##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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Form 10-K

|  |  |                                                                                                                                 
|- |  | --------------------------------------------------------------------------------------------------------------------------------
|þ |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003
|  |  |                                                                                                                                 
|o |  | TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
TO
.  

Commission File Number: 0-15624



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Second Bancorp Incorporated

(Exact Name of Registrant as Specified in Charter)


|                                                                   |  |                                            
|------------------------------------------------------------------ |  | -------------------------------------------
|Ohio(State or Other Jurisdiction of
Incorporation or Organization) |  | 34-1547453(IRS Employer
Identification No.)

108 Main Avenue SW, Warren, Ohio 44481(Address of Principal Executive Offices) (Zip Code)

Registrants telephone number, including area code:
330.841.0123

Securities registered pursuant to Section 12(g) of the Act:

|                           |  |                                          
|-------------------------- |  | -----------------------------------------
|Title of each class        |  | Name of each exchange
on which registered
|                           |  |                                          
|Common Stock, no par value |  | The NASDAQ National Market               

Securities registered pursuant to Section 12(b) of the Act:None

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes þ Noo

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. o

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes þ Noo

The aggregate market value of the Common Stock held by non-affiliates of the
registrant as of June 30, 2003 as reported on the NASDAQ National Market
System, was approximately $219,599,048. Shares of Common Stock held by each
officer and director and by each person who owns 5% or more of the outstanding
Common Stock have been excluded in that such persons may be deemed to be
affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.

As of January 31, 2004 the registrant had outstanding 9,479,371 shares of
Common Stock.

1



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TABLE OF CONTENTS



|                                             |                                                                                               |                                                 |  |  |  |  |  | 
|-------------------------------------------- | --------------------------------------------------------------------------------------------- | ----------------------------------------------- |  |  |  |  |  | 
|PART I                                      
|                                             | Item 1. BUSINESS                                                                             
|                                             | Item 2. PROPERTIES                                                                           
|                                             | Item 3. LEGAL PROCEEDINGS                                                                    
|                                             | Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                                             | Item 4 A. IDENTIFICATION OF EXECUTIVE OFFICERS                                               
|PART II                                     
|                                             | Item 5. MARKET FOR REGISTRANTS COMMON STOCK AND RELATED SHAREHOLDER MATTERS                 
|                                             | Item 6. SELECTED FINANCIAL DATA                                                              
|                                             | Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                             | Item 7 A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                         
|                                             | Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                          
|                                             |                                                                                               | Consolidated Balance Sheets                    
|                                             |                                                                                               | Consolidated Statements of Income              
|                                             |                                                                                               | Consolidated Statements of Shareholders Equity
|                                             |                                                                                               | Consolidated Statements of Cash Flows          
|                                             |                                                                                               | Notes to Consolidated Financial Statements     
|                                             |                                                                                               | Condensed Balance Sheets                       
|                                             |                                                                                               | Condensed Statements of Income                 
|                                             |                                                                                               | Condensed Statements of Cash Flows             
|REPORT OF INDEPENDENT AUDITORS              
|REPORT OF MANAGEMENT                        
|                                             | Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 
|                                             | Item 9 A. CONTROLS AND PROCEDURES                                                            
|PART III                                    
|                                             | Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                  
|                                             | Item 11. EXECUTIVE COMPENSATION                                                              
|                                             | Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                      
|                                             | Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                      
|                                             | Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES                                              
|PART IV                                     
|                                             | Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K                     
|SIGNATURES                                  
|EX-9.1 Form of Voting Agreement             
|EX-10.20 Amend to Emplymnt Agmt - Blossom   
|EX-10.21 Amnd Mgmt Service Agmt Dated 6-1-03
|EX-10.22 Amnd Mgmt Service Agmt Dated 6-1-03
|EX-21.1 Subsidiaries of Registrant          
|EX-23.1 Consent of Independent Auditors     
|EX-31.1 302 CEO Certification               
|EX-31.2  302 CFO Certification              
|EX-32.1 906 CEO Certification               
|EX-32.2 906 CFO Certification               



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PART I.




Item 1. BUSINESS

General

Second Bancorp Incorporated (Second Bancorp) is a one-bank financial holding
company with its most significant subsidiary being The Second National Bank of
Warren (Second National), a Warren, Ohio based commercial bank. Operating
through 33 retail banking centers and 5 loan production offices, Second
National offers a wide range of commercial and consumer banking and trust
services primarily to business and individual customers in various communities
in a nine county area in northeast and east-central Ohio. A second operating
subsidiary is Stouffer-Herzog Insurance Agency, which sells a wide range of
property, casualty, life and health insurance products in northeast Ohio. At
December 31, 2003, Second Bancorp had consolidated total assets of $2.12
billion, deposits of $1.22 billion and shareholders equity of $137 million.
Additional non-operating subsidiaries include Second National Capital
Corporation and Second National Financial Company, LLC, which were formed in
2002 to facilitate a capital conversion plan for the subsidiary Bank. The
Corporation also maintains an unconsolidated subsidiary, Second Bancorp Capital
Trust I, which was established in 2001 to facilitate raising Tier I eligible
capital in the form of corporation-obligated mandatorily redeemable capital
securities of a subsidiary trust; see footnote 17 of Item 8; Financial
Statements and Supplementary Data.

Second National focuses its marketing efforts primarily on local independent
commercial and professional firms, the individuals who are the owners and
principals of such firms as well as the low-to-moderate to upper income retail
customers in Second Nationals trade areas. In recent years, Second Bancorp has
emphasized increased commercial, direct consumer and real estate lending as
well as market area expansion.

On January 8, 2004, the Corporation and Sky Financial Group. Inc., based in
Bowling Green, Ohio, announced an agreement whereby Sky Financial Group will
acquire the Corporation and its wholly-owned subsidiaries including the Bank.
The transaction is expected to close during the second quarter of 2004. Under
the terms of the agreement, shareholders of the Corporation will receive 1.26
shares of Sky Financial Group common stock for each share of the Corporation.

The agreement provides for the merger of the Corporation into Sky Financial
Group, and the subsequent merger of the Bank into Sky Bank, Sky Financial
Groups commercial banking affiliate. The Corporations insurance affiliate
Stouffer-Herzog will be integrated into Sky Insurance some time after the
merger is complete.

The merger is subject to receipt of applicable regulatory approvals and to the
approval of the shareholders of the Corporation.

Primary Business Operations

We currently operate three major lines of business, each of which is discussed
below.

Commercial

Commercial includes credit and related financial services to
small-to-large-sized corporations and businesses.

Our commercial lending activities focus primarily on providing local
independent commercial and professional firms with commercial business loans
and loans secured by owner-occupied real estate. Typically, our customers
financing requirements range from $250,000 to $10 million. We primarily make
secured and unsecured commercial loans for general business purposes, including
working capital, accounts receivable financing, machinery and equipment
acquisition, and commercial real estate financing. These loans have both fixed
and floating interest rates and typically have maturities of three to seven
years. Commercial loans comprised approximately 47% of our total loan portfolio
at December 31, 2003.

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We have sought to differentiate Second Nationals Commercial business line by
being bankers, not just lenders. What this means is that our delivery of
premier commercial banking products and services is not dependent only on
competing over price. Rather, our professionals are responsible for taking on a
consultative role in long term relationship building, ensuring that what we are
providing is in harmony with the vision of our clients.

The success of this orientation is evident in the stability of our core group
of commercial bankers that has not experienced any turnover during the past two
years. Moreover, our most recent additions to the Commercial Banking staff have
come from within the Bank, further contributing to the depth of knowledge
represented by this team.

During 2003, new loan generation increased by 12.75 percent compared with 2002,
for a total of $219,030,265. Fee income also grew to $2,292,216 for an increase
of 5 percent over the prior year. Commercial portfolio balances were $630
million at year end, up from $542 million at December 31, 2002.

Second National uses a number of techniques to increase its client base. Some
of these include mass marketing, referrals from our existing clients and
referrals from CPAs and attorneys. Earlier in the year, we also initiated a
cold calling marketing program to increase our market penetration and meet
our profitability objectives in the Cleveland and Akron areas. Lenders
developed a customized target list that focused on small businesses and was
designed focusing on specific industries that are desirable to the Bank.
Results of this effort are incorporated into monthly sales activity and backlog
reports as a way of formalizing the process of relationship building.

Retail

Retail includes deposit gathering, direct and indirect consumer lending along
with a minor amount of small business banking services.

We offer a full range of consumer loans to individuals, including the owners
and principals of our commercial customers and a wide range of retail customers
in our market area. We offer consumer loans for a variety of personal financial
needs, including home equity, new and used automobiles, boat and recreational
vehicle loans, credit cards and overdraft protection for checking account
customers. At December 31, 2003, approximately 34% of our consumer loans
consisted of indirect auto, boat and recreational vehicle loans, which are
originated through dealers in the local area. Consumer loans comprised
approximately 30% of our total loan portfolio at December 31, 2003.

We continued to adjust our Retail Banking Center/Hub network by reallocating
resources to locations where marketplace intelligence gathering and analysis
indicated high growth potential. That effort is supported by ongoing training,
properly designed incentives, and utilization of Monthly Achievement Results
(MARs) reports as a system of evaluation and measurement. Using our Financial
Information System (FIS) we are capable of using real time, fact-based data to
make accurate decisions to achieve profitability growth targets.

During 2003, we were successful in reducing or controlling expenses through
consolidation of facilities, reducing charge-offs, increasing fee collection
rates, and streamlining contract pricing relative to various services such as
telecommunications and ATM costs. We also implemented a Resource Optimization
and Allocation Model (ROAM()) staffing model that has enabled us to reduce
costs while still improving performance.

Increases in income were achieved by growing the level of profitable products
sold or booked, delivered by professionals dedicated to continually developing
their sales acumen, and supported by an increase in target advertising and
outbound calling to cultivate new business prospects.

Other specific Retail Banking 2003 achievements include:



| |  |  | Banking Center Mortgage Loan production reached
$191,158,000, an increase of 36.67% over 2002
| | - |  | ---------------------------------------------------------------------------------------------

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| |  |  | Banking Center Consumer Loan production reached
$153,343,000, an increase of 70.42% over 2002
| | - |  | ---------------------------------------------------------------------------------------------
|
| |  |  | Banking Center Consumer Loan outstanding balances increased by 23.03% over 2002              
|
| |  |  | Banking Center outstanding non-interest demand deposits increased 4.55% over 2002            
|
| |  |  | Banking Center outstanding non-maturity deposits increased 17.72% over 2002                  
|
| |  |  | Call Center loan sales (excluding mortgage and commercial) were $11,413,875                  
|
| |  |  | Retail Banking cross sell improved from 2.70 in 2002 to 3.01 in 2003                         

Second National Bank continues to expand its geographic marketplace presence.
This past year we opened our new banking center located at 445 West Milltown
Road, Wooster. The new 3200-square-foot facility features full-service banking
including retail and commercial banking, private banking, wealth management and
investment product lines. Also available are a drive-up ATM, drive-thru banking
lanes, a walk-in vault and safe deposit boxes. The new banking center is within
easy access from Burbank Road (Highway 83). Second National Banks other
facility in Wooster, located at Liberty Commons, will remain open as a loan
production facility.

The doors also opened at Second Nationals new Kent Banking Center located at
1590 South Water Street (State Route 43). The new facility replaces our
original Kent and Brimfield Banking Centers and is less than three miles from
the former Brimfield Banking Center and only one mile from the original Kent
location. The new Kent Banking Center provides clients with a complete range of
products and services plus new conveniences, including two drive-thru lanes, a
drive-up ATM and additional safe deposit boxes.

Second National Bank will open a new Hudson Banking Center in May of 2004. The
3200-square-foot facility will be located at 5801 Darrow Road in Hudson, only
1.2 miles from our existing Hudson office. The new location, within easy access
from Route 91, will feature full-service banking including a drive-up ATM, two
drive-thru banking lanes, night depository, a walk-in vault and safe deposit
boxes.

A new Medina Banking Center, located at 1065 North Court Street on Route 42 (in
the K-Mart plaza), is also scheduled to open in May of 2004. This facility is
only one mile from our existing banking center and just a little more than a
mile from the town square. The 3200-square-foot Medina office will offer
full-service banking including a drive-up ATM, two drive-thru banking lanes,
night depository, a walk-in vault and safe deposit boxes.

Smart Business Checking and Freedom Checking, two new product offerings in
2003, focus on valuable features and benefits designed to give Second National
personal and business clients the choice advantage of two of the most
attractive checking accounts available in the Northeast Ohio marketplace.

Private Banking continues to focus on generating new members, while at the same
time cross selling new and enhanced products to current clients as a way of
ensuring client satisfaction. We are also focusing on building the business
relationships associated with the Private Banking client group.

The ease of transacting business as a Private Banking client was simplified
with the addition of free personal and business online banking. Of course, the
option of calling your Private Banking Officer anytime for personal assistance
remains a key feature of the Private Banking Program.

During 2003, Private Banking expanded the client base by 25% more than 2002,
currently serving over 1,050 clients. Loan volume surpassed prior years
production by 56%, generating $114,955,000 in new loans.

The Private Banking team expanded into the Medina market late in 2003 and we
look forward to growing our program in that market during 2004.

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Mortgage

Mortgage includes mortgage banking activities, including the ownership,
origination, sale and servicing of mortgages.

Our mortgage banking department underwrites and originates a wide range of
mortgage loan products and sells a significant volume of them primarily on a
servicing retained basis. Generally, the loans sold into the secondary mortgage
market make funds available for reuse in mortgage or other lending activities.
The sales typically generate a net gain (including origination fee income and
deferred origination costs), limit the interest rate risk caused by holding
long-term, fixed-rate loans, and supplement our portfolio of serviced loans
which generate fee income. We originated over $1.19 billion of loans in 2003
and serviced $1.75 billion in mortgage loans for others at December 31,
2003.

Second Nationals Mortgage lending business line continued during 2003 to
capitalize on the profitability of mortgage loans by emphasizing proactivity
and efficiency through a sales culture focused on fee generation, origination
and sale of investment quality mortgages, sales development and technological
resources.

In the Retail portion of our production activities, Second Nationals mortgage
originators and mortgage sales managers achieved an increase of 42 percent
compared to 2002 while Retail production increased 36.67 percent from the
previous year.

Of special note during 2003, Mortgage Servicing reached the benchmark of $2
billion of mortgages serviced together with a net increase of 4,221 accounts,
representing a year end total of 22,666 loans serviced. Our continued strong
Tier I server rating with our primary loan purchaser, which provides for better
pricing, is evidence that our plan for migrating from a portfolio mindset to a
secondary market environment with staff and banking centers was successful.

Related to the fact that 74 percent of Second Nationals mortgage servicing
during 2003 was performed on behalf of our major loan purchasers, FreddieMac
and Fannie Mae, it is important to note that Mike Filarski, Senior Vice
President, Mortgage Lending & Servicing, accepted an appointment to become a
member of Freddie Macs prestigious Community Lender Advisory Board. Membership
in the Freddie Macs Community Lender Advisory Board is limited to a highly
select group of professionals and provides a vital conduit for sharing
objective, proactive opinions about the ever-changing mortgage lending
industry.

To help offset anticipated nationwide drop offs in mortgage production and
refinancing during 2004, we have escalated our emphasis on expansion into new
market areas, improvements in operational efficiencies and a primary dedication
to optimum service levels. Staffing will continue to be strongly monitored
using industry standard benchmarks. Relationship building, supported by
quality, efficiency and the skilled application of new technological tools,
will be the foundation for continuing profitability in 2004.

Second Nationals new mortgage website is accessed by logging on to
www.secondnationalbank.com.This website serves as a new channel of business
for our organization while at the same time providing clients/members with a
number of helpful services.

Our online users are now able to:



| |  |  | Apply for a mortgage at their convenience, 24/7                                                
| | - |  | -----------------------------------------------------------------------------------------------
|
| |  |  | Obtain a loan decision in seconds, not days                                                    
|
| |  |  | Access online mortgage calculators, a glossary of mortgage terms and
product information       
|
| |  |  | Complete a customized application that only asks questions applying to
their specific situation
|
| |  |  | View SNB current mortgage rates                                                                

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| |  |  | Set up a rate watch alert when certain rates are reached
| | - |  | --------------------------------------------------------

Second National Bank associates now have the benefits of:



| |  |  | Originating loans at any time during the day or week                                                                                                    
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Improved application thoroughness at the time of loan submission,
meaning less follow-up work is required to get the loan approved and
ready for closing
|
| |  |  | Enhanced productivity by using the automated underwriting
functionality, thereby freeing up underwriters to focus on the more
difficult loan decisions  
|
| |  |  | Increased efficiency through integration with our loan processing system                                                                                

Other Activities

Community Development Banking continued its forward momentum in 2003 with a
primary focus on expanding its sales efforts, increasing its delivery system in
urban markets, and enhancing financial literacy and outreach activities.

With an emphasis on home ownership lending in 2003, we expanded our community
mortgage loan originators to include Mahoning, Trumbull, Ashtabula and Summit
Counties. Those originators are dedicated to serving low-and moderate-income
families and have established relationships with non-profit organizations and
community groups that provide home ownership, debt management and financial
literacy counseling. Their goal is to provide affordable home mortgages to
first time homebuyers and families with modest means. All community mortgage
loan originators have significant experience in government lending, including
FHA and VA lending which offer programs designed to increase home ownership in
urban markets.

In addition, Community Development Banking opened two Community Mortgage
Production offices in Warren and Akron, Ohio. Those new alternative delivery
channels will complement the existing retail branch network by giving residents
in the community better access to Second Nationals home loan products. Those
offices staffed with the community mortgage loan originators are located within
non-profit organizations that serve families within the urban communities.

Second Nationals commitment to community development continued to strengthen
in 2003 with a record breaking year of more than $20 million dollars in
community development loans.

Some of the projects funded include:



| |  |  | Construction of a 40-unit, 3-story senior citizens complex in Mahoning
County  
| | - |  | -------------------------------------------------------------------------------
|
| |  |  | Construction of a 48-unit, 3-story senior citizens complex in Summit
County    
|
| |  |  | Construction of a 40-unit, single-family housing project in Mahoning
County    
|
| |  |  | Construction of a 50-bed nursing home in Franklin County                       
|
| |  |  | Construction of a 5-unit single family home ownership project in Stark
County  
|
| |  |  | Acquisition and renovation of 25 distressed properties in Cuyahoga
County      
|
| |  |  | Acquisition of a 200-bed nursing home in Franklin County                       
|
| |  |  | Expansion and funding of an economic development corporation in
Trumbull County
|
| |  |  | Expansion of a youth development organization in Trumbull County               

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Second National also placed significant emphasis on financial literacy,
offering several innovative and exciting programs. Some of these programs
include Teach Children to Save Day and Make a Difference Day. Bank officers
and associates participated in these events and partnered with the public
schools and housing authorities to provide training on savings products and
setting financial goals. Second National reached more than 440 youths with
these programs. In addition, the Bank sponsored a Dress for Success clothing
drive, donating several suits and other business attire to an organization that
helps low income women return to the work force.

Several other community events included economic opportunity mixers, minority
trade fairs, homebuyer seminars, entrepreneurial programs and Community Day of
Caring with United Way. Overall, Second National provided more than 40
community development services and participated in over 25 community events in
its host communities in 2003.

Second National Bank also continued to provide financial support of
organizations that promote economic growth within our communities. In 2003 the
Bank made contributions and commitments of over $1.1 million to assist in the
creation of affordable housing, job development and numerous other community
development initiatives.

We will continue to approach Community Development as an opportunity not an
obligation.

Wealth Management integrates traditional Trust products and services with the
financial specialization capabilities of Private Banking plus opportunity
guidance provided by our Investment Center. Our mission is to protect, manage,
and grow the assets of individual and business clients.

During 2003, Second National took strides to position the Bank as a premier
provider of Wealth Management services in our marketplaces. For example:

Our Investment Center became part of Wealth Management. This logical
progression in the evolution of asset management creates additional value for
clients by providing financial planning and investment expertise as well as the
opportunity to invest in mutual funds, securities, and fixed/variable annuities
and to purchase insurance products. Internally, we have achieved greater
efficiency in that by placing these functions together, all referrals are
directed to one place and are then assigned to the area that can best serve the
needs of the client.

Additionally, Wealth Management enhanced its involvement with insurance through
the addition of an insurance specialist to its professional staff. This will
strengthen our focus on life insurance, disability and long term care packages.
Although insurance products are not new, the presence of a true specialist
will enhance increased cross selling and the ability to build relationships by
dovetailing insurance programs into broader financial planning.

During 2003, we added Wealth Management business development officers in our
Hub Financial Services Centers in Beachwood, North Olmsted, Akron and in
Trumbull County, thereby increasing the flow of leads and new account
opportunities through our business pipeline.

In April Second National Bank announced a new broker/dealer affiliation with
UVEST® Financial Services. UVEST, established in 1982, was one of the first
firms in the country to offer bank-based investment programs once laws were
revised to allow banks to offer non-deposit securities. Independently owned and
with a support staff of more than 100 professionals, UVEST partners only with
financial institutions. The firm is endorsed by the American Bankers
Association and is a registered securities broker-dealer and member of the
National Association of Securities Dealers, the Security Investors Protection
Corporation and the Securities Industry Association. Clients of Second National
Banks Investment Center will benefit from our new relationship with UVEST
because of expanded financial products and services, including a full range of
securities brokerage services, financial planning, professional money
management, stocks, bonds, mutual funds and annuities.

During 2003, Wealth Management introduced the MAP Account. Historically a
client had one basic choice when it came to how assets were invested, and that
was the individual style and preferences of the

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account manager. The MAP Account accommodates all levels of asset amounts
beginning as low as $25,000. Depending upon the level of assets, there are
choices ranging from mutual fund families to a series of asset management
options related to client-specific issues. This new program provides clients
significantly greater flexibility in working with Second National Wealth
Managers to determine optimum, individualized investment strategies.

Also introduced during 2003 was the American Funds platform providing corporate
clients with an additional option in the 401(k) arena. Second National
previously offered two platforms: one for larger companies who want all of the
available technology, and a second for plan sponsors who want the benefit of a
401(k) plan but do not need state of the art technology. The introduction of
the American Funds 401(k) platform provides many smaller companies with state
of the art technology with the caveat that in order to avail themselves of such
benefits they are limited to using only American Funds as their investment of
choice. American Funds, the largest mutual fund family distributed exclusively
by financial advisers, is the third largest mutual fund family in the U.S.,
with more than $300 billion in investments and over 20 million shareholder
accounts.

Wealth Managements web-based TrustReporter now offers clients the ability to
view trust accounts online. With just a few clicks authorized users can view
their portfolio, transactions, assets, and holdings without leaving the home or
office. A variety of useful reports and graphics are also available.
Demonstrations of the features of TrustReporteras well as access to the
program itselfare easily accessed at www.secondnationalbank.com.

During the past 12 months since the Stouffer-Herzog Insurance Agency became a
part of Second National Bank, we have successfully accomplished the integration
of staff, benefits and communication systems and have grown this portion of the
business by more than 10 percent. In doing so, the Bank absorbed some of the
back office functions of the insurance agency thereby increasing efficiency and
decreasing total staff. We are on track with our objective of increasing the
partnering of Bank employees and insurance agency personnel in order to cross
sell our products to Bank customers and, conversely, Second National products
and services to our insurance clients.

Our Client Advantage Program (CAP), created to build long term relationships
and to develop a sales culture for Second National Bank, continues to meet its
objectives through Client Preference Interviews that provide our associates the
knowledge necessary to address current and future client financial needs.
Throughout the Bank, associates have the capability of reviewing individual
performance via Monthly Achievement Results (MAR).

Sales training and coaching accomplished in groups and on a one-to-one basis
under the umbrella of CAP produced many notable achievements throughout the
organization. These include measurable improvements in client service;
heightened levels of cross selling; increased outbound call volumes; enhanced
effectiveness in the use of technology and core systems such as the Financial
Information System (FIS); and amplified attention to client retention.
Formalized training has also encompassed issues such as professionalism in the
work place, supervisory, sales, phone and listening skills, plus guidance in
effectively conducting Client Preference Interviews.

The beneficial results of CAP are seen in comparative results. In 2003, 12,524
Client Preference Interviews were generated. Outbound calls jumped
dramatically this year to 86,385 versus 49,682 in 2002. Most importantly,
cross selling has increased during 2003 to 3.01 for associate cross sells, an
increase from the 2002 level of 2.70.

Our CAP Sales Task Force continues to apply itself to ways of increasing our
selling and relationship-building efforts through lobby displays, contests
between banking centers, recognition of individuals for successful selling
efforts, and a variety of other promotional and incentive activities.

As of January 1, 2004, Second National Bank has 13,012 online
clients...impressive growth compared to 7,083 at the same time last year. Of
our current online users, 2,061 use the online banking bill pay function. That
compares to 483 during the same period last year.

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In October, Second National Bank began offering online banking and online bill
pay free of charge to all personal and business clients. Online banking
functions were enhanced by the addition of loan and deposit account
applications in a post-login environment for all online banking clients.

Numerous enhancements were made to the Banks website, including Map Me!
instructions to any office from any location in the United States; a link to
the Stouffer-Herzog website and vice versa; press releases; informational
articles; expanded FAQs, MortgageBot and TrustReporter.

As part of our commitment to supporting area businesses, Second National is
sponsoring a monthly profile television feature that will ultimately recognize
companies as Entrepreneurs of the Valley. This salute to forward thinking
features a 30-second video vignette that will air on local television during
key viewing times such as the daybreak, evening and late evening news. Each
months entrepreneur will also be the subject of a live news video segment.

The first two entrepreneurs receiving this honor were Gerald E. Henn, President
of the Henn Workshops; and Leonard J. Fisher, owner of Handels Ice Cream. Mr.
Henns company, located in Lordstown since 1982, markets fine handcrafted
reproductions of 18th and 19th century baskets, pottery, and Shaker woodenware.
Mr. Fisher owns the Handels Ice Cream & Yogurt Franchise headquartered in
Canfield, Ohio where the company has been successfully making and selling
homemade ice cream since 1945. Both Mr. Henn and Mr. Fisher represent the best
in quality, service to customers, marketplace innovation and integrity in
business.

As in every year, Second National Bank and our many associates are attentive to
contributing their time and resources through civic and charitable activities
to the betterment of the communities we serve. During 2003 that included active
participation in events such as the Jefferson Area Chamber of Commerce 12th
Annual Food Drive, the 10th consecutive year of the Trumbull County American
Cancer Society Relay For Life, the Junior Achievement Bowl-a-thon and the Akron
Breast Cancer Walk.

The outstanding hard work and professional dedication demonstrated by our
associates and vendors during the strenuous effort to quickly help Second
National Bank recover from flood damage during 2003 was a shining success.
These exceptional and positive contributions helped us to effectively overcome
what might otherwise have become truly disastrous to our business and are a
testament to the value of the careful preplanning in place to enable fast
response to unexpected events. It is said that rock-solid strength is not
developed by being happy in everyday circumstances but rather, is forged by
challenging adversity and surviving difficult times together. These two words
may not adequately express the depth of our appreciation, but please know that
they are completely heartfelt: Thank You!

Achievements

The profitable forward movement of Second National Bank during 2003 received
recognition in numerous ways by a variety of objective sources.

The Growth Partnership for Ashtabula County recognized Second National Bank
with its Best of the County award in the banking category.

The Best of the County celebration was initiated in the 1980s to honor
achievements involving business growth, community growth and the best use of
human and natural resources.

This years award reflects the commitment of Second National Bank to the
Ashtabula County communities, most notably a $16 million loan package that
financed the Geneva State Park Lodge/Conference Center. Second National also
established itself as a leader in home mortgages and repeatedly received
recognition by the U.S. Small Business Administration (SBA) for providing more
small business loans than any other bank lender in the Cleveland district,
which includes Ashtabula.

The Greater Cleveland Growth Associations Growth Capital Corp. awarded Second
National Bank its 2003 Emerging Bank of the Year award. This honor recognizes
banks that originated a loan during the year utilizing the SBA 504 program or
the Ohio Regional 166 program through Growth Capital Corp. for the first time.
Second National originated three loans totaling $1,569,000. Growth Capital
Corp. is the

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Greater Cleveland Growth Associations business finance arm and provides
financial assistance to the regions businesses to foster economic growth and
jobs creation in Northeast Ohio.

Once again, Second Bancorp Incorporated received highly favorable evaluations
as reported by The Plain Dealerin their ranking of Ohios Best Performing
Public Companies. In The Plain Dealer100, Second Bancorp Incorporated
placed:



| |  |  | 48 on the overall list...up from 64 in 2002.                                                     
| | - |  | -------------------------------------------------------------------------------------------------
|
| |  |  | 26 in the Top 50 Ohio stocks. These Ohio companies saw the biggest rise
in stock price last year.

The Plain Dealer100 is a ranking of Ohio companies by seven performance
criteria including revenue; compound growth in revenue; compound growth in net
income; return on average common equity; total return; percent change in net
income margin; and market value, or capitalization.

Second Bancorp Incorporated also ranked:



| |   |  |                                                                                                                                                         
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | 20 in Northeast Ohio 20, a subset of The Plain Dealer100.                                                                                               
|
| |  |  | 10 in Best Northeast Ohio Banks. Return on average common equity added
to profit margin and the efficiency ratio to determine the regions best
banks.

Second National Bank once again received the Number One Bank vote in the
Tribune ChronicleReaders Choice Contest. This is the fourth year in a row
that Second National received the Best of the Best award.

Second National Bank president and CEO, Rick Blossom, received the Entrepreneur
of the Year Award in the Financial Services category of the prestigious 2003
Ernst & Young Entrepreneur of the Year awards program. The awards mark the end
of an intensive search to identify and recognize outstanding business
entrepreneurs.

A press release from Ernst & Young summarizing the award notes:

High on Rick Blossoms list of objectives when he joined the bank was
balancing the twin realities of Second National as both a regional and a
community bank...serving Main Street and Wall Street! His goal: to achieve
profitable equilibrium through aggressive business development while running a
tight, highly efficient company that provides service to its clients.

Established in 1988 the E&Y Entrepreneur of the Year award recognizes great
business achievements around the world and was created to make the public more
aware of the benefits entrepreneurs provide to the international economy and
our global communities.

Second National is pleased to be a part of the business success demonstrated by
11 of our clients recently recognized with 2003 Business Growth Awards
co-sponsored by Smart Business magazine and the Cascade Capital Corp. This
award honors companies in Summit, Portage, Medina, Ashland, Holmes and Wayne
Counties that have experienced significant sales or employment growth. Among
the 40 companies that reached this impressive milestone, more than a quarter
have a progressive working relationship with Second National. They include:



| |   |  |                                                                                                                                                                                                                                                                                 
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | Darko, Inc  Diskin Enterprises, Inc.  Emerald Environmental, Inc.
Highlander Logo Products
 Hunters Manufacturing Co., Inc. Ice Tubes, Inc. Mid American
Security Services, Inc.  Natural Essentials, Inc.  Qualiform, Inc. 
Rays Discount Drugs, Inc.  Worens Group

Our latest television advertising campaign produced impressive results, not
only across all lines of our business, but also within the advertising
industry. The Baker TV spot, which began airing in January, received a gold
award at the 2003 Financial Communications Society (FCS) Portfolio Awards.

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This prestigious award is for Business-to-Business Television, a notoriously
tough category in which there were no other winners. The FCS awards seek to
promote the best and most innovative broadcast and print work in the financial
services industry.

Baker was one of three spots produced by Second National and Brokaw Inc. The
same campaign received featured status in an online write-up at adweek.com, a
weekly trade publication for the advertising and marketing industries. Adweek
highlights advertising it believes shines above the rest and extolled our
Baker TV spot for its unique take on the way we improve the lives of our
customers.

Market Area

Second Nationals primary market area consists of Trumbull, Ashtabula, Portage,
Mahoning, Summit, Medina, Stark, Cuyahoga and Wayne counties in the northeast
and east-central portions of Ohio, to the east and south of the Cleveland
metropolitan area. The market areas economy is heavily influenced by the
manufacturing sector with an emphasis on steel, auto manufacturing and a
variety of related and smaller industries. The area has benefited from an
extensive transportation system comprised mainly of railroad and trucking
systems.

Competition

There is significant competition in the financial services industry in
northeast Ohio among commercial banks. As a result of deregulation of the
financial services industry, Second Bancorp also competes with other providers
of financial services such as savings and loan associations, credit unions,
commercial finance companies, brokerage and securities firms, insurance
companies, commercial finance and leasing companies and the mutual fund
industry. Some of Second Bancorps competitors, including certain regional bank
holding companies, which have operations in Second Bancorps market area, have
substantially greater resources than Second Bancorp, and as such, may have
higher lending limits and may offer other services not available through Second
National. Second Bancorp also faces significant competition, particularly with
respect to interest rates paid on deposit accounts, from well-capitalized local
thrift institutions. Second National competes on the basis of rates of interest
charged on loans, the rates of interest paid on funds, the availability of
services and responsiveness to the needs of its customers.

Regulation

Second Bancorp is a one bank financial holding company and is regulated by the
Federal Reserve Bank (the FRB). Second National is a national bank and is
regulated by the Office of the Comptroller of the Currency (the OCC), as well
as the Federal Deposit Insurance Corporation (the FDIC). Dramatic changes
have developed over the past several years regarding minimum capital
requirements for financial institutions. A listing of the minimum requirements
for capital and Second Bancorps capital position as of December 31, 2003 and
2002 are presented in footnote 18 of Item 8; Financial Statements and
Supplementary Data and is hereby incorporated by reference. Under applicable
regulations, for a depository institution to be well capitalized it must have a
total risk-based capital ratio of at least 10%, a Tier I risk based capital
ratio of at least 6% and a Tier I leverage ratio of at least 5% and not be
subject to any specific capital order or directive. For a depository
institution to be adequately capitalized, it must have a total risk-based
capital ratio of at least 8%, a Tier I risk-based capital ratio of at least 4%
and a Tier I leverage ratio of at least 4% (or in some cases 3%). Under the
regulations, a depository institution will be deemed to be undercapitalized if
the depository institution has a total risk-based capital ratio that is less
than 8%, a Tier I risk-based capital ratio that is less than 4% or a Tier I
leverage ratio of less than 4% (or in some cases 3%). A depository institution
will be deemed to be significantly undercapitalized if the depository
institution has a total risk-based capital ratio that is less than 6%, a Tier I
risk-based capital ratio that is less than 3%, or a Tier I leverage ratio that
is less than 3% and will be deemed to be critically undercapitalized if it has
a ratio of tangible equity to total assets that is equal to less than 2%.

Regulations generally prohibit a depository institution from making a capital
distribution (including payment of dividends) or paying management fees to any
entity that controls the institution if it thereafter would be
undercapitalized. If a depository institution becomes undercapitalized, it will
be generally restricted from borrowing from the Federal Reserve, increasing its
average total assets, making any acquisitions, establishing any branches or
engaging in any new line of business. An undercapitalized institution must
submit an acceptable capital restoration plan to the appropriate federal
banking agency, which plan must, in the opinion of such agency, be based on
realistic assumptions and be likely to succeed in restoring the

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depository institutions capital. In connection with the approval of such a
plan, the holding company of the depository institution must guarantee that the
institution will comply with the plan, subject to a limitation of liability
equal to a portion of the depository institutions assets. If an
undercapitalized depository institution fails to submit an acceptable plan or
fails to implement such a plan, it will be treated as if it is significantly
undercapitalized.

Bank regulators are directed to require significantly undercapitalized
depository institutions, among other things, to restrict business activities,
raise capital through a sale of stock, merge with another depository
institution and/or take any other action which the agency determines would
better carry out the purposes of applicable banking laws.

Within 90 days after a depository institution is determined to be critically
undercapitalized, the appropriate federal banking agency must, in most cases,
appoint a receiver or conservator for the institution or take other action. In
general, critically undercapitalized depository institutions will be
prohibited from paying principal or interest on their subordinated debt and
will be subject to other substantial restrictions.

Second Bancorp is subject to regulation under the Bank Holding Company Act of
1956, as amended (the Act). The Act requires the prior approval of the
Federal Reserve Board for a bank holding company to acquire or hold more than a
5% voting interest in any bank, and restricts interstate banking activities.
The Act allows interstate bank acquisitions anywhere in the country and
interstate branching by acquisition and consolidation in those states that have
not opted out by January 1, 1997. Among the states where Second Bancorp may
acquire banks are Ohio, Michigan, Indiana, West Virginia and Pennsylvania. The
Act restricts non-banking activities to those, which are determined by the
Federal Reserve Board to be closely related to banking and a proper incident
thereto. The Act does not place territorial restrictions on the activities of
non-bank subsidiaries of bank holding companies. The Act also regulates
transactions between Second Bancorp and Second National and generally prohibits
tie-ins between credit and other products and services. Banking laws and
regulations also contain a variety of other provisions that could affect the
operations of Second Bancorp, including reporting requirements, regulatory
standards for real estate lending, limits on the amount that may be loaned to
one borrower, truth in savings provisions, the requirement that a depository
institution give 90 days prior notice to customers and regulatory authorities
before closing any branch, limitations on credit exposure between banks,
restrictions on loans to a banks insiders, guidelines governing regulatory
examinations and restrictions on the sharing of customer information.

