ 14,181     $ 13,817     $ 13,790     $ 14,083  
Provision for loan losses
     1,350       1,486       1,096       2,855       2,173  
Non-interest income
     7,199       5,581       3,491       10,700       14,211  
Security gains (losses)
     498       967       3,566       0       51  
Non-interest expense
     14,849       13,998       13,076       14,016       19,292  
Federal income taxes
     1,244       1,096       1,795       2,181       1,871  
 
    
 		      
 		      
 		      
 		      
 		  
Non-GAAP net income
   $ 3,812     $ 4,149     $ 4,907     $ 5,438     $ 5,009  
 
    
 		      
 		      
 		      
 		      
 		  
Non-GAAP per share:
                                        
Basic earnings
   $ 0.40     $ 0.44     $ 0.52     $ 0.57     $ 0.52  
Diluted earnings
     0.39       0.43       0.51       0.57       0.52  
Non-GAAP key ratios: (%)
                                        
Return on average assets (ROA)
     0.72       0.79       0.98       .14       1.07  
Return on average shareholders’ equity (ROE)
     10.93       12.42       14.56       15.62       14.81  
Net interest margin
     2.84       3.00       3.06       3.19       3.33  
Net overhead
     1.55       1.72       2.05       0.74       1.16  
Efficiency ratio
     68.29       69.12       73.49       56.10       58.98  

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

                                         
    March 2004
   Dec. 2003
   Sept. 2003
   June 2003
   March 2003
Net income
   $ 2,767     $ 4,149     $ 4,907     $ 5,438     $ 8,661  
Adjustments to GAAP to reflect Non-GAAP Operating Basis:
                                        
Add non-recurring costs:
                                        
Sale of banking centers
     0       0       0       0       (5,619 )
Merger costs
     1,138       0       0       0       0  
Banking center reconfiguration
     0       0       0       0       0  
 
    
 		      
 		      
 		      
 		      
 		  
Total adjustments
     1,138       0       0       0       (5,619 )
Federal income tax benefit (expense)
     93       0       0       0       (1,967 )
 
    
 		      
 		      
 		      
 		      
 		  
Non-GAAP net income
   $ 3,812     $ 4,149     $ 4,907     $ 5,438     $ 5,009  
 
    
 		      
 		      
 		      
 		      
 		  

Note: Recap of Income from Mortgage Banking Activities

                                         
    March 2004
   Dec. 2003
   Sept. 2003
   June 2003
   March 2003
Gross income from servicing
   $ 1,125     $ 947     $ 1,052     $ 986     $ 903  
Amortization of MSRs
     (1,052 )     (790 )     (2,723 )     (2,101 )     (1,549 )
 
    
 		      
 		      
 		      
 		      
 		  
(Excess amortization) / net servicing income
     73       157       (1,671 )     (1,115 )     (646 )
Change in valuation allowance MSRs
     (2,909 )     381       3,530       (1,522 )     (989 )
Net derivative gain (loss) — non hedging
     3,738       (834 )     (6,759 )     3,035       1,805  
 
    
 		      
 		      
 		      
 		      
 		  
Income (loss) from Mortgage Servicing
     902       (296 )     (4,900 )     398       170  
Gain on sale of mortgage loans
     1,026       737       3,743       6,152       4,188  
 
    
 		      
 		      
 		      
 		      
 		  
Net mortgage banking revenue (loss)
   $ 1,928     $ 441     $ (1,157 )   $ 6,550     $ 4,358  
 
    
 		      
 		      
 		      
 		      
 		  

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Table of Contents

Second Bancorp Incorporated and Subsidiaries
Financial Highlights – Non-GAAP Operating Results
Year-to-Date Data

(Dollars in thousands, except per share data)

                                         
    March 2004
   Dec. 2003
   Sept. 2003
   June 2003
   March 2003
Non-GAAP earnings:
                                        
