SECOND BANCORP INC
8-K, 2000-10-20
NATIONAL COMMERCIAL BANKS
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TABLE OF CONTENTS

Item 5. Other Events
Item 7. Financial Statements and Exhibits
Second Bancorp Financial Highlights Quarterly Data
Second Bancorp Financial Highlights Year-to-Date Data
Second Bancorp Consolidated Statements of Income Quarterly Data
Second Bancorp Consolidated Statements of Income Year-to-Date Data
Second Bancorp Consolidated Balance Sheets
Second Bancorp Consolidated Average Balance Sheets For the Quarter Ended
Second Bancorp Consolidated Average Balance Sheets For the Year-to-date period ended:
Second Bancorp Financial Highlights - Operating Basis - Excluding Restructuring and Reengineering Charges Quarterly Data
Second Bancorp Financial Highlights - Operating Basis - Excluding Restructuring and Reengineering Charges Year-to-Date Data
SIGNATURES

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: October 20, 2000

Second Bancorp Incorporated
(Exact name of registrant as specified in its charter)

         
Ohio 0-15624 34-1547453
(State of incorporation) (Commission
File Number) 		(IRS Employer 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

Item 5. Other Events

On October 12, 2000, the Company issued the following press release:

SECOND BANCORP REPORTS EARNINGS,
COMPLETES ANNOUNCED BALANCE SHEET RESTRUCTURING

Warren, Ohio, October 12, 2000—SECOND BANCORP INCORPORATED (Nasdaq “SECD”) reported a loss of $5,545,000 for the third quarter or a diluted fifty-five cents ($.55) per share as the Company completed the major restructuring of its balance sheet originally announced August 14th. Absent the $9,022,000 in after tax restructuring and other charges taken in the third quarter, earnings for the period would have been $3,477,000 or thirty-four cents ($.34) per share compared to $4,412,000 or forty-one cents ($.41) per share for the same period last year. On a year-to-date basis, net income through the end on the quarter was $2,104,000 ($11,126,000 without restructuring costs) or twenty cents ($.20) per share compared to $12,865,000 or $1.20 per share for the first three quarters of 1999.

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After tax charges to earnings (losses) during the quarter resulting from the balance sheet restructuring were $1,825,000 on securities sales; $2,836,000 on mortgage loan sales; $2,665,000 on additions to the loan loss reserve to reflect the shift in loan mix; $393,000 on Federal Home Loan Bank advance prepayments; and $1,303,000 on other non-recurring expenses.

Second Bancorp Treasurer David L. Kellerman indicated “One of the effects of our third quarter restructuring and reengineering was to minimally shrink the Company’s balance sheet as we sold off $130 million in below market, fixed rate loan assets and used $100 million of the proceeds to reduce our exposure on higher cost Federal Home Loan Bank advances. Some of the positive net effects of these actions will be to significantly improve balance sheet flexibility and liquidity, reduce the earnings drag caused by our large mortgage loan portfolio, and ease our overall cost of funds. We expect these actions and the continuing redeployment of our resources into higher yielding assets like consumer and commercial loans to positively impact our net interest margin and, as a result, our profitability going forward. It is important to note that the restructuring has been completed without material impact on our capital footings which remain strong and without jeopardizing our dividend which currently yields a strong 4.7%.”

President and Chief Executive Officer R. L. Blossom, commenting on the decision to undertake this significant restructuring and its long-term impact on the Company, stated “Second Bancorp is in transition from a solid franchise with average financial performance to what we fully expect to become a high performing financial holding company. Our top-to-bottom assessment of the organization undertaken since my arrival last December made it clear to us that one of the major conditions restraining our profitability was the persistent impact of a major thrift acquisition in late 1998. That acquisition increased the percentage of mortgage loans in our overall portfolio from just over 14% to an unacceptably high 42% earlier this year and played a major role in depressing our net interest margin to its current 3.31% from 4.34% just prior to the transaction. Though we will continue to aggressively develop our mortgage business, we will service new loan originations but will retain a much smaller percentage of them on our balance sheet.