Second National is subject to regulation under the National Banking Act and is
periodically examined by the OCC and is subject, as a member bank, to the rules
and regulations of the FRB. Second National is an insured institution and
member of the Bank Insurance Fund (BIF) and also has approximately $429
million in deposits acquired through acquisitions of savings and loan
institutions that are insured through the Savings Association Insurance Fund
(SAIF). As such, Second National is also subject to regulation by the FDIC.
Establishment of branches is subject to approval of the OCC and geographic
limits established by state law.

Gramm-Leach-Bliley Act

The Gramm-Leach-Bliley Act (the GLB Act) established a comprehensive
framework to permit affiliations among commercial banks, insurance companies,
securities firms and other financial service providers through the creation of
a financial holding company entity. Bank holding companies that elect to
become financial holding companies have the ability to expand their activities
from those historically permissible for bank holding companies and engage in
activities that are financial in nature or complementary to financial
activities, including securities and insurance activities, sponsoring mutual
funds and investment companies and merchant banking. Financial holding
companies are also permitted to acquire, without regulatory approval, a
company, other than a bank or savings association, engaged in activities that
are financial in nature or incidental to activities that are deemed financial
in nature by the Federal Reserve Board.

In order to become a financial holding company, a bank holding company must
file a declaration with the Federal Reserve Bank indicating its desire to
become a financial holding company. In addition, all subsidiary banks of the
bank holding company must be well capitalized, well managed and have at least a
satisfactory rating under the Community Reinvestment Act. Failure to maintain
the well-capitalized standard or the

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other criteria for a financial holding company may result in requirements to
correct the deficiency or limit activities to those allowed bank holding
companies.

In 2000, Second Bancorp elected to become a financial holding company.

Deposit Insurance Assessments

The FDIC is authorized to establish separate annual assessment rates for
deposit insurance for members of the BIF and the SAIF. The FDIC may increase
assessment rates for either fund if necessary to restore the funds ratio of
reserves to insured deposits to its target level within a reasonable time and
may decrease such rates if such target level has been met. The FDIC has
established a risk-based assessment system for both BIF and SAIF members. Under
this system, assessments vary based on the risk the institution poses to its
deposit insurance fund. The risk level is determined based on the institutions
capital level and the FDICs level of supervisory concern about the depository
institution.

Based upon its respective level of deposits at December 31, 2003, the projected
BIF and SAIF assessments for Second National for 2004 will total approximately
$174,000.

Interstate Banking and Branching Legislation

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
IBBEA) authorized interstate acquisitions of banks and bank holding companies
without geographic constraint beginning September 29, 1995. Beginning June 1,
1997, the IBBEA also authorizes banks to merge with banks located in another
state provided that neither state has opted out of interstate branching
between September 29, 1994 and May 31, 1997. After acquiring interstate
branches through a merger, a bank may establish additional branches in that
state at the same locations as any bank involved in the merger could have
established branches under state and federal law. In addition, a bank may
establish a de novo branch in another state that expressly permits the
establishment of such branches. A bank that establishes a de novo interstate
branch may thereafter establish additional branches on the same basis as a bank
that has established interstate branches through a merger transaction.

If a state opts out of interstate branching, no bank from another state may
establish a branch in that state, whether through a merger or by a de novo
establishment. Pennsylvania, the state in closest proximity to Second National,
has opted to permit interstate branching.

Insurance Regulation

Stouffer-Herzog Insurance Agency is subject to the insurance laws and
regulations of the State of Ohio and the Ohio Department of Insurance. The
insurance laws and regulations require education and licensing of individual
agents and agencies, require the filing of reports and impose business conduct
rules.

Sarbanes-Oxley Act

On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002
(the Sarbanes-Oxley Act). The stated goals of the Sarbanes-Oxley Act are to
increase corporate responsibility, to provide for enhanced penalties for
accounting and auditing improprieties at publicly traded companies and to
protect investors by improving the accuracy and reliability of corporate
disclosures made pursuant to the securities laws. The proposed changes are
intended to allow shareholders to monitor the performance of companies and
directors more easily and efficiently.

The Sarbanes-Oxley Act generally applies to all companies, both U.S. and
non-U.S., that file or are required to file reports with the SEC under the
Exchange Act. Further, the Sarbanes-Oxley Act includes very specific additional
disclosure requirements and new corporate governance rules, requires the SEC,
securities exchanges and the NASDAQ Stock Market to adopt extensive additional
disclosure, corporate governance and other related rules and mandates further
studies of certain issues by the SEC and the Comptroller General. Given the
extensive role in implementing rules relating to many of the Sarbanes-Oxley
Acts new requirements, the final scope of these requirements remains to be
determined.

The Sarbanes-Oxley Act and regulations adopted by the SEC and rules of the
NASDAQ stock market implementing the Sarbanes-Oxley Act address, among other
matters: audit and nominating committee

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composition and responsibilities; certification of financial statements by the
chief executive officer and the chief financial officer; the forfeiture of
bonuses and profits made by directors and senior officers in the twelve-month
period covered by restated financial statements; a prohibition on insider
trading during pension plan black out periods; disclosure of off-balance sheet
transactions; a prohibition on personal loans to directors and officers
(excluding loans by insured depository institutions that are subject to the
insider lending restrictions of the Federal Reserve Act); expedited filing
requirements for stock transaction reports by officers and directors; the
formation of a public accounting oversight board; auditor independence; and
various increased criminal penalties for violations of securities laws.

Employees

The number of full time equivalent employees of Second Bancorp as of December
31, 2003 was approximately 595. Second Bancorp considers its employee relations
to be good. None of the employees are covered by a collective bargaining
agreement.

Web Site Access to United States
Securities and Exchange Commission Filings

Second Bancorps internet address is www.secondbancorp.com. All reports filed
electronically by Second Bancorp Incorporated with the United States Securities
and Exchange Commission (SEC), including the annual report on Form 10-K,
quarterly reports on Form 10-Q and current event reports on Form 8-K, as well
as any amendments to those reports, are accessible at no cost through the
Corporations Web site. These filings are also accessible on the SECs Web site
at www.sec.gov.




Item 2. PROPERTIES

Second Bancorps executive offices are located at Second Nationals main office
building in Warren, Ohio, which is leased by Second National under a long-term
triple net lease agreement with a term, including optional renewals, expiring
on October 31, 2029. Second National has the option to purchase the main office
facility before two optional renewal periods at the fair market value in
existence at that time. Second National owns eight of its banking center
locations and one administrative building, while Second Nationals 25 other
banking center locations are leased under lease and sublease agreements with
remaining terms of 1 to 20 years. Second National also has leases for five loan
production offices for one year and office space locations with remaining lease
terms of three to five years.




Item 3. LEGAL PROCEEDINGS

Second Bancorp is subject to various pending and threatened lawsuits in which
claims for monetary damages are asserted in the ordinary course of business.
While any litigation involves an element of uncertainty, in the opinion of
management, liabilities, if any, arising from such litigation or threat thereof
will not have a material effect on the financial position or results of
operations of Second Bancorp.




Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no special meetings for shareholders since last years annual
meeting.

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Item 4 A. IDENTIFICATION OF EXECUTIVE OFFICERS

The following table sets forth the names, ages and business experience for the
last five years of each of the executive officers of the Corporation. Each
executive officer of the Corporation is appointed by the Board of Directors on
an annual basis, and serves at the pleasure of the Board.

|                     |  |     |    |                         |  |                                                                                                                                                                                                                                                                                                                                       |  |      |      | 
|-------------------- |  | --- | -- | ----------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---- | 
|                     |  |     |    |                         |  |                                                                                                                                                                                                                                                                                                                                       |  | Year
|Name                 |  | Age |    | Position and Experience |  | Appointed                                                                                                                                                                                                                                                                                                                            
|                     |  |     |    |                         |  |                                                                                                                                                                                                                                                                                                                                      
|R. L. (Rick) Blossom |  |     | 56 |                         |  | Chairman, President, Chief
Executive Officer and
Director of Second Bancorp
and Chairman, President,
Chief Executive Officer and
Director of Second National.
Former Chief Executive
Officer and Director of First
National Bank of Southwestern
Ohio and Senior Vice
President and Chief Lending
Officer of First Financial
Bancorp. |  |      | 1999 | 
|                     |  |     |    |                         |  |                                                                                                                                                                                                                                                                                                                                       |  |      |      | 
|David L. Kellerman   |  |     | 46 |                         |  | Chief Financial Officer and
Treasurer of Second Bancorp
and Executive Vice President,
Chief Financial Officer and
Director of Second National.                                                                                                                                                                                        |  |      | 1987 | 
|                     |  |     |    |                         |  |                                                                                                                                                                                                                                                                                                                                       |  |      |      | 
|Christopher Stanitz  |  |     | 55 |                         |  | Executive Vice President and
Secretary of Second Bancorp
and Senior Vice President of
Second National.                                                                                                                                                                                                                                |  |      | 1992 | 
|                     |  |     |    |                         |  |                                                                                                                                                                                                                                                                                                                                       |  |      |      | 
|Thomas W. Allen      |  |     | 59 |                         |  | Executive Officer of Second
Bancorp and Senior Vice
President of Second National,
previously Senior Vice
President and Senior
Fiduciary Officer for
Northern Indiana for Key
Trust Company of Indiana
(1997 to 2000).                                                                                                                 |  |      | 2000 | 
|                     |  |     |    |                         |  |                                                                                                                                                                                                                                                                                                                                       |  |      |      | 
|Diane C. Bastic      |  |     | 60 |                         |  | Executive Officer of Second
Bancorp and Senior Vice
President of Second National.                                                                                                                                                                                                                                                     |  |      | 1985 | 
|                     |  |     |    |                         |  |                                                                                                                                                                                                                                                                                                                                       |  |      |      | 
|John L. Falatok      |  |     | 46 |                         |  | Executive Officer of Second
Bancorp and Senior Vice
President of Second National.
Previously Vice President of
Second National.                                                                                                                                                                                                       |  |      | 2000 | 
|                     |  |     |    |                         |  |                                                                                                                                                                                                                                                                                                                                       |  |      |      | 
|Myron Filarski       |  |     | 55 |                         |  | Executive Officer of Second
Bancorp and Senior Vice
President of Second National.
Former President for Signal
Mortgage (1998-99).                                                                                                                                                                                                     |  |      | 1999 | 
|                     |  |     |    |                         |  |                                                                                                                                                                                                                                                                                                                                       |  |      |      | 
|Darryl E. Mast       |  |     | 53 |                         |  | Executive Officer of Second
Bancorp and Senior Vice
President of Second National.                                                                                                                                                                                                                                                     |  |      | 1986 | 

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PART II.




Item 5. MARKET FOR REGISTRANTS COMMON STOCK AND RELATED SHAREHOLDER MATTERS

Second Bancorps Common Stock trades on The NASDAQ National Market tier of The
NASDAQ Stock Market under the trading symbol SECD. As of January 31, 2004, the
number of shareholders of record of the Common Stock totaled 2,804. Information
regarding stock prices and dividend payments is incorporated herein by
reference from Item 7; Managements Discussion and Analysis of Financial
Condition and Results of Operations. Dividend restrictions are detailed in
footnote 18 of Item 8; Second Bancorps Financial Statements and Supplementary
Data, which is incorporated herein by reference.

Equity Compensation Plan information is incorporated herein by reference to
Part III, Item 11; Executive Compensation.

The subsidiary Second Bancorp Capital Trust Is Corporation-obligated
mandatorily redeemable capital securities (Trust Preferred Securities) also
trade on The NASDAQ National Market under the trading symbol SECDP. The
securities began trading September 28, 2001 and in 2001 traded to a high of
$11.25, and a low of $10.10 and closed at $11.00 on December 31, 2001. In 2002,
the securities traded to a high of $11.60, a low of $9.985 and closed at $10.63
on December 31, 2002. In 2003, the securities traded to a high of $11.75, a low
of $10.68 and closed at $11.45 on December 31, 2003.

16



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Item 6. SELECTED FINANCIAL DATA

(Dollars in thousands except per share data or as otherwise indicated)

The following is a summary of the quarterly results of operations for the years
ended December 31, 2003 and 2002.

|                                   |         |          |                    |         |  |              |        |             |  |   |        |      |  |   |        |      | 
|---------------------------------- | ------- | -------- | ------------------ | ------- |  | ------------ | ------ | ----------- |  | - | ------ | ---- |  | - | ------ | ---- | 
|                                   |         |          | Three Months Ended
|                                   |         |          |                   
|2003                               |         | March 31 |                    | June 30 |  | September 30 |        | December 31
|                                   |         |          |                    |         |  |              |        |            
|Interest income                    |         | $        | 25,901             |         |  | $            | 25,388 |             |  | $ | 25,229 |      |  | $ | 26,044 |     
|Interest expense                   |         |          | 11,818             |         |  |              | 11,598 |             |  |   | 11,412 |      |  |   | 11,863 |     
|Net interest income                |         |          | 14,083             |         |  |              | 13,790 |             |  |   | 13,817 |      |  |   | 14,181 |     
|Provision for loan losses          |         |          | 2,173              |         |  |              | 2,855  |             |  |   | 1,096  |      |  |   | 1,486  |     
|Other income                       |         |          | 8,592              |         |  |              | 10,700 |             |  |   | 3,491  |      |  |   | 5,581  |     
|Gain on sale of banking centers    |         |          | 5,619              |         |  |              |       |             |  |   |       |      |  |   |       |     
|Security gains                     |         |          | 51                 |         |  |              |       |             |  |   | 3,566  |      |  |   | 967    |     
|Other expenses                     |         |          | 13,673             |         |  |              | 14,016 |             |  |   | 13,076 |      |  |   | 13,998 |     
|Income before federal income taxes |         |          | 12,499             |         |  |              | 7,619  |             |  |   | 6,702  |      |  |   | 5,245  |     
|Federal income taxes               |         |          | 3,838              |         |  |              | 2,181  |             |  |   | 1,795  |      |  |   | 1,096  |     
|Net income                         |         |          | 8,661              |         |  |              | 5,438  |             |  |   | 4,907  |      |  |   | 4,149  |     
|Earnings per common share: (1)     |         |          |                    |         |  |              |        |             |  |   |        |      |  |   |        |     
|                                   | Basic   |          | $                  | 0.90    |  |              | $      | 0.57        |  |   | $      | 0.52 |  |   | $      | 0.44 | 
|                                   | Diluted |          | $                  | 0.89    |  |              | $      | 0.57        |  |   | $      | 0.51 |  |   | $      | 0.43 | 

|                                   |         |          |        |         |  |              |        |             |  |   |        |      |  |   |        |      | 
|---------------------------------- | ------- | -------- | ------ | ------- |  | ------------ | ------ | ----------- |  | - | ------ | ---- |  | - | ------ | ---- | 
|2002                               |         | March 31 |        | June 30 |  | September 30 |        | December 31
|                                   |         |          |        |         |  |              |        |            
|Interest income                    |         | $        | 27,023 |         |  | $            | 27,104 |             |  | $ | 26,834 |      |  | $ | 26,311 |     
|Interest expense                   |         |          | 12,866 |         |  |              | 12,701 |             |  |   | 12,880 |      |  |   | 12,365 |     
|Net interest income                |         |          | 14,157 |         |  |              | 14,403 |             |  |   | 13,954 |      |  |   | 13,946 |     
|Provision for loan losses          |         |          | 933    |         |  |              | 1,303  |             |  |   | 1,573  |      |  |   | 2,350  |     
|Other income                       |         |          | 5,157  |         |  |              | 4,053  |             |  |   | 6,329  |      |  |   | 7,314  |     
|Security (losses) gains            |         |          | (193   | )       |  |              |       |             |  |   | 832    |      |  |   | (67    | )   
|Merger-related costs               |         |          |       |         |  |              |       |             |  |   | 124    |      |  |   | 10     |     
|Banking center reconfiguration     |         |          |       |         |  |              |       |             |  |   |       |      |  |   | 2,096  |     
|Other expenses                     |         |          | 11,797 |         |  |              | 11,283 |             |  |   | 11,717 |      |  |   | 12,469 |     
|Income before federal income taxes |         |          | 6,391  |         |  |              | 5,870  |             |  |   | 7,701  |      |  |   | 4,268  |     
|Federal income taxes               |         |          | 1,708  |         |  |              | 1,517  |             |  |   | 2,165  |      |  |   | 840    |     
|Net income                         |         |          | 4,683  |         |  |              | 4,353  |             |  |   | 5,536  |      |  |   | 3,428  |     
|Earnings per common share: (1)     |         |          |        |         |  |              |        |             |  |   |        |      |  |   |        |     
|                                   | Basic   |          | $      | 0.47    |  |              | $      | 0.44        |  |   | $      | 0.56 |  |   | $      | 0.35 | 
|                                   | Diluted |          |        | 0.47    |  |              |        | 0.43        |  |   |        | 0.55 |  |   |        | 0.34 | 

(1)  The sum of the four quarters of earnings per share might not equal the
total earnings per share for the full year due to rounding.

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This Selected Financial Data should be read in conjunction with the
consolidated financial statements and accompanying notes.

For the Years Ended December 31

|                                                               |  |      |           |      |  |      |            |      |  |      |            |   |  |   |            |   |  |   |            |  
|-------------------------------------------------------------- |  | ---- | --------- | ---- |  | ---- | ---------- | ---- |  | ---- | ---------- | - |  | - | ---------- | - |  | - | ---------- | -
|Selected Financial Data                                        |  | 2003 |           | 2002 |  | 2001 |            | 2000 |  | 1999
|                                                               |  |      |           |      |  |      |            |      |  |     
|Results of Operations:                                         |  |      |           |      |  |      |            |      |  |      |            |   |  |   |            |   |  |   |            |  
|Interest income                                                |  | $    | 102,562   |      |  | $    | 107,272    |      |  | $    | 112,557    |   |  | $ | 116,298    |   |  | $ | 104,582    |  
|Interest expense                                               |  |      | 46,691    |      |  |      | 50,812     |      |  |      | 62,367     |   |  |   | 66,921     |   |  |   | 55,310     |  
|                                                               |  |      |           |      |  |      |            |      |  |      |            |   |  |   |            |   |  |   |            |  
|Net interest income                                            |  |      | 55,871    |      |  |      | 56,460     |      |  |      | 50,190     |   |  |   | 49,377     |   |  |   | 49,272     |  
|Provision for loan losses                                      |  |      | 7,610     |      |  |      | 6,159      |      |  |      | 4,718      |   |  |   | 7,129      |   |  |   | 3,195      |  
|Other income                                                   |  |      | 38,567    |      |  |      | 23,425     |      |  |      | 19,528     |   |  |   | 8,275      |   |  |   | 14,792     |  
|Other expense                                                  |  |      | 54,763    |      |  |      | 49,496     |      |  |      | 41,939     |   |  |   | 44,213     |   |  |   | 39,330     |  
|                                                               |  |      |           |      |  |      |            |      |  |      |            |   |  |   |            |   |  |   |            |  
|Income before federal income taxes                             |  |      | 32,065    |      |  |      | 24,230     |      |  |      | 23,061     |   |  |   | 6,310      |   |  |   | 21,539     |  
|Federal income tax expense                                     |  |      | 8,910     |      |  |      | 6,230      |      |  |      | 5,880      |   |  |   | 176        |   |  |   | 5,361      |  
|                                                               |  |      |           |      |  |      |            |      |  |      |            |   |  |   |            |   |  |   |            |  
|Net income before cumulative effect of
accounting change       |  | $    | 23,155    |      |  | $    | 18,000     |      |  | $    | 17,181     |   |  | $ | 6,134      |   |  | $ | 16,178     |  
|                                                               |  |      |           |      |  |      |            |      |  |      |            |   |  |   |            |   |  |   |            |  
|Cumulative effect of accounting
change- SFAS No. 133           |  |      |          |      |  |      |           |      |  |      | (101       | ) |  |   |           |   |  |   |           |  
|Net income                                                     |  | $    | 23,155    |      |  | $    | 18,000     |      |  | $    | 17,080     |   |  | $ | 6,134      |   |  | $ | 16,178     |  
|                                                               |  |      |           |      |  |      |            |      |  |      |            |   |  |   |            |   |  |   |            |  
|Per Common Share Data:                                         |  |      |           |      |  |      |            |      |  |      |            |   |  |   |            |   |  |   |            |  
|Basic earnings before cumulative
effect of accounting change   |  |      | N/A       |      |  |      | N/A        |      |  | $    | 1.72       |   |  |   | N/A        |   |  |   | N/A        |  
|Diluted earnings before cumulative
effect of accounting change |  |      | N/A       |      |  |      | N/A        |      |  |      | 1.70       |   |  |   | N/A        |   |  |   | N/A        |  
|Basic earnings                                                 |  | $    | 2.43      |      |  | $    | 1.82       |      |  |      | 1.71       |   |  | $ | 0.60       |   |  | $ | 1.52       |  
|Diluted earnings                                               |  |      | 2.41      |      |  |      | 1.79       |      |  |      | 1.69       |   |  |   | 0.60       |   |  |   | 1.51       |  
|Cash dividends                                                 |  |      | 0.76      |      |  |      | 0.72       |      |  |      | 0.68       |   |  |   | 0.64       |   |  |   | 0.56       |  
|Book value, December 31                                        |  |      | 14.47     |      |  |      | 13.97      |      |  |      | 12.90      |   |  |   | 11.65      |   |  |   | 11.12      |  
|Market value, December 31                                      |  |      | 26.40     |      |  |      | 26.50      |      |  |      | 21.61      |   |  |   | 14.50      |   |  |   | 22.38      |  
|Weighted-average shares outstanding                            |  |      |           |      |  |      |            |      |  |      |            |   |  |   |            |   |  |   |            |  
|Basic                                                          |  |      | 9,512,324 |      |  |      | 9,905,832  |      |  |      | 10,013,068 |   |  |   | 10,247,025 |   |  |   | 10,635,852 |  
|Diluted                                                        |  |      | 9,623,388 |      |  |      | 10,040,001 |      |  |      | 10,080,005 |   |  |   | 10,271,548 |   |  |   | 10,698,717 |  
|Shares outstanding at year-end                                 |  |      | 9,471,371 |      |  |      | 9,762,254  |      |  |      | 9,949,316  |   |  |   | 10,057,110 |   |  |   | 10,458,450 |  
|Balance Sheet Data:                                            |  |      |           |      |  |      |            |      |  |      |            |   |  |   |            |   |  |   |            |  
|As of December 31:                                             |  |      |           |      |  |      |            |      |  |      |            |   |  |   |            |   |  |   |            |  
|Total assets                                                   |  | $    | 2,116,761 |      |  | $    | 1,894,775  |      |  | $    | 1,680,356  |   |  | $ | 1,546,290  |   |  | $ | 1,537,278  |  
|Loans, net of allowance for loan losses                        |  |      | 1,330,946 |      |  |      | 1,150,196  |      |  |      | 1,105,197  |   |  |   | 1,054,872  |   |  |   | 1,060,493  |  
|Deposits                                                       |  |      | 1,215,342 |      |  |      | 1,195,112  |      |  |      | 1,123,131  |   |  |   | 1,036,135  |   |  |   | 1,097,589  |  
|Shareholders equity                                           |  |      | 137,016   |      |  |      | 136,334    |      |  |      | 128,299    |   |  |   | 117,197    |   |  |   | 116,347    |  
|Averages:                                                      |  |      |           |      |  |      |            |      |  |      |            |   |  |   |            |   |  |   |            |  
|Total assets                                                   |  |      | 1,969,670 |      |  |      | 1,754,156  |      |  |      | 1,595,968  |   |  |   | 1,584,016  |   |  |   | 1,498,946  |  
|Earning assets                                                 |  |      | 1,842,980 |      |  |      | 1,642,907  |      |  |      | 1,502,164  |   |  |   | 1,488,334  |   |  |   | 1,405,195  |  
|Loans                                                          |  |      | 1,234,926 |      |  |      | 1,121,777  |      |  |      | 1,078,196  |   |  |   | 1,107,948  |   |  |   | 1,005,998  |  
|Deposits                                                       |  |      | 1,162,555 |      |  |      | 1,159,350  |      |  |      | 1,070,439  |   |  |   | 1,091,441  |   |  |   | 1,092,260  |  
|Shareholders equity                                           |  |      | 135,748   |      |  |      | 134,178    |      |  |      | 124,773    |   |  |   | 114,652    |   |  |   | 121,369    |  
|Ratios:                                                        |  |      |           |      |  |      |            |      |  |      |            |   |  |   |            |   |  |   |            |  
|Return on average assets                                       |  |      | 1.18      | %    |  |      | 1.03       | %    |  |      | 1.09       | % |  |   | 0.39       | % |  |   | 1.08       | %
|Return on average common shareholders
equity                  |  |      | 17.06     |      |  |      | 13.42      |      |  |      | 13.93      |   |  |   | 5.35       |   |  |   | 13.33      |  
|Net interest margin                                            |  |      | 3.14      |      |  |      | 3.56       |      |  |      | 3.49       |   |  |   | 3.46       |   |  |   | 3.68       |  
|Efficiency ratio                                               |  |      | 59.63     |      |  |      | 60.81      |      |  |      | 58.35      |   |  |   | 70.67      |   |  |   | 59.45      |  
|Dividend pay-out                                               |  |      | 31.09     |      |  |      | 39.53      |      |  |      | 39.80      |   |  |   | 106.26     |   |  |   | 36.68      |  
|Average loans to average deposits                              |  |      | 106.23    |      |  |      | 96.76      |      |  |      | 100.72     |   |  |   | 101.51     |   |  |   | 92.10      |  
|Allowance for loan losses as a percent of loans                |  |      | 1.40      |      |  |      | 1.51       |      |  |      | 1.49       |   |  |   | 1.42       |   |  |   | 1.04       |  
|Net charge-offs as a percent of
average loans                  |  |      | 0.51      |      |  |      | 0.47       |      |  |      | 0.47       |   |  |   | 0.28       |   |  |   | 0.27       |  
|Non-performing loans to total loans                            |  |      | 1.72      |      |  |      | 1.64       |      |  |      | 0.94       |   |  |   | 0.75       |   |  |   | 0.55       |  
|Allowance for loans losses to non-
performing loans            |  |      | 81        |      |  |      | 92         |      |  |      | 158        |   |  |   | 191        |   |  |   | 188        |  
|Equity to assets                                               |  |      | 6.47      |      |  |      | 7.17       |      |  |      | 7.64       |   |  |   | 7.58       |   |  |   | 7.57       |  
|Tier I leverage ratio                                          |  |      | 7.08      |      |  |      | 7.68       |      |  |      | 8.22       |   |  |   | 7.47       |   |  |   | 8.15       |  

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The table below details non-GAAP operating results, including the non-GAAP
adjustments to GAAP income for the five years ended December 31:

Selected Financial Data - Non-GAAP Operating Results

|                                                           |  |      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|---------------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | - |  | - | ------- | -
|Reconciliation of GAAP vs.                                 |  |      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|non-GAAP results of operations                             |  | 2003 |         | 2002 |  | 2001 |         | 2000 |  | 1999
|                                                           |  |      |         |      |  |      |         |      |  |     
|Net income                                                 |  | $    | 23,155  |      |  | $    | 18,000  |      |  | $    | 17,080  |   |  | $ | 6,134   |   |  | $ | 16,178  |  
|Adjustments to GAAP to reflect
non-GAAP operating results: |  |      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Deduct non-recurring income:                               |  |      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Gain on sale of banking centers                            |  |      | (5,619  | )    |  |      |        |      |  |      |        |   |  |   |        |   |  |   |        |  
|Add non-recurring costs:                                   |  |      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Merger costs                                               |  |      |        |      |  |      | 134     |      |  |      | 305     |   |  |   |        |   |  |   |        |  
|Banking center reconfiguration                             |  |      |        |      |  |      | 2,096   |      |  |      |        |   |  |   |        |   |  |   |        |  
|Restructuring costs:                                       |  |      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Interest income-deferred costs on
sold mortgages           |  |      |        |      |  |      |        |      |  |      |        |   |  |   | 652     |   |  |   |        |  
|Provision for loan losses                                  |  |      |        |      |  |      |        |      |  |      |        |   |  |   | 4,100   |   |  |   |        |  
|Loss on sale of loans                                      |  |      |        |      |  |      |        |      |  |      |        |   |  |   | 3,711   |   |  |   |        |  
|Loss on sale of securities                                 |  |      |        |      |  |      |        |      |  |      |        |   |  |   | 2,808   |   |  |   |        |  
|Other expenses                                             |  |      |        |      |  |      |        |      |  |      |        |   |  |   | 2,609   |   |  |   |        |  
|                                                           |  |      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Total adjustments                                          |  |      | (5,619  | )    |  |      | 2,230   |      |  |      | 305     |   |  |   | 13,880  |   |  |   |        |  
|Federal income tax expense                                 |  |      | (1,967  | )    |  |      | 781     |      |  |      | 107     |   |  |   | 4,858   |   |  |   |        |  
|Add: Cumulative effect of
accounting change,
net of tax    |  |      |        |      |  |      |        |      |  |      | 101     |   |  |   |        |   |  |   |        |  
|                                                           |  |      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Net income                                                 |  | $    | 19,503  |      |  | $    | 19,449  |      |  | $    | 17,379  |   |  | $ | 15,156  |   |  | $ | 16,178  |  
|                                                           |  |      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Non-GAAP results of operations:                            |  |      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Interest income                                            |  | $    | 102,562 |      |  | $    | 107,272 |      |  | $    | 112,557 |   |  | $ | 116,950 |   |  | $ | 104,582 |  
|Interest expense                                           |  |      | 46,691  |      |  |      | 50,812  |      |  |      | 62,367  |   |  |   | 66,921  |   |  |   | 55,310  |  
|                                                           |  |      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Net interest income                                        |  |      | 55,871  |      |  |      | 56,460  |      |  |      | 50,190  |   |  |   | 50,029  |   |  |   | 49,272  |  
|Provision for loan losses                                  |  |      | 7,610   |      |  |      | 6,159   |      |  |      | 4,718   |   |  |   | 3,029   |   |  |   | 3,195   |  
|Other income                                               |  |      | 32,948  |      |  |      | 23,425  |      |  |      | 19,528  |   |  |   | 14,794  |   |  |   | 14,792  |  
|Other expense                                              |  |      | 54,763  |      |  |      | 47,266  |      |  |      | 41,634  |   |  |   | 41,604  |   |  |   | 39,330  |  
|Income before federal income taxes                         |  |      | 26,446  |      |  |      | 26,460  |      |  |      | 23,366  |   |  |   | 20,190  |   |  |   | 21,539  |  
|Federal income tax expense                                 |  |      | 6,943   |      |  |      | 7,011   |      |  |      | 5,987   |   |  |   | 5,034   |   |  |   | 5,361   |  
|                                                           |  |      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Net income                                                 |  | $    | 19,503  |      |  | $    | 19,449  |      |  | $    | 17,379  |   |  | $ | 15,156  |   |  | $ | 16,178  |  
|                                                           |  |      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Non-GAAP ratios:                                           |  |      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Return on average assets                                   |  |      | 0.99    | %    |  |      | 1.11    | %    |  |      | 1.09    | % |  |   | 0.96    | % |  |   | 1.08    | %
|Return on average common
shareholders equity              |  |      | 14.37   |      |  |      | 14.49   |      |  |      | 13.93   |   |  |   | 13.22   |   |  |   | 13.33   |  
|Net interest margin                                        |  |      | 3.14    |      |  |      | 3.56    |      |  |      | 3.49    |   |  |   | 3.51    |   |  |   | 3.68    |  
|Efficiency ratio                                           |  |      | 63.52   |      |  |      | 58.07   |      |  |      | 58.35   |   |  |   | 62.17   |   |  |   | 59.45   |  

The Corporation analyzes its performance on a net income basis determined in
accordance with accounting principles generally accepted in the United States,
as well as on a non-GAAP operating basis, referred to in this analysis as
non-GAAP operating results or non-GAAP operating earnings. Operating
earnings and related discussions are presented as supplementary information in
this analysis to enhance the readers understanding of, and highlight trends
in, the Corporations core financial results excluding the nonrecurring effects
of discrete activities and events. Operating earnings should not be viewed as a
substitute for net income and earnings per share as determined in accordance
with accounting principles generally accepted in the United States. Gains from
the sale of banking centers, banking center reconfiguration charges,
restructuring charges, merger-related costs and cumulative effect of accounting
change excluded from net income to derive operating earnings may be significant
and may not be comparable to other companies.

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Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands except per share data or as otherwise indicated)

Forward Looking Statements

Certain sections of this report contain certain forward-looking statements (as
defined in the Private Securities Litigation Reform Act of 1995). These
forward-looking statements may involve significant risks and uncertainties.
Although the Corporation believes that the expectations reflected in such
forward-looking statements are reasonable, actual results may differ materially
from these results discussed in these forward-looking statements. Risks and
uncertainties that could cause or contribute to such material differences
include, but are not limited to, general economic conditions, interest rate
environment, competitive conditions in the financial services industry, changes
in law, governmental policies and regulations, and rapidly changing technology
affecting financial services. These forward looking statements also may be
significantly affected by the proposed merger with Sky Financial Group, Inc.
Refer to the section entitled General within Item 1; Business.

This Managements discussion and analysis of financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and accompanying notes.

Critical Accounting Policies

The Corporation has established various accounting policies, which govern the
application of accounting principles generally accepted in the United States in
the preparation of the Corporations financial statements. The significant
accounting principles of the Corporation are described in the notes to the
consolidated financial statements. Certain accounting policies involve
significant judgments and assumptions by Management, which have a material
impact on the carrying value of certain assets and liabilities; Management
considers such accounting policies to be critical accounting policies. The
judgments and assumptions used by Management are based on historical experience
and other factors, which are believed to be reasonable under the circumstances.
Because of the nature of the judgments and assumptions made by Management,
actual results could differ from these judgments and estimates, which could
have a material impact on the carrying value of assets and liabilities and the
results of operations of the Corporation.

Allowance for Loan Losses

The Corporation believes the allowance for loan losses is a critical accounting
policy that requires the most significant judgments and estimates used in
preparation of its consolidated financial statements. Refer to the section
entitled Asset Quality and the section Allowance for Loan Losses and Impaired
Loans within Note 1, Significant Accounting Policies, for a detailed
description of the Corporations estimation process and methodology related to
the allowance for loan losses.

Valuation of Mortgage Servicing Assets

The Corporation believes the valuation of mortgage servicing assets is a
critical accounting policy that requires significant estimates in preparation
of its consolidated financial statements. The Corporation recognizes as
separate assets the value of mortgage servicing rights, whether those rights
are acquired through loan origination activities or through purchase
activities. Refer to the section entitled Servicing Assets and the section
Mortgage Servicing Assets within Note 1, Significant Accounting Policies and
Note 13, Servicing Assets, for a detailed description of the Corporations
process and methodology.

Pension Expense

The Corporation believes that the actuarial assumptions used to calculate the
Corporations pension expense is a critical accounting policy that utilizes
estimates in preparation of its consolidated financial statements. The
assumptions utilized include the discount rate and expected return on plan
assets.

The Corporation intends to maintain the expected return on plan assets at 8.75%
in 2004. The Corporation had planned to use a 9.0% expected return on plan
assets in 2003 but changed the assumption to 8.75%. Total pension expense in
2004 is expected to be $1,700 as compared to $1,397, $616 and $289 in 2003,
2002 and 2001, respectively.

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Derivative Instruments

The Corporation believes that SFAS No. 133 - Accounting for Derivative
Instruments and Hedging Activities is a critical accounting policy that
utilizes estimates in preparation of its consolidated financial statements. The
Corporation utilizes derivative instruments in managing risks associated with
mortgage servicing assets as well as for managing interest rate risk and its
potential impact on the Corporations earnings stream. Refer to the section
entitled Derivative Instruments within Note 1, Significant Accounting Policies,
for a detailed description of the Corporations process and methodology.

Results of Operations

Net income for 2003 totaled $23,155 and represents a $5,155, or a 28.6%
increase over net income for 2002. Net income in 2003 was impacted by a $5,619
gain on sale of two banking centers. Net income in 2002 was impacted by a
$2,096 expense for the execution of a banking center reconfiguration strategy.
The strategy is designed to improve the overall growth potential and
profitability of the retail banking center network. Included in the
reconfiguration strategy is the sale of two banking centers (which occurred in
the first quarter of 2003), the closure of two facilities in 2002, the
consolidation of four facilities into two larger, more accessible facilities
(one consolidation was completed in 2003, the other is scheduled to be
completed in 2004), the relocation of two facilities to larger, more accessible
locations (one relocation occurred in 2003, the other relocation is scheduled
to occur in 2004) and the de novo opening of a new banking center in the new
market of Wooster, Ohio in 2003. Net income for 2001 totaled $17,080 and
included a $101 reduction in income from the cumulative effect of an accounting
change related to the implementation of SFAS No. 133. Net income in 2002 and
2001 was minimally impacted by $134 and $305, respectively, in pre-tax merger
costs. The merger-related costs were related to the acquisition of
Stouffer-Herzog Insurance Agency. The 2001 merger-related costs were associated
with the acquisition of Commerce Exchange Corporation (Commerce). The
acquisition of Commerce gives the Corporation further access to the attractive
commercial lending market in the suburban Cleveland market.

Also prominent among the factors positively impacting 2003 and 2002 earnings
were the higher levels of mortgage banking activities, including the
origination and sale of mortgages into the secondary market. Over $1.19
billion and $920 million in mortgage loans were originated in 2003 and 2002,
respectively. Nearly $1.09 billion and $865 million in residential mortgage
loans were sold in 2003 and 2002, respectively, generating $14.8 million and
$10.5 million in gains during those same periods.