Net interest income
   $ 13,558     $ 55,871     $ 41,690     $ 27,873     $ 14,083  
Provision for loan losses
     1,350       7,610       6,124       5,028       2,173  
Non-interest income
     7,199       28,364       22,783       19,292       14,211  
Security gains (losses)
     498       4,584       3,617       51       51  
Non-interest expense
     14,849       54,763       40,765       27,689       19,292  
Federal income taxes
     1,244       6,943       5,847       4,052       1,871  
 
    
 		      
 		      
 		      
 		      
 		  
Non-GAAP net income
   $ 3,812     $ 19,503     $ 15,354     $ 10,447     $ 5,009  
 
    
 		      
 		      
 		      
 		      
 		  
Non-GAAP per share:
                                        
Basic earnings
   $ 0.40     $ 2.05     $ 1.61     $ 1.09     $ 0.52  
Diluted earnings
     0.39       2.03       1.59       1.08       0.52  
Non-GAAP key ratios: (%)
                                        
Return on average assets (ROA)
     0.72       0.99       1.06       1.11       1.07  
Return on average shareholders’ equity (ROE)
     10.93       14.37       15.00       15.22       14.81  
Net interest margin
     2.84       3.14       3.19       3.26       3.33  
Net overhead
     1.55       1.43       1.33       0.95       1.16  
Efficiency ratio
     68.29       63.52       61.80       57.49       58.98  

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

                                         
    March 2004
   Dec. 2003
   Sept. 2003
   June 2003
   March 2003
Net income
   $ 2,767     $ 23,155     $ 19,006     $ 14,099     $ 8,661  
Adjustments to GAAP to reflect
                                        
Non-GAAP Operating Basis:
                                        
Add non-recurring costs:
                                        
Sale of banking centers
     0       (5,619 )     (5,619 )     (5,619 )     (5,619 )
Merger costs
     1,138       0       0       0       0  
Banking center reconfiguration
     0       0       0       0       0  
 
    
 		      
 		      
 		      
 		      
 		  
Total adjustments
     1,138       (5,619 )     (5,619 )     (5,619 )     (5,619 )
Federal income tax benefit (expense)
     93       (1,967 )     (1,967 )     (1,967 )     (1,967 )
 
    
 		      
 		      
 		      
 		      
 		  
Non-GAAP net income
   $ 3,812     $ 19,503     $ 15,354     $ 10,447     $ 5,009  
 
    
 		      
 		      
 		      
 		      
 		  

Note: Recap of Income from Mortgage Banking Activities

                                         
    March 2004
   Dec. 2003
   Sept. 2003
   June 2003
   March 2003
Gross income from servicing
   $ 1,125     $ 3,888     $ 2,941     $ 1,889     $ 903  
Amortization of MSRs
     (1,052 )     (7,163 )     (6,373 )     (3,650 )     (1,549 )
 
    
 		      
 		      
 		      
 		      
 		  
(Excess amortization) / net servicing income
     73       (3,275 )     (3,432 )     (1,761 )     (646 )
Change in valuation allowance MSRs
     (2,909 )     1,400       1,019       (2,511 )     (989 )
Net derivative gain (loss) — non hedging
     3,738       (2,753 )     (1,919 )     4,840       1,805  
 
    
 		      
 		      
 		      
 		      
 		  
Income (loss) from mortgage servicing
     902       (4,628 )     (4,332 )     568       170  
Gain on sale of mortgage loans
     1,026       14,822       14,083       10,340       4,188  
 
    
 		      
 		      
 		      
 		      
 		  
Net mortgage banking revenue
   $ 1,928     $ 10,194     $ 9,751     $ 10,908     $ 4,358  
 
    
 		      
 		      
 		      
 		      
 		  

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Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

     
  Second Bancorp Incorporated
 
    
Date:  May 3, 2004
  /s/ David L. Kellerman
 
 
  David L. Kellerman
  Chief Financial Officer and Treasurer

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