“Our decision to restructure was based on the recognition that decisive action to deal with this and other persistent conditions was necessary if we were to continue to grow earnings. We believe that a recovering net interest margin produced by adjusting our loan mix and renewed emphasis on core deposit generation; a newly installed state-of-the-art financial information system which will give us real-time budgeting, forecasting and financial management capabilities; improved efficiency; implementation of a culture centered on personal service and customer relationship building; and a heightened focus on the generation of fee income will help us reach our goal.”

Second Bancorp also reported that its Board of Directors has declared a sixteen cents ($.16) per share common dividend payable October 31, 2000 to shareholders of record on October 13. That dividend is unchanged from the second quarter of this year and is 14.3% higher than the dividend paid for the third quarter last year.

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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.

Second Bancorp is a $1.56 billion financial holding company providing a full range of commercial and consumer banking, trust, insurance and investment products and services to communities in a nine county area of Northeastern and East-Central Ohio through subsidiary Second National Bank’s network of 35 retail banking centers.

Additional information about Second Bancorp can be found on the World Wide Web at www.prnewswire.com. Information about products and services offered by Second National Bank can also be accessed at www.secondnationalbank.com.

CONTACT: Christopher Stanitz, Executive Vice President and Secretary, 330.841.0234 or fax, 330.841.0489.

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Item 7. Financial Statements and Exhibits

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

                                                     
Sept. 2000 June 2000 March 2000 Dec. 1999 Sept. 1999
Earnings:
Net interest income $ 11,606 $ 12,645 $ 12,418 $ 12,286 $ 12,348
Provision for loan losses 4,843 696 687 765 757
Non-interest income (28 ) 4,102 3,590 3,414 3,890
Security gains (2,802 ) (225 ) 99 82 55
Trading account (28 ) (431 ) 114 0 0
Non-interest expense 13,140 10,431 10,297 10,770 9,618
Federal income taxes (3,690 ) 1,251 1,301 934 1,506
Net income $ (5,545 ) $ 3,713 $ 3,936 $ 3,313 $ 4,412
Per share:
Basic earnings $ (0.55 ) $ 0.36 $ 0.38 $ 0.32 $ 0.41
Diluted earnings (0.55 ) 0.36 0.38 0.32 0.41
Common dividends 0.16 0.16 0.16 0.14 0.14
Book value 11.05 11.31 11.17 11.12 11.31
Tangible book value 10.88 11.12 10.97 10.92 11.08
Market value 14.13 15.19 17.50 22.38 27.00
Weighted average shares outstanding:
Basic 10,161,386 10,318,828 10,406,020 10,501,175 10,657,805
Diluted 10,161,386 10,340,082 10,439,890 10,557,091 10,728,633
Period end balance sheet:
Assets $ 1,561,617 $ 1,632,913 $ 1,592,993 $ 1,537,278 $ 1,550,247
Securities 400,176 370,250 384,941 367,587 383,847
Total loans 1,059,530 1,157,123 1,099,413 1,071,662 1,019,361
Reserve for loan losses 15,040 11,378 11,354 11,169 12,049
Deposits 1,084,377 1,105,449 1,095,123 1,097,589 1,106,349
Total shareholders’ equity 112,019 115,368 115,993 116,347 118,999
Tier I capital 114,158 122,595 122,595 121,981 121,709
Tier I ratio 10.2 % 10.8 % 11.3 % 11.8 % 12.1 %
Total capital 128,193 133,452 133,949 133,150 133,758
Total capital ratio 11.4 % 11.8 % 12.4 % 12.8 % 13.3 %
Total risk-adjusted assets 1,122,803 1,133,429 1,082,351 1,036,978 1,007,118
Tier I leverage ratio 7.3 % 7.5 % 8.0 % 8.2 % 7.9 %
Average balance sheet:
Assets $ 1,650,501 $ 1,603,540 $ 1,540,716 $ 1,559,356 $ 1,513,484
Earning assets 1,552,441 1,504,564 1,443,262 1,462,789 1,420,449
Loans 1,173,799 1,125,998 1,070,764 1,051,212 1,008,538
Deposits 1,110,194 1,103,687 1,098,353 1,105,863 1,090,729
Shareholders’ equity 116,702 114,132 114,880 117,603 118,556
Key ratios: (%)
Return on average assets (ROA) (1.34 ) 0.93 1.02 0.85 1.17
Return on average shareholders’ equity (ROE) (19.01 ) 13.01 13.70 10.92 14.89
Net interest margin 3.14 3.51 3.61 3.52 3.65
Net overhead 3.40 1.91 1.83 2.01 1.61
Efficiency ratio 108.40 63.48 61.61 66.09 57.13
Credit quality:
Non-accrual loans $ 3,821 $ 2,987 $ 3,068 $ 2,743 $ 4,994
Restructured loans 45 47 0 52 55
90 day past due and accruing 3,171 2,875 2,082 3,132 2,848
Other real estate owned 961 1,170 231 281 138
Charge-offs $ 1,528 $ 873 $ 719 $ 2,015 $ 1,120
Recoveries 348 200 217 370 540
Net charge-offs $ 1,180 $ 673 $ 502 $ 1,645 $ 580
Reserve for loan losses as a percent of period-end loans (%) 1.42 0.98 1.03 1.04 1.18
Net charge-offs (annualized) as a percent of average loans (%) 0.40 0.24 0.19 0.63 0.23