Also prominent in the trend in earnings over the past three years has been the
compression of the Corporations net interest margin brought on by three
consecutive years of a low interest rate environment. The net interest margin
improved slightly in 2002 to 3.56% from 3.49% in 2001 primarily due to lower
funding costs. In 2003, a reduction in longer-term interest rates created
accelerated prepayments for long-term loans (primarily mortgages) and
securities (primarily mortgage-backed and collateralized mortgage obligations).
The accelerated prepayments created a reduction in asset yields and an
accompanying reduction in the net interest margin to 3.14%.

The Corporations return on average assets (ROA) was 1.18%, 1.03% and 1.09%
for 2003, 2002 and 2001, respectively. The total shareholders return on
average equity (ROE) was 17.06%, 13.42% and 13.93% in 2003, 2002 and 2001,
respectively. The ratios were impacted by the non-recurring gains on sale of
banking centers, banking center reconfiguration changes and merger costs.
Absent these non-recurring items, the non-GAAP ratios for ROA for the three
years were 0.99%, 1.11% and 1.09%, respectively while the non-GAAP ROE for the
three years were 14.37%, 14.49% and 13.93%, respectively. After improved
operating performance in 2002, both ratios declined in 2003 due primarily to
the reduced net interest margin and its impact on net interest income. Both the
GAAP and non-GAAP ROE were positively influenced by the continued buy back of
the Corporations common stock.

Diluted earnings per share (EPS) were $2.41, $1.79 and $1.69 in 2003, 2002
and 2001, respectively. The improvement in EPS from 2002 to 2003 is almost
entirely due to the non-recurring gain on sale of banking centers in 2003 and
banking center reconfiguration costs in 2002. The market value of the
Corporations common stock, trading under the NASDAQ symbol of SECD, was
relatively stable in 2003, finishing the year at $26.40 as compared to $26.50
at the end of 2002. The stock price is still improved from its year end 2001
and 2000 closing prices of $21.61 and $14.50, respectively. The stock price at
year-end 2003 represents a price of 182% of book value, relatively unchanged
from 189% at the end of

21



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##### Table of Contents



2002. The price/earnings ratio for the stock at year-end 2003 (based on the
trailing twelve months earnings) was 11.0X. Dividends declared in 2003 totaled
$0.76 per share compared to $0.72 and $0.68 per share in 2002 and 2001,
respectively.

Net Interest Income

Revenue continues to be provided primarily from interest and fees on loans,
which totaled $76,493, $80,593 and $86,723 in 2003, 2002 and 2001,
respectively. This represents 54%, 62% and 66% of total revenues for those
years. The decline in the dollar amount of loan interest is due entirely to the
reduction in yields brought on by the continued low interest rate environment.
The percentage decline is due to the increased revenue from mortgage banking
activities in 2002 and 2003. Interest income on securities is also a major
source of revenue, contributing 18%, 20% and 19% of revenues in 2003, 2002 and
2001, respectively.

Net interest income declined by 1.0% from 2002 to 2003 as the decline in the
net interest margin from 3.56% to 3.14% during the same time frame more than
offset the 12.2% increase in average earning assets over the past year. Net
interest income improved by 12.5% in 2002 as compared to 2001 due primarily to
a 9.4% increase in average earning assets and a seven basis point improvement
in the net interest margin.

The relationship between net interest income, fully taxable equivalent (FTE)
net interest income, earning assets and net interest margin for the past three
years follows:

|                                               |  |      |           |      |  |      |           |   |  |   |           |  
|---------------------------------------------- |  | ---- | --------- | ---- |  | ---- | --------- | - |  | - | --------- | -
|                                               |  | 2003 |           | 2002 |  | 2001
|                                               |  |      |           |      |  |     
|Net interest income - per Financial Statements |  | $    | 55,871    |      |  | $    | 56,460    |   |  | $ | 50,190    |  
|Tax equivalent
Adjustment                      |  |      | 1,977     |      |  |      | 2,083     |   |  |   | 2,277     |  
|                                               |  |      |           |      |  |      |           |   |  |   |           |  
|Net interest income - FTE                      |  | $    | 57,848    |      |  | $    | 58,543    |   |  | $ | 52,467    |  
|                                               |  |      |           |      |  |      |           |   |  |   |           |  
|Average earning Assets                         |  | $    | 1,842,980 |      |  | $    | 1,642,907 |   |  | $ | 1,502,164 |  
|Net interest margin - FTE                      |  |      | 3.14      | %    |  |      | 3.56      | % |  |   | 3.49      | %
|                                               |  |      |           |      |  |      |           |   |  |   |           |  

22



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##### Table of Contents



Net interest income can be analyzed through the use of the Yields Analysis
table. The table shows a three-year comparison of the average balance of
interest earning assets and interest bearing liabilities along with interest
and yields associated with them.

Yields Analysis

|                                                                           |                                        |         |           |          |      |      |         |         |        |          |         |      |  |         |           |          |        |      |         |  |  |  |      |   |        |   |           |         |  |   |         |  |  |  |      |   | 
|-------------------------------------------------------------------------- | -------------------------------------- | ------- | --------- | -------- | ---- | ---- | ------- | ------- | ------ | -------- | ------- | ---- |  | ------- | --------- | -------- | ------ | ---- | ------- |  |  |  | ---- | - | ------ | - | --------- | ------- |  | - | ------- |  |  |  | ---- | - | 
|                                                                           |                                        |         | 2003      |          | 2002 |      | 2001   
|                                                                           |                                        |         |           |          |      |      |        
|                                                                           |                                        |         | Average   |          |      |      |         |         | Yield/ |          | Average |      |  |         |           |          | Yield/ |      | Average |  |  |  |      |   | Yield/
|Year Ended December 31                                                     |                                        | Balance |           | Interest |      | Rate |         | Balance |        | Interest |         | Rate |  | Balance |           | Interest |        | Rate
|                                                                           |                                        |         |           |          |      |      |         |         |        |          |         |      |  |         |           |          |        |     
|Assets                                                                     |                                        |         |           |          |      |      |         |         |        |          |         |      |  |         |           |          |        |      |         |  |  |  |      |   |        |   |           |         |  |   |         |  |  |  |      |  
|Interest earning assets:                                                   |                                        |         |           |          |      |      |         |         |        |          |         |      |  |         |           |          |        |      |         |  |  |  |      |   |        |   |           |         |  |   |         |  |  |  |      |  
|Taxable loans (1)(3)                                                       |                                        | $       | 1,217,909 |          |      | $    | 75,655  |         |        |          | 6.21    | %    |  | $       | 1,104,300 |          |        | $    | 79,671  |  |  |  | 7.21 | % |        | $ | 1,058,506 |         |  | $ | 85,361  |  |  |  | 8.09 | %
|Tax-exempt loans (2)                                                       |                                        |         | 17,017    |          |      |      | 1,289   |         |        |          | 7.57    |      |  |         | 17,477    |          |        |      | 1,419   |  |  |  | 8.12 |   |        |   | 19,690    |         |  |   | 1,680   |  |  |  | 8.53 |  
|Taxable securities                                                         |                                        |         | 511,569   |          |      |      | 22,919  |         |        |          | 4.48    |      |  |         | 387,343   |          |        |      | 22,648  |  |  |  | 5.85 |   |        |   | 324,209   |         |  |   | 21,614  |  |  |  | 6.67 |  
|Tax-exempt securities                                                      |                                        |         | 66,079    |          |      |      | 4,360   |         |        |          | 6.60    |      |  |         | 65,284    |          |        |      | 4,532   |  |  |  | 6.94 |   |        |   | 68,520    |         |  |   | 4,826   |  |  |  | 7.04 |  
|Federal funds sold and other                                               |                                        |         | 30,406    |          |      |      | 316     |         |        |          | 1.04    |      |  |         | 68,503    |          |        |      | 1,085   |  |  |  | 1.58 |   |        |   | 31,239    |         |  |   | 1,083   |  |  |  | 3.47 |  
|                                                                           |                                        |         |           |          |      |      |         |         |        |          |         |      |  |         |           |          |        |      |         |  |  |  |      |   |        |   |           |         |  |   |         |  |  |  |      |  
|Total interest earning assets                                              |                                        |         | 1,842,980 |          |      |      | 104,539 |         |        |          | 5.67    |      |  |         | 1,642,907 |          |        |      | 109,355 |  |  |  | 6.66 |   |        |   | 1,502,164 |         |  |   | 114,834 |  |  |  | 7.64 |  
|Non-interest earning assets                                                |                                        |         | 126,690   |          |      |      |         |         |        |          |         |      |  |         | 111,249   |          |        |      |         |  |  |  |      |   |        |   | 93,804    |         |  |   |         |  |  |  |      |  
|                                                                           |                                        |         |           |          |      |      |         |         |        |          |         |      |  |         |           |          |        |      |         |  |  |  |      |   |        |   |           |         |  |   |         |  |  |  |      |  
|Total                                                                      |                                        | $       | 1,969,670 |          |      |      |         |         |        |          |         |      |  | $       | 1,754,156 |          |        |      |         |  |  |  |      |   |        | $ | 1,595,968 |         |  |   |         |  |  |  |      |  
|                                                                           |                                        |         |           |          |      |      |         |         |        |          |         |      |  |         |           |          |        |      |         |  |  |  |      |   |        |   |           |         |  |   |         |  |  |  |      |  
|Liabilities and Shareholders Equity                                       |                                        |         |           |          |      |      |         |         |        |          |         |      |  |         |           |          |        |      |         |  |  |  |      |   |        |   |           |         |  |   |         |  |  |  |      |  
|Interest bearing liabilities:                                              |                                        |         |           |          |      |      |         |         |        |          |         |      |  |         |           |          |        |      |         |  |  |  |      |   |        |   |           |         |  |   |         |  |  |  |      |  
|Demand deposits-interest
bearing                                           |                                        | $       | 160,226   |          |      |      | 1,791   |         |        |          | 1.12    |      |  | $       | 101,222   |          |        |      | 869     |  |  |  | 0.86 |   |        | $ | 90,762    |         |  |   | 1,196   |  |  |  | 1.32 |  
|Savings deposits                                                           |                                        |         | 359,712   |          |      |      | 4,262   |         |        |          | 1.18    |      |  |         | 374,313   |          |        |      | 7,444   |  |  |  | 1.99 |   |        |   | 242,242   |         |  |   | 5,918   |  |  |  | 2.44 |  
|Time deposits                                                              |                                        |         | 482,118   |          |      |      | 15,745  |         |        |          | 3.27    |      |  |         | 537,217   |          |        |      | 21,087  |  |  |  | 3.93 |   |        |   | 621,578   |         |  |   | 34,896  |  |  |  | 5.61 |  
|Federal funds purchased
and securities sold under
agreements to repurchase |                                        |         | 195,619   |          |      |      | 2,472   |         |        |          | 1.26    |      |  |         | 136,041   |          |        |      | 2,499   |  |  |  | 1.84 |   |        |   | 116,131   |         |  |   | 3,904   |  |  |  | 3.36 |  
|Note payable                                                               |                                        |         | 8,393     |          |      |      | 214     |         |        |          | 2.55    |      |  |         | 1,335     |          |        |      | 38      |  |  |  | 2.85 |   |        |   | 740       |         |  |   | 47      |  |  |  | 6.35 |  
|Other borrowed funds                                                       |                                        |         | 394       |          |      |      | 11      |         |        |          | 2.79    |      |  |         | 1,726     |          |        |      | 42      |  |  |  | 2.43 |   |        |   | 2,240     |         |  |   | 90      |  |  |  | 4.02 |  
|Federal Home Loan Bank
advances                                            |                                        |         | 419,091   |          |      |      | 19,174  |         |        |          | 4.58    |      |  |         | 278,998   |          |        |      | 15,900  |  |  |  | 5.70 |   |        |   | 263,719   |         |  |   | 15,567  |  |  |  | 5.90 |  
|Debentures and capital
securities                                          |                                        |         | 30,519    |          |      |      | 3,022   |         |        |          | 9.90    |      |  |         | 30,528    |          |        |      | 2,933   |  |  |  | 9.61 |   |        |   | 7,765     |         |  |   | 749     |  |  |  | 9.65 |  
|                                                                           |                                        |         |           |          |      |      |         |         |        |          |         |      |  |         |           |          |        |      |         |  |  |  |      |   |        |   |           |         |  |   |         |  |  |  |      |  
|Total interest bearing liabilities                                         |                                        |         | 1,656,072 |          |      |      | 46,691  |         |        |          | 2.82    |      |  |         | 1,461,380 |          |        |      | 50,812  |  |  |  | 3.48 |   |        |   | 1,345,177 |         |  |   | 62,367  |  |  |  | 4.64 |  
|Non-interest bearing liabilities:                                          |                                        |         |           |          |      |      |         |         |        |          |         |      |  |         |           |          |        |      |         |  |  |  |      |   |        |   |           |         |  |   |         |  |  |  |      |  
|                                                                           | Demand deposits                        |         |           | 160,499  |      |      |         |         |        |          |         |      |  |         |           | 146,598  |        |      |         |  |  |  |      |   |        |   |           | 115,857 |  |   |         |  |  |  |      |   | 
|                                                                           | Accrued expenses and other
liabilities |         |           | 17,351   |      |      |         |         |        |          |         |      |  |         |           | 12,000   |        |      |         |  |  |  |      |   |        |   |           | 10,161  |  |   |         |  |  |  |      |   | 
|                                                                           |                                        |         |           |          |      |      |         |         |        |          |         |      |  |         |           |          |        |      |         |  |  |  |      |   |        |   |           |         |  |   |         |  |  |  |      |  
|                                                                           | Other liabilities                      |         |           | 177,850  |      |      |         |         |        |          |         |      |  |         |           | 158,598  |        |      |         |  |  |  |      |   |        |   |           | 126,018 |  |   |         |  |  |  |      |   | 
|                                                                           | Shareholders equity                   |         |           | 135,748  |      |      |         |         |        |          |         |      |  |         |           | 134,178  |        |      |         |  |  |  |      |   |        |   |           | 124,773 |  |   |         |  |  |  |      |   | 
|                                                                           |                                        |         |           |          |      |      |         |         |        |          |         |      |  |         |           |          |        |      |         |  |  |  |      |   |        |   |           |         |  |   |         |  |  |  |      |  
|Total                                                                      |                                        | $       | 1,969,670 |          |      |      |         |         |        |          |         |      |  | $       | 1,754,156 |          |        |      |         |  |  |  |      |   |        | $ | 1,595,968 |         |  |   |         |  |  |  |      |  
|                                                                           |                                        |         |           |          |      |      |         |         |        |          |         |      |  |         |           |          |        |      |         |  |  |  |      |   |        |   |           |         |  |   |         |  |  |  |      |  
|Net interest earnings (FTE)                                                |                                        |         |           |          |      |      | 57,848  |         |        |          |         |      |  |         |           |          |        |      | 58,543  |  |  |  |      |   |        |   |           |         |  |   | 52,467  |  |  |  |      |  
|Taxable equivalent adjustment                                              |                                        |         |           |          |      |      | 1,977   |         |        |          |         |      |  |         |           |          |        |      | 2,083   |  |  |  |      |   |        |   |           |         |  |   | 2,277   |  |  |  |      |  
|                                                                           |                                        |         |           |          |      |      |         |         |        |          |         |      |  |         |           |          |        |      |         |  |  |  |      |   |        |   |           |         |  |   |         |  |  |  |      |  
|Net interest income (per
financial statements)                             |                                        |         |           |          |      | $    | 55,871  |         |        |          |         |      |  |         |           |          |        | $    | 56,460  |  |  |  |      |   |        |   |           |         |  | $ | 50,190  |  |  |  |      |  
|                                                                           |                                        |         |           |          |      |      |         |         |        |          |         |      |  |         |           |          |        |      |         |  |  |  |      |   |        |   |           |         |  |   |         |  |  |  |      |  
|Net yield on interest earning
assets                                       |                                        |         |           |          |      |      |         |         |        |          | 3.14    | %    |  |         |           |          |        |      |         |  |  |  | 3.56 | % |        |   |           |         |  |   |         |  |  |  | 3.49 | %
|                                                                           |                                        |         |           |          |      |      |         |         |        |          |         |      |  |         |           |          |        |      |         |  |  |  |      |   |        |   |           |         |  |   |         |  |  |  |      |  



|(1) |  | For purposes of these computations, non-accruing loans are included in the
daily average loan amounts outstanding.                                
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The tax-exempt income and yields are shown on a tax equivalent basis
using the 35% marginal federal tax rate in effect during 2003, 2002 and
2001.
|   
|(3) |  | Loan fees are included in the interest reported for loans. Those fees
amounted to $3,112, $3,631 and $2,835 in 2003, 2002 and 2001,
respectively. 

23



---



##### Table of Contents



You can further analyze the change in net interest income by separating the
volume and rate impact of the change.

The following table details the breakdown of the major categories affecting the
change:

|                                                                           |  |   |                       |   |  |                       |          |   |  |  |         |   |  |   |        |   |  |   |         |   |  |   |         |  
|-------------------------------------------------------------------------- |  | - | --------------------- | - |  | --------------------- | -------- | - |  |  | ------- | - |  | - | ------ | - |  | - | ------- | - |  | - | ------- | -
|                                                                           |  |   | 2003 compared to 2002 |   |  | 2002 compared to 2001
|                                                                           |  |   | Due to Change in      |   |  | Due to Change in     
|                                                                           |  |   |                       |   |  |                      
|Rate / Volume Analysis (1)                                                 |  |   | Volume                |   |  |                       | Rate     |   |  |  | Net     |   |  |   | Volume |   |  |   | Rate    |   |  |   | Net     |  
|                                                                           |  |   |                       |   |  |                       |          |   |  |  |         |   |  |   |        |   |  |   |         |   |  |   |         |  
|Increase (decrease) in FTE interest
income:                                |  |   |                       |   |  |                       |          |   |  |  |         |   |  |   |        |   |  |   |         |   |  |   |         |  
|Taxable loans                                                              |  | $ | 8,196                 |   |  |                       | ($12,212 | ) |  |  | ($4,016 | ) |  | $ | 3,705  |   |  | $ | (9,665  | ) |  | $ | (5,960  | )
|Tax-exempt loans                                                           |  |   | (37                   | ) |  |                       | (93      | ) |  |  | (130    | ) |  |   | (189   | ) |  |   | (72     | ) |  |   | (261    | )
|Taxable securities                                                         |  |   | 7,264                 |   |  |                       | (6,993   | ) |  |  | 271     |   |  |   | 4,209  |   |  |   | (3,175  | ) |  |   | 1,034   |  
|Tax-exempt securities                                                      |  |   | 55                    |   |  |                       | (227     | ) |  |  | (172    | ) |  |   | (228   | ) |  |   | (66     | ) |  |   | (294    | )
|Federal funds sold                                                         |  |   | (603                  | ) |  |                       | (166     | ) |  |  | (769    | ) |  |   | 1,292  |   |  |   | (1,290  | ) |  |   | 2       |  
|                                                                           |  |   |                       |   |  |                       |          |   |  |  |         |   |  |   |        |   |  |   |         |   |  |   |         |  
|Total interest income                                                      |  |   | 14,875                |   |  |                       | (19,691  | ) |  |  | (4,816  | ) |  |   | 8,789  |   |  |   | (14,268 | ) |  |   | (5,479  | )
|Interest (decrease) in interest expense:                                   |  |   |                       |   |  |                       |          |   |  |  |         |   |  |   |        |   |  |   |         |   |  |   |         |  
|Demand
deposits  interest bearing                                         |  |   | 507                   |   |  |                       | 415      |   |  |  | 922     |   |  |   | 138    |   |  |   | (465    | ) |  |   | (327    | )
|Savings deposits                                                           |  |   | (290                  | ) |  |                       | (2,892   | ) |  |  | (3,182  | ) |  |   | 3,227  |   |  |   | (1,701  | ) |  |   | 1,526   |  
|Time deposits                                                              |  |   | (2,163                | ) |  |                       | (3,179   | ) |  |  | (5,342  | ) |  |   | (4,736 | ) |  |   | (9,073  | ) |  |   | (13,809 | )
|Federal funds purchased and
securities sold under agreements
to repurchase |  |   | 1,094                 |   |  |                       | (1,121   | ) |  |  | (27     | ) |  |   | 669    |   |  |   | (2,074  | ) |  |   | (1,405  | )
|Note payable                                                               |  |   | 201                   |   |  |                       | (25      | ) |  |  | 176     |   |  |   | 38     |   |  |   | (47     | ) |  |   | (9      | )
|Other borrowed funds                                                       |  |   | (32                   | ) |  |                       | 1        |   |  |  | (31     | ) |  |   | (21    | ) |  |   | (27     | ) |  |   | (48     | )
|Federal Home Loan Bank advances                                            |  |   | 7,984                 |   |  |                       | (4,710   | ) |  |  | 3,274   |   |  |   | 902    |   |  |   | (569    | ) |  |   | 333     |  
|Debentures and capital securities                                          |  |   | (1                    | ) |  |                       | 90       |   |  |  | 89      |   |  |   | 2,196  |   |  |   | (12     | ) |  |   | 2,184   |  
|                                                                           |  |   |                       |   |  |                       |          |   |  |  |         |   |  |   |        |   |  |   |         |   |  |   |         |  
|Total interest expense                                                     |  |   | 7,300                 |   |  |                       | (11,421  | ) |  |  | (4,121  | ) |  |   | 2,413  |   |  |   | (13,968 | ) |  |   | (11,555 | )
|                                                                           |  |   |                       |   |  |                       |          |   |  |  |         |   |  |   |        |   |  |   |         |   |  |   |         |  
|Total effect on FTE net interest income                                    |  | $ | 7,575                 |   |  |                       | ($8,270  | ) |  |  | ($695   | ) |  | $ | 6,376  |   |  | $ | (300    | ) |  | $ | 6,076   |  
|                                                                           |  |   |                       |   |  |                       |          |   |  |  |         |   |  |   |        |   |  |   |         |   |  |   |         |  



|(1) |  | The change in interest due to both rate and volume has been allocated to
volume and rate changes in proportion to the relationship of the
absolute dollar amounts of the change in each.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In 2003, reduced asset yields created a $19,691 negative impact on earnings.
Reduced funding costs only offset $11,421 of the decline resulting in a decline
in net interest income due to rate factors of $8,270. Asset growth was
emphasized in 2003 to offset the margin compression and produced a $7,575
benefit to earnings, driven primarily by loan and security balance increases.
In 2002, the rate/volume analysis indicates that, on an FTE basis, the net
interest income increase predominantly as a result of increased volume
concentrated in both loans and securities, while rate changes had a nominally
negative impact.

Provision For Loan Losses

The provision for loan losses totaled $7,610 during 2003, representing .62% of
average loans. This exceeds the net charge-off rate of .51% of average loans in
2003 due to both the increase in the overall level of non-performing loans and
the increase in average loan balances during the year. The provision for loan
losses totaled $6,159 during 2002, representing .55% of average loans.
Similarly, this exceeds the 2002 net charge-off rate of .47% of average loans
in 2002 and is due to both the increase in the overall level of non-performing
loans and the increase in average loan balances during the year. The allowance
for loan losses represents 1.40% of loans at year-end 2003. The provision for
loan losses totaled $4,718 in 2001 representing .44% of average loans. The
provision was slightly less than net charge-offs, which were .47% of average
loans primarily due to a decrease in outstanding indirect automobile loans,
which tend to have a higher expected loss experience. With the allowance
acquired from Commerce, the allowance for loan losses represents 1.49% of loans
at year-end 2001.

Non-Interest Income

The Corporation is making steady improvement in diversifying its revenue source
away from net interest income, primarily through strength in mortgage banking
and deposit service charge activities. Non-interest income (exclusive of
securities gains and losses and gain on sale of banking centers) has increased
as a percent of net revenues (net interest income plus non-interest income)
from 27% and 29%

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in 2001 and 2002, respectively to 34% in 2003.

The Corporation was well positioned to take advantage of the dramatically lower
market rates in 2001 through 2003. Mortgage loan originations increased
significantly, totaling over $1.19 billion, $920 million and nearly $600
million in 2003, 2002 and 2001, respectively. Secondary market activities were
also very strong and sales of residential mortgage loans totaled $1.09 billion,
$860 million and $520 million during the past three years. The table below
details the major categories or revenues that comprise mortgage banking income
for the past three years:

|                                          |  |      |        |      |  |      |        |   |  |   |       |  
|----------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ----- | -
|                                          |  | 2003 |        | 2002 |  | 2001
|                                          |  |      |        |      |  |     
|Gain on sale of loans                     |  | $    | 14,822 |      |  | $    | 10,497 |   |  | $ | 5,378 |  
|Gross income from servicing               |  |      | 3,888  |      |  |      | 2,701  |   |  |   | 1,549 |  
|Amortization of mortgage servicing assets |  |      | (7,163 | )    |  |      | (4,335 | ) |  |   | (747  | )
|Change in valuation allowance - MSRs      |  |      | 1,400  |      |  |      | (2,984 | ) |  |   | (810  | )
|Net derivative (loss) gain                |  |      | (2,753 | )    |  |      | 567    |   |  |   | 0     |  
|                                          |  |      |        |      |  |      |        |   |  |   |       |  
|Total mortgage banking revenue            |  | $    | 10,194 |      |  | $    | 6,446  |   |  | $ | 5,370 |  
|                                          |  |      |        |      |  |      |        |   |  |   |       |  

The gains from sale of mortgages realized totaled $14.8 million in 2003
representing a record income from mortgage sales. The very low interest rate
environment that was present through mid-year 2003 allowed the Corporation to
capitalize on the infrastructure established within the mortgage line of
business to take advantage of the refinancing opportunity. After longer-term
interest rates increased starting in the third quarter of 2003, mortgage
production volume has declined and the mortgage banking revenue is expected to
decline in 2004. Gross servicing income has increased steadily as the total
amount of loans serviced increased. As of December 31, 2003, the Corporation
serviced over $1.7 billion in mortgage loans for others. Included in mortgage
banking income were valuation allowance charges for mortgage servicing rights.
The valuation allowance charges totaled $2,984 in 2002, $810 in 2001 and
represented a recovery of $1,400 in 2003. Also included in mortgage banking
revenue is the amortization of mortgage servicing rights. The sharp increase in
the amortization is due to both the increase in the overall size of the
servicing portfolio as well as the sharp increase in prepayment speeds in both
2002 and 2003.

The gain on the sale of securities totaled $4,584 in 2003 and was the result of
the planned reduction in duration risk as longer-term interest rates rose in
the second half of 2003. The Corporation sold securities with longer durations
and securities with a high degree of extension risk to reduce the risk of a
potentially large increase in unrealized losses within the portfolio as
longer-term interest rates increased. The gain on the sale of securities
totaled $592 in 2002 and was primarily attributable to shortening the duration
of the securities portfolio. The gain on sale of securities totaled $642 in
2001 and represented gains realized on sales early in 2001 with the proceeds
used to reinvest in longer-maturity, higher-rate securities.

Service charges on deposit accounts improved significantly in both 2003 and
2002, increasing by 7.5% and 9.8% during the two years. The increase was due to
the increased usage of ATM machines and debit cards for transaction purposes as
an increase in the number of non interest-bearing demand deposit accounts. The
number of non-interest bearing demand deposit accounts increased 2.2% during
2003 and an additional 1.1% increase in 2002. The number of interest bearing
demand accounts increased 12.5% during 2003 after declining slightly in 2002.
Service charges on deposits totaled $6,259 in 2003, $5,823 in 2002 and $5,302
in 2001.

Trust fees were lower in both 2003 and 2002 as the market value of assets was
under pressure in both years. Market values began a reversal in the later half
of 2003 but the reversal was not enough to offset the decline for the year.
Trust fees totaled $2,560 in 2003, $2,715 in 2002 and $2,870 in 2001.
Additional sales personnel were hired in 2003 to help in the expansion of the
delivery channel of wealth management services outside of Trumbull County.

The Corporation utilizes single-premium life insurance policies as a means of
providing earnings to offset the cost of employee retirement benefits. The
balance of the cash surrender value is accumulated in other assets on the
balance sheet and totaled $34,742 and $33,086 as of December 31, 2003 and 2002,
respectively. The increase in cash surrender value represents non-taxable
income and is included in other operating income within the non-interest income
section of the income statement. The increase in cash surrender value totaled
$1,656, $1,637 and $1,554 in 2003, 2002 and 2001, respectively.

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Non-Interest Expense

Excluding the non-recurring costs from 2002, non-interest expenses increased by
16% in 2003. The increase was concentrated in three categories of expenses.
Salaries and benefits, professional services and other expenses. The salary and
benefit increase of 12% from 2002 to 2003 is attributable to increased staffing
for mortgage production, processing and servicing as well as additional private
banking, wealth management and commercial lending sales personnel in the
Corporations western regions. The professional services increase of 60% is
attributable to a sharp increase in legal expenses associated with problem
credits. The other expense increase of 29% is attributable to processing
expenses associated with mortgage loans and increased business development
costs associated with new banking centers.

Corporate expenses increased by 18% in 2002 and totaled $49,496. The increase
included certain non-recurring expenses for merger-related activities and the
banking center reconfiguration. Excluding those items, expenses would have
totaled $47,266 and would have represented a 13.5% increase on a non-GAAP
operating basis. The increase in costs was primarily attributable to an
increase in salary and benefit costs. These costs increased due to a
combination of factors including 1) a full year of expenses related to the
Commerce acquisition and a partial year for the Stouffer-Herzog acquisition, 2)
an increase in mortgage lending staff to facilitate the processing,
underwriting, closing, sale and servicing of the increased volume of loans and
3) an increase in incentive payouts due to increased production activities.
Salaries and benefits totaled $26,345 in 2002 and $21,544 in 2001.

The following table details the percentage change in each non-interest expense
category over the past three years:

|                                             |  |                |    |                |  |  |    |  
|-------------------------------------------- |  | -------------- | -- | -------------- |  |  | -- | -
|Percentage Change                            |  | 2003 over 2002 |    | 2002 over 2001
|                                             |  |                |    |               
|Salaries and benefits                        |  |                | 12 | %              |  |  | 22 | %
|Net occupancy                                |  |                | 6  |                |  |  | 5  |  
|Equipment                                    |  |                | 4  |                |  |  |   |  
|Professional services                        |  |                | 60 |                |  |  | 20 |  
|Assessment on deposits and other taxes       |  |                | 8  |                |  |  | (9 | )
|Amortization of goodwill & other intangibles |  |                | (2 | )              |  |  | 26 |  
|Other expenses                               |  |                | 29 |                |  |  | 4  |  

Income Taxes

The provision for income taxes was $8,910, $6,230 and $5,880 in 2003, 2002 and
2001, respectively. The effective tax rate for the Corporation was 27.8%, 25.7%
and 25.5% during the same periods. The higher effective tax rate in 2003 is
attributable to the addition of the non-recurring gain on sale of banking
centers which totaled $5,619 pre-tax. The Corporation utilizes tax-exempt loans
and securities as well as bank owned life insurance and low-income housing tax
credits to minimize the impact of taxes on earnings.

Balance Sheet

The balance sheet totaled nearly $2.12 billion as of December 31, 2003. This
represents an 11.7% increase over last year end. Average assets increased by
12.5% during 2003, led by a 27.6% increase in average securities and a 10.1%
increase in average gross loans. A portion of the strategy to offset net
interest margin compression in 2003 was to increase earning assets and take
advantage of leveraging opportunities to produce additional earnings. The
increase in securities was funded primarily by increases in wholesale
borrowings through the FHLB and provided the additional benefit of keeping
interest rate risks within acceptable limits. The increase in loan balances is
attributable to strong sales efforts in commercial and direct consumer lending,
including sales to private banking clients. Increases in loan balances were
predominantly achieved through increases in market share, primarily in the
Corporations western regions. Average assets increased by 9.9% during 2002,
led by a 119% increase in average temporary investments, a 15% increase in
average securities and a 4% increase in average loans. The increase in
securities and temporary investments was due to a build up in liquidity for the
planned sale of two banking centers with approximately $90 million in deposits.
The sale was closed in the first quarter of 2003.

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Period end deposit balances increased by a modest 1.7% in 2003 as core deposit
balances (non-interest bearing, interest bearing demand and savings accounts)
were in aggregate down slightly from the prior year while higher rate time
deposits balances increased by 9.7% and were utilized to help fund loan growth.
Impacting the growth figures was the reduction of $88,456 in deposit balances
resulting from the sale of two banking centers in the first quarter of 2003. Of
the deposit balances included in the sale were $50,978 in time deposits. Absent
the impact of the banking center sale, period end deposit balances increased by
$108,686, or 9.8%. Time deposit balances increased by $100,206, or 22.0% and
core deposits increased by $8,480, or 1.3%. A minor deposit purchase (less than
$3 million in deposit balances) was also completed in 2003. Additionally,
federal funds purchased and securities sold under agreements to repurchase
increased by 56.2% from year end 2002 and also aided in funding loan growth.
The reversal of the prior years growth in core deposits was evidence of a
rebound in the attractiveness of potential returns in non-traditional bank
investments, including mutual funds. In 2002, core deposits increased by
30.7%. In 2002, the shift in balances towards core funding is a function of
both the low interest rate environment, which tends to create a demand for
these funds in the market as well as the increased internal focus placed on
core deposit generation and retention. One particular product that was
successful in 2002 was a premium priced Your Best Interest MMDA account. The
success of the product allowed savings balances to increase by 46.6% during
2002. Over the long-term, financial institutions are expecting slower deposit
growth rates due to increased competition from non-traditional alternatives,
especially mutual funds.

Earning Assets

Securities:

The securities portfolio of the Corporation is used to provide an adequate rate
of return to the Corporation along with appropriate levels of liquidity and
pledging and as a tool for efficient tax management and interest rate risk
management. The accounting treatment for the securities portfolio is determined
by the Corporations intent regarding particular security holdings. Purchases
in longer maturity ranges that provided yield enhancement included purchases of
tax-exempt securities, which provide the additional benefit of tax reduction.

The securities portfolio totaled $620,696 as of December 31, 2003 and is
classified entirely as available-for-sale. Federal agency securities declined
by $27 million in 2003 as the Corporation sought the additional yield and cash
flow characteristics of mortgage-backed securities. Corporate securities
continued to decline in 2003 and totaled just under $43 million versus $68
million at the end of 2002. The reduction was primarily in longer term
securities and allowed the overall duration of the securities portfolio to
remain little changed from 2002. The mortgage-backed securities increased by
$138 million in 2003 as 1) additional leveraging strategies with spreads in
excess 150 basis points were utilized to bolster net interest income and 2) the
cash flow and yield characteristics of these securities fit the desired
investment profile better than federal agency securities. The securities
portfolio totaled $523,669 as of December 31, 2002. In 2002, U.S. agency and
municipal holding remained relatively unchanged from the prior year-end.
Corporate balances declined by over $20 million as holdings in this sector were
deemphasized. Mortgage-backed securities increased by over $120 million during
2002 and included $100 million in a leveraging transaction completed just prior
to year-end 2002. The leveraging transaction was funded primarily by FHLB
advances and will provide an estimated 1.7% net spread to income with nominal
interest rate risk. The securities portfolio totaled $417,496 as of December
31, 2001. That balance represents a 9.3% increase over the prior year-end. For
2001, the growth in securities was concentrated in mortgage-backed securities,
including collateralized mortgage obligations that helped improve the earnings
performance characteristics of the portfolio.

