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: January 22, 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
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 330-841-0123
ITEM 5. OTHER EVENTS
On January 22, 2004, the Company issued the following press release:
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
Page 1 of 12
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.
Page 2 of 12
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
Page 3 of 12
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
Page 4 of 12
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
Page 5 of 12
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: 0
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
Page 6 of 12
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)
=========== =========== =========== =========== ===========
Page 7 of 12
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
=========== =========== =========== =========== ===========
Page 8 of 12
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
=========== =========== =========== =========== ===========
Page 9 of 12
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
========== ========== ========== ========== ==========
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
---------- ---------- ---------- ---------- ----------
Adjusted 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
========== ========== ========== ========== ==========
Page 10 of 12
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
========== ========== ========== ========== ==========
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
---------- ---------- ---------- ---------- ----------
Adjusted 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
========== ========== ========== ========== ==========
Page 11 of 12
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: January 22, 2004 /s/ David L. Kellerman
-------------------------------------
David L. Kellerman
Chief Financial Officer and Treasurer
Page 12 of 12