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

                                                     
Sept. 2000 June 2000 March 2000 Dec. 1999 Sept. 1999
Earnings:
Net interest income $ 36,669 $ 25,063 $ 12,418 $ 49,272 $ 36,986
Provision for loan losses 6,226 1,383 687 3,195 2,430
Non-interest income 7,233 7,578 3,590 14,480 11,066
Security gains (2,497 ) (12 ) 99 312 230
Trading account (345 ) (317 ) 114 0 0
Non-interest expense 33,868 20,728 10,297 39,330 28,560
Federal income taxes (1,138 ) 2,552 1,301 5,361 4,427
Net income $ 2,104 $ 7,649 $ 3,936 $ 16,178 $ 12,865
 
Per share:
Basic earnings $ 0.20 $ 0.74 $ 0.38 $ 1.52 $ 1.21
Diluted earnings 0.20 0.74 0.38 1.51 1.20
Common dividends 0.48 0.32 0.16 0.56 0.42
Book value 11.05 11.31 11.17 11.12 11.31
Tangible book value 10.88 11.12 10.97 10.92 11.08
Market value 14.13 15.19 17.50 22.38 27.00
 
Weighted average shares outstanding:
Basic 10,294,922 10,362,424 10,406,020 10,635,852 10,680,710
Diluted 10,318,413 10,396,194 10,439,890 10,698,717 10,748,607
 
Period end balance sheet:
Assets $ 1,561,617 $ 1,632,913 $ 1,592,993 $ 1,537,278 $ 1,550,247
Securities 400,176 370,250 384,941 367,587 383,847
Total loans 1,059,530 1,157,123 1,099,413 1,071,662 1,019,361
Reserve for loan losses 15,040 11,378 11,354 11,169 12,049
Deposits 1,084,377 1,105,449 1,095,123 1,097,589 1,106,349
Total shareholders’ equity 112,019 115,368 115,993 116,347 118,999
Tier I capital 114,158 122,074 122,595 121,981 121,709
Tier I ratio 10.2 % 10.8 % 11.3 % 11.8 % 12.1 %
Total capital 128,193 133,452 133,949 133,150 133,758
Total capital ratio 11.4 % 11.8 % 12.4 % 12.8 % 13.3 %
Total risk-adjusted assets 1,122,803 1,133,429 1,082,351 1,036,978 1,007,118
Tier I leverage ratio 7.3 % 7.5 % 8.0 % 8.2 % 7.9 %
 
Average balance sheet:
Assets $ 1,598,443 $ 1,572,128 $ 1,540,716 $ 1,498,946 $ 1,478,588
Earning assets 1,500,280 1,473,913 1,443,262 1,405,195 1,385,786
Loans 1,123,704 1,098,381 1,070,764 1,005,998 990,761
Deposits 1,104,100 1,101,020 1,098,353 1,092,260 1,087,676
Shareholders’ equity 115,243 114,506 114,880 121,369 122,638
 