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##### Table of Contents



Summary yield and maturity information regarding the available-for-sale
securities portfolios on December 31 follows. Yields are calculated on a fully
taxable equivalent basis using the marginal federal income tax rate of 35% for
2003.

|                                                                     |  |            |         |       |  |          |     |            |  |            |         |  |  |   |         | 
|-------------------------------------------------------------------- |  | ---------- | ------- | ----- |  | -------- | --- | ---------- |  | ---------- | ------- |  |  | - | ------- | 
|                                                                     |  | 2003       |         | 2003  |  | 2002     |     | 2001      
|                                                                     |  |            |         |       |  |          |     |           
|                                                                     |  | Available- |         |       |  |          |     | Available- |  | Available-
|Book Value                                                           |  | For-Sale   |         | Yield |  | For-Sale |     | For-Sale  
|                                                                     |  |            |         |       |  |          |     |           
|U. S. Treasury and other U. S. Government
agencies and corporations: |  |            |         |       |  |          |     |            |  |            |         |  |  |   |         | 
|Under 1 year                                                         |  | $          | 3,048   |       |  |          | 4.4 | %          |  | $          | 2,193   |  |  | $ | 1,527   | 
|1 to 5 years                                                         |  |            |        |       |  |          |    |            |  |            | 3,171   |  |  |   | 5,413   | 
|5 to 10 years                                                        |  |            |        |       |  |          |    |            |  |            | 14,252  |  |  |   | 22,108  | 
|Over 10 years                                                        |  |            |        |       |  |          |    |            |  |            | 10,144  |  |  |   |        | 
|                                                                     |  |            |         |       |  |          |     |            |  |            |         |  |  |   |         | 
|Total                                                                |  |            | 3,048   |       |  |          | 4.4 |            |  |            | 29,760  |  |  |   | 29,048  | 
|Obligations of states and political subdivisions:                    |  |            |         |       |  |          |     |            |  |            |         |  |  |   |         | 
|Under 1 year                                                         |  |            |        |       |  |          |    |            |  |            | 310     |  |  |   | 1,498   | 
|1 to 5 years                                                         |  |            | 14,493  |       |  |          | 6.9 |            |  |            | 16,222  |  |  |   | 19,858  | 
|5 to 10 years                                                        |  |            | 36,270  |       |  |          | 6.5 |            |  |            | 41,491  |  |  |   | 29,785  | 
|Over 10 years                                                        |  |            | 22,483  |       |  |          | 6.2 |            |  |            | 8,904   |  |  |   | 17,069  | 
|                                                                     |  |            |         |       |  |          |     |            |  |            |         |  |  |   |         | 
|Total                                                                |  |            | 73,246  |       |  |          | 6.5 |            |  |            | 66,927  |  |  |   | 68,210  | 
|Corporate:                                                           |  |            |         |       |  |          |     |            |  |            |         |  |  |   |         | 
|Under 1 year                                                         |  |            | 4,570   |       |  |          | 7.3 |            |  |            |        |  |  |   | 3,524   | 
|1 to 5 years                                                         |  |            |        |       |  |          |    |            |  |            | 5,749   |  |  |   | 13,650  | 
|5 to 10 years                                                        |  |            |        |       |  |          |    |            |  |            | 6,787   |  |  |   | 15,368  | 
|Over 10 years                                                        |  |            | 38,131  |       |  |          | 4.6 |            |  |            | 55,522  |  |  |   | 57,245  | 
|                                                                     |  |            |         |       |  |          |     |            |  |            |         |  |  |   |         | 
|Total                                                                |  |            | 42,701  |       |  |          | 4.9 |            |  |            | 68,058  |  |  |   | 89,787  | 
|Mortgage-backed securities                                           |  |            | 470,784 |       |  |          | 4.1 |            |  |            | 333,258 |  |  |   | 211,096 | 
|Equity securities                                                    |  |            | 30,917  |       |  |          | 3.9 |            |  |            | 25,666  |  |  |   | 19,355  | 
|                                                                     |  |            |         |       |  |          |     |            |  |            |         |  |  |   |         | 
|Total securities                                                     |  | $          | 620,696 |       |  |          | 4.4 | %          |  | $          | 523,669 |  |  | $ | 417,496 | 
|                                                                     |  |            |         |       |  |          |     |            |  |            |         |  |  |   |         | 

The average yield on the portfolio is 4.4% as of December 31, 2003, down 160
basis points from the prior year-end. The primary reason for the decline was
very low longer-term interest rates in place through mid- year 2003 which
created a large increase in prepayment speeds and cash flows that were
reinvested at lower rates. During 2003, 2002 and 2001, the Corporation realized
gains on security sales of $4,584, $592 and $642, respectively. The large
increase in gains realized in 2003 is a result of the Corporations strategy to
limit the increase in duration of the portfolio via the sale of securities with
longer maturities and large potential extensions in effective maturity dates as
interest rates rose in the last half of 2003. Even with the rebound in
longer-term interest rates, overall interest rates are still at historically
low levels. The Corporation now has an unrealized loss position for the
portfolio of $905 versus a $12.0 million unrealized gain the prior year-end. It
is anticipated that the Corporation will strive to maintain the average
duration profile of the portfolio near its current levels.

Mortgage-backed securities have various stated maturities through September
2033. The estimated weighted-average maturity of this segment of the portfolio
is 3.6 years.

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Loans:

Listed below is the Corporations loan distribution at the end of each of the
last five years:

|                          |  |      |           |      |  |      |           |      |  |      |           |  |  |   |           |  |  |   |           | 
|------------------------- |  | ---- | --------- | ---- |  | ---- | --------- | ---- |  | ---- | --------- |  |  | - | --------- |  |  | - | --------- | 
|                          |  | 2003 |           | 2002 |  | 2001 |           | 2000 |  | 1999
|                          |  |      |           |      |  |      |           |      |  |     
|Commercial                |  | $    | 631,170   |      |  | $    | 542,691   |      |  | $    | 508,579   |  |  | $ | 421,229   |  |  | $ | 413,097   | 
|Consumer                  |  |      | 399,137   |      |  |      | 322,841   |      |  |      | 316,097   |  |  |   | 302,881   |  |  |   | 216,173   | 
|Real estate mortgage      |  |      | 273,422   |      |  |      | 249,946   |      |  |      | 247,221   |  |  |   | 300,526   |  |  |   | 402,468   | 
|Real estate construction  |  |      | 46,091    |      |  |      | 52,313    |      |  |      | 49,995    |  |  |   | 45,453    |  |  |   | 39,924    | 
|                          |  |      |           |      |  |      |           |      |  |      |           |  |  |   |           |  |  |   |           | 
|Balance as of December 31 |  | $    | 1,349,820 |      |  | $    | 1,167,791 |      |  | $    | 1,121,892 |  |  | $ | 1,070,089 |  |  | $ | 1,071,662 | 
|                          |  |      |           |      |  |      |           |      |  |      |           |  |  |   |           |  |  |   |           | 

|                         |  |      |     |      |  |      |     |      |  |      |     |   |  |  |     |   |  |  |     |  
|------------------------ |  | ---- | --- | ---- |  | ---- | --- | ---- |  | ---- | --- | - |  |  | --- | - |  |  | --- | -
|Percentage distribution  |  | 2003 |     | 2002 |  | 2001 |     | 2000 |  | 1999
|                         |  |      |     |      |  |      |     |      |  |     
|Commercial               |  |      | 47  | %    |  |      | 46  | %    |  |      | 45  | % |  |  | 40  | % |  |  | 39  | %
|Consumer                 |  |      | 30  |      |  |      | 28  |      |  |      | 28  |   |  |  | 28  |   |  |  | 20  |  
|Real estate mortgage     |  |      | 20  |      |  |      | 22  |      |  |      | 22  |   |  |  | 28  |   |  |  | 37  |  
|Real estate construction |  |      | 3   |      |  |      | 4   |      |  |      | 5   |   |  |  | 4   |   |  |  | 4   |  
|                         |  |      |     |      |  |      |     |      |  |      |     |   |  |  |     |   |  |  |     |  
|Total                    |  |      | 100 | %    |  |      | 100 | %    |  |      | 100 | % |  |  | 100 | % |  |  | 100 | %
|                         |  |      |     |      |  |      |     |      |  |      |     |   |  |  |     |   |  |  |     |  

An analysis of maturity and interest rate sensitivity of commercial loans as of
December 31, 2003 follows:

|                       |  |          |         |            |  |            |         |       |  |   |         |  |  |   |         | 
|---------------------- |  | -------- | ------- | ---------- |  | ---------- | ------- | ----- |  | - | ------- |  |  | - | ------- | 
|                       |  | One Year |         | One to     |  | Over       |         |       |  |  
|                       |  | Or Less  |         | Five Years |  | Five Years |         | Total
|                       |  |          |         |            |  |            |         |      
|Fixed rate             |  | $        | 25,985  |            |  | $          | 66,693  |       |  | $ | 34,184  |  |  | $ | 126,862 | 
|Variable rate          |  |          | 108,906 |            |  |            | 210,420 |       |  |   | 184,982 |  |  |   | 504,308 | 
|                       |  |          |         |            |  |            |         |       |  |   |         |  |  |   |         | 
|Total commercial loans |  | $        | 134,891 |            |  | $          | 277,113 |       |  | $ | 219,166 |  |  | $ | 631,170 | 
|                       |  |          |         |            |  |            |         |       |  |   |         |  |  |   |         | 

At December 31, 2003, real estate construction loans totaled $46,091, all of
which were fixed rate loans with a maturity of one year or less.

The Corporation emphasizes on-balance sheet growth in direct consumer and
commercial balances. As evidence of this, commercial loan balances have
increased from 39% of the total loan portfolio at the end of 1999 to 47% as of
December 31, 2003. Total commercial loan originations totaled just over $300
million in 2003 as compared to $274 million in 2002. Commercial loans are
generated through a calling program targeting medium-sized companies. The
Corporation is also generating an increasing volume of Small Business
Administration (SBA) loans. The Corporation sells the guaranteed portion of
the SBA loans originated. The sales generated $559 and $639 in net revenues,
including $131 and $185 in revenues from the value of the servicing retained in
2003 and 2002, respectively. The amount of SBA loans being serviced by the
Corporation totaled approximately $16.8 million and $16.4 million at December
31, 2003 and 2002, respectively.

The Corporations commercial loans are granted to customers within the
immediate trade area of the Corporation. The mix is diverse, covering a wide
range of borrowers. The table below details the stratification of commercial
loan balances at the end of 2003:

|                       |  |        |         | 
|---------------------- |  | ------ | ------- | 
|Stratification         |  | Amount
|                       |  |       
|Under $1 million       |  | $      | 389,211 | 
|From $1 to $5 million  |  |        | 217,531 | 
|From $5 to $10 million |  |        | 13,241  | 
|Over $10 million       |  |        | 11,187  | 
|                       |  |        |         | 
|Total                  |  | $      | 631,170 | 
|                       |  |        |         | 

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The Corporation monitors and controls concentrations within a particular
industry or segment. As of December 31, 2003, the Corporation had a
concentration in commercial real estate loans totaling approximately $421
million, approximately 75% of which were owner-occupied businesses, including
nursing homes, retail and fast-food restaurants within the Corporations market
area. The table below details as of December 31, 2003 the industry
concentrations by SIC code that exceed 10% of tier I capital:

|                          |  |          |      |        |  |   |        | 
|------------------------- |  | -------- | ---- | ------ |  | - | ------ | 
|Industry                  |  | SIC Code |      | Amount
|                          |  |          |      |       
|Non-residential buildings |  |          | 6512 |        |  | $ | 63,149 | 
|Restaurants
 retail      |  |          | 5812 |        |  |   | 22,824 | 
|Motels/Hotels             |  |          | 7011 |        |  |   | 18,271 | 
|Nursing homes             |  |          | 8051 |        |  |   | 14,859 | 
|Apartments                |  |          | 6513 |        |  |   | 14,516 | 

Consumer loan balances have increased from 20% to 30% of total loans over the
same time frame. Direct consumer new loan volumes totaled $230 million in 2003
versus $151 million in 2002. These volumes were supplemented by indirect loan
volumes of $61 million in 2003 and $57 million in 2002. The direct loan volumes
are originated primarily by banking center and call center personnel and were
higher in 2003 despite the ability of many borrowers to utilize first mortgage
loans as a primary borrowing vehicle due to the extremely low interest rate
environment present through much of 2003.

The Corporation emphasizes real estate lending through its branch network,
reaching a broad range of customers, as well as through the use of mortgage
loan originators and correspondent lender relationships. Generally, the loans
sold into the secondary mortgage market make funds available for reuse in
mortgage or other lending activities, generate a net gain (including
origination fee income) from the sale, limit the interest rate risk caused by
holding long-term, fixed-rate loans and build a portfolio of serviced loans
which generate fee income for the Corporation. New real estate loans
originations totaled $478 million and $715 million from retail and wholesale
sources, respectively as compared to $321 and $600 from the same sources in
2002. Loans sold into the secondary mortgage market totaled $1.09 billion in
2003 versus $864 million in 2002. The serviced portfolio of mortgages totaled
$1.75 billion and $1.32 billion as of December 31, 2003 and 2002, respectively.

Asset Quality

The allowance for loan losses is analyzed in the table below:

|                                                                  |  |      |        |      |  |      |        |      |  |      |        |   |  |   |        |   |  |   |        |  
|----------------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | - |  | - | ------ | -
|                                                                  |  | 2003 |        | 2002 |  | 2001 |        | 2000 |  | 1999
|                                                                  |  |      |        |      |  |      |        |      |  |     
|Balance at January 1                                              |  | $    | 17,595 |      |  | $    | 16,695 |      |  | $    | 15,217 |   |  | $ | 11,169 |   |  | $ | 10,739 |  
|Charge-offs:                                                      |  |      |        |      |  |      |        |      |  |      |        |   |  |   |        |   |  |   |        |  
|Commercial                                                        |  |      | 4,000  |      |  |      | 2,593  |      |  |      | 2,486  |   |  |   | 1,702  |   |  |   | 2,430  |  
|Real estate mortgage                                              |  |      | 141    |      |  |      | 242    |      |  |      | 175    |   |  |   | 164    |   |  |   | 86     |  
|Real estate construction                                          |  |      |       |      |  |      | 97     |      |  |      |       |   |  |   |       |   |  |   |       |  
|Consumer                                                          |  |      | 2,821  |      |  |      | 3,652  |      |  |      | 3,810  |   |  |   | 2,194  |   |  |   | 1,961  |  
|                                                                  |  |      |        |      |  |      |        |      |  |      |        |   |  |   |        |   |  |   |        |  
|                                                                  |  |      | 6,962  |      |  |      | 6,584  |      |  |      | 6,471  |   |  |   | 4,060  |   |  |   | 4,477  |  
|Recoveries:                                                       |  |      |        |      |  |      |        |      |  |      |        |   |  |   |        |   |  |   |        |  
|Commercial                                                        |  |      | 107    |      |  |      | 857    |      |  |      | 707    |   |  |   | 533    |   |  |   | 901    |  
|Real estate mortgage                                              |  |      | 57     |      |  |      | 10     |      |  |      | 5      |   |  |   | 8      |   |  |   | 4      |  
|Real estate construction                                          |  |      |       |      |  |      |       |      |  |      |       |   |  |   |       |   |  |   |       |  
|Consumer                                                          |  |      | 467    |      |  |      | 458    |      |  |      | 641    |   |  |   | 438    |   |  |   | 807    |  
|                                                                  |  |      |        |      |  |      |        |      |  |      |        |   |  |   |        |   |  |   |        |  
|                                                                  |  |      | 631    |      |  |      | 1,325  |      |  |      | 1,353  |   |  |   | 979    |   |  |   | 1,712  |  
|Net charge-offs                                                   |  |      | 6,331  |      |  |      | 5,259  |      |  |      | 5,118  |   |  |   | 3,081  |   |  |   | 2,765  |  
|Acquired reserves                                                 |  |      |       |      |  |      |       |      |  |      | 1,878  |   |  |   |       |   |  |   |       |  
|Provision for loan losses charged to operations                   |  |      | 7,610  |      |  |      | 6,159  |      |  |      | 4,718  |   |  |   | 7,129  |   |  |   | 3,195  |  
|                                                                  |  |      |        |      |  |      |        |      |  |      |        |   |  |   |        |   |  |   |        |  
|Balance at December 31                                            |  | $    | 18,874 |      |  | $    | 17,595 |      |  | $    | 16,695 |   |  | $ | 15,217 |   |  | $ | 11,169 |  
|                                                                  |  |      |        |      |  |      |        |      |  |      |        |   |  |   |        |   |  |   |        |  
|Allowance for loan losses as a percentage of
year-end loans       |  |      | 1.40   | %    |  |      | 1.51   | %    |  |      | 1.49   | % |  |   | 1.42   | % |  |   | 1.04   | %
|Allowance for loan losses as a percentage of
non-performing loans |  |      | 81     | %    |  |      | 92     | %    |  |      | 158    | % |  |   | 191    | % |  |   | 188    | %
|                                                                  |  |      |        |      |  |      |        |      |  |      |        |   |  |   |        |   |  |   |        |  

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Net charge-offs as a percent of average loans by major loan category are shown below:

|                                       |  |      |      |      |  |      |      |      |  |      |      |   |  |  |      |   |  |  |      |  
|-------------------------------------- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- | - |  |  | ---- | - |  |  | ---- | -
|                                       |  | 2003 |      | 2002 |  | 2001 |      | 2000 |  | 1999
|                                       |  |      |      |      |  |      |      |      |  |     
|Commercial                             |  |      | 0.67 | %    |  |      | 0.34 | %    |  |      | 0.44 | % |  |  | 0.29 | % |  |  | 0.40 | %
|Real estate mortgage                   |  |      | 0.03 | %    |  |      | 0.08 | %    |  |      | 0.04 | % |  |  | 0.04 | % |  |  | 0.02 | %
|Real estate construction               |  |      | 0.00 | %    |  |      | 0.03 | %    |  |      | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | %
|Consumer                               |  |      | 0.67 | %    |  |      | 1.02 | %    |  |      | 1.22 | % |  |  | 0.68 | % |  |  | 0.53 | %
|Total net charge-offs to average loans |  |      | 0.51 | %    |  |      | 0.47 | %    |  |      | 0.47 | % |  |  | 0.28 | % |  |  | 0.27 | %

The allowance for loan losses has increased steadily from 1999 to 2003 as
outstanding loan balances increased and the risk characteristics of the
portfolios shifted from lower risk residential estate loans to higher risk
consumer and commercial loans. The allowance for loan losses was $18,874, or
1.40% of loans as of December 31, 2003. The allowance represents 85% of non-performing
loans, which is lower than the coverage of non-performing loans at
the end of the previous four years. With over $6 million of the non-performing
loans balances as of December 31, 2003 represented by residential real estate
loans, the allowance for loan losses, in Managements opinion is adequate to
absorb losses inherent with the loan portfolios. Commercial loan charge-offs
increased to .67% of commercial loans. The .29% commercial charge-off rate in
2000 represented the low point for these charge-offs for the past five years.
Consecutive years of softness in the local and national economies since 2000
have been a contributing factor to the increased loss experience. Consumer
charge-offs decreased from 2001 due to stricter underwriting standards for
indirect automobile lending and a shift in emphasis to higher credit quality
boat and recreational vehicle (RV) loans. The underwriting standards
include, among other factors, a reduced level of loan advance to vehicle value.
The decision to deemphasize indirect auto lending was due to low levels of
return on the investment primarily due to higher levels of loan losses. The
indirect boat and RV loans are typically of a higher credit quality as
evidenced by independent credit scores. As of December 31, 2003, the average
credit score for indirect auto loans was 712 versus 728 for boat loans and 741
for RV loans. The underwriting criteria have resulted in a decline in
outstanding indirect automobile loans. Indirect automobile loans totaled $52
million at the end of 2003 as compared to $86 million as of December 31, 2002.
Conversely, indirect boat and RV loans totaled $42 million at the end of 2002
and have increased to $79 million at the end of 2003. The changes have brought
about a reduction in net charge-offs for the consumer loan portfolio from a
high of 1.22% of average consumer loan balances in 2001 to .67% in 2003.

The following presents a breakdown of the loan loss allowance by loan category
for each of the last five years:

|                         |  |      |        |      |  |      |        |      |  |      |        |  |  |   |        |  |  |   |        | 
|------------------------ |  | ---- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------ |  |  | - | ------ | 
|Loan Category            |  | 2003 |        | 2002 |  | 2001 |        | 2000 |  | 1999
|                         |  |      |        |      |  |      |        |      |  |     
|Commercial               |  | $    | 13,493 |      |  | $    | 12,040 |      |  | $    | 11,673 |  |  | $ | 9,927  |  |  | $ | 7,449  | 
|Consumer                 |  |      | 4,357  |      |  |      | 4,577  |      |  |      | 4,762  |  |  |   | 5,161  |  |  |   | 2,587  | 
|Real estate mortgage     |  |      | 823    |      |  |      | 736    |      |  |      | 260    |  |  |   | 129    |  |  |   | 1,133  | 
|Real estate construction |  |      | 201    |      |  |      | 242    |      |  |      |       |  |  |   |       |  |  |   |       | 
|                         |  |      |        |      |  |      |        |      |  |      |        |  |  |   |        |  |  |   |        | 
|Total                    |  | $    | 18,874 |      |  | $    | 17,595 |      |  | $    | 16,695 |  |  | $ | 15,217 |  |  | $ | 11,169 | 
|                         |  |      |        |      |  |      |        |      |  |      |        |  |  |   |        |  |  |   |        | 

The Corporations loan portfolios are subject to varying degrees of credit
risk. Credit risk is mitigated through portfolio diversification, limiting
exposure to any single industry or customer (see the Loan section above for
discussion on the commercial loan portfolios balance stratification and
industry concentration). The determination of the allowance for loan losses is
based on Managements evaluation of the potential losses in the loan portfolio
considering, among other relevant factors, repayment status, borrowers ability
to repay, collateral and current foreseeable economic conditions. The valuation
methodology has been consistently applied since 2000, when current Management
applied a more conservative view to the assumptions utilized in determining the
specific reserves to be allocated to each credit. These evaluations take into
consideration such factors as changes in the nature and volume of the loan
portfolio, economic conditions that may affect the borrowers ability to repay
(including the timing of future payments), overall quality, analysis of prior
and current loss experience and a review of specific problem loans. The
allowance reflects expected losses resulting from the analysis of specific
credits and historical loss experience for each loan category. The Bank
utilizes its internal loan gradings for commercial loans in conjunction with
historical loss experience for loans of each grade level and current economic
trends as parts of its analysis in determining the adequacy of its allowance
for loan losses. The allowance for loan

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losses is calculated using a written,
systematic methodology approved by a committee of the Banks Board of
Directors. The methodology includes specific allocations for known and
potential impaired loans; identified concentrations of credit; economic trends; collateral value trends;
new loan volume, and delinquent and non-accrual loan balances. The Banks
trailing eight-quarter net charge-off experience is utilized to determine the
appropriate general allocations. The methodology is consistently applied on a
monthly basis and a summary report presented for ratification to the Banks
Board of Directors.

Non-accrual loans are loans that are no longer accruing interest at the
discretion of Management. This occurs when Management determines that the
borrower can no longer service the debt, but the loan is adequately secured
with collateral or the borrower is able to repay the principal of the loan in
the future.

For the year ended December 31, 2003, interest income that would have been
earned under the original terms of the loans classified in non-accrual and
restructured loans amounted to $1,325, $1,229 and $398 in 2003, 2002 and 2001,
respectively. No interest income was realized on these loans for 2003, 2002 or
2001, respectively.

Below is a table listing the non-accrual, past due and restructured loans at
the end of the last five years. Past due loans are loans over 90 days past due
and still accruing interest.

|                             |  |      |        |      |  |      |        |      |  |      |        |   |  |   |       |   |  |   |       |  
|---------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ----- | - |  | - | ----- | -
|                             |  | 2003 |        | 2002 |  | 2001 |        | 2000 |  | 1999
|                             |  |      |        |      |  |      |        |      |  |     
|Non-accrual loans            |  | $    | 13,349 |      |  | $    | 13,123 |      |  | $    | 5,004  |   |  | $ | 4,699 |   |  | $ | 2,743 |  
|Past due loans               |  |      | 8,878  |      |  |      | 5,692  |      |  |      | 5,304  |   |  |   | 3,239 |   |  |   | 3,132 |  
|Restructured loans           |  |      | 1,017  |      |  |      | 378    |      |  |      | 258    |   |  |   | 43    |   |  |   | 52    |  
|                             |  |      |        |      |  |      |        |      |  |      |        |   |  |   |       |   |  |   |       |  
|Total                        |  | $    | 23,244 |      |  | $    | 19,193 |      |  | $    | 10,566 |   |  | $ | 7,981 |   |  | $ | 5,927 |  
|                             |  |      |        |      |  |      |        |      |  |      |        |   |  |   |       |   |  |   |       |  
|Percent of loans at year end |  |      | 1.72   | %    |  |      | 1.64   | %    |  |      | 0.94   | % |  |   | 0.75  | % |  |   | 0.55  | %
|Other real estate owned      |  | $    | 713    |      |  | $    | 1,371  |      |  | $    | 1,399  |   |  | $ | 902   |   |  | $ | 281   |  
|                             |  |      |        |      |  |      |        |      |  |      |        |   |  |   |       |   |  |   |       |  

Loans 30 to 89 days past due, where the monthly payment is more than 30 days
past due but less than 90 days past the payment date, excluding non-accrual and
restructured loans included in the table above, amounted to $5,970 or 0.44% of
outstanding loans as of December 31, 2003, as compared to $8,334 or 0.71% of
loans on December 31, 2002. Loans then current where some concerns existed as
to the ability of the borrower to comply with loan repayment terms approximated
$36,958 at December 31, 2003 and $43,095 at December 31, 2002. Such loans are
closely monitored by Management.

The provision for loan losses represents the charge to income necessary to
adjust the allowance for loan losses to an amount that represents Managements
assessment of the estimated probable loan losses inherent in the loan portfolio
that have been incurred at each balance sheet date. All lending activity
contains associated risks of loan losses that are a necessary element of
business activity. The provision for loan losses for 2003 was $7,610, compared
to $6,159 for 2002 and $4,718 in 2001. The changes in the provision for loan
losses were attributable to changes in the allowance for loan losses as a
result of net charge-offs, increasing non-performing loans and the recognition
of changes in the current risk factors. In 2000, the Corporation additionally
underwent a more stringent review of specific problem loans, which necessitated
the addition of $4,100 in additional provision during the third quarter of that
year.

Servicing Assets

The valuation of mortgage servicing assets is performed by an independent third
party. The critical factors and assumptions used in the valuation as of
December 31, 2003 were a discount rate of 9.01%, PSA of 257, weighted average
coupon of 5.94%, weighted average servicing fee of .252%, remaining term of 292
months, delinquency of 2.1%, a cost per loan of $45 and other income per loan
of $38.

At December 31, 2003, key economic assumptions and the sensitivity of the
current fair value of mortgage servicing assets to immediate 10% and 20%
adverse changes in those assumptions are presented in the table that follows.
These sensitivities are hypothetical and should be used with caution. As the
figures indicate, changes in fair value based on a 10% variation in assumptions
generally cannot be extrapolated because the relationship of the change in the
assumption to the change in fair value may not be linear. Also, the effect of a
variation in a particular assumption on the fair value of the
mortgage-

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servicing asset is calculated independently without changing any other
assumption. In reality, changes in one factor may result in changes in another
(for example, changes in the prepayment rate estimates could result in changes
in the discount rates), which might magnify or counteract the sensitivities.

|                                               |  |   |        |  
|---------------------------------------------- |  | - | ------ | -
|Fair value                                     |  | $ | 20,892 |  
|Expected weighted average life (in years)      |  |   | 4.8    |  
|Prepayment rate (annual PSA)                   |  |   | 257    |  
|Decrease in fair value from 10% adverse change |  | $ | 981    |  
|Decrease in fair value from 20% adverse change |  | $ | 1,881  |  
|Discount rate                                  |  |   | 9.01   | %
|Decrease in fair value from 10% adverse change |  | $ | 628    |  
|Decrease in fair value from 20% adverse change |  | $ | 1,223  |  

Funding Sources
Deposits

The average amounts of deposits are summarized below:

|                                     |  |      |           |      |  |      |           |  |  |   |           | 
|------------------------------------ |  | ---- | --------- | ---- |  | ---- | --------- |  |  | - | --------- | 
|                                     |  | 2003 |           | 2002 |  | 2001
|                                     |  |      |           |      |  |     
|Demand deposits-non-interest bearing |  | $    | 160,499   |      |  | $    | 146,598   |  |  | $ | 115,857   | 
|Demand deposits-interest bearing     |  |      | 160,226   |      |  |      | 101,222   |  |  |   | 90,762    | 
|Savings deposits                     |  |      | 359,712   |      |  |      | 374,313   |  |  |   | 242,242   | 
|Time deposits                        |  |      | 482,118   |      |  |      | 537,217   |  |  |   | 621,578   | 
|                                     |  |      |           |      |  |      |           |  |  |   |           | 
|Total                                |  | $    | 1,162,555 |      |  | $    | 1,159,350 |  |  | $ | 1,070,439 | 
|                                     |  |      |           |      |  |      |           |  |  |   |           | 

Average deposits increased slightly in 2003 after a slight decrease in 2002.
The increase in core deposit average balances (non-interest and interest
bearing demand and savings accounts) in 2003 allowed the Corporation to
de-emphasize higher cost time deposits through much of the year. The average
balance changes in 2003 were impacted by the sale of two banking centers in the
first quarter of 2003 with an accompanying reduction in deposits of $88,456.
Time deposit balances included in the sale totaled $50,978. Average time
deposits decreased by $55,099, or 10.3% in 2003. The trend reversed itself
after mid-year as other investment alternatives, including non-traditional bank
investments such as mutual funds came back into favor with the investing
public. As a result, core deposit balances declined and time deposits balances
were forced to increase by over $49 million from the end of 2002 to support
strong loan activities. In 2002, increases in average non-interest bearing and
interest bearing demand deposit balances coupled with the increase in MMDA
savings accounts offset the decline in time deposit balances.

The following is a maturity distribution for the $555,606 of time deposits
outstanding as of December 31, 2003:

|           |      |  |       |         | 
|---------- | ---- |  | ----- | ------- | 
|           | 2004 |  | $     | 333,402 | 
|           | 2005 |  |       | 98,972  | 
|           | 2006 |  |       | 105,861 | 
|           | 2007 |  |       | 8,219   | 
|           | 2008 |  |       | 7,650   | 
|Thereafter |      |  | 1,502 |        

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On December 31, 2003, time deposits over $100 totaled $128,270. The Bank
continues to maintain strong relationships with the various public entities
centered in the primary markets of the Bank which contributes to the balance of
time deposits over $100. The increase in these balances is due primarily to an
active calling program for public entities. The maturity schedule for time
deposits over $100 as of December 31, 2003, is given in the table below:

|                 |  |      |         |      |  |   |        | 
|---------------- |  | ---- | ------- | ---- |  | - | ------ | 
|Maturing in:     |  | 2003 |         | 2002
|                 |  |      |         |     
|3 months or less |  | $    | 18,119  |      |  | $ | 17,194 | 
|3 to 6 months    |  |      | 44,113  |      |  |   | 9,463  | 
|6 to 12 months   |  |      | 28,416  |      |  |   | 21,237 | 
|Over 12 months   |  |      | 37,622  |      |  |   | 34,557 | 
|                 |  |      |         |      |  |   |        | 
|Total            |  | $    | 128,270 |      |  | $ | 82,451 | 
|                 |  |      |         |      |  |   |        | 

Other Sources of Funds

The Corporation has the availability to borrow $73 million from correspondent
banks as overnight federal funds purchased. Federal funds purchased as of
December 31, 2003 totaled $51.5 million. There were $0 federal funds purchased
at both December 31, 2002 and 2001. The increase in funds purchased during 2003
is attributable to strong asset growth rates and only a modest increase in
deposit balances. The short-term funding also served to keep the Corporations
interest rate risk sensitivity within acceptable levels in 2003. The
Corporation has repurchase agreements with corporate customers and local
municipalities. These borrowings have an overnight maturity and are
collateralized with U. S. Treasury and government agency securities, including
agency-issued mortgage-backed securities with a market value of $188,953 and
$161,998 as of December 31, 2003 and 2002, respectively. The Corporation
continuously pledges collateral for these borrowings at an amount exceeding the
outstanding balance. The securities are held in the Corporations safekeeping
account at the Federal Reserve Bank. Although there were no repurchase
agreements with approved brokers outstanding at December 31, 2003, the
Corporation previously maintained such balances, which were collateralized by
U. S. Treasury and government agency securities held by the broker.

The following table summarizes certain information relative to these
borrowings:

|                                                           |  |      |         |      |  |      |         |   |  |   |         |  
|---------------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                                           |  | 2003 |         | 2002 |  | 2001
|                                                           |  |      |         |      |  |     
|Outstanding at December 31                                 |  | $    | 216,761 |      |  | $    | 138,796 |   |  | $ | 107,279 |  
|Weighted-average interest rate at December 31              |  |      | 1.18    | %    |  |      | 1.56    | % |  |   | 3.58    | %
|Maximum amount outstanding as of any month end             |  |      | 251,404 |      |  | $    | 178,536 |   |  | $ | 133,743 |  
|Average amount outstanding                                 |  | $    | 195,620 |      |  | $    | 134,374 |   |  | $ | 109,476 |  
|Approximate weighted-average interest rate
during the year |  |      | 1.26    | %    |  |      | 1.84    | % |  |   | 3.40    | %

The repurchase agreement program provides a sweep feature on the customers
primary business account along with competitive market rates of interest for
their excess funds. The success of this product reflects the strong emphasis
the Bank places on offering competitive products coupled with personalized
service to the small-to mid-size businesses operating in the Banks various
markets. Federal funds purchased and securities sold under agreements to
repurchase averaged $195,620 in 2003 with the majority of the average balances
representing the retail sweep product.

The Corporation also has available to it unsecured lines of credit with
correspondent banks totaling $20 million. The lines of credit are renewable
annually and bear interest at a floating rate based on several
indices. The
Corporation had utilized $7.75 million and $7 million in borrowings under these
lines as of December 31, 2003 and 2002, respectively. There were no balances
outstanding on the lines at the end of 2001. The primary use for the borrowings
was to fund common stock share repurchases under the Board approved repurchase
program.

The Corporation also has access to federal tax deposits on a daily basis. After
being deposited by customers, the tax deposits are held at the Corporation up
to a self-imposed limit of $6 million until they are drawn upon by the federal
government. The balance of these funds was $1,302 and $3,863 as of December 31,
2003 and 2002, respectively.

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The Bank also is a member of the Federal Home Loan Bank (FHLB) system and
utilizes the various advance programs offered by the FHLB. The funds are drawn
from the FHLB for various terms through 2007 and are utilized to provide
long-term funding to offset the interest rate risk inherent with holding
long-term, fixed-rate mortgages as well as funding for specific leveraging
activities. The balances of these advances were $492,299 and $365,844 as of
December 31, 2003 and 2002, respectively.

Most recently, the Corporation has utilized the issuance of junior subordinated
debentures to an unconsolidated subsidiary trust as a funding source. The
debentures are the sole asset of the unconsolidated subsidiary trust which
issued corporation-obligated mandatorily redeemable securities, more commonly
known as trust preferred securities. The securities are traded under the symbol
SECDP on the NASDAQ National Market System, currently qualify as tier I capital for
regulatory purposes and also bear interest that is tax deductible to the
Corporation.

Capital

The shareholders equity increased to $137,016 at December 31, 2003 from
$136,334 a year earlier. The increase, which was attributable to retention of
earnings, was mostly offset by a decrease in other comprehensive income,
primarily from a decline in the unrealized gains of the securities portfolio,
as well as an increase in the amount of shares in treasury.

In 2002, shareholders equity increased to $136,334 at December 31, 2002 from
$128,299 a year earlier. The increase was attributable to retention of earnings
as well as the increase in market values for the available-for-sale securities.
The increase was partially offset by the treasury share repurchase activities.
The impact of the change in unrealized market value adjustment on securities
available-for-sale, net of tax resulted in a net unrealized gain position
within other comprehensive income of $7,838 at December 31, 2002.

In 2000, the Board of Directors authorized the repurchase of up to 2% of shares
outstanding annually. Additionally, in 2000 and 2002, the Board of Directors
authorized the repurchase of an additional 600,000 and 500,000 shares,
respectively. The following table depicts treasury repurchase activity for the
past three years:

|                     |  |                  |           | 
|-------------------- |  | ---------------- | --------- | 
|                     |  | Number of Shares
|                     |  |                 
|Balance 12/31/00     |  |                  | 730,200   | 
|Repurchased 2001     |  |                  | 153,294   | 
|Balance 12/31/01     |  |                  | 883,494   | 
|Repurchased 2002     |  |                  | 395,515   | 
|Balance 12/31/02     |  |                  | 1,279,009 | 
|Net repurchased 2003 |  |                  | 241,080   | 
|                     |  |                  |           | 
|Balance 12/31/03     |  |                  | 1,520,089 | 
|                     |  |                  |           | 

The Corporation has consistently had qualifying capital under the risk-based
capital requirements in excess of those required to meet the well-capitalized
standards. For further details on capital ratios, see Note 18.

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The Corporation trades under the symbol SECD on the NASDAQ National Market
System. The total market capitalization of the Corporation was approximately
$250 million at December 31, 2003. The table below lists the high and low
trading prices for the common stock by quarter for the last three years.

|                   |  |       |       |        |  |       |       |        |  |      |       |  |  |   |       |  |  |   |       | 
|------------------ |  | ----- | ----- | ------ |  | ----- | ----- | ------ |  | ---- | ----- |  |  | - | ----- |  |  | - | ----- | 
|Quarter            |  | First |       | Second |  | Third |       | Fourth |  | Year
|                   |  |       |       |        |  |       |       |        |  |     
|2003:              |  |       |       |        |  |       |       |        |  |      |       |  |  |   |       |  |  |   |       | 
|High               |  | $     | 26.90 |        |  | $     | 25.82 |        |  | $    | 28.75 |  |  | $ | 28.99 |  |  | $ | 28.99 | 
|Low                |  |       | 22.15 |        |  |       | 21.55 |        |  |      | 25.61 |  |  |   | 25.62 |  |  |   | 21.55 | 
|Dividends declared |  |       | .19   |        |  |       | .19   |        |  |      | .19   |  |  |   | .19   |  |  |   | .76   | 
|2002:              |  |       |       |        |  |       |       |        |  |      |       |  |  |   |       |  |  |   |       | 
|High               |  | $     | 25.03 |        |  | $     | 28.39 |        |  | $    | 28.32 |  |  | $ | 28.12 |  |  | $ | 28.39 | 
|Low                |  |       | 20.50 |        |  |       | 24.25 |        |  |      | 23.53 |  |  |   | 24.51 |  |  |   | 20.50 | 
|Dividends declared |  |       | .18   |        |  |       | .18   |        |  |      | .18   |  |  |   | .18   |  |  |   | .72   | 
|2001:              |  |       |       |        |  |       |       |        |  |      |       |  |  |   |       |  |  |   |       | 
|High               |  | $     | 18.75 |        |  | $     | 23.00 |        |  | $    | 22.89 |  |  | $ | 22.36 |  |  | $ | 23.00 | 
|Low                |  |       | 13.75 |        |  |       | 16.55 |        |  |      | 17.00 |  |  |   | 18.45 |  |  |   | 13.75 | 
|Dividends declared |  |       | .17   |        |  |       | .17   |        |  |      | .17   |  |  |   | .17   |  |  |   | .68   | 

The Corporations price for its common stock decreased by 0.4% in 2003 to
finish the year at $26.40 with a trading range of $21.55 to $28.99 per share.
The flatness of the stock performance for the full year paralleled the
Corporations static non-GAAP operating financial performance. Bank stock
prices rebounded in 2002 and 2001 as market rates declined and the
Corporations stock price also improved in conjunction with improved financial
performance. Book value per common share was $14.47 and $13.91 at December
31, 2003 and 2002, respectively.

The Corporation has historically paid cash dividends on a quarterly basis and
has periodically paid stock dividends at the discretion of the Board of
Directors. The payment and amount of future dividends on the common stock will
be determined by the Board of Directors. The payment will depend on, among
other things, earnings, financial condition and cash requirements of the
Corporation at the time that such payment is considered, and on the ability of
the Corporation to receive dividends from the Bank, the amount of which is
subject to regulatory limitations. For 2003, 2002 and 2001, the dividend-payout
ratio for the Corporation was 31.1%, 39.5%, and 39.8%, respectively. The
reduction in the payout ratio in 2003 is attributable to the strength in net
income resulting partially from the non-recurring gain on the sale of the
banking centers.

Liquidity

Management of the Corporations liquidity position is necessary to ensure that
funds are available to meet the cash flow needs of depositors and borrowers as
well as the operating cash needs of the Corporation. Funds are available from
a number of sources including maturing securities, payments made on loans, the
acquisition of new deposits, the sale of packaged loans, borrowing from the
FHLB and overnight lines of credit of over $73 million through correspondent
banks. The parent company has three major sources of funding including
dividends from the Bank, $20 million in unsecured lines of credit with
correspondent banks, which are renewable annually, and access to the capital
markets. The Corporations liquidity position is monitored utilizing a variety
of methods including key ratio analyses. Recently the trend in the ratios has
indicated a higher degree of liquidity risk than was inherent in the balance
sheet in prior years. Part of the increase is due to the leveraging activities
undertaken in an attempt to improve earnings. Additional liquidity risk was
exhibited due to the continued growth of assets and recent decline in core
deposit balances.

The net cash provided by operating activities for 2003, 2002 and 2001 was
approximately $27 million, $39 million and $22 million, respectively.
Management does not expect future cash flows available from operations to be
materially different from the cash flow experience of the prior three years.
Factors affecting cash flows from investing or financing activities are not
expected to have a significant negative impact on foreseeable future
liquidity. As discussed in Note 18, the Bank is subject to regulation and may
be limited in its ability to pay dividends to the parent company. Accordingly,
consolidated cash flows may not represent cash available to common
shareholders.

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Market Risk Management

Market risk is the risk of economic loss from adverse changes in the fair value
of financial instruments due to changes in (a) interest rates, (b) foreign
exchange rates, or (c) other factors that relate to market volatility of the
rate, index, or price underlying the financial instrument. The Corporations
market risk is composed primarily of interest rate risk. The Corporations
Asset/Liability Committee (ALCO) is responsible for reviewing the interest rate
sensitivity position of the Corporation and establishing policies to monitor
and limit the exposure to interest rate risk. Since nearly the Corporations
entire interest rate risk exposure relates to the financial instrument activity
of the Bank, the Banks Board of Directors reviews the policies and guidelines
established by ALCO.

The primary objective of asset/liability management is to provide an optimum
and stable net interest margin, after-tax return on assets and return on equity
capital, as well as adequate liquidity and capital. Interest rate risk is
monitored through the use of two complementary measures: dynamic gap analysis
and earnings simulation models. While each of the measurement techniques has
limitations, taken together they represent a reasonably comprehensive tool for measuring the
magnitude of interest rate risk inherent in the Corporation.

The dynamic gap analysis measures the amount of repricing risk associated with
the balance sheet at a specific point in time. Expected cash flows from fixed
rate instruments are defined utilizing contractual maturities and anticipated
cash flows through early repayment of loans, early calls and paydowns of
securities and early withdrawals of deposits. Variable rate instruments
repricing frequencies are categorized according to their earliest repricing
opportunity. Core deposits with non-contractual maturities are included in the
gap repricing distributions based on historical patterns of pricing behavior.

The earnings simulation model forecasts earnings for a one-year horizon frame
under a variety of interest rate scenarios. Management evaluates the impact
of the various rate simulations against earnings in a stable interest rate
environment. The most recent model projects net income would increase by 3.9%
if interest rates would immediately fall by 100 basis points and decrease by
2.6% if interest rates would immediately rise by 200 basis points. At December
31, 2002, the model projected net income would decrease by 0.1% if interest
rates would immediately fall by 125 basis points and increase by 19.0% if
interest rates would immediately rise by 200 basis points. The projected
changes in net income include the projected changes in net interest income from
the table below as well as projected changes in income from gains on sale of
mortgage loans and projected adjustments to mortgage servicing assets and
associated derivatives. Management believes this asset sensitive position for
the one-year time horizon is within acceptable levels of risk tolerance. The
earnings simulation model includes assumptions about how the various components
of the balance sheet and rate structure are likely to react through time in
different interest rate environments. These assumptions are derived from
historical analysis and Managements outlook. Also included are estimates and
assumptions regarding the impact to earnings from changes in the valuation
allowance for servicing assets, gains on sale of mortgage loans and changes in
the volume of interest rate floors.

The following table shows the projected changes in net interest income and the
economic value of equity based on a series of interest rate shocks:

|                     |  |                     |      |                          |  |  |       |   
|-------------------- |  | ------------------- | ---- | ------------------------ |  |  | ----- | --
|Rate Shock Scenario  |  | Net Interest Income |      | Economic Value of Equity
|                     |  |                     |      |                         
|Down 100             |  |                     | (7.8 | )%                       |  |  | (13.3 | )%
|Up 200               |  |                     | 0.7  | %                        |  |  | (5.4  | )%
|Board approved limit |  |                     | (10  | )%                       |  |  | (30   | )%

The economic value of equity is a measure used to determine the risk of changes
to the value of equity from interest rate changes and incorporates the duration
of assets and liabilities as well as their sensitivity to interest rate
changes.

Interest rate sensitivity is managed through the use of security portfolio
management techniques, the use of fixed rate long-term borrowings from the
FHLB, the establishment of rate and term structures for time deposits and
loans, the sale of long-term fixed rate mortgages through the secondary
mortgage market and interest rate swaps, caps and floors.

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Contractual Obligations, Commitments, Contingent liabilities and Off Balance
Sheet Arrangements

As disclosed in the Notes to the Consolidated Financial Statements, the
Corporation has various financial obligations, including contractual
obligations and commitments that may require future cash payments.

Contractual Obligations

The following table presents, as of December 31, 2003, significant fixed and
determinable contractual obligations to third parties by payment date.

|                                                                               |       |      |           |           |  |           |         |         |  |       |         |         |        |   |         |         |  |   |         |           | 
|------------------------------------------------------------------------------ | ----- | ---- | --------- | --------- |  | --------- | ------- | ------- |  | ----- | ------- | ------- | ------ | - | ------- | ------- |  | - | ------- | --------- | 
|                                                                               |       |      | 1 year or |           |  |           |         |         |  |       |         |         | Over 5 |   |         |         | 
|Payments due in                                                                |       | Less |           | 1-3 Years |  | 3-5 Years |         | Years   |  | Total
|                                                                               |       |      |           |           |  |           |         |         |  |      
|Deposits without a stated maturity (a)                                         |       | $    | 659,736   |           |  | $         |        |         |  | $     |        |         |        | $ |        |         |  | $ | 659,736 |          
|Consumer and brokered certificates of deposit (b)                              |       |      | 363,919   |           |  |           | 193,236 |         |  |       | 16,991  |         |        |   | 1,832   |         |  |   | 575,978 |          
|Federal funds purchased and securities sold
under agreements to repurchase (a) |       |      | 216,761   |           |  |           |        |         |  |       |        |         |        |   |        |         |  |   | 216,761 |          
|Note payable (a)                                                               |       |      | 7,750     |           |  |           |        |         |  |       |        |         |        |   |        |         |  |   | 7,750   |          
|Other borrowed funds (a)                                                       |       |      | 1,301     |           |  |           |        |         |  |       |        |         |        |   |        |         |  |   | 1,301   |          
|Federal Home Loan Bank advances (b)                                            |       |      | 145,374   |           |  |           | 55,584  |         |  |       | 106,953 |         |        |   | 292,742 |         |  |   | 600,653 |          
|Debentures (b)                                                                 |       |      | 2,838     |           |  |           | 37,214  |         |  |       |        |         |        |   |        |         |  |   | 40,052  |          
|Annual rental commitments under non-cancelable
leases                          |       |      | 2,589     |           |  |           | 4,969   |         |  |       | 3,639   |         |        |   | 5,857   |         |  |   | 17,054  |          
|                                                                               |       |      |           |           |  |           |         |         |  |       |         |         |        |   |         |         |  |   |         |          
|                                                                               | Total |      | $         | 1,400,268 |  |           | $       | 291,003 |  |       | $       | 127,583 |        |   | $       | 300,431 |  |   | $       | 2,119,285 | 
|                                                                               |       |      |           |           |  |           |         |         |  |       |         |         |        |   |         |         |  |   |         |          



|(a) |  | Excludes interest
|--- |  | -----------------
|   
|(b) |  | Includes interest

The Corporation also has obligations under its two non-qualified supplemental
retirement plans for key employees as described in Note 21 to the consolidated
financial statements. The benefit payments represent actuarially determined
future benefit payments to eligible plan participants. The Corporation does not
have any commitments or obligations to the defined benefit pension plan at
December 31, 2003 due to the funded status of the plan. The supplemental plans
are unfunded. See further discussion in Note 21.

Commitments and Off Balance Sheet Arrangements

The following table details the amounts and expected maturities of significant
commitments as of December 31, 2003. Further discussion of these commitments is
included in Note 25 to the consolidated financial statements.

|                                            |       |           |         |           |  |           |        |        |  |       |       |        |  |   |     |     |  |   |         |         | 
|------------------------------------------- | ----- | --------- | ------- | --------- |  | --------- | ------ | ------ |  | ----- | ----- | ------ |  | - | --- | --- |  | - | ------- | ------- | 
|Amount of commitment                        |       | 1 year or |         |           |  |           |        |        |  |       |       | Over 5 |  |   |     |    
|Expiration by period                        |       | Less      |         | 1-3 Years |  | 3-5 Years |        | Years  |  | Total
|                                            |       |           |         |           |  |           |        |        |  |      
|Commitments to lend-commercial              |       | $         | 126,753 |           |  | $         | 29,788 |        |  | $     | 1,699 |        |  | $ |    |     |  | $ | 158,240 |        
|Commitments to lend-residential real estate |       |           | 34,376  |           |  |           |       |        |  |       |      |        |  |   |    |     |  |   | 34,376  |        
|Commitments to lend-consumer                |       |           | 88,243  |           |  |           |       |        |  |       |      |        |  |   |    |     |  |   | 88,243  |        
|Standby letters of credit                   |       |           | 16,914  |           |  |           | 64     |        |  |       | 5,185 |        |  |   | 262 |     |  |   | 22,425  |        
|                                            |       |           |         |           |  |           |        |        |  |       |       |        |  |   |     |     |  |   |         |        
|                                            | Total |           | $       | 266,286   |  |           | $      | 29,852 |  |       | $     | 6,884  |  |   | $   | 262 |  |   | $       | 303,284 | 
|                                            |       |           |         |           |  |           |        |        |  |       |       |        |  |   |     |     |  |   |         |        

Commitments to extend credit, including loan commitments, standby letters of
credit and commercial letters of credit do not necessarily represent future
cash requirements, in that these commitments often expire without being drawn
upon.

The commitments to fund principal investments primarily relate to the
Corporations indirect investments in various private equity funds managed by
third-party general and limited partners. These estimated commitments were
based primarily on the expiration of each funds investment period at December
31, 2003. The timing of these payments could change due to extensions in the
investment periods of the funds or by the rate the commitments are invested,
both of which are determined by either the general and/or limited partners of
the funds.

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There are no recourse provisions with third parties or balances recorded for
the standby letters of credit at December 31, 2003.

The Corporation also enters into derivative contracts under which the
Corporation is required to either receive cash from or pay cash to
counterparties depending on changes in interest rates. Derivative contracts are
carried at fair value on the consolidated balance sheet with the fair value
representing the net present value of expected future cash receipts or payments
based on market interest rates as of the balance sheet date. The fair value of
the contracts change daily as market interest rates change. Certain contracts,
such as interest rate futures, are cash settled daily, while others, such as
interest rate swaps, involve monthly cash settlement. Because the derivative
liabilities recorded on the balance sheet at December 31, 2003 do not represent
the amounts that may ultimately be paid under these contracts, these
liabilities are not included in the table of contractual obligations presented
on the previous page. Further discussion of derivative instruments is included
in Notes 1 and 24 to the consolidated financial statements.




Item 7 A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this Item is included under the caption Market
Risk Management presented in Item 7 above.

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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

(Dollars in thousands except per share data or as otherwise indicated)

Consolidated Balance Sheets

As of December 31

|                                                                                                                |  |      |           |      |  |   |           |  
|--------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ---- |  | - | --------- | -
|ASSETS                                                                                                          |  | 2003 |           | 2002
|                                                                                                                |  |      |           |     
|Cash and due from banks                                                                                         |  | $    | 40,773    |      |  | $ | 60,822    |  
|Federal funds sold and temporary investments                                                                    |  |      | 6,529     |      |  |   | 61,449    |  
|Securities available-for-sale (at market value)                                                                 |  |      | 620,696   |      |  |   | 523,669   |  
|Loans                                                                                                           |  |      | 1,349,820 |      |  |   | 1,167,791 |  
|Less allowance for loan losses                                                                                  |  |      | 18,874    |      |  |   | 17,595    |  
|                                                                                                                |  |      |           |      |  |   |           |  
|Net loans                                                                                                       |  |      | 1,330,946 |      |  |   | 1,150,196 |  
|Premises and equipment                                                                                          |  |      | 19,013    |      |  |   | 16,632    |  
|Accrued interest receivable                                                                                     |  |      | 8,501     |      |  |   | 8,762     |  
|Goodwill                                                                                                        |  |      | 16,700    |      |  |   | 16,708    |  
|Other intangible assets                                                                                         |  |      | 3,347     |      |  |   | 3,714     |  
|Servicing assets                                                                                                |  |      | 20,936    |      |  |   | 12,403    |  
|Other assets                                                                                                    |  |      | 49,320    |      |  |   | 40,420    |  
|                                                                                                                |  |      |           |      |  |   |           |  
|Total assets                                                                                                    |  | $    | 2,116,761 |      |  | $ | 1,894,775 |  
|                                                                                                                |  |      |           |      |  |   |           |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                            |  |      |           |      |  |   |           |  
|Deposits:                                                                                                       |  |      |           |      |  |   |           |  
|Demand  non-interest bearing                                                                                   |  | $    | 170,176   |      |  | $ | 179,714   |  
|Demand  interest bearing                                                                                       |  |      | 142,709   |      |  |   | 103,583   |  
|Savings                                                                                                         |  |      | 346,851   |      |  |   | 405,437   |  
|Time deposits                                                                                                   |  |      | 555,606   |      |  |   | 506,378   |  
|                                                                                                                |  |      |           |      |  |   |           |  
|Total deposits                                                                                                  |  |      | 1,215,342 |      |  |   | 1,195,112 |  
|Federal funds purchased and securities sold under agreements to repurchase                                      |  |      | 216,761   |      |  |   | 138,796   |  
|Note payable                                                                                                    |  |      | 7,750     |      |  |   | 7,000     |  
|Other borrowed funds                                                                                            |  |      | 1,301     |      |  |   | 3,863     |  
|Federal Home Loan Bank advances                                                                                 |  |      | 492,299   |      |  |   | 365,844   |  
|Accrued expenses and other liabilities                                                                          |  |      | 14,755    |      |  |   | 17,331    |  
|Debentures                                                                                                      |  |      | 31,537    |      |  |   |          |  
|Corporation-obligated mandatorily redeemable capital securities of
subsidiary trust                             |  |      |          |      |  |   | 30,495    |  
|                                                                                                                |  |      |           |      |  |   |           |  
|Total liabilities                                                                                               |  |      | 1,979,745 |      |  |   | 1,758,441 |  
|Shareholders equity:                                                                                           |  |      |           |      |  |   |           |  
|Common stock, no par value; 30,000,000 shares authorized; 10,991,460 and
11,041,263 shares issued, respectively |  |      | 42,973    |      |  |   | 41,763    |  
|Treasury stock; 1,520,089 and 1,279,009 shares, respectively                                                    |  |      | (36,173   | )    |  |   | (27,180   | )
|Accumulated other comprehensive income                                                                          |  |      | (834      | )    |  |   | 6,656     |  
|Retained earnings                                                                                               |  |      | 131,050   |      |  |   | 115,095   |  
|                                                                                                                |  |      |           |      |  |   |           |  
|Total shareholders equity                                                                                      |  |      | 137,016   |      |  |   | 136,334   |  
|                                                                                                                |  |      |           |      |  |   |           |  
|Total liabilities and shareholders equity                                                                      |  | $    | 2,116,761 |      |  | $ | 1,894,775 |  
|                                                                                                                |  |      |           |      |  |   |           |  

See Notes to Consolidated Financial Statements

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Consolidated Statements of
Income
For the Years Ended December 31

|                                                                           |  |      |           |      |  |      |            |   |  |   |            |  
|-------------------------------------------------------------------------- |  | ---- | --------- | ---- |  | ---- | ---------- | - |  | - | ---------- | -
|INTEREST INCOME                                                            |  | 2003 |           | 2002 |  | 2001
|                                                                           |  |      |           |      |  |     
|Loans (including fees):                                                    |  |      |           |      |  |      |            |   |  |   |            |  
|Taxable                                                                    |  | $    | 75,655    |      |  | $    | 79,671     |   |  | $ | 85,631     |  
|Exempt from federal income taxes                                           |  |      | 838       |      |  |      | 922        |   |  |   | 1,092      |  
|Securities:                                                                |  |      |           |      |  |      |            |   |  |   |            |  
|Taxable                                                                    |  |      | 22,919    |      |  |      | 22,648     |   |  |   | 21,614     |  
|Exempt from federal income taxes                                           |  |      | 2,834     |      |  |      | 2,946      |   |  |   | 3,137      |  
|Federal funds sold and other                                               |  |      | 316       |      |  |      | 1,085      |   |  |   | 1,083      |  
|                                                                           |  |      |           |      |  |      |            |   |  |   |            |  
|Total interest income                                                      |  |      | 102,562   |      |  |      | 107,272    |   |  |   | 112,557    |  
|INTEREST EXPENSE                                                           |  |      |           |      |  |      |            |   |  |   |            |  
|Deposits                                                                   |  |      | 21,798    |      |  |      | 29,400     |   |  |   | 42,010     |  
|Federal funds purchased and securities sold under agreements to
repurchase |  |      | 2,472     |      |  |      | 2,499      |   |  |   | 3,904      |  
|Note payable                                                               |  |      | 214       |      |  |      | 38         |   |  |   | 47         |  
|Other borrowed funds                                                       |  |      | 11        |      |  |      | 42         |   |  |   | 90         |  
|Federal Home Loan Bank advances                                            |  |      | 19,174    |      |  |      | 15,900     |   |  |   | 15,567     |  
|Debentures and capital securities                                          |  |      | 3,022     |      |  |      | 2,933      |   |  |   | 749        |  
|                                                                           |  |      |           |      |  |      |            |   |  |   |            |  
|Total interest expense                                                     |  |      | 46,691    |      |  |      | 50,812     |   |  |   | 62,367     |  
|                                                                           |  |      |           |      |  |      |            |   |  |   |            |  
|Net interest income                                                        |  |      | 55,871    |      |  |      | 56,460     |   |  |   | 50,190     |  
|Provision for loan losses                                                  |  |      | 7,610     |      |  |      | 6,159      |   |  |   | 4,718      |  
|                                                                           |  |      |           |      |  |      |            |   |  |   |            |  
|Net interest income after provision for loan losses                        |  |      | 48,261    |      |  |      | 50,301     |   |  |   | 45,472     |  
|NON-INTEREST INCOME                                                        |  |      |           |      |  |      |            |   |  |   |            |  
|Mortgage banking revenue                                                   |  |      | 10,194    |      |  |      | 6,446      |   |  |   | 5,370      |  
|Service charges on deposit accounts                                        |  |      | 6,259     |      |  |      | 5,823      |   |  |   | 5,302      |  
|Trust fees                                                                 |  |      | 2,560     |      |  |      | 2,715      |   |  |   | 2,870      |  
|Security gains                                                             |  |      | 4,584     |      |  |      | 592        |   |  |   | 642        |  
|Trading (losses) gains                                                     |  |      |          |      |  |      | (20        | ) |  |   | 19         |  
|Gain on sale of banking centers                                            |  |      | 5,619     |      |  |      |           |   |  |   |           |  
|Other operating income                                                     |  |      | 9,351     |      |  |      | 7,869      |   |  |   | 5,325      |  
|                                                                           |  |      |           |      |  |      |            |   |  |   |            |  
|Total non-interest income                                                  |  |      | 38,567    |      |  |      | 23,425     |   |  |   | 19,528     |  
|NON-INTEREST EXPENSE                                                       |  |      |           |      |  |      |            |   |  |   |            |  
|Salaries and employee benefits                                             |  |      | 29,583    |      |  |      | 26,345     |   |  |   | 21,544     |  
|Net occupancy                                                              |  |      | 4,740     |      |  |      | 4,480      |   |  |   | 4,263      |  
|Equipment                                                                  |  |      | 4,052     |      |  |      | 3,898      |   |  |   | 3,891      |  
|Professional services                                                      |  |      | 3,417     |      |  |      | 2,139      |   |  |   | 1,776      |  
|Assessment on deposits and other taxes                                     |  |      | 1,503     |      |  |      | 1,397      |   |  |   | 1,542      |  
|Amortization of goodwill and other intangibles                             |  |      | 467       |      |  |      | 475        |   |  |   | 377        |  
|Merger-related costs                                                       |  |      |          |      |  |      | 134        |   |  |   | 305        |  
|Banking center reconfiguration                                             |  |      |          |      |  |      | 2,096      |   |  |   |           |  
|Other operating expenses                                                   |  |      | 11,001    |      |  |      | 8,532      |   |  |   | 8,241      |  
|                                                                           |  |      |           |      |  |      |            |   |  |   |            |  
|Total non-interest expense                                                 |  |      | 54,763    |      |  |      | 49,496     |   |  |   | 41,939     |  
|                                                                           |  |      |           |      |  |      |            |   |  |   |            |  
|Income before federal income taxes                                         |  |      | 32,065    |      |  |      | 24,230     |   |  |   | 23,061     |  
|Income tax expense:                                                        |  |      |           |      |  |      |            |   |  |   |            |  
|Current                                                                    |  |      | 3,446     |      |  |      | 5,567      |   |  |   | 4,050      |  
|Deferred                                                                   |  |      | 5,464     |      |  |      | 663        |   |  |   | 1,830      |  
|                                                                           |  |      |           |      |  |      |            |   |  |   |            |  
|Total federal income tax expense                                           |  |      | 8,910     |      |  |      | 6,230      |   |  |   | 5,880      |  
|                                                                           |  |      |           |      |  |      |            |   |  |   |            |  
|Net income before cumulative effect of accounting change                   |  | $    | 23,155    |      |  | $    | 18,000     |   |  | $ | 17,181     |  
|                                                                           |  |      |           |      |  |      |            |   |  |   |            |  
|Cumulative effect of accounting change, net of tax - SFAS No. 133          |  |      |          |      |  |      |           |   |  |   | (101       | )
|Net income                                                                 |  | $    | 23,155    |      |  | $    | 18,000     |   |  | $ | 17,080     |  
|                                                                           |  |      |           |      |  |      |            |   |  |   |            |  
|Earnings per common share:                                                 |  |      |           |      |  |      |            |   |  |   |            |  
|Basic - before cumulative effect of accounting change                      |  | $    | 2.43      |      |  | $    | 1.82       |   |  | $ | 1.72       |  
|Diluted - before cumulative effect of accounting change                    |  | $    | 2.41      |      |  | $    | 1.79       |   |  | $ | 1.70       |  
|Basic                                                                      |  | $    | 2.43      |      |  | $    | 1.82       |   |  | $ | 1.71       |  
|Diluted                                                                    |  | $    | 2.41      |      |  | $    | 1.79       |   |  | $ | 1.69       |  
|Average common shares outstanding:                                         |  |      |           |      |  |      |            |   |  |   |            |  
|Basic                                                                      |  |      | 9,512,324 |      |  |      | 9,905,832  |   |  |   | 10,013,068 |  
|Diluted                                                                    |  |      | 9,623,388 |      |  |      | 10,040,001 |   |  |   | 10,080,005 |  
|                                                                           |  |      |           |      |  |      |            |   |  |   |            |  

See Notes to Consolidated Financial Statements

41



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##### Table of Contents






Consolidated Statements of Shareholders Equity

|                                                                                                                                                           |  |        |        |          |  |               |         |          |  |             |        |        |  |               |         |   |  |   |         |   |  |   |        |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------ | ------ | -------- |  | ------------- | ------- | -------- |  | ----------- | ------ | ------ |  | ------------- | ------- | - |  | - | ------- | - |  | - | ------ | -
|                                                                                                                                                           |  |        |        |          |  |               |         |          |  | Accumulated |        |        |  |               |         |   |  |   |         |   |  |  
|                                                                                                                                                           |  |        |        |          |  |               |         |          |  | Other       |        |        |  |               |         |   |  |   |         |   |  |  
|                                                                                                                                                           |  | Common |        | Treasury |  | Comprehensive |         | Retained |  |             |        |        |  | Comprehensive
|                                                                                                                                                           |  | Stock  |        | Stock    |  | Income        |         | Earnings |  | Total       |        | Income
|                                                                                                                                                           |  |        |        |          |  |               |         |          |  |             |        |       
|Balance, January 1, 2001                                                                                                                                   |  | $      | 36,935 |          |  | $             | (13,947 | )        |  | $           | 281    |        |  | $             | 93,928  |   |  | $ | 117,197 |   |  |   |        |  
|Comprehensive income:                                                                                                                                      |  |        |        |          |  |               |         |          |  |             |        |        |  |               |         |   |  |   |         |   |  |   |        |  
|Net income                                                                                                                                                 |  |        |        |          |  |               |         |          |  |             |        |        |  |               | 17,080  |   |  |   | 17,080  |   |  | $ | 17,080 |  
|Change in other comprehensive
income employee benefit
plans, net of tax $38                                                                                |  |        |        |          |  |               |         |          |  |             | (71    | )      |  |               |         |   |  |   | (71     | ) |  |   | (71    | )
|Change in unrealized gain on
securities of $5,602, net of
reclassification adjustment for
gains included in net income
of $642 and net of tax of
$1,736    |  |        |        |          |  |               |         |          |  |             | 3,224  |        |  |               |         |   |  |   | 3,224   |   |  |   | 3,224  |  
|                                                                                                                                                           |  |        |        |          |  |               |         |          |  |             |        |        |  |               |         |   |  |   |         |   |  |   |        |  
|Comprehensive income                                                                                                                                       |  |        |        |          |  |               |         |          |  |             |        |        |  |               |         |   |  |   |         |   |  | $ | 20,233 |  
|                                                                                                                                                           |  |        |        |          |  |               |         |          |  |             |        |        |  |               |         |   |  |   |         |   |  |   |        |  
|Cash dividends declared:                                                                                                                                   |  |        |        |          |  |               |         |          |  |             |        |        |  |               |         |   |  |   |         |   |  |   |        |  
|Common stock ($.68 per share)                                                                                                                              |  |        |        |          |  |               |         |          |  |             |        |        |  |               | (6,798  | ) |  |   | (6,798  | ) |  |   |        |  
|Purchase of treasury stock                                                                                                                                 |  |        |        |          |  |               | (2,851  | )        |  |             |        |        |  |               |         |   |  |   | (2,851  | ) |  |   |        |  
|Common stock issued - dividend
reinvestment and stock
option plans                                                                                         |  |        | 518    |          |  |               |         |          |  |             |        |        |  |               |         |   |  |   | 518     |   |  |   |        |  
|                                                                                                                                                           |  |        |        |          |  |               |         |          |  |             |        |        |  |               |         |   |  |   |         |   |  |   |        |  
|Balance, December 31, 2001                                                                                                                                 |  |        | 37,453 |          |  |               | (16,798 | )        |  |             | 3,434  |        |  |               | 104,210 |   |  |   | 128,299 |   |  |   |        |  
|Comprehensive income:                                                                                                                                      |  |        |        |          |  |               |         |          |  |             |        |        |  |               |         |   |  |   |         |   |  |   |        |  
|Net income                                                                                                                                                 |  |        |        |          |  |               |         |          |  |             |        |        |  |               | 18,000  |   |  |   | 18,000  |   |  | $ | 18,000 |  
|Change in other comprehensive
income employee benefit plans, net
of tax of $598                                                                            |  |        |        |          |  |               |         |          |  |             | (1,111 | )      |  |               |         |   |  |   | (1,111  | ) |  |   | (1,111 | )
|Change in unrealized gain on
securities of $7,258, net of
reclassification adjustment
for gains included in net
income of $592 and net of tax
of $2,333    |  |        |        |          |  |               |         |          |  |             | 4,333  |        |  |               |         |   |  |   | 4,333   |   |  |   | 4,333  |  
|                                                                                                                                                           |  |        |        |          |  |               |         |          |  |             |        |        |  |               |         |   |  |   |         |   |  |   |        |  
|Comprehensive income                                                                                                                                       |  |        |        |          |  |               |         |          |  |             |        |        |  |               |         |   |  |   |         |   |  | $ | 21,222 |  
|                                                                                                                                                           |  |        |        |          |  |               |         |          |  |             |        |        |  |               |         |   |  |   |         |   |  |   |        |  
|Tax benefit on stock option exercise                                                                                                                       |  |        | 554    |          |  |               |         |          |  |             |        |        |  |               |         |   |  |   | 554     |   |  |   |        |  
|Cash dividends declared:                                                                                                                                   |  |        |        |          |  |               |         |          |  |             |        |        |  |               |         |   |  |   |         |   |  |   |        |  
|Common stock ($.72 per share)                                                                                                                              |  |        |        |          |  |               |         |          |  |             |        |        |  |               | (7,115  | ) |  |   | (7,115  | ) |  |   |        |  
|Purchase of treasury stock                                                                                                                                 |  |        |        |          |  |               | (10,382 | )        |  |             |        |        |  |               |         |   |  |   | (10,382 | ) |  |   |        |  
|Common stock issued - dividend
reinvestment and stock
option plans                                                                                         |  |        | 3,756  |          |  |               |         |          |  |             |        |        |  |               |         |   |  |   | 3,756   |   |  |   |        |  
|                                                                                                                                                           |  |        |        |          |  |               |         |          |  |             |        |        |  |               |         |   |  |   |         |   |  |   |        |  
|Balance, December 31, 2002                                                                                                                                 |  |        | 41,763 |          |  |               | (27,180 | )        |  |             | 6,656  |        |  |               | 115,095 |   |  |   | 136,334 |   |  |   |        |  
|Comprehensive income:                                                                                                                                      |  |        |        |          |  |               |         |          |  |             |        |        |  |               |         |   |  |   |         |   |  |   |        |  
|Net income                                                                                                                                                 |  |        |        |          |  |               |         |          |  |             |        |        |  |               | 23,155  |   |  |   | 23,155  |   |  | $ | 23,155 |  
|Change in other comprehensive
income-employee benefit
plans, net of tax of
$606                                                                            |  |        |        |          |  |               |         |          |  |             | 1,126  |        |  |               |         |   |  |   | 1,126   |   |  |   | 1,126  |  
|Change in other comprehensive
income-unrealized loss on
derivatives, net
of tax of $113                                                                    |  |        |        |          |  |               |         |          |  |             | (210   | )      |  |               |         |   |  |   | (210    | ) |  |   | (210   | )
|Change in unrealized gain on
securities of $(8,348) net of
reclassification adjustment for
gains included in net
income of $4,584 and
net of tax of $4,526 |  |        |        |          |  |               |         |          |  |             | (8,406 | )      |  |               |         |   |  |   | (8,406  | ) |  |   | (8,406 | )
|                                                                                                                                                           |  |        |        |          |  |               |         |          |  |             |        |        |  |               |         |   |  |   |         |   |  |   |        |  
|Comprehensive income                                                                                                                                       |  |        |        |          |  |               |         |          |  |             |        |        |  |               |         |   |  |   |         |   |  | $ | 15,665 |  
|                                                                                                                                                           |  |        |        |          |  |               |         |          |  |             |        |        |  |               |         |   |  |   |         |   |  |   |        |  
|Tax benefit on stock option exercise                                                                                                                       |  |        | 128    |          |  |               |         |          |  |             |        |        |  |               |         |   |  |   | 128     |   |  |   |        |  
|Cash dividends declared:                                                                                                                                   |  |        |        |          |  |               |         |          |  |             |        |        |  |               |         |   |  |   |         |   |  |   |        |  
|Common stock ($.76 per share)                                                                                                                              |  |        |        |          |  |               |         |          |  |             |        |        |  |               | (7,200  | ) |  |   | (7,200  | ) |  |   |        |  
|Purchase of treasury stock                                                                                                                                 |  |        |        |          |  |               | (8,993  | )        |  |             |        |        |  |               |         |   |  |   | (8,993  | ) |  |   |        |  
|Common stock issued - dividend
reinvestment and stock
option plans                                                                                         |  |        | 1,082  |          |  |               |         |          |  |             |        |        |  |               |         |   |  |   | 1,082   |   |  |   |        |  
|                                                                                                                                                           |  |        |        |          |  |               |         |          |  |             |        |        |  |               |         |   |  |   |         |   |  |   |        |  
|Balance, December 31, 2003                                                                                                                                 |  | $      | 42,973 |          |  | $             | (36,173 | )        |  | $           | (834   | )      |  | $             | 131,050 |   |  | $ | 137,016 |   |  |   |        |  
|                                                                                                                                                           |  |        |        |          |  |               |         |          |  |             |        |        |  |               |         |   |  |   |         |   |  |   |        |  

See Notes to Consolidated Financial Statements

42



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##### Table of Contents






Consolidated Statements of Cash
Flows
For the Years Ended December 31

|                                                                                                      |  |      |            |      |  |      |          |   |  |   |          |  
|----------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- |  | ---- | -------- | - |  | - | -------- | -
|OPERATING ACTIVITIES                                                                                  |  | 2003 |            | 2002 |  | 2001
|                                                                                                      |  |      |            |      |  |     
|Net income                                                                                            |  | $    | 23,155     |      |  | $    | 18,000   |   |  | $ | 17,080   |  
|Adjustments to reconcile net income to net cash
provided by operating activities:                     |  |      |            |      |  |      |          |   |  |   |          |  
|Provision for loan losses                                                                             |  |      | 7,610      |      |  |      | 6,159    |   |  |   | 4,718    |  
|Depreciation                                                                                          |  |      | 3,132      |      |  |      | 3,354    |   |  |   | 3,487    |  
|Amortization of intangible assets                                                                     |  |      | 467        |      |  |      | 475      |   |  |   | 377      |  
|Amortization of servicing assets                                                                      |  |      | 7,445      |      |  |      | 4,861    |   |  |   | 1,320    |  
|Amortization (accretion) of investment discount and
premium                                           |  |      | 2,308      |      |  |      | 5        |   |  |   | (441     | )
|(Decrease) increase in allowance for servicing assets                                                 |  |      | (1,400     | )    |  |      | 2,984    |   |  |   | 810      |  
|Deferred income taxes (benefit)                                                                       |  |      | (5,464     | )    |  |      | 663      |   |  |   | 1,830    |  
|Net securities gains                                                                                  |  |      | (4,584     | )    |  |      | (592     | ) |  |   | (642     | )
|Gain on sale of banking centers                                                                       |  |      | (5,619     | )    |  |      |         |   |  |   |         |  
|Other gains, net                                                                                      |  |      | (15,831    | )    |  |      | (8,730   | ) |  |   | (5,796   | )
|Decrease in interest receivable                                                                       |  |      | 261        |      |  |      | 1,510    |   |  |   | 1,463    |  
|Decrease in interest payable                                                                          |  |      | (82        | )    |  |      | (579     | ) |  |   | (975     | )
|Originations of loans held-for-sale                                                                   |  |      | (1,095,222 | )    |  |      | (865,470 | ) |  |   | (527,498 | )
|Proceeds from sale of loans held-for-sale                                                             |  |      | 1,111,038  |      |  |      | 874,189  |   |  |   | 527,041  |  
|Net change in other assets & other liabilities                                                        |  |      | (356       | )    |  |      | 1,681    |   |  |   | (483     | )
|                                                                                                      |  |      |            |      |  |      |          |   |  |   |          |  
|Net cash provided by operating activities                                                             |  |      | 26,858     |      |  |      | 38,510   |   |  |   | 22,291   |  
|INVESTING ACTIVITIES                                                                                  |  |      |            |      |  |      |          |   |  |   |          |  
|Proceeds from maturities of securities-available-for-sale                                             |  |      | 373,343    |      |  |      | 188,675  |   |  |   | 143,976  |  
|Proceeds from sales of securities-available-for-sale                                                  |  |      | 78,036     |      |  |      | 253,852  |   |  |   | 76,420   |  
|Purchases of securities-available-for-sale                                                            |  |      | (559,068   | )    |  |      | (541,411 | ) |  |   | (234,001 | )
|Cash paid for acquisition of Commerce Exchange Corporation, net of cash acquired                      |  |      |           |      |  |      |         |   |  |   | (24,522  | )
|Net (decrease) increase in loans                                                                      |  |      | (202,912   | )    |  |      | (62,684  | ) |  |   | 36,232   |  
|Net increase in premises and equipment                                                                |  |      | (5,524     | )    |  |      | (3,559   | ) |  |   | (1,812   | )
|                                                                                                      |  |      |            |      |  |      |          |   |  |   |          |  
|Net cash used by investing activities                                                                 |  |      | (316,125   | )    |  |      | (165,127 | ) |  |   | (3,707   | )
|FINANCING ACTIVITIES                                                                                  |  |      |            |      |  |      |          |   |  |   |          |  
|Net increase in demand deposits, interest bearing demand and
savings deposits                         |  |      | 11,473     |      |  |      | 161,932  |   |  |   | 41,534   |  
|Net increase (decrease) in time deposits                                                              |  |      | 100,206    |      |  |      | (89,951  | ) |  |   | (49,657  | )
|Net deposits sold                                                                                     |  |      | (85,868    | )    |  |      |         |   |  |   |         |  
|Net increase (decrease) in federal funds purchased and securities sold under agreements to
repurchase |  |      | 77,965     |      |  |      | 31,517   |   |  |   | (27,896  | )
|Increase (decrease) in note payable                                                                   |  |      | 750        |      |  |      | 7,000    |   |  |   | (1,000   | )
|Net (decrease) increase in borrowings                                                                 |  |      | (1,572     | )    |  |      | (1,990   | ) |  |   | 3,299    |  
|Net increase in advances from Federal Home Loan Bank                                                  |  |      | 126,455    |      |  |      | 90,692   |   |  |   | 23,419   |  
|Issuance of Corporation-obligated mandatorily redeemable capital securities of subsidiary trust       |  |      |           |      |  |      |         |   |  |   | 30,429   |  
|Cash dividends                                                                                        |  |      | (7,200     | )    |  |      | (7,115   | ) |  |   | (6,798   | )
|Purchase of treasury stock                                                                            |  |      | (8,993     | )    |  |      | (10,382  | ) |  |   | (2,851   | )
|Net issuance of common stock                                                                          |  |      | 1,082      |      |  |      | 2,332    |   |  |   | 518      |  
|                                                                                                      |  |      |            |      |  |      |          |   |  |   |          |  
|Net cash provided by financing activities                                                             |  |      | 214,298    |      |  |      | 184,035  |   |  |   | 10,997   |  
|                                                                                                      |  |      |            |      |  |      |          |   |  |   |          |  
|(Decrease) increase in cash and cash equivalents                                                      |  |      | (74,969    | )    |  |      | 57,418   |   |  |   | 29,581   |  
|Cash and cash equivalents at beginning of year                                                        |  |      | 122,271    |      |  |      | 64,853   |   |  |   | 35,272   |  
|                                                                                                      |  |      |            |      |  |      |          |   |  |   |          |  
|Cash and cash equivalents at end of year                                                              |  | $    | 47,302     |      |  | $    | 122,271  |   |  | $ | 64,853   |  
|                                                                                                      |  |      |            |      |  |      |          |   |  |   |          |  

Supplementary Cash Flow Information:

Cash paid for:

Federal income taxes - $5,418, $5,600 and $5,650 for the 12 months ended
December 31, 2003, 2002 and 2001, respectively and

Interest - $46,773, $47,273 and $63,342 for the 12 months ended December 31,
2003, 2002 and 2001, respectively.