Key ratios: (%)
Return on average assets (ROA) 0.18 0.97 1.02 1.08 1.16
Return on average shareholders’ equity (ROE) 2.43 13.36 13.70 13.33 13.99
Net interest margin 3.41 3.56 3.61 3.68 3.73
Net overhead 2.37 1.87 1.83 1.77 1.68
Efficiency ratio 74.31 62.54 61.61 59.45 57.28
 
Credit quality:
Non-accrual loans $ 3,821 $ 2,987 $ 3,068 $ 2,743 $ 4,994
Restructured loans 45 47 0 52 55
90 day past due and accruing 3,171 2,875 2,082 3,132 2,848
Other real estate owned 961 1,170 231 281 138
Charge-offs $ 3,120 $ 1,592 $ 719 $ 4,477 $ 1,120
Recoveries 765 417 217 1,712 540
Net charge-offs $ 2,355 $ 1,175 $ 502 $ 2,765 $ 580
 
Reserve for loan losses as a percent of period-end loans (%) 1.42 0.98 1.03 1.04 1.18
Net charge-offs (annualized) as a percent of average loans (%) 0.28 0.21 0.19 0.27 0.08

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

                                                       
Sept. 2000 June 2000 March 2000 Dec. 1999 Sept. 1999
INTEREST INCOME
Loans (including fees):
Taxable $ 23,367 $ 22,887 $ 21,536 $ 21,005 $ 20,195
Exempt from federal income taxes 285 238 215 174 148
Securities:
Taxable 5,419 5,261 4,709 4,734 4,795
Exempt from federal income taxes 777 777 882 932 960
Federal funds sold 46 13 93 406 316
Trading account 0 3 0 0 0
Total interest income 29,894 29,179 27,435 27,251 26,414
 
INTEREST EXPENSE
Deposits 12,216 11,312 10,879 10,836 10,440
Federal funds purchased and securities sold under agreements to repurchase 1,440 1,356 1,184 1,467 1,459
Note Payable 0 0 19 0 0
Other borrowed funds 46 58 43 102 53
Federal Home Loan Bank advances 4,586 3,808 2,892 2,560 2,114
Total interest expense 18,288 16,534 15,017 14,965 14,066
Net interest income 11,606 12,645 12,418 12,286 12,348
Provision for loan losses 4,843 696 687 765 757
Net interest income after provision for loan losses 6,763 11,949 11,731 11,521 11,591
 
NON-INTEREST INCOME
Service charges on deposit accounts 1,163 1,079 1,054 1,123 1,130
Trust fees 833 1,049 1,004 894 950
Gain on sale of loans (3,191 ) 309 391 0 0
Trading account gains (28 ) (431 ) 114 0 0
Security gains (2,802 ) 206 99 82 55
Other operating income 1,167 1,234 1,141 1,397 1,810
Total non-interest income (2,858 ) 3,446 3,803 3,496 3,945
 
NON-INTEREST EXPENSE
Salaries and employee benefits 5,421 5,189 5,316 5,054 4,747
Net occupancy 1,062 1,037 1,052 1,081 1,032
Equipment 1,044 959 987 937 784
Professional services 1,650 698 477 779 535
Assessment on deposits and other taxes 423 425 413 450 439
Amortization of goodwill and other intangibles 216 115 116 172 171
Other operating expenses 3,324 2,008 1,936 2,297 1,910
Total non-interest expense 13,140 10,431 10,297 10,770 9,618
Income before federal income taxes (9,235 ) 4,964 5,237 4,247 5,918
Income tax expense (3,690 ) 1,251 1,301 934 1,506
Net income $ (5,545 ) $ 3,713 $ 3,936 $ 3,313 $ 4,412
 
NET INCOME PER COMMON SHARE:
Basic $ (0.55 ) $ 0.36 $ 0.38 $ 0.32 $ 0.41
Diluted $ (0.55 ) $ 0.36 $ 0.38 $ 0.32 $ 0.41
Weighted average common shares outstanding:
Basic 10,161,386 10,318,828 10,406,020 10,501,175 10,656,697
Diluted 10,161,386 10,340,082 10,436,890 10,557,091 10,728,633

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

                                               
Sept. 2000 June 2000 March 2000 Dec. 1999 Sept. 1999
INTEREST INCOME
Loans (including fees):
Taxable $ 67,790 $ 44,423 $ 21,536 $ 80,783 $ 59,778
Exempt from federal income taxes 738 453 215 681 507
Securities:
Taxable 15,389 9,970 4,709 18,446 13,712
Exempt from federal income taxes 2,436 1,659 882 3,781 2,849
Federal funds sold 152 106 93 891 485
Trading account 3 3 0 0 0
Total interest income 86,508 56,614 27,435 104,582 77,331
INTEREST EXPENSE
Deposits 34,407 22,191 10,879 41,938 31,102
Federal funds purchased and securities sold under agreements to repurchase 3,980 2,540 1,184 5,781 4,314
Note Payable 19 19 19 0 0
Other borrowed funds 147 101 43 219 117
Federal Home Loan Bank advances 11,286 6,700 2,892 7,372 4,812
Total interest expense 49,839 31,551 15,017 55,310 40,345
Net interest income 36,669 25,063 12,418 49,272 36,986
Provision for loan losses 6,226 1,383 687 3,195 2,430
Net interest income after provision for loan losses 30,443 23,680 11,731 46,077 34,556
NON-INTEREST INCOME
Service charges on deposit accounts 3,296 2,133 1,054 4,309 3,186
Trust fees 2,886 2,053 1,004 3,534 2,640
Gain on sale of loans (2,491 ) 700 391 0 0
Trading account gains (345 ) (317 ) 114 0 0
Security gains (2,497 ) 305 99 312 230
Other operating income 3,542 2,375 1,141 6,637 5,240
Total non-interest income 4,391 7,249 3,803 14,792 11,296
NON-INTEREST EXPENSE
Salaries and employee benefits 15,926 10,505 5,316 19,054 14,000
Net occupancy 3,151 2,089 1,052 4,134 3,053
Equipment 2,990 1,946 987 3,418 2,481
Professional services 2,825 1,175 477 2,192 1,413
Assessment on deposits and other taxes 1,261 838 413 1,689 1,239
Amortization of goodwill and other intangibles 447 231 116 685 513
Other operating expenses 7,268 3,944 1,936 8,158 5,861
Total non-interest expense 33,868 20,728 10,297 39,330 28,560
Income before federal income taxes 966 10,201 5,237 21,539 17,292
Income tax expense (1,138 ) 2,552 1,301 5,361 4,427
Net income $ 2,104 $ 7,649 $ 3,936 $ 16,178 $ 12,865
NET INCOME PER COMMON SHARE:
Basic $ 0.20 $ 0.74 $ 0.38 $ 1.55 $ 1.23
Diluted $ 0.20 $ 0.74 $ 0.38 $ 1.54 $ 1.22
Weighted average common shares outstanding:
Basic 10,294,922 10,362,424 10,406,020 10,635,852 10,680,710
Diluted 10,318,413 10,396,194 10,436,890 10,698,717 10,745,607