See Notes to Consolidated Financial Statements

43



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##### Table of Contents






Notes to Consolidated Financial Statements

1. Significant Accounting Policies

Nature of Operations

Second Bancorp Incorporated (the Corporation) is a one-bank holding company
with its most significant subsidiary being The Second National Bank of Warren
(the Bank), headquartered in Warren, Ohio, with 33 retail banking centers and
five loan production offices operating in northeast Ohio. In addition to
general retail and commercial banking, the Bank engages in trust and mortgage
banking activities and other financially related businesses. A second operating
subsidiary is Stouffer-Herzog Insurance Agency, which sells a wide range of
property, casualty, life and health insurance products in northeast Ohio.
Additional non-operating subsidiaries include Second National Capital
Corporation and Second National Financial Company, LLC, which were formed in
2002 to facilitate a capital conversion plan for the subsidiary Bank. The
Corporation also maintains an unconsolidated subsidiary, Second Bancorp Capital
Trust I, which was established in 2001 to facilitate raising Tier I eligible
capital in the form of corporation-obligated mandatorily redeemable capital
securities of the subsidiary trust (see Note 17).

The accounting policies followed by the Corporation conform to accounting
principles generally accepted in the United States and to general practices
within the banking industry. The following is a description of the more
significant accounting policies:

Principles of Consolidation

Significant inter-company balances and transactions between the
Corporation and its subsidiaries have been eliminated. Certain prior year
amounts have been reclassified to conform to the current year presentation.

Use of Estimates

The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States requires Management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ
from these estimates.

Business Combinations

Business combinations, which have been accounted for under the purchase method
of accounting, include the results of operations of the acquired business from
the date of acquisition. Net assets of the Corporation were recorded at their
estimated fair value as of the date of acquisition.

Cash Equivalents

Cash equivalents include amounts due from banks and federal funds sold and
temporary investments. Generally, federal funds are purchased and sold for
periods of less than 30 days.

Securities

Debt and equity securities are classified as available-for-sale and are carried
at their estimated fair value. Adjustments to fair value of the securities
available-for-sale, in the form of unrealized holding gains and losses, are
excluded from earnings and reported net of tax as a separate component of
shareholders equity. Available-for-sale securities offer Management
flexibility to sell securities to fund liquidity and manage the Corporations
interest rate risk.

The amortized cost of the debt securities is adjusted for amortization of
premiums and accretion of discounts to maturity, probable call date, or, in the
case of mortgage-backed securities, over the estimated life of the security.
Such amortization is included in interest income from securities. Interest and
dividends are included in interest income from securities. Realized gains and
losses, and declines in value judged to be other than temporary are included in
net securities gains (losses). The cost of securities sold is based on the
specific identification method.

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Loans

Loans are stated at the principal amounts outstanding, net of unearned income
and unamortized deferred costs. Interest on loans is accrued and credited to
operations based upon the principal amount outstanding. Premiums on acquired
loans have been deducted from the related interest income and are amortized
over the remaining useful life of the loans acquired. The accrual of interest
income generally is discontinued when a loan becomes, in Managements opinion,
doubtful of being collectible and is impaired. When interest accruals are
discontinued, interest credited to income for the current year is reversed and
interest accrued in prior years is charged to the allowance for loan losses.

The Corporation accounts for loan origination and commitment fees and certain
direct loan origination costs by deferring the net fees, or net costs, and
amortizing them as an adjustment of the related loans yield. The Corporation
is amortizing these amounts over terms up to the contractual life of the
related loans. Net unamortized deferred costs, primarily representing costs of
acquiring indirect automobile, boat and recreational vehicle loans, were $4,481
and $3,643 at December 31, 2003 and 2002, respectively.

Loans Held-for-sale

From time to time, the Corporation will sell loans it originated, primarily
mortgages. The loans are reclassified as held-for-sale and are recorded at the
lower of aggregate cost or market value.

Allowance for Loan Losses and Impaired Loans

The allowance for loan losses is maintained at a level believed adequate by
Management to absorb probable losses in the loan portfolio. Managements
determination of the adequacy of the allowance is based upon an evaluation of
the collectibility of the loans. These evaluations take into consideration such
factors as changes in the nature and volume of the loan portfolio, current
economic conditions that may affect the borrowers ability to repay (including
the timing of future payments), overall quality, analysis of prior and current
loss experience and a review of specific problem loans. The allowance reflects
probable losses resulting from the analysis of individual loans, developed
through specific credit allocations for individual loans and historical loss
experience for each loan category. The specific credit allocations are based on
a regular analysis of all loans over a specific dollar amount where the
internal credit rating is at or below a predetermined classification level. The
historical loan loss component is determined statistically using a loss
migration analysis that examines loss experience and the related internal
grading of loans charged off. The allowance also includes components for
concentrations, loan volume and specific economic conditions of the markets in
which the Corporation operates. The determinations arrived at inherently
involve a high degree of uncertainty and knowledge of the loans loss
characteristics may be incomplete. Loan losses are charged off against the
allowance, while recoveries of amounts previously charged off are credited to
the allowance. A provision for loan losses is charged to operations based on
Managements periodic evaluation of these and other pertinent factors.

Loans are considered impaired when it is probable that amounts due pursuant to
the contractual terms of the loan will not be collected. This evaluation is
inherently subjective and requires Management to make estimates regarding the
amounts and timing of future cash flows expected to be received on impaired
loans that could be susceptible to change. To determine the amount of impaired
loans, the Corporation analyzes the expected cash flows of non-accrual loans.
To the extent that the expected cash flows are less than the amounts due
according to the contractual terms of an individual loan, the loan balance is
included as impaired loans. A specific allowance is maintained on impaired
loans when the net present value of expected cash flows after considering
collateral and other credit enhancements is less than the carrying amount of
the loan.

Premises and Equipment

Premises and equipment are stated at cost, less accumulated depreciation and
amortization. Depreciation and amortization for premises and equipment,
including costs related to developing or obtaining software for internal use,
is computed generally by the straight-line method over their useful lives.
Original estimated useful lives for premises and equipment range from 3 to 10
years. Leasehold improvements are amortized over the shorter of the terms of
the respective leases or the estimated useful lives.

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Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair
value of the net assets acquired. On January 1, 2002, the Corporation adopted
SFAS No. 142, Goodwill and Other Intangible Assets. Under the provisions of
SFAS No. 142, goodwill is no longer ratably amortized into the income statement
over an estimated life but rather is tested at least annually for impairment.
The Corporation performed the annual testing for impairment as of July 1, 2003
and concluded that no impairment had occurred.

Intangible Assets

Other intangible assets represent purchased assets that also lack physical
substance but can be distinguished from goodwill because of contractual or
other legal rights or because the asset is capable of being sold or exchanged
either on its own or in combination with a related contract, asset or
liability. Intangible assets resulting from the excess of the purchase
price over net identifiable tangible assets acquired through acquisitions are
specifically identified when determinable. The resulting core deposit and
customer list intangibles are amortized both on an accelerated basis and on a
straight-line basis over the estimated useful life. Original estimated useful
lives for the intangibles range from 10 to 18 years.

Mortgage Servicing Assets

The Corporation recognizes as separate assets the value of mortgage
servicing rights, whether those rights are acquired through loan origination
activities or through purchase activities. Mortgage servicing assets are
carried at the lower of initial carrying amount, adjusted for amortization, or
fair estimated value. Management stratifies servicing assets based on term, pass-through rate and
method of acquisition. Capitalized mortgage servicing assets are amortized on
an accelerated basis over the estimated life of the loans sold. Management
evaluates the recoverability of the mortgage servicing assets in relation to
the impact of actual and anticipated loan portfolio prepayments, foreclosures
and delinquency experience.

Deposits

Discounts and premiums on acquired deposits have been deducted or added
respectively from the related interest expense and are being accreted or
amortized over the remaining useful life of the deposits.

Stock Options

At December 31, 2003, the Corporation maintains three stock-based compensations
plans, which are more fully described in Note 22. The Corporation accounts for
those plans under recognition and measurement principles of Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees and related Interpretations. Under APB No. 25, because the exercise
price of the Corporations employee stock options equals the market price of
the underlying stock on the date of the grant, no compensation expense is
recognized.

Pro-forma information regarding net income and earnings per share is required
by SFAS No. 123, Accounting for Stock-Based Compensation and has been
determined as if the Corporation had accounted for its employee stock options
under the fair value method of that Statement. Under the fair-value based
method, compensation cost is measured at the grant date based upon the value of
the award and recognized over the service period. For purposes of the pro-forma
disclosures, the estimated fair value of the option is amortized to expense
over the options vesting period. The Corporations pro-forma information
follows:

|                                                                                                                                                 |  |                         |        |      |  |      |        |   |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                                                                                                                                 |  | Years Ended December 31 |        |      |  |     
|                                                                                                                                                 |  | 2003                    |        | 2002 |  | 2001
|                                                                                                                                                 |  |                         |        |      |  |     
|Net income, as reported                                                                                                                          |  | $                       | 23,155 |      |  | $    | 18,000 |   |  | $ | 17,080 |  
|Deduct: Total stock-based
compensation expense determined
under fair-value based method for
all awards (see note 22), net of
related tax effects |  |                         | (611   | )    |  |      | (585   | ) |  |   | (418   | )
|                                                                                                                                                 |  |                         |        |      |  |      |        |   |  |   |        |  
|Pro-forma net income                                                                                                                             |  | $                       | 22,544 |      |  | $    | 17,415 |   |  | $ | 16,662 |  
|                                                                                                                                                 |  |                         |        |      |  |      |        |   |  |   |        |  
|Earnings per share:                                                                                                                              |  |                         |        |      |  |      |        |   |  |   |        |  
|Basic-as reported                                                                                                                                |  | $                       | 2.43   |      |  | $    | 1.82   |   |  | $ | 1.71   |  
|Basic-pro-forma                                                                                                                                  |  | $                       | 2.37   |      |  | $    | 1.76   |   |  | $ | 1.66   |  
|Diluted-as reported                                                                                                                              |  | $                       | 2.41   |      |  | $    | 1.79   |   |  | $ | 1.69   |  
|Diluted-pro-forma                                                                                                                                |  | $                       | 2.34   |      |  | $    | 1.73   |   |  | $ | 1.65   |  

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Treasury Stock

Acquisitions of treasury stock are recorded on the cost method with the full
amount of the cash paid deducted from shareholders equity.

Derivative Instruments

As part of managing the Corporations interest rate risk, a variety of
financial instruments may, from time to time, be used to hedge fair values and
to alter the cash flow characteristics of certain on-balance sheet instruments.
The derivative financial instruments used primarily consist of interest rate
caps, floors and swaps.

SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
requires companies to recognize all derivative instruments as either assets or
liabilities in the statement of financial position at fair value. The
accounting for changes in the fair value (i.e. unrealized gains or losses) of a
derivative instrument depends on whether it has been designated and qualifies
as part of a hedging relationship and further, on the type of hedging
relationship. For those derivative instruments that are designated and qualify
as hedging instruments, the Corporation must designate the hedging instruments,
based upon the exposure being hedged, as either a fair value hedge or a cash
flow hedge.

For derivative instruments that are designated and qualify as a fair value
hedge (i.e. hedging the exposure to changes in the fair value of an asset or a
liability or an identified portion thereof that is attributable to a particular
risk), the change in fair value of the derivative instrument and the change in
fair value of the hedged item attributable to the hedged risk is recorded on
the balance sheet with the corresponding entry recognized in other income or
other expense. The adjustment to the hedged item is included in the basis of the hedged item, while the fair value of the
derivative instrument is recorded in other assets/other liabilities. Accrual of
cash receipts or payments related to the derivative instrument is recorded in
interest income or interest expense, depending on the hedged item. Upon
termination of a derivative instrument prior to maturity, the aforementioned
basis adjustment to the hedged item is amortized/accreted into interest income
or interest expense over the remaining life of the hedged item using the
effective interest method. Should the hedged item be sold, mature or be
extinguished prior to the maturity date of the derivative instrument, the
derivative instruments change in fair value subsequent to sale, maturity or
extinguishment of the hedged item will be recorded in other income or other
expense.

For derivative instruments that are designated and qualify as a cash flow hedge
(i.e. hedging the exposure to variability in expected future cash flows that is
attributable to a particular risk), the effective portion of the gain or loss
on the derivative instrument is reported as a component of accumulated other
comprehensive income and reclassified into interest income or interest expense
in the same period or periods during which the hedged item affects interest
income or interest expense. The remaining gain or loss of the derivative
instrument in excess of the cumulative change in the present value of future
cash flows of the hedged item, if any, is ineffectiveness and is recognized in
other income/other expense during the period of change. Upon termination of a
derivative instrument prior to maturity, the aforementioned adjustment to
accumulated other comprehensive income is amortized/accreted into interest
income or interest expense over the remaining term of the hedge relationship
using the effective interest method. Should the hedged item be sold, mature or
extinguished prior to the end of the hedge relationship or a forecasted
transaction is probable of not occurring, the aforementioned amounts in
accumulated other comprehensive income are reclassified to interest income or
interest expense and the derivative instruments change in fair value from that
point forward will be recorded in other income or other expense.

For derivative instruments not designated as hedging instruments, the gain or
loss is recognized in other income or other expense during the period of
change.

Marketing Costs

All marketing  related costs, including advertising costs are expensed as
incurred. Marketing costs expensed in 2003, 2002 and 2001 were $1.8 million,
$1.4 million and $1.6 million, respectively.

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Federal Income Taxes

Deferred federal income taxes are provided for differences between tax and
financial statement bases of assets and liabilities at year-end. Deferred
taxes are recognized using the liability method, whereby tax rates are
applied to cumulative temporary differences based on when and how they are
expected to affect the tax return. Deferred tax assets and liabilities are
adjusted for tax rate changes. The statutory rate in effect for a
particular year is used to determine after-tax components of other
comprehensive income included in the statements of changes in
shareholders equity.

2.     Pending Merger

On January 8, 2004, the Corporation and Sky Financial Group. Inc., based in
Bowling Green, Ohio, announced an agreement whereby Sky Financial Group will
acquire the Corporation and its wholly-owned subsidiaries including the Bank.
The transaction is expected to close during the second quarter of 2004. Under
the terms of the agreement, shareholders of the Corporation will receive 1.26
shares of Sky Financial Group common stock for each share of the Corporation.

The agreement provides for the merger of the Corporation into Sky Financial
Group, and the subsequent merger of the Bank into Sky Bank, Sky Financial
Groups commercial banking affiliate. The Corporations insurance affiliate
Stouffer-Herzog will be integrated into Sky Insurance some time after the
merger is complete.

The merger is subject to receipt of applicable regulatory approvals and to the
approval of the shareholders of the Corporation.

3.     Recent Accounting Pronouncements

Accounting for Stock-Based Compensation

In December 2002, SFAS No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure-an Amendment of FASB Statement 123, was
issued. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition to adopting SFAS
No. 123s fair value method of accounting for stock-based employee
compensation. SFAS No. 148 also amends the disclosure provisions of SFAS No.
123 and APB Opinion No. 28 Interim Financial Reporting, to require disclosure
in the summary of significant accounting policies of the effects of an entitys
accounting policy with respect to stock-based employee compensation on reported
net income and earnings per share in annual and interim financial statements.
SFAS No. 148 was effective for fiscal years ending after December 15, 2002.
Interim pro forma disclosures are required for interim periods beginning after
December 15, 2002. The disclosure requirements of SFAS No. 148 are reflected in
Note 1  Significant Accounting Policies  Stock Options.

Amendment of Statement 133 on Derivative Instruments and Hedging Activities

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, which amends and clarifies
financial accounting and reporting for derivative instruments, including
certain derivative instruments embedded in other contracts, and hedging
activities addressed under SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities. This accounting guidance amends SFAS No. 133 for
decisions made by the FASB as part of the Derivatives Implementation Group
process and also amends SFAS No. 133 to clarify the definition of a derivative.
SFAS No. 149 is effective generally for contracts entered into or modified
after June 30, 2003, and for hedging relationships designated after June 30,
2003. The adoption of SFAS No. 149 did not have a material impact on the
Corporations financial condition, results of operations or liquidity.

Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity, which
establishes standards for how an issuer is to classify and measure certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify certain financial instruments that would
previously have been classified as equity as liabilities (or as assets in some
circumstances). Specifically, SFAS No. 150 requires that financial instruments
issued in the form of shares that are mandatorily redeemable; financial
instruments that embody an obligation to

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repurchase the issuers equity shares
or are indexed to such an obligation; or financial instruments that embody an
unconditional obligation or a conditional obligation that can be settled in
certain ways be classified as liabilities. This accounting guidance is
effective for financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. The adoption of SFAS No. 150 did not have a
material impact on the Corporations financial condition, results of operations
or liquidity.

Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others

In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN No. 45) which expands on the
accounting guidance of Statements No. 5, 57 and 107 and incorporates without
change the provisions of FASB Interpretation No. 34, which is being superseded.

FIN No. 45, which is applicable to public and non-public entities, has
significantly changed current practice in the accounting for, and disclosure
of, guarantees. Each guarantee meeting the characteristics described in FIN No.
45 is to be recognized and initially measured at fair value, which will be a
change from current practice for most entities. In addition, guarantors will be
required to make significant new disclosures, even if the likelihood of the
guarantor making payments under the guarantee is remote, which represents
another change from current general practice.

FIN No. 45s disclosure requirements are effective for financial statements of
interim or annual periods ending after December 15, 2002, while the initial
recognition and initial measurement provisions are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002.

The Corporation has adopted FIN No. 45 effective January 1, 2003 and included
the required disclosures in Note 25. FIN No. 45 recognition and measurement
provisions have not had a material impact on the Corporations results of
operations, financial position or liquidity.

Consolidation of Variable Interest Entities

In January 2003, the FASB issued Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities (VIEs), an interpretation of
Accounting Research Bulletin No. 51, Consolidated Financial Statements, to
improve financial reporting of special purpose and other entities. In
accordance with FIN 46, business enterprises that represent the primary
beneficiary of another entity by retaining a controlling financial interest in
that entitys assets, liabilities and results of operating activities must
consolidate the entity in its financial statements. Prior to the issuance of
FIN 46, consolidation generally occurred when an enterprise controlled another
entity through voting interests. Certain VIEs that are qualifying special
purpose entities subject to the reporting requirements of FASB 140, Accounting
for Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities will not be required to be consolidated under the provisions of
FIN 46. The consolidation provisions of FIN 46 apply to VIEs entered into after
January 31, 2003. For preexisting VIEs, the FASB deferred the consolidation
provisions on October 8, 2003, to periods ending after December 15, 2003. In
December 2003, the FASB reissued FIN 46 with certain modifications and
clarifications. Application of this guidance was effective for interests in
certain VIEs commonly referred to as special-purpose entities (SPEs) as of
December 31, 2003. Application for all other types of entities is required for
periods ending after March 15, 2004, unless previously applied.

The Corporation makes investments directly in low income housing projects
through the Retail Banking line of business. As a limited partner in these
unconsolidated projects, the Corporation is allocated tax credits and
deductions associated with the underlying properties. The Corporation has
determined these projects to be VIEs in which it has an interest, but for which
it is not the primary beneficiary. At December 31, 2003, estimated assets of
the projects totaled approximately $315,000. The Corporations maximum exposure
to loss from its involvement with these projects is the unamortized investment
balance of $555 at December 31, 2003. During the year ended December 31, 2003,
the Corporation obtained no significant interests in low income housing
projects created after January 31, 2003.

The Corporation applied the provisions of FIN 46 to a wholly-owned subsidiary
grantor trust that had issued mandatorily redeemable preferred securities of
the grantor trust to third party investors. The

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application of FIN 46 to this pre-existing VIE was effective December 31, 2003 and resulted in the
deconsolidation of the trust. The assets and liabilities of the subsidiary
trust that was deconsolidated totaled $33.0 million and $32.0 million,
respectively. See Note 17 for further discussion of this trust and the
Corporations related obligations.

There was no material impact to results of operations or liquidity as of and
for the year ended December 31, 2003 as a result of applying the provisions of
FIN 46.

Accounting for Certain Loans or Debt Securities Acquired in a Transfer

In December 2003, the FASB cleared Statement of Position No. 03-3, Accounting
for Certain Loans or Debt Securities Acquired in a Transfer (SOP 03-3) which
had been issued by the Accounting Standards Executive Committee of the AICPA.
SOP 03-3 addresses accounting for differences between contractual cash flows
and cash flows expected to be collected from an investors initial investment
in loans or debt securities acquired in a transfer if those differences are
attributable, at least in part, to credit quality. The provisions of SOP 03-3
are effective for the Corporation for loans acquired beginning January 1, 2005,
with early adoption encouraged. The Corporation is currently assessing the
potential impact this statement will have on results of operation, financial
position or liquidity.

Loan Commitments

On December 11, 2003, the SEC staff announced its intention to release a Staff
Accounting Bulletin that would require all registrants to account for mortgage
loan interest rate lock commitments related to loans held for sale as written
options, effective no later than for commitments entered into after March 31,
2004. The Corporation enters into such commitments with customers in connection
with residential mortgage loan applications and at December 31, 2003 had
approximately $80 million in notional amount of these commitments outstanding.
This guidance, if issued, would require the Corporation to recognize a
liability on its balance sheet equal to the fair value of the commitment at the
time the loan commitment is issued. As a result, this guidance would delay the
recognition of any revenue related to these commitments until such time as the
loan is sold, however, it would have no effect on the ultimate amount of
revenue or cash flows recognized over time. The Corporation is currently
assessing the impact on this pending guidance on its results of operations and
financial position. In the quarter of adoption, there would likely be a
one-time negative impact to mortgage banking revenue yet to be determined.

4.     Mergers, acquisitions and reconfiguration

On September 4, 2002, the Corporation acquired Stouffer-Herzog Insurance Agency
(Stouffer-Herzog), an insurance agency located in Ashtabula, Ohio, in a
transaction accounted for as a purchase under SFAS No. 141. Goodwill of $1.3
million was recorded in connection with the acquisition. Additionally, a
customer list intangible asset of $978 was recorded and is being amortized on a
straight-line basis over 18 years. Second Bancorp paid $1.98 million through
the issuance of common stock to the shareholders of Stouffer-Herzog for all the
outstanding shares of Stouffer-Herzog common stock. Merger expenses incurred in
2002 as a result of the Stouffer-Herzog acquisition totaled $134 and consisted
primarily of consulting fees.

The condensed balance sheet at fair value of Stouffer-Herzog as of the
acquisition date was as follows:

|                              |  |   |       | 
|----------------------------- |  | - | ----- | 
|Assets:                       |  |   |       | 
|Cash and due from banks       |  | $ | 395   | 
|Other assets                  |  |   | 636   | 
|                              |  |   |       | 
|Total assets                  |  | $ | 1,031 | 
|                              |  |   |       | 
|Liabilities and capital:      |  |   |       | 
|Current liabilities           |  | $ | 599   | 
|Long-term liabilities         |  |   | 149   | 
|Capital                       |  |   | 283   | 
|                              |  |   |       | 
|Total liabilities and capital |  | $ | 1,031 | 
|                              |  |   |       | 

Net income in 2002 was impacted by a $2,096 expense for the execution of a
banking center reconfiguration strategy. The strategy was designed to improve
the overall growth potential and

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profitability of the retail banking center
network. The cost recognized in 2002 included the costs to close two
facilities, the costs to close four facilities that were consolidated into two
larger, more accessible facilities and the costs to close two facilities, which
were relocated to larger, more accessible locations. The strategy also included
the sale of two remote banking centers and the opening of a new banking center
in a new market.

5. Restrictions on Cash and Due from Bank Accounts

The Bank is required to maintain average reserve balances with the Federal
Reserve Bank. The average amounts of those reserve balances for the years ended
December 31, 2003 and 2002 were approximately $3,014 and $1,988, respectively,
which represents compensating balances for services provided by the Federal
Reserve Bank.

6. Securities

The following is a summary of securities:

|                                                                                           |  |           |         |            |  |            |       |        |  |           |        |   |  |   |         | 
|------------------------------------------------------------------------------------------ |  | --------- | ------- | ---------- |  | ---------- | ----- | ------ |  | --------- | ------ | - |  | - | ------- | 
|                                                                                           |  |           |         |            |  | Gross      |       | Gross  |  | Estimated
|                                                                                           |  | Amortized |         | Unrealized |  | Unrealized |       | Market
|December 31, 2003                                                                          |  | Cost      |         | Gains      |  | Losses     |       | Value 
|                                                                                           |  |           |         |            |  |            |       |       
|Available for Sale:                                                                        |  |           |         |            |  |            |       |        |  |           |        |   |  |   |         | 
|U.S. Treasury securities and
obligations of other U.S
government agencies and
corporations |  | $         | 3,023   |            |  | $          | 25    |        |  | $         |       |   |  | $ | 3,048   | 
|Obligations of states and
political subdivisions                                           |  |           | 70,990  |            |  |            | 2,438 |        |  |           | (182   | ) |  |   | 73,246  | 
|Corporate securities                                                                       |  |           | 42,881  |            |  |            | 392   |        |  |           | (572   | ) |  |   | 42,701  | 
|Mortgage-backed securities                                                                 |  |           | 473,777 |            |  |            | 1,991 |        |  |           | (4,984 | ) |  |   | 470,784 | 
|                                                                                           |  |           |         |            |  |            |       |        |  |           |        |   |  |   |         | 
|Total debt securities                                                                      |  |           | 590,671 |            |  |            | 4,846 |        |  |           | (5,738 | ) |  |   | 589,779 | 
|Equity securities                                                                          |  |           | 30,930  |            |  |            |      |        |  |           | (13    | ) |  |   | 30,917  | 
|                                                                                           |  |           |         |            |  |            |       |        |  |           |        |   |  |   |         | 
|Total Available-for-Sale Securities                                                        |  | $         | 621,601 |            |  | $          | 4,846 |        |  | $         | (5,751 | ) |  | $ | 620,696 | 

|                                                                                              |  |           |         |            |  |            |        |        |  |           |        |   |  |   |         | 
|--------------------------------------------------------------------------------------------- |  | --------- | ------- | ---------- |  | ---------- | ------ | ------ |  | --------- | ------ | - |  | - | ------- | 
|                                                                                              |  |           |         |            |  | Gross      |        | Gross  |  | Estimated
|                                                                                              |  | Amortized |         | Unrealized |  | Unrealized |        | Market
|December 31, 2002                                                                             |  | Cost      |         | Gains      |  | Losses     |        | Value 
|                                                                                              |  |           |         |            |  |            |        |       
|Available for Sale:                                                                           |  |           |         |            |  |            |        |        |  |           |        |   |  |   |         | 
|U. S. Treasury securities and
obligations of other U. S.
government agencies and
corporations |  | $         | 28,438  |            |  | $          | 1,322  |        |  | $         |       |   |  | $ | 29,760  | 
|Obligations of states and
political subdivisions                                              |  |           | 63,485  |            |  |            | 3,482  |        |  |           | (40    | ) |  |   | 66,927  | 
|Corporate securities                                                                          |  |           | 68,068  |            |  |            | 2,709  |        |  |           | (2,719 | ) |  |   | 68,058  | 
|Mortgage-backed securities                                                                    |  |           | 326,011 |            |  |            | 7,247  |        |  |           |       |   |  |   | 333,258 | 
|                                                                                              |  |           |         |            |  |            |        |        |  |           |        |   |  |   |         | 
|Total debt securities                                                                         |  |           | 486,002 |            |  |            | 14,760 |        |  |           | (2,759 | ) |  |   | 498,003 | 
|Equity securities                                                                             |  |           | 25,641  |            |  |            | 107    |        |  |           | (82    | ) |  |   | 25,666  | 
|                                                                                              |  |           |         |            |  |            |        |        |  |           |        |   |  |   |         | 
|Total Available-for-Sale Securities                                                           |  | $         | 511,643 |            |  | $          | 14,867 |        |  | $         | (2,841 | ) |  | $ | 523,669 | 
|                                                                                              |  |           |         |            |  |            |        |        |  |           |        |   |  |   |         | 

Accumulated unrealized (loss) gain in accumulated other comprehensive income,
net of tax is $(568), $7,838 and $3,505 for the years ended December 31, 2003,
2002 and 2001, respectively.

Information relating to the aggregate amount of unrealized losses and the
aggregate related fair values of investments with unrealized losses, segregated
by the time periods during which the investment has been in an unrealized loss
position, as of December 31, 2003, is as follows:

|                       |  |                |         |                         |  |                        |        |   |  |   |         | 
|---------------------- |  | -------------- | ------- | ----------------------- |  | ---------------------- | ------ | - |  | - | ------- | 
|                       |  | Amortized Cost |         | Gross Unrealized Losses |  | Estimated Market Value
|                       |  |                |         |                         |  |                       
|Less than 12 months    |  | $              | 332,979 |                         |  | $                      | (5,196 | ) |  | $ | 327,783 | 
|Greater than 12 months |  |                | 6,763   |                         |  |                        | (555   | ) |  |   | 6,208   | 
|                       |  |                |         |                         |  |                        |        |   |  |   |         | 
|Total                  |  | $              | 339,742 |                         |  | $                      | (5,751 | ) |  | $ | 333,991 | 
|                       |  |                |         |                         |  |                        |        |   |  |   |         | 

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The securities owned less than one year that have unrealized losses are
typically mortgage-backed securities or municipal securities. The
mortgage-backed securities typically have weighted-average maturities of three
to five years and their values fluctuate with longer-term interest rates that
affect prepayment speeds on the underlying collateral. The securities are
typically well structured and in aggregate have a low level of extension risk.
The municipal securities are typically acquired with final maturities of 10 to
15 years with an emphasis on yield. The securities are typically held until two
to three years are left until maturity and are sold and the proceeds reinvested
in longer-term municipal securities. Their values also fluctuate in general
with the long end of the yield curve.

There are two securities that have had unrealized losses for longer than one
year. These securities are trust preferred securities of a major credit card
issuer. The bonds have a variable rate with no floor. This rate setting feature
along with downgrades of credit card issuer from a year earlier has created the
unrealized loss position. The price of the bond has risen steadily versus its
book value over the past year and the unrealized loss is not deemed to be
other-than-temporary. As evidence of that trend, the bonds were sold in January
2004 at a combined loss of only $115.

There were no holdings of trading securities at December 31, 2003 and 2002. The
amortized cost and estimated market value of securities at December 31, 2003 by
contractual maturity are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without prepayment penalties.

|                                    |  |                |         |                        |  |   |         | 
|----------------------------------- |  | -------------- | ------- | ---------------------- |  | - | ------- | 
|                                    |  | Amortized Cost |         | Estimated Market Value
|                                    |  |                |         |                       
|Under 1 year                        |  | $              | 7,514   |                        |  | $ | 7,618   | 
|1 to 5 years                        |  |                | 13,802  |                        |  |   | 14,493  | 
|5 to 10 years                       |  |                | 34,860  |                        |  |   | 36,270  | 
|Over 10 years                       |  |                | 60,718  |                        |  |   | 60,614  | 
|                                    |  |                |         |                        |  |   |         | 
|                                    |  |                | 116,894 |                        |  |   | 118,995 | 
|Mortgage-backed securities          |  |                | 473,777 |                        |  |   | 470,784 | 
|Equity securities                   |  |                | 30,930  |                        |  |   | 30,917  | 
|                                    |  |                |         |                        |  |   |         | 
|Total available-for-sale securities |  | $              | 621,601 |                        |  | $ | 620,696 | 
|                                    |  |                |         |                        |  |   |         | 

Information relating to sales of available-for-sale securities for the three
years ended December 31 is as follows:

|                                                     |  |      |        |      |  |      |         |   |  |   |        | 
|---------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------- | - |  | - | ------ | 
|                                                     |  | 2003 |        | 2002 |  | 2001
|                                                     |  |      |        |      |  |     
|Proceeds from sales of available-for-sale securities |  | $    | 78,036 |      |  | $    | 253,852 |   |  | $ | 76,420 | 
|                                                     |  |      |        |      |  |      |         |   |  |   |        | 
|Gross realized gains                                 |  | $    | 4,852  |      |  | $    | 2,120   |   |  | $ | 724    | 
|Gross realized losses                                |  |      | (268   | )    |  |      | (1,528  | ) |  |   | (82)   | 
|                                                     |  |      |        |      |  |      |         |   |  |   |        | 
|Net gains on sales                                   |  | $    | 4,584  |      |  | $    | 592     |   |  | $ | 642    | 
|                                                     |  |      |        |      |  |      |         |   |  |   |        | 

At December 31, 2003 and 2002, securities with a carrying value of $486,706 and
$364,973, respectively, were pledged to secure repurchase agreements, deposits
of public funds and for other purposes.

7. Loans

Loans consist of the following:

|                         |  |      |           |      |  |   |           | 
|------------------------ |  | ---- | --------- | ---- |  | - | --------- | 
|December 31              |  | 2003 |           | 2002
|                         |  |      |           |     
|Commercial               |  | $    | 631,170   |      |  | $ | 542,691   | 
|Consumer                 |  |      | 399,137   |      |  |   | 322,841   | 
|Real estate mortgage     |  |      | 273,422   |      |  |   | 249,946   | 
|Real estate construction |  |      | 46,091    |      |  |   | 52,313    | 
|                         |  |      |           |      |  |   |           | 
|Total                    |  | $    | 1,349,820 |      |  | $ | 1,167,791 | 
|                         |  |      |           |      |  |   |           | 

The Bank also has granted loans to officers and directors of both the
Corporation and the Bank and their associates (Related Party Loans). Related
party loans are made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions
with unrelated persons. The aggregate dollar amounts of these loans were
$10,009 and $8,841 at December 31, 2003 and 2002, respectively. New loans and
advances totaled $12,118 and payments were $10,950

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in 2003. During 2003, the
Bank leased one of its banking centers from a partnership that is 50% owned by
a director emeritus of the Corporation. The fair market annual rental rate on
the lease totals $40 and expires in 2004. Additionally in 2003, the Bank
received rent from a foundation that has a director as a trustee totaling $17
and a current directors law firm totaling $81. Corporate vendor payments to
that same law firm in 2003 totaled $90.

8. Asset Quality

Allowance for Loan Losses

Changes in the allowance for loan losses for each of the last three years ended
December 31 were as follows:

|                                                      |  |      |        |      |  |      |        |   |  |   |        |  
|----------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                                      |  | 2003 |        | 2002 |  | 2001
|                                                      |  |      |        |      |  |     
|Balance at beginning of year                          |  | $    | 17,595 |      |  | $    | 16,695 |   |  | $ | 15,217 |  
|Charge-offs                                           |  |      | (6,962 | )    |  |      | (6,584 | ) |  |   | (6,471 | )
|Recoveries                                            |  |      | 631    |      |  |      | 1,325  |   |  |   | 1,353  |  
|                                                      |  |      |        |      |  |      |        |   |  |   |        |  
|Net charge-offs                                       |  |      | (6,331 | )    |  |      | (5,259 | ) |  |   | (5,118 | )
|Provision for loan losses                             |  |      | 7,610  |      |  |      | 6,159  |   |  |   | 4,718  |  
|Acquired provision balances                           |  |      |       |      |  |      |       |   |  |   | 1,878  |  
|                                                      |  |      |        |      |  |      |        |   |  |   |        |  
|Balance at end of year                                |  | $    | 18,874 |      |  | $    | 17,595 |   |  | $ | 16,695 |  
|                                                      |  |      |        |      |  |      |        |   |  |   |        |  
|Allowance for loan losses as a percent of total loans |  |      | 1.40   | %    |  |      | 1.51   | % |  |   | 1.49   | %
|                                                      |  |      |        |      |  |      |        |   |  |   |        |  

Non-accrual, Past-due and Restructured Loans (Non-performing Loans)

Non-accrual loans are loans that are no longer accruing interest at the
discretion of Management. This occurs when Management determines that the
borrower can no longer service the debt, but the loan is adequately secured
with collateral or the borrower will be able to repay the principal of the loan
in the future. Past-due loans are loans with principal payments more than 90
days past due. Both interest and principal are expected to be repaid.
Restructured loans include loans whose original terms were redesigned to allow
the customer to remain current and repay the loan. Also listed is other real
estate owned which represents real estate acquired through the default of
loans. The Banks practice is to carry other real estate owned at the lower of
cost or fair market value, less estimated costs to sell.

|                                         |  |      |        |      |  |   |        |  
|---------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | -
|December 31                              |  | 2003 |        | 2002
|                                         |  |      |        |     
|Non-accrual loans                        |  | $    | 13,349 |      |  | $ | 13,123 |  
|Past-due loans                           |  |      | 8,878  |      |  |   | 5,692  |  
|Restructured loans                       |  |      | 1,017  |      |  |   | 378    |  
|                                         |  |      |        |      |  |   |        |  
|Total                                    |  | $    | 23,244 |      |  | $ | 19,193 |  
|                                         |  |      |        |      |  |   |        |  
|Percent of total loans at year end       |  |      | 1.72   | %    |  |   | 1.64   | %
|Other real estate owned (net of reserve) |  | $    | 713    |      |  | $ | 1,371  |  
|                                         |  |      |        |      |  |   |        |  

Interest income that would have been earned under the original terms of the
loans classified in non-accrual and restructured loans in the above schedule
amounted to $1,325 and $1,229 in 2003 and 2002,
respectively. No interest income was realized on these loans for 2003 or 2002,
respectively. Loans that were considered to be impaired under SFAS No. 114
totaled $13,349 and $13,123 as of December 31, 2003 and 2002, respectively, all
of which were included in non-performing assets as of those dates. The average
balance of impaired loans was $12,600 in 2003 and $8,114 in 2002. The related
allowance allocated to impaired loans for 2003 and 2002 was $3,633 and $3,829,
respectively.

9.     Significant Concentration of Credit Risk

Most of the Banks business activity is with customers located within the state
of Ohio. As of December 31, 2003, the Bank had a concentration in commercial
real estate loans totaling approximately $420,709, approximately 75.0% of which
were owner-occupied businesses, including restaurants and nursing homes within
the Banks market area. Of the $420,709 of commercial real estate loans, $3,166
or 0.75% were on non-accrual status as of December 31, 2003.

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10.     Fair Values of Financial Instruments

SFAS No. 107, Disclosures about Fair Value of Financial Instruments, requires
that the Corporation disclose estimated fair values for its financial
instruments. The market value of securities, as presented in Note 6, is based
primarily upon quoted market prices. For substantially all other financial
instruments, the fair values are Managements estimates of the values at which
the instruments could be exchanged in a transaction between willing parties. In
accordance with SFAS No. 107, fair values are based on estimates using present
value and other valuation techniques in instances where quoted prices are not
available. These techniques are significantly affected by the assumptions used,
including discount rates and estimates of future cash flows. As such, the
derived fair value estimates cannot be substantiated by comparison to
independent markets and, further, may not be realizable in an immediate
settlement of the instruments. SFAS No. 107 also excludes certain items from
its disclosure requirements. Accordingly, the aggregate fair value amounts
presented do not represent, and should not be construed to represent, the
underlying value of the Corporation.

The following table presents the estimates of fair value of financial
instruments:

|                                                                           |  |                   |           |                   |  |          |           |       |  |   |           |   |  |   |           | 
|-------------------------------------------------------------------------- |  | ----------------- | --------- | ----------------- |  | -------- | --------- | ----- |  | - | --------- | - |  | - | --------- | 
|                                                                           |  | December 31, 2003 |           | December 31, 2002
|                                                                           |  | Carrying          |           | Fair              |  | Carrying |           | Fair 
|                                                                           |  | Value             |           | Value             |  | Value    |           | Value
|                                                                           |  |                   |           |                   |  |          |           |      
|Assets:                                                                    |  |                   |           |                   |  |          |           |       |  |   |           |   |  |   |           | 
|Cash and cash equivalents                                                  |  | $                 | 47,302    |                   |  | $        | 47,302    |       |  | $ | 122,271   |   |  | $ | 122,271   | 
|Securities                                                                 |  |                   | 620,696   |                   |  |          | 620,696   |       |  |   | 523,669   |   |  |   | 523,669   | 
|Loans                                                                      |  |                   | 1,349,820 |                   |  |          | 1,341,385 |       |  |   | 1,167,791 |   |  |   | 1,166,701 | 
|Allowance for loan losses                                                  |  |                   | (18,874   | )                 |  |          |          |       |  |   | (17,595   | ) |  |   |          | 
|Servicing assets                                                           |  |                   | 20,936    |                   |  |          | 21,316    |       |  |   | 12,403    |   |  |   | 12,403    | 
|Servicing asset derivatives                                                |  |                   | 492       |                   |  |          | 492       |       |  |   | 375       |   |  |   | 375       | 
|Liabilities:                                                               |  |                   |           |                   |  |          |           |       |  |   |           |   |  |   |           | 
|Demand deposits-non-interest bearing                                       |  |                   | 170,176   |                   |  |          | 170,176   |       |  |   | 179,714   |   |  |   | 179,714   | 
|Demand deposits-interest bearing                                           |  |                   | 142,709   |                   |  |          | 142,709   |       |  |   | 103,583   |   |  |   | 103,583   | 
|Savings deposits                                                           |  |                   | 346,851   |                   |  |          | 346,851   |       |  |   | 405,437   |   |  |   | 405,437   | 
|Time deposits                                                              |  |                   | 555,606   |                   |  |          | 564,146   |       |  |   | 506,378   |   |  |   | 518,121   | 
|Federal funds purchased and
securities sold under
agreements to repurchase |  |                   | 216,761   |                   |  |          | 216,761   |       |  |   | 138,796   |   |  |   | 138,796   | 
|Note payable                                                               |  |                   | 7,750     |                   |  |          | 7,750     |       |  |   | 7,000     |   |  |   | 7,000     | 
|Other borrowed funds                                                       |  |                   | 1,301     |                   |  |          | 1,301     |       |  |   | 3,863     |   |  |   | 3,863     | 
|FHLB advances                                                              |  |                   | 492,299   |                   |  |          | 522,401   |       |  |   | 365,844   |   |  |   | 405,984   | 
|Other long-term debt                                                       |  |                   | 31,537    |                   |  |          | 32,886    |       |  |   | 30,495    |   |  |   | 35,389    | 
|Interest rate swap liability                                               |  |                   | 408       |                   |  |          | 408       |       |  |   | 258       |   |  |   | 258       | 

Fair value estimates, methods and assumptions are set forth below for the
Corporations financial instruments:

Cash and Cash Equivalents

The carrying amounts reported in the balance sheet for cash and cash
equivalents approximate those assets fair value.

Securities

Fair values for securities are based on quoted market prices, where available.
If quoted market prices are not available, fair values are based on quoted
market prices of comparable instruments.

Loans

Variable-rate loans that reprice frequently are assumed to have a
short-duration period, yielding a fair value that approximates the carrying
value. The fair values for other loans are estimated using a discounted cash
flow calculation.

Servicing Assets

The fair value of servicing assets was determined via an independent valuation
from a third party.

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Included in the valuation were assumptions regarding
prepayment speeds, discount rates, servicing costs, delinquency, ancillary
income and foreclosure costs arrived at from third party sources and internal
historical records.

Servicing Asset Derivatives

The fair values disclosed are from quoted market prices determined by the floor
counterparty.

Deposit Liabilities

The fair values disclosed for demand deposits and interest bearing demand and
savings deposit accounts are, by definition, equal to the amount payable on
demand at the reporting date (i.e., their carrying amounts). The carrying
amounts for time deposits are estimated using a discounted cash flow
calculation. Variable-rate time deposits that reprice frequently are assumed to
have a short-duration period, yielding a fair value that approximates the
carrying value.

Federal Funds Purchased, Securities Sold Under Agreements to Repurchase and
Other Short-Term Borrowings

The carrying amounts of federal funds purchased, securities sold under
agreements to repurchase and other short-term borrowings approximate their fair
values.

FHLB Advances

The fair value for the FHLB advances was determined using payoff quotations
from the FHLB and discounted cash flow calculations.

Other Long-term Debt

The fair value for the other long-term debt was based on market prices of
comparable instruments.

Interest Rate Swap Liability

The fair value represents the estimated amounts the Corporation would receive
or pay to terminate the contracts, taking into account current interest rates.

11.     Premises and Equipment

The following is a summary of bank premises and equipment accounts as of
December 31:

|                                          |  |      |        |      |  |   |        | 
|----------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | 
|                                          |  | 2003 |        | 2002
|                                          |  |      |        |     
|Land and buildings                        |  | $    | 7,649  |      |  | $ | 7,993  | 
|Leasehold improvements                    |  |      | 11,351 |      |  |   | 9,558  | 
|Furniture and equipment                   |  |      | 31,701 |      |  |   | 28,923 | 
|                                          |  |      |        |      |  |   |        | 
|                                          |  |      | 50,701 |      |  |   | 46,474 | 
|Less:                                     |  |      |        |      |  |   |        | 
|Accumulated depreciation and amortization |  |      | 31,688 |      |  |   | 29,842 | 
|                                          |  |      |        |      |  |   |        | 
|Total                                     |  | $    | 19,013 |      |  | $ | 16,632 | 
|                                          |  |      |        |      |  |   |        | 

12. Goodwill and Intangible Assets

The carrying amount for goodwill and intangible assets as of December 31 is as
follows:

|                         |  |      |        |      |  |   |        | 
|------------------------ |  | ---- | ------ | ---- |  | - | ------ | 
|                         |  | 2003 |        | 2002
|                         |  |      |        |     
|Goodwill                 |  | $    | 16,700 |      |  | $ | 16,708 | 
|Core deposit intangible  |  |      | 2,480  |      |  |   | 2,764  | 
|Customer list intangible |  |      | 867    |      |  |   | 950    | 
|                         |  |      |        |      |  |   |        | 
|Total                    |  | $    | 20,047 |      |  | $ | 20,422 | 
|                         |  |      |        |      |  |   |        | 

Core deposit intangible accumulated amortization as of December 31, 2003 and
2002 is $7,311 and $6,871, respectively. Core deposit intangible amortization
expense for 2003 and 2002 was $439 and $447, respectively. Amortization expense
for the customer list intangible was $83 in 2003 and $28 in 2002.

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Future core deposit intangible and customer list intangible amortization
expense is as follows for the years ended December 31:

|     |  |                         |     |                          |  |   |    | 
|---- |  | ----------------------- | --- | ------------------------ |  | - | -- | 
|     |  | Core Deposit Intangible |     | Customer List Intangible
|     |  |                         |     |                         
|2004 |  | $                       | 372 |                          |  | $ | 79 | 
|2005 |  |                         | 366 |                          |  |   | 74 | 
|2006 |  |                         | 362 |                          |  |   | 70 | 
|2007 |  |                         | 358 |                          |  |   | 67 | 
|2008 |  |                         | 369 |                          |  |   | 63 | 

The changes to the carrying amount of goodwill are as follows:

|                                        |  |      |        |      |  |   |        | 
|--------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | 
|                                        |  | 2003 |        | 2002
|                                        |  |      |        |     
|Balance at January 1                    |  | $    | 16,708 |      |  | $ | 14,645 | 
|Goodwill acquired during the year       |  |      | 54     |      |  |   | 1,319  | 
|Adjustments for specific identification |  |      |       |      |  |   | 744    | 
|Impairment (sale of banking centers)    |  |      | (62    | )    |  |   |       | 
|                                        |  |      |        |      |  |   |        | 
|Balance at December 31                  |  | $    | 16,700 |      |  | $ | 16,708 | 
|                                        |  |      |        |      |  |   |        | 

As of December 31, 2003, goodwill was allocated to the Corporations lines of
business as follows: Mortgage $0; Commercial $11,763; Retail $3,618; Parent and
other $1,319.

13. Servicing Assets

Servicing assets consisted of the following as of December 31:

|                          |  |      |        |      |  |   |        | 
|------------------------- |  | ---- | ------ | ---- |  | - | ------ | 
|                          |  | 2003 |        | 2002
|                          |  |      |        |     
|Mortgage servicing assets |  | $    | 20,512 |      |  | $ | 11,967 | 
|Other servicing assets    |  |      | 424    |      |  |   | 436    | 
|                          |  |      |        |      |  |   |        | 
|Total                     |  | $    | 20,936 |      |  | $ | 12,403 | 
|                          |  |      |        |      |  |   |        | 

At December 31, 2003, 2002 and 2001, the Corporation serviced mortgage loans
for others totaling $1,750,733, $1,319,645 and $812,774, respectively.
Following is an analysis of the activity for capitalized mortgage loan
servicing assets during the years ended December 31:

|                              |  |      |        |      |  |      |        |   |  |   |        |  
|----------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                              |  | 2003 |        | 2002 |  | 2001
|                              |  |      |        |      |  |     
|Balance at January 1          |  | $    | 11,967 |      |  | $    | 8,313  |   |  | $ | 4,065  |  
|Additions                     |  |      | 14,447 |      |  |      | 11,342 |   |  |   | 6,270  |  
|Amortizations                 |  |      | (7,302 | )    |  |      | (4,704 | ) |  |   | (1,212 | )
|Change in valuation allowance |  |      | 1,400  |      |  |      | (2,984 | ) |  |   | (810   | )
|                              |  |      |        |      |  |      |        |   |  |   |        |  
|Balance at December 31        |  | $    | 20,512 |      |  | $    | 11,967 |   |  | $ | 8,313  |  
|                              |  |      |        |      |  |      |        |   |  |   |        |  

The fair value of mortgage servicing assets is estimated by calculating the
present value of estimated future cash flows, taking into consideration several
different variables including discount rate, investor type, product type,
interest rate, escrow balances, delinquencies, servicing fees and costs and
prepayment speeds. The expected and actual rate of mortgage loan prepayments
is the most significant factor affecting the value of mortgage servicing
assets. The risk characteristics used to stratify the recognized servicing
assets include method of origination and interest rate. The fair value of the
servicing assets was $20,892, $11,967 and $8,844 as of December 31, 2003, 2002
and 2001, respectively. Following is an analysis of the aggregate changes in
the valuation allowances for mortgage servicing assets for the years ended
December 31:

|                       |  |      |        |      |  |      |       |  |  |   |     | 
|---------------------- |  | ---- | ------ | ---- |  | ---- | ----- |  |  | - | --- | 
|                       |  | 2003 |        | 2002 |  | 2001
|                       |  |      |        |      |  |     
|Balance at January 1   |  | $    | 3,794  |      |  | $    | 810   |  |  | $ |    | 
|Additions              |  |      | 4,251  |      |  |      | 2,984 |  |  |   | 810 | 
|Reductions             |  |      | (5,651 | )    |  |      |      |  |  |   |    | 
|                       |  |      |        |      |  |      |       |  |  |   |     | 
|Balance at December 31 |  | $    | 2,394  |      |  | $    | 3,794 |  |  | $ | 810 | 
|                       |  |      |        |      |  |      |       |  |  |   |     | 

The Corporation utilized interest rate derivatives to mitigate the risk of
changes in the valuation of mortgage servicing assets. The fair value of the
derivatives was $492 and $375 as of December 31, 2003

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and 2002, respectively.
Changes in market value of derivatives included in mortgage banking revenue
were $(2,753), $567 and $0 in 2003, 2002 and 2001, respectively.

At December 31, 2003, key economic assumptions and the sensitivity of the
current fair value of mortgage servicing assets to immediate 10% and 20%
adverse changes in those assumptions are presented in the table that follows.
These sensitivities are hypothetical and should be used with caution. As the
figures indicate, changes in fair value based on a 10% variation in assumptions
generally cannot be extrapolated because the relationship of the change in the
assumption to the change in fair value may not be linear. Also, the effect of a
variation in a particular assumption on the fair value of the mortgage
servicing assets is calculated independently without changing any other
assumption. In reality, changes in one factor may result in changes in another
(for example, changes in prepayment rate estimates could result in changes in
the discount rates), which might magnify or counteract the sensitivities.

|                                               |  |   |        |  
|---------------------------------------------- |  | - | ------ | -
|Fair value                                     |  | $ | 20,892 |  
|Expected weighted average life (in years)      |  |   | 4.8    |  
|Prepayment rate (annual PSA)                   |  |   | 257    |  
|Decrease in fair value from 10% adverse change |  | $ | 981    |  
|Decrease in fair value from 20% adverse change |  | $ | 1,881  |  
|Discount rate                                  |  |   | 9.01   | %
|Decrease in fair value from 10% adverse change |  | $ | 628    |  
|Decrease in fair value from 20% adverse change |  | $ | 1,223  |  

The Corporation also services Small Business Administration (SBA) loans for
others totaling $16,862 and $16,414 as of December 31, 2003 and 2002,
respectively. Amounts capitalized as originated servicing assets were $131,
$185, and $144 in 2003, 2002 and 2001, respectively. Capitalized servicing
assets amortized were $143, $157 and $108 in 2003, 2002 and 2001, respectively.

14. Federal Funds Purchased and Securities Sold Under Agreements to Repurchase

The Corporation has the availability to borrow $73 million from correspondent
banks as overnight federal funds purchased. Federal funds purchased as of
December 31, 2003 totaled $51.5 million. There were no federal funds purchased
as of December 31, 2002. The Corporation has repurchase agreements with
corporate customers and local municipalities. These borrowings have an
overnight maturity and are collateralized with U.S. Treasury and government
agency securities, including agency-issued mortgage-backed securities with a
market value of $188,953 and $161,998 as of December 31, 2003 and 2002,
respectively. The securities are held in the Corporations safekeeping account
at the Federal Reserve Bank. Although there were no repurchase agreements with
approved brokers outstanding at December 31, 2003, the Corporation previously
maintained such balances, which were collateralized by U.S. Treasury and
government agency securities held by the broker. The following table summarizes
certain information relative to these borrowings:

|                                                           |  |      |         |      |  |   |         |  
|---------------------------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | -
|                                                           |  | 2003 |         | 2002
|                                                           |  |      |         |     
|Outstanding at December 31                                 |  | $    | 216,761 |      |  | $ | 138,796 |  
|Weighted-average interest rate at December 31              |  |      | 1.18    | %    |  |   | 1.56    | %
|Maximum amount outstanding as of any month end             |  | $    | 251,404 |      |  | $ | 178,536 |  
|Average amount outstanding                                 |  | $    | 195,620 |      |  | $ | 134,374 |  
|Approximate weighted-average interest rate during the year |  |      | 1.26    | %    |  |   | 1.84    | %

15. Notes Payable

As of December 31, 2003, the Corporation had $20 million in unsecured lines of
credit with two correspondent banks. The lines are renewable annually and bear
interest at a floating rate based on several indices including LIBOR, federal
funds or prime rate. As of December 31, 2003 and 2002,
respectively, the Corporation had $7.75 million and $7 million in outstanding
notes payable to a correspondent bank.

16. Other Borrowed Funds and Federal Home Loan Bank Advances

The Corporation has a Treasury Note Option Agreement with the Federal
Government, which allows the

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Corporation to hold funds deposited by customers
for treasury and tax payments to the Government up to a self-imposed limit of
$6,000. Federal Home Loan Bank (FHLB) advances are primarily collateralized by
all shares of FHLB stock and a portion of the Corporations qualified mortgage
loan portfolio, and are used to fund mortgage loan originations of the
Corporation and as a regular funding source. As of December 31, 2003, the book
value of pledged collateral totaled $649 million and consisted of $350 million
in residential mortgage loans, $69 million in home equity loans, $43 million
in junior lien installment loans and $187 million in various securities. As of
December 31, 2002, the book value of pledged collateral was $506 million and
consisted of $331 million in residential mortgage loans, $55 million in home
equity loans, $35 million in junior lien installment loans and $85 million in
various securities. The detail of these borrowings on December 31, 2003 and
2002 is as follows:

|                                                                      |  |                  |      |         |         |      |       |   |         |   |        | 
|--------------------------------------------------------------------- |  | ---------------- | ---- | ------- | ------- | ---- | ----- | - | ------- | - | ------ | 
|                                                                      |  | Current Interest |      | Balance
|Description                                                           |  | Rates            |      | 2003    |         | 2002
|                                                                      |  |                  |      |         |         |     
|Other borrowed funds                                                  |  |                  | 0.73 | %       |         | $    | 1,301 |   |         | $ | 3,863  | 
|Fixed rate FHLB advances with monthly principal and interest payments |  |                  |      |         |         |      |       |   |         |   |        | 
|Advances with contractual maturities within one year                  |  |                  | 4.29 | %       |         | $    | 8,000 |   |         | $ | 10,000 | 
|Fixed rate FHLB advances with monthly principal and interest payments |  |                  |      |         |         |      |       |   |         |   |        | 
|Advances with contractual maturities over one year until 2013         |  | 1.76% to 6.87%   |      | $       | 362,299 |      |       | $ | 348,844 |  
|Variable rate FHLB advances with monthly interest payments            |  |                  |      |         |         |      |       |   |         |   |        | 
|Advances with contractual maturities within one year                  |  | 1.04% to 1.07%   |      | $       | 115,000 |      |       | $ |        |  
|Advance with contractual maturity due in 2005                         |  |                  | 1.06 | %       |         | $    | 7,000 |   |         | $ | 7,000  | 

The Bank has a number of FHLB advances with fixed rates that have a convertible
date prior to their contractual maturity date. In an increasing rate
environment, these advances may be subject to their convertible date.

The table below provides a maturity distribution for the Corporations $523,836
long-term debt, which includes the FHLB advances and the debentures owed to the
unconsolidated subsidiary trust discussed in Note 17:

|           |      |  |         |         | 
|---------- | ---- |  | ------- | ------- | 
|           | 2004 |  | $       | 123,000 | 
|           | 2005 |  |         | 7,000   | 
|           | 2006 |  |         | 5,000   | 
|           | 2007 |  |         | 45,663  | 
|           | 2008 |  |         | 21,000  | 
|Thereafter |      |  | 322,173 |        

17.     Junior Subordinated Debentures Owed to Unconsolidated Subsidiary trust and
Corporation-Obligated Mandatorily Redeemable Capital Securities of Subsidiary
Trust Holding Solely Debentures of the Corporation

The corporation-obligated mandatorily redeemable capital securities (the
capital securities) of a subsidiary trust hold solely junior subordinated
debt securities of the Corporation (the debentures). The capital securities
were issued in 2001 by a statutory business trust, Second Bancorp Capital Trust
I, of which 100% of the common equity is owned by the Corporation. The trust
was formed with the sole purpose of issuing the capital securities and
investing the proceeds from the sale of such capital securities in the
debentures. The debentures held by the trust are the sole assets of the trust.
Distributions on the capital securities are payable quarterly at a per annum
rate of 9%, which is equal to the interest rate being earned by the trust on
the debentures and are recorded as interest expense of the Corporation. The
capital securities are subject to mandatory redemption, in whole or in part,
upon repayment of the debentures. The Corporation has entered into agreements
which, taken collectively, fully or unconditionally guarantee the capital
securities subject to the terms of the guarantees. The debentures are first
redeemable, in whole or in part, by the Corporation on December 31, 2006 and
mature on December 31, 2031.

At December 31, 2003, as a result of applying the provisions of FIN 46, which
represents new accounting guidance governing when an equity interest should be
consolidated, the Corporation was required to

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deconsolidate the subsidiary
trust from its financial statements. The deconsolidation of the net assets and
results of operations of the trust had virtually no impact on the Corporations
financial statements or liquidity position since the Corporation continues to
be obligated to repay the debentures held by the trust and guarantees repayment
of the capital securities issued by the trust. The consolidated debt obligation
related to the trust increased from $30,495 million to $31,537 million upon
deconsolidation with the difference representing the Corporations common
ownership interest in the trust.

The capital securities held by the trust continue to qualify as Tier I capital
for the Corporation under Federal Reserve Board guidelines. As a result of the
issuance of FIN 46, the Federal Reserve Board is currently evaluating whether
deconsolidation of the trust will affect the qualification of the capital
securities as Tier I capital. If in the future it is determined that the
capital securities can no longer qualify as Tier I capital, the effect of such
a change would reduce the Tier I capital ratios by approximately 2.1% and the
leverage ratios by approximately 1.5%.

18. Shareholders Equity

In 2000, the Board of Directors authorized the repurchase of up to 2% of shares
outstanding annually. Additionally, in 2000 and 2002, the Board of Directors
authorized the repurchase of an additional 600,000 and 500,000 shares,
respectively. The following table depicts treasury repurchase activity for the
past three years:

|                     |  |                  |           | 
|-------------------- |  | ---------------- | --------- | 
|                     |  | Number of Shares
|                     |  |                 
|Balance 12/31/00     |  |                  | 730,200   | 
|Repurchased 2001     |  |                  | 153,294   | 
|                     |  |                  |           | 
|Balance 12/31/01     |  |                  | 883,494   | 
|Repurchased 2002     |  |                  | 395,515   | 
|                     |  |                  |           | 
|Balance 12/31/02     |  |                  | 1,279,009 | 
|Net repurchased 2003 |  |                  | 241,080   | 
|                     |  |                  |           | 
|Balance 12/31/03     |  |                  | 1,520,089 | 
|                     |  |                  |           | 

Regulatory Restrictions and Capital Ratios

Dividends are paid by the Corporation from its assets, which are mainly
provided by dividends from the Bank. However, certain restrictions exist
regarding the ability of the Bank to transfer funds to the Corporation in the
form of cash dividends, loans or advances. The approval of the Comptroller of
the Currency is required to pay dividends in excess of the Banks earnings
retained in the current year plus retained net profits from the preceding two
years. As of December 31, 2003, the Bank had retained earnings of $96,351, of
which $7,475 was available for distribution to the Corporation as dividends
without prior regulatory approval. Regulatory approval was received in 2002 to
provide a $21 million special dividend that was utilized to facilitate a
capital conversion at the subsidiary Bank level.

The Corporation and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory  and possibly
additional discretionary  actions by regulators that, if undertaken, could
have a direct material effect on the Corporations and the Banks financial
statements. Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, the Corporation and the Bank must meet specific
capital guidelines that involve quantitative measures of the banks assets,
liabilities and certain off-balance sheet items as calculated under regulatory
accounting practices. The Corporations and the Banks capital amounts and
classification are also subject to qualitative judgments by the regulators
about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require the Corporation and the Bank to maintain minimum amounts and ratios
(set forth in the table below) of total and Tier I capital (as defined by the
regulations) to risk-weighted assets (as defined), and of Tier I capital (as
defined) to average assets (as defined). Management believes, as of December
31, 2003, that the Corporation and the Bank meet all capital adequacy
requirements to which it is subject.

As discussed in Note 17, the capital securities held by Second Bancorp Capital
Trust I qualify as Tier I capital for the Corporation under Federal Reserve
Board guidelines. As a result of the issuance of Fin 46,

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the Federal Reserve Board is currently evaluating whether deconsolidation of
the trust will affect the qualification of the capital securities as Tier I
capital. If in the future it is determined that the capital securities can no
longer qualify as Tier I capital, the effect of such a change would reduce the
Tier I capital ratios by approximately 2.1% and the leverage ratios by
approximately 1.5%.

As of December 31, 2003 and 2002, the most recent notification from the Office
of the Comptroller of the Currency categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action. To be categorized
as well capitalized the Bank must maintain minimum total risk-based, Tier I
risk-based and Tier I leverage ratios as set forth in the table. There are no
conditions or events since that notification that Management believes have
changed the Banks category.

The consolidated Corporations and the subsidiary Banks actual capital amounts
and ratios are presented in the table.

|                                          |  |        |         |                   |  |            |      |       |  |             |          |                   |  |  |      |   |  |                        |          |  |  |  |       |  
|----------------------------------------- |  | ------ | ------- | ----------------- |  | ---------- | ---- | ----- |  | ----------- | -------- | ----------------- |  |  | ---- | - |  | ---------------------- | -------- |  |  |  | ----- | -
|                                          |  |        |         |                   |  |            |      |       |  |             |          |                   |  |  |      |   |  | To Be Well-Capitalized
|                                          |  |        |         |                   |  |            |      |       |  |             |          |                   |  |  |      |   |  | Under Prompt          
|                                          |  |        |         |                   |  |            |      |       |  | For Capital |          | Corrective Action
|                                          |  | Actual |         | Adequacy Purposes |  | Provisions
|                                          |  |        |         |                   |  |           
|                                          |  | Amount |         | Ratio             |  | Amount     |      | Ratio |  | Amount      |          | Ratio            
|                                          |  |        |         |                   |  |            |      |       |  |             |          |                  
|As of December 31, 2003:                  |  |        |         |                   |  |            |      |       |  |             |          |                   |  |  |      |   |  |                        |          |  |  |  |       |  
|Total capital (to risk-weighted assets):  |  |        |         |                   |  |            |      |       |  |             |          |                   |  |  |      |   |  |                        |          |  |  |  |       |  
|Second Bancorp                            |  | $      | 164,607 |                   |  |            | 11.4 | %     |  | 3$          | 115,122  |                   |  |  | 38.0 | % |  |                        | N/A      |  |  |  | N/A   |  
|Second National Bank                      |  |        | 169,089 |                   |  |            | 11.8 |       |  |             | 3115,041 |                   |  |  | 38.0 |   |  | 3$                     | 143,801  |  |  |  | 310.0 | %
|Tier I capital (to risk-weighted assets): |  |        |         |                   |  |            |      |       |  |             |          |                   |  |  |      |   |  |                        |          |  |  |  |       |  
|Second Bancorp                            |  |        | 146,608 |                   |  |            | 10.2 |       |  |             | 357,561  |                   |  |  | 34.0 |   |  |                        | N/A      |  |  |  | N/A   |  
|Second National Bank                      |  |        | 151,103 |                   |  |            | 10.5 |       |  |             | 357,520  |                   |  |  | 34.0 |   |  |                        | 386,280  |  |  |  | 36.0  |  
|Tier I leverage:                          |  |        |         |                   |  |            |      |       |  |             |          |                   |  |  |      |   |  |                        |          |  |  |  |       |  
|Second Bancorp                            |  |        | 146,608 |                   |  |            | 7.1  |       |  |             | 382,833  |                   |  |  | 34.0 |   |  |                        | N/A      |  |  |  | N/A   |  
|Second National Bank                      |  |        | 151,103 |                   |  |            | 7.3  |       |  |             | 382,774  |                   |  |  | 34.0 |   |  |                        | 3103,468 |  |  |  | 35.0  |  
|As of December 31, 2002:                  |  |        |         |                   |  |            |      |       |  |             |          |                   |  |  |      |   |  |                        |          |  |  |  |       |  
|Total capital (to risk-weighted assets):  |  |        |         |                   |  |            |      |       |  |             |          |                   |  |  |      |   |  |                        |          |  |  |  |       |  
|Second Bancorp                            |  | $      | 154,464 |                   |  |            | 12.2 | %     |  | 3$          | 101,689  |                   |  |  | 38.0 | % |  |                        | N/A      |  |  |  | N/A   |  
|Second National Bank                      |  |        | 159,419 |                   |  |            | 12.7 |       |  |             | 3100,299 |                   |  |  | 38.0 |   |  | 3$                     | 125,375  |  |  |  | 310.0 | %
|Tier I capital (to risk-weighted assets): |  |        |         |                   |  |            |      |       |  |             |          |                   |  |  |      |   |  |                        |          |  |  |  |       |  
|Second Bancorp                            |  |        | 138,554 |                   |  |            | 10.9 |       |  |             | 350,845  |                   |  |  | 34.0 |   |  |                        | N/A      |  |  |  | N/A   |  
|Second National Bank                      |  |        | 143,723 |                   |  |            | 11.5 |       |  |             | 350,150  |                   |  |  | 34.0 |   |  |                        | 375,224  |  |  |  | 36.0  |  
|Tier I leverage:                          |  |        |         |                   |  |            |      |       |  |             |          |                   |  |  |      |   |  |                        |          |  |  |  |       |  
|Second Bancorp                            |  |        | 138,554 |                   |  |            | 7.7  |       |  |             | 372,164  |                   |  |  | 34.0 |   |  |                        | N/A      |  |  |  | N/A   |  
|Second National Bank                      |  |        | 143,723 |                   |  |            | 8.2  |       |  |             | 370,235  |                   |  |  | 34.0 |   |  |                        | 387,794  |  |  |  | 35.0  |  

19. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings
per share:

|                                                                              |  |      |           |      |  |      |            |  |  |   |            | 
|----------------------------------------------------------------------------- |  | ---- | --------- | ---- |  | ---- | ---------- |  |  | - | ---------- | 
|                                                                              |  | 2003 |           | 2002 |  | 2001
|                                                                              |  |      |           |      |  |     
|Numerator for basic and diluted earnings per share:                           |  |      |           |      |  |      |            |  |  |   |            | 
|Net income                                                                    |  | $    | 23,155    |      |  | $    | 18,000     |  |  | $ | 17,080     | 
|                                                                              |  |      |           |      |  |      |            |  |  |   |            | 
|Denominator:                                                                  |  |      |           |      |  |      |            |  |  |   |            | 
|Denominator for basic earnings per share-weighted average shares              |  |      | 9,512,324 |      |  |      | 9,905,832  |  |  |   | 10,013,068 | 
|Effect of dilutive securities:                                                |  |      |           |      |  |      |            |  |  |   |            | 
|Employee stock options                                                        |  |      | 111,064   |      |  |      | 134,169    |  |  |   | 66,937     | 
|                                                                              |  |      |           |      |  |      |            |  |  |   |            | 
|Denominator for diluted earnings per share - adjusted weighted
average shares |  |      | 9,623,388 |      |  |      | 10,040,001 |  |  |   | 10,080,005 | 
|                                                                              |  |      |           |      |  |      |            |  |  |   |            | 
|Basic earnings per share                                                      |  | $    | 2.43      |      |  | $    | 1.82       |  |  | $ | 1.71       | 
|                                                                              |  |      |           |      |  |      |            |  |  |   |            | 
|Diluted earnings per share                                                    |  | $    | 2.41      |      |  | $    | 1.79       |  |  | $ | 1.69       | 
|                                                                              |  |      |           |      |  |      |            |  |  |   |            | 

Excluding the effect of the accounting change associated with the transition
adjustment related to the adoption of SFAS No. 133, net income in 2001 was
$17,181 resulting in basic and diluted earnings per share of $1.72 and $1.70,
respectively.