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

                                               
September 30 June 30 March 31 December 31 September 30
2000 2000 2000 1999 1999
ASSETS
Cash and due from banks $ 34,079 $ 38,526 $ 43,925 $ 35,238 $ 35,855
Federal funds sold 8,000 0 0 0 50,000
Trading Account 447 944 0 0 0
Securities 400,176 370,250 384,941 367,587 383,847
Loans 1,059,530 1,157,123 1,099,413 1,071,662 1,019,361
Less reserve for loan losses 15,040 11,378 11,354 11,169 12,049
Net loans 1,044,490 1,145,745 1,088,059 1,060,493 1,007,312
Premises and equipment 17,798 18,119 18,611 18,575 18,147
Accrued interest receivable 10,630 10,508 9,509 9,277 9,072
Goodwill and intangible assets 6,193 5,472 5,739 5,931 6,019
Other assets 39,804 43,349 42,209 40,177 39,995
Total assets $ 1,561,617 $ 1,632,913 $ 1,592,993 $ 1,537,278 $ 1,550,247
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Demand — non-interest bearing $ 107,391 $ 115,380 $ 113,207 $ 110,811 $ 105,047
Demand — interest bearing 83,991 88,184 90,465 90,570 89,850
Savings 262,024 269,925 277,892 270,544 274,245
Time deposits 630,971 631,960 613,559 625,664 637,207
Total deposits 1,084,377 1,105,449 1,095,123 1,097,589 1,106,349
Federal funds purchased and securities sold under agreements to repurchase 116,707 124,930 136,640 106,532 122,502
Other borrowed funds 3,622 2,609 2,798 9,739 6,322
Federal Home Loan Bank advances 238,872 276,009 233,144 200,276 187,406
Accrued expenses and other liabilities 6,020 8,548 9,295 6,795 8,669
Total liabilities 1,449,598 1,517,545 1,477,000 1,420,931 1,431,248
Shareholders’ equity:
Common stock, no par value; 30,000,000 shares authorized; 36,952 36,974 36,944 36,966 36,931
Treasury stock (12,590 ) (11,646 ) (8,943 ) (7,140 ) (5,357 )
Net unrealized holding gains on available-for-sale securities, net of tax (3,849 ) (8,631 ) (8,597 ) (7,791 ) (5,038 )
Retained earnings 91,506 98,671 96,589 94,312 92,463
Total shareholders’ equity 112,019 115,368 115,993 116,347 118,999
    Total liabilities
    and shareholders’ equity		 $ 1,561,617 $ 1,632,913 $ 1,592,993 $ 1,537,278 $ 1,550,247
Miscellaneous data:
Common shares issued 10,776,870 10,776,870 10,776,470 10,762,950 10,756,950
Treasury shares 639,920 575,720 393,100 304,500 231,700
Bank owned life insurance (in other assets) $ 29,527 $ 29,163 $ 28,819 $ 28,438 $ 28,090
Loans serviced for others $ 462,957 $ 325,012 $ 334,993 $ 343,859 $ 332,974
Mortgage servicing rights $ 4,102 $ 3,172 $ 3,341 $ 3,490 $ 3,390
Goodwill 1,213 1,379 1,445 1,511 1,588
Other intangibles 878 921 953 930 1,041
Total goodwill and intangibles assets $ 6,193 $ 5,472 $ 5,739 $ 5,931 $ 6,019

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

                                               
ASSETS Sept. 2000 June 2000 March 2000 Dec. 1999 Sept. 1999
Cash and demand balances due from banks $ 34,439 $ 34,628 $ 34,964 $ 37,677 $ 37,452
Federal funds sold 2,750 869 7,115 30,411 23,837
Trading Account 811 2,050
Securities 375,081 375,647 365,383 381,166 388,074
Loans:
Commercial 412,356 401,787 398,897 396,106 391,139
Consumer 272,322 245,457 221,853 214,383 214,087
Real estate 489,121 478,754 450,014 440,723 403,312
Total loans 1,173,799 1,125,998 1,070,764 1,051,212 1,008,538
Reserve for loan losses 11,578 11,451 11,413 12,288 12,257
Net loans 1,162,221 1,114,547 1,059,351 1,038,924 996,281
Premises and equipment 18,032 18,493 18,703 18,412 18,343
Goodwill and intangible assets 5,416 5,620 5,808 5,830 5,869
Other 51,751 51,686 49,392 46,936 43,628
Total assets $ 1,650,501 $ 1,603,540 $ 1,540,716 $ 1,559,356 $ 1,513,484
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Demand deposits (non-interest bearing) $ 112,662 $ 113,958 $ 112,086 $ 112,573 $ 108,345
Demand deposits (interest bearing) 85,432 89,531 88,665 92,003 91,304
Savings 265,319 273,879 275,433 271,970 283,593
Time deposits 646,781 626,319 622,169 629,317 607,487
Total deposits 1,110,194 1,103,687 1,098,353 1,105,863 1,090,729
Federal funds purchased and securities sold under agreements to repurchase 117,645 117,236 110,364 135,311 137,079
Borrowed funds 2,568 3,470 3,732 2,919 3,048
Accrued expenses and other liabilities 9,060 9,435 8,409 11,808 8,920
Federal Home Loan Bank advances 294,332 255,580 204,978 185,852 155,152
Total liabilities 1,533,799 1,489,408 1,425,836 1,441,753 1,394,928
Shareholders’ equity:
Common stock 36,962 36,955 36,975 36,967 36,966
Treasury shares (12,172 ) (9,931 ) (8,195 ) (6,030 ) (1,995 )
Net unrealized holding gains (6,957 ) (10,155 ) (9,085 ) (2,108 ) (5,210 )
Retained earnings 98,869 97,263 95,185 88,774 88,795
Total shareholders’ equity 116,702 114,132 114,880 117,603 118,556
Total liabilities and shareholders’ equity $ 1,650,501 $ 1,603,540 $ 1,540,716 $ 1,559,356 $ 1,513,484

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

                                               
ASSETS Sept. 2000 June 2000 March 2000 Dec. 1999 Sept. 1999
Cash and demand balances due from banks $ 34,676 $ 34,796 $ 34,964 $ 37,045 $ 36,832
Federal funds sold 3,575 3,992 7,115 16,215 11,431
Trading Account 953 1,025
Securities 372,048 370,515 365,383 382,982 383,594
Loans:
Commercial 404,376 400,342 398,897 387,008 383,942
Consumer 246,638 233,655 221,853 218,819 220,314
Real estate 472,690 464,384 450,014 400,171 386,505
Total loans 1,123,704 1,098,381 1,070,764 1,005,998 990,761
Reserve for loan losses 11,481 11,432 11,413 12,125 12,070
Net loans 1,112,223 1,086,949 1,059,351 993,873 978,691
Premises and equipment 18,408 18,598 18,703 18,210 18,142
Goodwill and intangible assets 5,614 5,714 5,808 5,756 5,731
Other 50,946 50,539 49,392 44,865 44,167
Total assets $ 1,598,443 $ 1,572,128 $ 1,540,716 $ 1,498,946 $ 1,478,588
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Demand deposits (non-interest bearing) $ 112,901 $ 113,022 $ 112,086 $ 108,778 $ 107,499
Demand deposits (interest bearing) 87,867 89,098 88,665 92,350 92,467
Savings 271,521 274,656 275,433 279,305 281,777
Time deposits 631,811 624,244 622,169 611,827 605,933
Total deposits 1,104,100 1,101,020 1,098,353 1,092,260 1,087,676
Federal funds purchased and securities sold under agreements to repurchase 115,091 113,800 110,364 136,382 136,743
Borrowed funds 3,254 3,601 3,732 2,696 2,621
Accrued expenses and other liabilities 8,969 8,922 8,409 9,755 9,063
Federal Home Loan Bank advances 251,786 230,279 204,978 136,484 119,847
Total liabilities 1,483,200 1,457,622 1,425,836 1,377,577 1,355,950
Shareholders’ equity:
Common stock 36,964 36,965 36,975 36,943 36,935
Treasury shares (10,107 ) (9,063 ) (8,195 ) (2,416 ) (1,198 )
Net unrealized holding gains (8,726 ) (9,620 ) (9,085 ) (1,698 ) (1,560 )
Retained earnings 97,112 96,224 95,185 88,540 88,461
Total shareholders’ equity 115,243 114,506 114,880 121,369 122,638
Total liabilities and shareholders’ equity $ 1,598,443 $ 1,572,128 $ 1,540,716 $ 1,498,946 $ 1,478,588

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Second Bancorp Incorporated and Subsidiary
Financial Highlights — Operating Basis — Excluding Restructuring and Reengineering Charges
Quarterly Data

(Dollars in thousands, except per share data)

                                               
Sept. 2000 June 2000 March 2000 Dec. 1999 Sept. 1999
Earnings:
Net interest income $ 12,258 $ 12,645 $ 12,418 $ 12,286 $ 12,348
Provision for loan losses 743 696 687 765 757
Non-interest income 3,683 4,102 3,590 3,414 3,890
Security gains 6 (225 ) 99 82 55
Trading account (28 ) (431 ) 114 0 0
Non-interest expense 10,531 10,431 10,297 10,770 9,618
Federal income taxes 1,168 1,251 1,301 934 1,506
Net income $ 3,477 $ 3,713 $ 3,936 $ 3,313 $ 4,412
Per share:
Basic earnings $ 0.34 $ 0.36 $ 0.38 $ 0.32 $ 0.41
Diluted earnings 0.34 0.36 0.38 0.32 0.41
Common dividends 0.16 0.16 0.16 0.14 0.14
 
Key ratios: (%)
Return on average assets (ROA) 0.84 0.93 1.02 0.85 1.17
Return on average shareholders’ equity (ROE) 11.92 13.01 13.70 10.92 14.89
Net interest margin 3.31 3.51 3.61 3.52 3.65
Net overhead 1.77 1.91 1.83 2.01 1.61
Efficiency ratio 66.51 63.48 61.61 66.09 57.13

Second Bancorp Incorporated and Subsidiary
Recap of Restructuring and Reengineering Charges
Quarterly Data
 (Dollars in thousands, except per share data)

             
Sept. 2000 Description
Interest income $ 652 Net deferred costs on sold mortgages
Provision for loan losses 4,100 Additional provision for specific credits
Loss on sale of loans 3,711 Sale of long-term fixed rate mortgages
Loss on sale of securities 2,808 Sale and reinvestment into higher yielding securities
Other expenses 2,609 Various restructuring and reengineering costs
including consulting costs, reduction of FHLB
balances and writedown of OREO property.
Pre-tax total $ 13,880
After-tax total $ 9,022

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Second Bancorp Incorporated and Subsidiary
Financial Highlights — Operating Basis — Excluding Restructuring and Reengineering Charges
Year-to-Date Data

(Dollars in thousands, except per share data)

                                                       
Sept. 2000 June 2000 March 2000 Dec. 1999 Sept. 1999
Earnings:
Net interest income $ 37,321 $ 25,063 $ 12,418 $ 49,272 $ 36,986
Provision for loan losses 2,126 1,383 687 3,195 2,430
Non-interest income 10,944 7,578 3,590 14,480 11,066
Security gains 311 (12 ) 99 312 230
Trading account (345 ) (317 ) 114 0 0
Non-interest expense 31,720 20,728 10,297 39,330 28,560
Federal income taxes 3,720 2,552 1,301 5,361 4,427
Net income $ 11,126 $ 7,649 $ 3,936 $ 16,178 $ 12,865
Per share:
Basic earnings $ 1.08 $ 0.74 $ 0.38 $ 1.52 $ 1.21
Diluted earnings 1.08 0.74 0.38 1.51 1.20
Common dividends 0.48 0.32 0.16 0.56 0.42
Key ratios: (%)
Return on average assets (ROA) 0.93 0.97 1.02 1.08 1.16
Return on average shareholders’ equity (ROE) 12.87 13.36 13.70 13.33 13.99
Net interest margin 3.47 3.56 3.61 3.68 3.73
Net overhead 1.81 1.87 1.83 1.77 1.68
Efficiency ratio 63.42 62.54 61.61 59.45 57.28

Second Bancorp Incorporated and Subsidiary
Recap of Restructuring and Reengineering Charges
Year-to-Date Data
 (Dollars in thousands, except per share data)

             
      Sept. 20   Description
     
Interest income $ 652 Net deferred costs on sold mortgages
Provision for loan losses 4,100 Additional provision for specific credits
Loss on sale of loans 3,711 Sale of long-term fixed rate mortgages
Loss on sale of securities 2,808 Sale and reinvestment into higher yielding securities
Other expenses 2,609 Various restructuring and reengineering costs
including consulting costs, reduction of FHLB
balances and writedown of OREO property.
Pre-tax total $ 13,880
After-tax total $ 9,022

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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:   October 20, 2000 /s/ David L.Kellerman              
David L. Kellerman, Treasurer

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