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20. Federal Income Taxes

The Corporations federal income tax provision in the accompanying statements
of income differs from the statutory rate as follows:

|                                                   |  |      |        |      |  |      |        |   |  |   |        |  
|-------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                                   |  | 2003 |        | 2002 |  | 2001
|                                                   |  |      |        |      |  |     
|Statutory rate                                     |  |      | 35     | %    |  |      | 35     | % |  |   | 35     | %
|Income before federal income taxes (1)             |  | $    | 32,065 |      |  | $    | 24,230 |   |  | $ | 23,061 |  
|Tax at statutory rate                              |  | $    | 11,223 |      |  | $    | 8,481  |   |  | $ | 8,071  |  
|Non-taxable interest                               |  |      | (1,285 | )    |  |      | (1,350 | ) |  |   | (1,480 | )
|Increase in cash surrender value   life insurance |  |      | (582   | )    |  |      | (573   | ) |  |   | (545   | )
|Disallowed interest expense                        |  |      | 133    |      |  |      | 163    |   |  |   | 245    |  
|Other items, net                                   |  |      | (579   | )    |  |      | (491   | ) |  |   | (411   | )
|                                                   |  |      |        |      |  |      |        |   |  |   |        |  
|                                                   |  | $    | 8,910  |      |  | $    | 6,230  |   |  | $ | 5,880  |  
|                                                   |  |      |        |      |  |      |        |   |  |   |        |  

|(1) |  | Excludes the cumulative effect adjustment of accounting change for SFAS
No. 133 for 2001. The pre-tax amount was $(155) with a tax benefit of $54.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------

Significant components of the Corporations deferred tax assets and liabilities
as of December 31 are as follows:

|                                              |  |      |        |      |  |   |        |  
|--------------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | -
|                                              |  | 2003 |        | 2002
|                                              |  |      |        |     
|Deferred tax assets:                          |  |      |        |      |  |   |        |  
|Provision for loan losses                     |  | $    | 6,525  |      |  | $ | 6,017  |  
|Non-accrual interest                          |  |      | 947    |      |  |   | 633    |  
|Valuation allowance mortgage servicing assets |  |      | 838    |      |  |   | 1,328  |  
|Banking center reconfiguration expense        |  |      | 649    |      |  |   | 719    |  
|SFAS No. 115 adjustment                       |  |      | 317    |      |  |   |       |  
|Other                                         |  |      | 498    |      |  |   | 1,439  |  
|                                              |  |      |        |      |  |   |        |  
|Total deferred tax assets                     |  |      | 9,774  |      |  |   | 10,136 |  
|Deferred tax liabilities:                     |  |      |        |      |  |   |        |  
|Capitalized mortgage servicing assets         |  |      | 7,924  |      |  |   | 5,358  |  
|SFAS No. 115 adjustment                       |  |      |       |      |  |   | 4,209  |  
|FHLB dividends                                |  |      | 2,928  |      |  |   | 2,619  |  
|Pension expense                               |  |      | 1,187  |      |  |   |       |  
|Goodwill and intangible amortization          |  |      | 555    |      |  |   | 693    |  
|Other                                         |  |      | 1,351  |      |  |   | 524    |  
|                                              |  |      |        |      |  |   |        |  
|Total deferred tax liabilities                |  |      | 13,945 |      |  |   | 13,403 |  
|                                              |  |      |        |      |  |   |        |  
|Net deferred tax liability                    |  | $    | (4,171 | )    |  | $ | (3,267 | )
|                                              |  |      |        |      |  |   |        |  

21. Employee Benefit Plans

The Corporation has a non-contributory, defined-benefit pension plan covering
substantially all of its employees. The benefits are based on a percentage of
the employees average annual earnings multiplied by completed years of
continuous service. The Corporations funding policy is to contribute annually
an amount between the minimum required and the maximum amount that can be
deducted for federal income tax purposes. The Corporation expects to contribute
$0 to the plan during 2004. Contributions are intended to provide not only for
benefits attributed to service to date but also for those expected to be earned
in the future. The Corporation also has supplemental retirement deferred
benefit plans for certain employees, which provide benefits in excess of the
defined benefit plan. The Corporation uses a December 31 measurement date for
its plans.

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|                                                           |  |      |        |      |  |   |        |  
|---------------------------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | -
|Obligations and Funded Status                              |  | 2003 |        | 2002
|                                                           |  |      |        |     
|Change in benefit obligation:                              |  |      |        |      |  |   |        |  
|Benefit obligation at beginning of year                    |  | $    | 13,701 |      |  | $ | 10,762 |  
|Service cost                                               |  |      | 1,381  |      |  |   | 901    |  
|Interest cost                                              |  |      | 996    |      |  |   | 802    |  
|Amendments                                                 |  |      | 707    |      |  |   |       |  
|Actuarial loss                                             |  |      | 2,100  |      |  |   | 1,582  |  
|Disbursements                                              |  |      | (366   | )    |  |   | (346   | )
|                                                           |  |      |        |      |  |   |        |  
|Benefit obligation at end of year                          |  | $    | 18,519 |      |  | $ | 13,701 |  
|                                                           |  |      |        |      |  |   |        |  
|Change in plan assets:                                     |  |      |        |      |  |   |        |  
|Fair value of plan assets at beginning of year             |  | $    | 8,343  |      |  | $ | 9,593  |  
|Actual return on plan assets                               |  |      | 934    |      |  |   | (990   | )
|Employer contribution                                      |  |      | 6,186  |      |  |   | 86     |  
|Disbursements                                              |  |      | (366   | )    |  |   | (346   | )
|                                                           |  |      |        |      |  |   |        |  
|Fair value of plan assets at end of year                   |  | $    | 15,097 |      |  | $ | 8,343  |  
|                                                           |  |      |        |      |  |   |        |  
|Reconciliation of funded status:                           |  |      |        |      |  |   |        |  
|Funded status                                              |  | $    | (3,422 | )    |  | $ | (5,358 | )
|Unrecognized net actuarial loss                            |  |      | 6,130  |      |  |   | 3,989  |  
|Unrecognized prior service cost                            |  |      | 720    |      |  |   | 14     |  
|Unrecognized initial net obligation                        |  |      |       |      |  |   | (6     | )
|                                                           |  |      |        |      |  |   |        |  
|Net amount recognized                                      |  | $    | 3,428  |      |  | $ | (1,361 | )
|                                                           |  |      |        |      |  |   |        |  
|Amounts recognized in the statement of financial position: |  |      |        |      |  |   |        |  
|Prepaid pension cost                                       |  | $    | 4,367  |      |  | $ |       |  
|Accrued pension liability                                  |  |      | (1,165 | )    |  |   | (3,021 | )
|Accumulated other comprehensive income                     |  |      | 226    |      |  |   | 1,660  |  
|                                                           |  |      |        |      |  |   |        |  
|Net amount recognized                                      |  | $    | 3,428  |      |  | $ | (1,361 | )
|                                                           |  |      |        |      |  |   |        |  
|Accumulated benefit obligation                             |  | $    | 15,668 |      |  | $ | 11,321 |  
|                                                           |  |      |        |      |  |   |        |  

|                                        |  |      |        |      |  |      |        |   |  |   |        |  
|--------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|Components of net periodic benefit cost |  | 2003 |        | 2002 |  | 2001
|                                        |  |      |        |      |  |     
|Service cost                            |  | $    | 1,381  |      |  | $    | 901    |   |  | $ | 727    |  
|Interest cost                           |  |      | 996    |      |  |      | 802    |   |  |   | 694    |  
|Expected return on plan assets          |  |      | (1,051 | )    |  |      | (1,076 | ) |  |   | (1,008 | )
|Amortization of prior service cost      |  |      | 1      |      |  |      | 1      |   |  |   | 6      |  
|Amortization of initial net asset       |  |      | (6     | )    |  |      | (22    | ) |  |   | (21    | )
|Recognized net actuarial loss (gain)    |  |      | 76     |      |  |      | 10     |   |  |   | (109   | )
|Net periodic benefit cost               |  | $    | 1,397  |      |  | $    | 616    |   |  | $ | 289    |  
|                                        |  |      |        |      |  |      |        |   |  |   |        |  

|                                                                     |  |      |    |      |  |   |       | 
|-------------------------------------------------------------------- |  | ---- | -- | ---- |  | - | ----- | 
|Additional information                                               |  | 2003 |    | 2002
|                                                                     |  |      |    |     
|Increase in minimum liability included in other comprehensive income |  | $    | 30 |      |  | $ | 1,502 | 
|                                                                     |  |      |    |      |  |   |       | 

|                                                                                                          |  |            |      |            |  |  |      |  
|--------------------------------------------------------------------------------------------------------- |  | ---------- | ---- | ---------- |  |  | ---- | -
|Assumptions                                                                                               |  | 2003       |      | 2002      
|                                                                                                          |  |            |      |           
|Weighted-average assumptions used to determine benefit obligation at December 31:                         |  |            |      |            |  |  |      |  
|Discount rate                                                                                             |  |            | 6.25 | %          |  |  | 6.75 | %
|Rate of compensation increase                                                                             |  | Age-graded |      | Age-graded
|Weighted-average assumptions used to determine net periodic benefit cost for
the years ended December 31: |  |            |      |            |  |  |      |  
|Discount rate                                                                                             |  |            | 6.75 | %          |  |  | 6.75 | %
|Expected return on plan assets                                                                            |  |            | 8.75 | %          |  |  | 9.75 | %
|Rate of compensation increase                                                                             |  | Age-graded |      | Age-graded

The expected return on plan assets is derived from expected long-term
performance of each major asset investment category. The returns are validated
by a retrospective computation of actual long-term returns on plan assets.

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Plan Assets

The Corporations pension plan weighted average asset allocations at December
31, 2003 and 2002, by asset category are as follows:

|                  |  |      |     |      |  |  |     |  
|----------------- |  | ---- | --- | ---- |  |  | --- | -
|                  |  | 2003 |     | 2002
|                  |  |      |     |     
|Equity securities |  |      | 39  | %    |  |  | 43  | %
|Debt securities   |  |      | 16  |      |  |  | 27  |  
|Real estate       |  |      |    |      |  |  |    |  
|Other             |  |      | 45  |      |  |  | 30  |  
|                  |  |      |     |      |  |  |     |  
|Total             |  |      | 100 | %    |  |  | 100 | %
|                  |  |      |     |      |  |  |     |  

Equity securities include the Corporations common stock in the amounts of $442
(2.9% of total plan assets) and $444 (5.3% of total plan assets) at December
31, 2003 and 2002, respectively. Other plan assets include temporary
investments and cash.

Plan assets are managed with those assets being balanced between stocks,
fixed-income and cash equivalents. Typical asset allocation is 60% equity and
40% fixed income and cash. A $6,100 contribution in fourth quarter 2003 plus
several bond calls temporarily elevated the cash allocation. It is being
gradually reduced and reallocated as market opportunities permit. Equities are
broadly diversified among 10 industry groups in the S & P 500. The objective is
to achieve long-term total return relative to the S & P 500 commensurate with
risk. Fixed-income assets are to be diversified among issuers as well as to the
length of maturities. Bonds should be rated A or better at the time of
purchase.

The projected benefit obligation, accumulated benefit obligation and fair value
of plan assets for the nonqualified pension plan with accumulated benefit
obligations in excess of plan assets were $17,372, $14,649 and $15,097,
respectively, as of December 31, 2003, and $12,741, $10,465 and $8,343,
respectively, as of December 31, 2002. The actual return on plan assets in 2003
represented a 11.2% increase in the fair value of plan assets.

The Corporation also maintains two nonqualified supplemental retirement plans
for certain key employees. The plans benefits are unfunded and any payments to
the plan participants are made by the Corporation. The projected benefit
obligation, accumulated benefit obligations and fair value of plan assets for
the nonqualified pension plan with accumulated benefits obligations in excess
of plan assets were $1,146, $1,019, and $0, respectively, as of December 31,
2003, and $960, $856, and $0, respectively, as of December 31, 2002. For the
years ended December 31, 2003, 2002 and 2001, expenses related to these plans
were $86, $149 and $95, respectively.

The Bank also sponsors a defined contribution benefit plan covering
substantially all eligible employees of the Bank. The Bank voluntarily
contributes 75% of the participants contribution to a maximum of 4.5% of the
participants compensation. Participants, at their discretion, may invest in
several investment funds or a stock fund consisting solely of the Corporations
common stock. The Banks contribution is initially limited to the stock fund;
however participants may choose to reallocate the investments at any time.
Contributions in 2003, 2002 and 2001 were $691, $626 and $524, respectively.
The Board of Directors of the Corporation has authorized the issuance of 99,000
shares of the Corporations common stock for use in the Banks defined
contribution benefit plan. As of December 31, 2003, none of the shares
authorized have been issued.

22. Stock Options and Awards

Stock Options

The Corporation maintains incentive and non-qualified stock option plans that
allow for stock based awards to eligible employees and directors. Through
February 1998, the Corporation issued incentive stock options that were
exercisable in one year after issuance and expire after ten years. The maximum
annual grant was 7,500 shares per employee. The plan was terminated in May 1998
when the non-qualified stock option plan was approved. In 1998, the
non-qualified plan authorized 650,000 shares of common stock to be reserved and
subject to issuance. In April 2002, the plan was amended with shareholder
approval to increase by 450,000 the number of authorized shares. Until January
2001, the maximum annual grant was 10,000 shares per employee and 1,000 shares
per director. After this date,

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the awards had no maximum. The options granted
under the non-qualified plan are exercisable one year after issuance and expire
after ten years.

In April 2003, an Equity Ownership Plan was approved by shareholders. The plan
replaced both the non-qualified plan and the restricted stock plan. The plan
allows for the granting of a variety of awards including incentive stock
options, non-qualified stock options, stock appreciation rights, restricted
shares, deferred issuance performance shares, phantom shares and stock awards.
The maximum number of shares that can be granted under the plan is 1,000,000.
There were 223,360 shares issued during 2003 under the plan (165,000
non-qualified stock options, 14,360 restricted shares and 44,000 deferred
issuance performance shares). Of the 165,000 non-qualified stock options
granted in 2003, 156,000 vest in one year and expire in 10 years, 4,500 vest in
18 months and expire in 10 years and 4,500 vest in 36 months and expire in 10
years.

The weighted-average fair value of the options granted during 2003, 2002 and
2001 was $5.41, $5.38 and $3.85, respectively. The fair value for these options
was estimated at the date of grant using a Black-Scholes option-pricing model
with the following weighted-average assumptions:

|                                                                        |  |         |           |         |  |         |      |   |  |  |      |  
|----------------------------------------------------------------------- |  | ------- | --------- | ------- |  | ------- | ---- | - |  |  | ---- | -
|                                                                        |  | 2003    |           | 2002    |  | 2001   
|                                                                        |  |         |           |         |  |        
|Risk-free interest rate                                                 |  |         | 3.0       | %       |  |         | 3.0  | % |  |  | 4.0  | %
|Dividend yield                                                          |  |         | 3.0%-3.25 | %       |  |         | 3.0  | % |  |  | 3.0  | %
|Volatility factor of expected
market price of Corporations
common stock |  |         | .289-.290 |         |  |         | .289 |   |  |  | .302 |  
|Weighted-average expected life                                          |  | 6 years |           | 6 years |  | 6 years
|                                                                        |  |         |           |         |  |         |      |   |  |  |      |  

The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options, which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.

Because the Corporations employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value estimate,
in Managements opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options.

A summary of stock option activity is as follows:

|                                 |  |                  |          |                        |  |       |              |  |  |   |        |  
|-------------------------------- |  | ---------------- | -------- | ---------------------- |  | ----- | ------------ |  |  | - | ------ | -
|                                 |  | Number of Shares |          | Option Price Per Share |  | Total
|                                 |  |                  |          |                        |  |      
|Outstanding at December 31, 2000 |  |                  | 396,200  |                        |  | $     | 7.33-$25.44  |  |  | $ | 7,690  |  
|Granted                          |  |                  | 197,500  |                        |  |       | 14.44-20.19  |  |  |   | 2,943  |  
|Forfeited                        |  |                  | (5,500   | )                      |  |       | 22.13-25.44  |  |  |   | (125   | )
|Exercised                        |  |                  | (47,500  | )                      |  |       | 7.33-13.66   |  |  |   | (540   | )
|                                 |  |                  |          |                        |  |       |              |  |  |   |        |  
|Outstanding at December 31, 2001 |  |                  | 540,700  |                        |  |       | 10.58-25.44  |  |  |   | 9,968  |  
|Granted                          |  |                  | 167,000  |                        |  |       | 23.27-26.32  |  |  |   | 3,928  |  
|Exercised                        |  |                  | (127,300 | )                      |  |       | 10.56-22.72  |  |  |   | (1,795 | )
|                                 |  |                  |          |                        |  |       |              |  |  |   |        |  
|Outstanding at December 31, 2002 |  |                  | 580,400  |                        |  |       | 13.44-26.32  |  |  |   | 12,101 |  
|Granted                          |  |                  | 165,000  |                        |  |       | 22.90-25.15  |  |  |   | 4,012  |  
|Forfeited                        |  |                  | (5,000   | )                      |  |       | 14.88-26.32  |  |  |   | (108   | )
|Exercised                        |  |                  | (54,700  | )                      |  |       | 13.44-23.27  |  |  |   | (1,077 | )
|                                 |  |                  |          |                        |  |       |              |  |  |   |        |  
|Outstanding at December 31, 2003 |  |                  | 685,700  |                        |  | $     | 13.44-$26.32 |  |  | $ | 14,928 |  
|                                 |  |                  |          |                        |  |       |              |  |  |   |        |  
|Exercisable at December 31, 2003 |  |                  | 520,700  |                        |  | $     | 13.44-$26.32 |  |  | $ | 10,916 |  
|                                 |  |                  |          |                        |  |       |              |  |  |   |        |  

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Information about stock options outstanding at December 31, 2003 follows:

|                  |       |             |         |         |  |                 |           |                       |                  |       |     |     |  |          |         |         |          |   |       |       | 
|----------------- | ----- | ----------- | ------- | ------- |  | --------------- | --------- | --------------------- | ---------------- | ----- | --- | --- |  | -------- | ------- | ------- | -------- | - | ----- | ----- | 
|                  |       |             |         |         |  |                 | Weighted- |                       |                  |       |     |     |  |          |         |         | Weighted
|                  |       |             |         |         |  |                 | Average   |                       | Weighted-Average |       |     |     |  |          | Average
|Range of Exercise |       |             |         |         |  | Exercise        |           | Remaining Contractual |                  |       |     |     |  | Exercise
|Prices            |       | Outstanding |         | Price   |  | Life (in years) |           | Exercisable           |                  | Price
|                  |       |             |         |         |  |                 |           |                       |                  |      
|$13.44-$14.99     |       |             | 141,500 |         |  | $               | 14.24     |                       |                  |       | 6.8 |     |  |          | 141,500 |         |          | $ | 14.24 |      
|19.00-22.99       |       |             | 140,100 |         |  |                 | 22.32     |                       |                  |       | 5.6 |     |  |          | 127,100 |         |          |   | 22.27 |      
|23.00-26.32       |       |             | 404,100 |         |  |                 | 24.21     |                       |                  |       | 7.7 |     |  |          | 252,100 |         |          |   | 24.08 |      
|                  |       |             |         |         |  |                 |           |                       |                  |       |     |     |  |          |         |         |          |   |       |      
|                  | Total |             |         | 685,700 |  |                 | $         | 21.77                 |                  |       |     | 7.1 |  |          |         | 520,700 |          |   | $     | 20.96 | 
|                  |       |             |         |         |  |                 |           |                       |                  |       |     |     |  |          |         |         |          |   |       |      

Restricted Stock Awards

Until April 2003, the Corporation utilized a restricted stock plan that
provided for the issuance of up to 50,000 shares of common stock to key
employees. In April 2003, the shareholders approved an Equity Ownership Plan
that replaced the restricted stock plan but allowed for the issuance of
restricted shares. The restriction expires after five years and the Corporation recognizes expense
over the restricted period. Compensation expense recognized in 2003, 2002 and
2001 totaled $156, $104 and $72, respectively.

A summary of restricted stock activity is as follows:

|                                 |  |                  |        |                 |  |       |              |  |  |   |     |  
|-------------------------------- |  | ---------------- | ------ | --------------- |  | ----- | ------------ |  |  | - | --- | -
|                                 |  | Number of Shares |        | Price Per Share |  | Value
|                                 |  |                  |        |                 |  |      
|Outstanding at December 31, 2001 |  |                  | 21,460 |                 |  | $     | 16.38-$32.63 |  |  | $ | 399 |  
|Granted                          |  |                  | 6,120  |                 |  |       | 20.56-27.10  |  |  |   | 150 |  
|                                 |  |                  |        |                 |  |       |              |  |  |   |     |  
|Outstanding at December 31, 2002 |  |                  | 27,580 |                 |  |       | 16.38-32.63  |  |  |   | 549 |  
|Granted                          |  |                  | 14,360 |                 |  |       | 22.90-25.15  |  |  |   | 359 |  
|Vested                           |  |                  | (1,050 | )               |  |       | 16.38-32.63  |  |  |   | (29 | )
|Forfeited                        |  |                  | (500   | )               |  |       | 23.26        |  |  |   | (12 | )
|                                 |  |                  |        |                 |  |       |              |  |  |   |     |  
|Outstanding at December 31, 2003 |  |                  | 40,390 |                 |  | $     | 16.38-$27.10 |  |  | $ | 867 |  
|                                 |  |                  |        |                 |  |       |              |  |  |   |     |  

Deferred Issuance Performance Shares

Performance shares are shares of Corporation common stock that are earned over
a stated period of time upon the attainment or fulfillment of predetermined
performance goals.

There were 44,000 performance shares awarded in 2003 of which 22,000 shares
related to the attainment of performance goals for 2003 and another 22,000
shares related to performance goals for 2005. The 2003 goals were not attained
and the 22,000 shares relating to 2003 were forfeited.

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23. Parent Company

Condensed financial information of Second Bancorp Incorporated (Parent Company
only) is as follows:

Condensed Balance Sheets

|                                                                                                                |  |      |         |      |  |   |         |  
|--------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | -
|December 31                                                                                                     |  | 2003 |         | 2002
|                                                                                                                |  |      |         |     
|Assets:                                                                                                         |  |      |         |      |  |   |         |  
|Cash                                                                                                            |  | $    | 2,385   |      |  | $ | 486     |  
|Available-for-sale securities                                                                                   |  |      | 450     |      |  |   | 1,011   |  
|Loans                                                                                                           |  |      |        |      |  |   | 557     |  
|Investment in and advances to subsidiaries, at equity in
underlying value of their net assets                   |  |      | 171,773 |      |  |   | 172,142 |  
|Fixed assets                                                                                                    |  |      | 2       |      |  |   | 3       |  
|Other assets                                                                                                    |  |      | 3,677   |      |  |   | 2,886   |  
|                                                                                                                |  |      |         |      |  |   |         |  
|Total assets                                                                                                    |  | $    | 178,287 |      |  | $ | 177,085 |  
|                                                                                                                |  |      |         |      |  |   |         |  
|Liabilities and Shareholders Equity:                                                                           |  |      |         |      |  |   |         |  
|Accrued and other liabilities                                                                                   |  | $    | 1,984   |      |  | $ | 2,266   |  
|Note payable                                                                                                    |  |      | 7,750   |      |  |   | 7,000   |  
|Subordinated debentures                                                                                         |  |      | 31,537  |      |  |   | 31,485  |  
|Shareholders Equity:                                                                                           |  |      |         |      |  |   |         |  
|Common stock, no par value; 30,000,000 shares authorized;
10,991,460 and 11,041,263 shares issued,
respectively |  |      | 42,973  |      |  |   | 41,763  |  
|Treasury stock; 1,520,089, and 1,279,009 shares, respectively                                                   |  |      | (36,173 | )    |  |   | (27,180 | )
|Accumulated other comprehensive (loss) income                                                                   |  |      | (834    | )    |  |   | 6,656   |  
|Retained earnings                                                                                               |  |      | 131,050 |      |  |   | 115,095 |  
|                                                                                                                |  |      |         |      |  |   |         |  
|Total liabilities and shareholders equity                                                                      |  | $    | 178,287 |      |  | $ | 177,085 |  
|                                                                                                                |  |      |         |      |  |   |         |  

Condensed Statements of Income

|                                                                                |  |      |        |      |  |      |         |   |  |   |        |  
|------------------------------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------- | - |  | - | ------ | -
|Years ended December 31                                                         |  | 2003 |        | 2002 |  | 2001
|                                                                                |  |      |        |      |  |     
|Income:                                                                         |  |      |        |      |  |      |         |   |  |   |        |  
|Cash dividends from subsidiaries                                                |  | $    | 17,730 |      |  | $    | 30,790  |   |  | $ | 8,150  |  
|Interest income                                                                 |  |      | 73     |      |  |      | 99      |   |  |   | 161    |  
|Trading account losses                                                          |  |      |       |      |  |      |        |   |  |   | (10    | )
|Gains (losses) on sale of securities                                            |  |      | 216    |      |  |      | (56     | ) |  |   | 37     |  
|Other income                                                                    |  |      | 435    |      |  |      | 169     |   |  |   |       |  
|                                                                                |  |      |        |      |  |      |         |   |  |   |        |  
|Total income                                                                    |  |      | 18,454 |      |  |      | 31,002  |   |  |   | 8,338  |  
|Expenses:                                                                       |  |      |        |      |  |      |         |   |  |   |        |  
|Interest expense                                                                |  |      | 3,235  |      |  |      | 3,060   |   |  |   | 796    |  
|Merger costs                                                                    |  |      |       |      |  |      | 134     |   |  |   | 305    |  
|Other expenses                                                                  |  |      | 1,544  |      |  |      | 966     |   |  |   | 962    |  
|                                                                                |  |      |        |      |  |      |         |   |  |   |        |  
|Total expenses                                                                  |  |      | 4,779  |      |  |      | 4,160   |   |  |   | 2,063  |  
|Income before income taxes and equity in undistributed earnings
of subsidiaries |  |      | 13,675 |      |  |      | 26,842  |   |  |   | 6,275  |  
|Income tax benefit                                                              |  |      | 1,400  |      |  |      | 1,403   |   |  |   | 739    |  
|                                                                                |  |      |        |      |  |      |         |   |  |   |        |  
|Income before and equity in undistributed earnings of subsidiaries              |  |      | 15,075 |      |  |      | 28,245  |   |  |   | 7,014  |  
|Equity in undistributed income (loss) of subsidiaries                           |  |      | 8,080  |      |  |      | (10,245 | ) |  |   | 10,066 |  
|                                                                                |  |      |        |      |  |      |         |   |  |   |        |  
|Net income                                                                      |  | $    | 23,155 |      |  | $    | 18,000  |   |  | $ | 17,080 |  
|                                                                                |  |      |        |      |  |      |         |   |  |   |        |  

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Condensed Statements of Cash Flows

|                                                              |  |      |         |      |  |      |         |   |  |   |         |  
|------------------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|Years ended December 31                                       |  | 2003 |         | 2002 |  | 2001
|                                                              |  |      |         |      |  |     
|Operating Activities:                                         |  |      |         |      |  |      |         |   |  |   |         |  
|Net income                                                    |  | $    | 23,155  |      |  | $    | 18,000  |   |  | $ | 17,080  |  
|Less: Equity in undistributed net (income) loss of subsidiary |  |      | (8,080  | )    |  |      | 10,245  |   |  |   | (10,066 | )
|Depreciation                                                  |  |      | 1       |      |  |      | 1       |   |  |   | 2       |  
|Net decrease (increase) in trading account securities         |  |      |        |      |  |      |        |   |  |   | 328     |  
|(Gain) loss on sale of securities                             |  |      | (216    | )    |  |      | 55      |   |  |   | (37     | )
|Donation of securities to foundation                          |  |      |        |      |  |      | 75      |   |  |   |        |  
|Gain on disposal of loans, equipment and other assets         |  |      | (435    | )    |  |      | (169    | ) |  |   |        |  
|Amortization of debt issuance costs                           |  |      | 52      |      |  |      | 53      |   |  |   | 13      |  
|Impairment loss on security                                   |  |      | 44      |      |  |      |        |   |  |   |        |  
|Other (net)                                                   |  |      | (72     | )    |  |      | (128    | ) |  |   | (25     | )
|                                                              |  |      |         |      |  |      |         |   |  |   |         |  
|Cash provided by operations                                   |  |      | 14,449  |      |  |      | 28,132  |   |  |   | 7,295   |  
|                                                              |  |      |         |      |  |      |         |   |  |   |         |  
|Investing Activities:                                         |  |      |         |      |  |      |         |   |  |   |         |  
|Sale of loan                                                  |  |      | 979     |      |  |      |        |   |  |   |        |  
|Net decrease in loans                                         |  |      | 13      |      |  |      | 29      |   |  |   | 26      |  
|Sale of securities                                            |  |      | 799     |      |  |      |        |   |  |   | 417     |  
|Purchase of securities                                        |  |      | (97     | )    |  |      | (55     | ) |  |   |        |  
|Acquisition of subsidiaries                                   |  |      |        |      |  |      | (1,979  | ) |  |   | (26,926 | )
|Investment in subsidiaries                                    |  |      | (11     | )    |  |      | (21,000 | ) |  |   | (990    | )
|Sale of other assets                                          |  |      |        |      |  |      | 319     |   |  |   |        |  
|                                                              |  |      |         |      |  |      |         |   |  |   |         |  
|Cash provided by (used by) investing activities               |  |      | 1,683   |      |  |      | (22,686 | ) |  |   | (27,473 | )
|                                                              |  |      |         |      |  |      |         |   |  |   |         |  
|Financing Activities:                                         |  |      |         |      |  |      |         |   |  |   |         |  
|Issuance of note payable                                      |  |      | 750     |      |  |      | 7,000   |   |  |   |        |  
|Repayment of note payable                                     |  |      |        |      |  |      |        |   |  |   | (1,000  | )
|Issuance of subordinated debentures to non- bank subsidiary   |  |      |        |      |  |      |        |   |  |   | 31,419  |  
|Net issuance of common stock                                  |  |      | 1,210   |      |  |      | 4,310   |   |  |   | 518     |  
|Purchase of treasury stock                                    |  |      | (8,993  | )    |  |      | (10,382 | ) |  |   | (2,851  | )
|Payment of dividend                                           |  |      | (7,200  | )    |  |      | (7,115  | ) |  |   | (6,798  | )
|                                                              |  |      |         |      |  |      |         |   |  |   |         |  
|Cash (used by) provided by financing activities               |  |      | (14,233 | )    |  |      | (6,187  | ) |  |   | 21,288  |  
|                                                              |  |      |         |      |  |      |         |   |  |   |         |  
|Increase
(decrease) in cash                                   |  |      | 1,899   |      |  |      | (741    | ) |  |   | 1,110   |  
|Cash at beginning of year                                     |  |      | 486     |      |  |      | 1,227   |   |  |   | 117     |  
|                                                              |  |      |         |      |  |      |         |   |  |   |         |  
|Cash at end of year                                           |  | $    | 2,385   |      |  | $    | 486     |   |  | $ | 1,227   |  
|                                                              |  |      |         |      |  |      |         |   |  |   |         |  

24. Derivative Instruments

The Corporation uses derivative instruments primarily to protect against the
risk of interest rate movements on the value of certain assets and liabilities
and on future cash flows. Derivative instruments represent contracts between
parties that usually require little or no initial net investment and result in
one party delivering cash or another type of asset to the other party based on
a notional amount and underlying as specified in the contract. A notional
amount represents the number of units of a specific item, such as currency
units. An underlying represents a variable, such as an interest rate or price
index. The amount of cash or other asset delivered from one party to the other
is determined based on the interaction of the notional amount of the contract
with the underlying. Derivatives are also implicit in certain contracts and
commitments.

The Corporations primary market risk is interest rate risk. Management
periodically uses derivative instruments to protect against the risk of
interest rate movements on the value of certain assets and liabilities and on
future cash flows. These instruments primarily include interest rate swaps and
interest rate caps and floors with indices that relate to the pricing of
specific assets and liabilities. The nature and volume of the derivative
instruments used to manage interest rate risk depend on the level and type of
assets and liabilities on the balance sheet and the risk management strategies
for the current and anticipated rate environment.

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On January 1, 2001, the Corporation adopted SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, which requires all derivative
instruments to be carried at fair value on the balance sheet. As a result of
adopting the new standard, the Corporation recorded amounts establishing the
fair values of the derivatives and hedged items on the balance sheet. A pre-tax
transition loss of $155, or $101 after tax, was recorded in the income
statement net of tax as a cumulative effect of accounting change to establish
the fair value hedge relationships. Prior to 2001, unrealized gains and losses
on derivatives used for hedging purposes were generally not required to be
reported in the financial statements. In order to reduce the earnings
volatility that would result from having to recognize in earnings the fair
value of certain derivative instruments used to hedge risks associated with
financial instruments carried at fair value, SFAS No. 133 provides special
hedge accounting provisions. The provisions permit the change in the fair value
of the hedged item related to the risk being hedged to be recognized in
earnings in the same period and in the same income statement line as the change
in fair value of the derivatives in interest income on commercial loans and
interest expense on FHLB advances. The Corporation usually designates
derivative instruments used to manage interest rate risk into SFAS No. 133
hedge relationships with specific assets, liabilities or cash flows being
hedged.

As with any financial instrument, derivative instruments have inherent risks.
Market risk is the adverse effect a change in interest rates, currency or
implied volatility has on the value of a financial instrument. The risk is
periodically measured as part of the Corporations overall market risk
monitoring process, which includes the use of earnings simulation and net
present value estimation.

Credit risk is the risk that a counter party to a derivative contract with an
unrealized gain fails to perform according to the terms of the agreement.
Credit risk is managed by limiting the aggregate amount of net unrealized gains
in agreements outstanding and monitoring the size and the maturity structure of
the derivative portfolio.

Fair Value Hedges

During 2003, the Corporation utilized pay-fixed interest rate swaps for
commercial loans for changes in interest rates. The swaps have a $1.9 million
notional amount with a $(85) fair market value as of December 31, 2003 with no
net ineffectiveness hedge gain or loss. As of December 31, 2002, the swap had a
fair market value of $(258). Previously, the Corporation utilized interest rate
caps to mitigate the risk of increased borrowing costs associated with
convertible features of certain FHLB advances. The caps were terminated during
2001 with no impact on future years earning and $72 in expense recognized in
2001.

Cash Flow Hedges

During 2003 and 2001, the Corporation hedged cash flow variability related to
floating rate loans. In 2003 and 2001, the Corporation used interest rate swaps
and interest rate floors, respectively to mitigate the risk of a decline in
interest receipts on floating rate loans due to a decline in the Banks prime
rate. In 2003, the Corporation recognized $615 in income from the effectiveness
of the $100 million notional interest rate swaps. During 2001, the Corporation
recognized $217 in income from the effectiveness of the floors with an
additional $390 to be amortized into income over the remaining term of the
floors, which was generated when the floors were terminated during 2001.

Other Derivatives

During 2003, the Corporation utilized a variety of derivative instruments,
including forward purchase commitments for mortgage and treasury securities
(to be announced or TBA securities), options on those securities, interest
rate swaps and swaptions, to mitigate the risk of changes in the valuation of
mortgage servicing assets. During 2003, the Corporation recognized $2,694 in
losses from the derivatives. At December 31, 2003, the Corporation had
derivatives with $410,000 in notional value and a value of $492. During 2002,
the Corporation utilized interest rate floors to mitigate the risk of changes
in the valuation of mortgage servicing assets. At December 31, 2002, the floors
had a fair value of $375 based on a $300 million notional value and a remaining
life of 1.9 years. The Corporation also recognized $58 loss from the floors in
2003. The Corporation also has ineffective pay-fixed interest rate swaps with a
notional value of $2.2 million for commercial loans changes in interest rates.
The Corporation recognized $32 in income from these swaps in 2003.

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25. Commitments and Contingent Liabilities

Loan Commitments

Loan commitments are made to accommodate the financial needs of the Banks
customers; however, there are no long-term, fixed-rate loan commitments that
result in market risk. Standby letters of credit commit the Bank to make
payments on behalf of customers when certain specified future events occur.
They primarily are issued to facilitate customers trade transactions.

Both arrangements have credit risk, essentially the same as that involved in
extending loans to customers, and are subject to the Banks normal credit
policies. Collateral (e.g., securities, receivables, inventory and equipment)
is obtained based on Managements credit assessment of the customer.

The Banks maximum obligation to extend credit for loan commitments (unfunded
loans and unused lines of credit) and standby letters of credit outstanding on
December 31 was as follows:

|                          |  |      |         |      |  |   |         | 
|------------------------- |  | ---- | ------- | ---- |  | - | ------- | 
|                          |  | 2003 |         | 2002
|                          |  |      |         |     
|Commercial                |  | $    | 158,240 |      |  | $ | 162,892 | 
|Real Estate               |  |      | 34,376  |      |  |   | 32,231  | 
|Consumer                  |  |      | 88,243  |      |  |   | 68,967  | 
|Standby Letters of Credit |  |      | 22,425  |      |  |   | 18,020  | 
|                          |  |      |         |      |  |   |         | 
|Total                     |  | $    | 303,284 |      |  | $ | 282,110 | 
|                          |  |      |         |      |  |   |         | 

The Corporation also enters into mortgage loan interest rate lock commitments
related to loans held for sale in connection with residential mortgage loan
applications. At December 31, 2003 and 2002, the Corporation had approximately
$80 million and $220 million of these commitments outstanding, respectively.
Refer to the section entitled Loan Commitments within Note 3, Recent Accounting
Pronouncements, for further discussion.

Lease Agreements

The Bank has entered into lease agreements covering its main office, several
branch locations and equipment for various periods through 2014, with options
to renew. Also, the Bank has the option to purchase the main office facility
before two optional periods at the fair market value in existence at that time.

Future minimum commitments under non-cancelable operating leases are as
follows:

|           |      |  |       |       | 
|---------- | ---- |  | ----- | ----- | 
|           | 2004 |  | $     | 2,589 | 
|           | 2005 |  |       | 2,553 | 
|           | 2006 |  |       | 2,416 | 
|           | 2007 |  |       | 2,225 | 
|           | 2008 |  |       | 1,414 | 
|Thereafter |      |  | 5,857 |      
|           |      |  |       |       | 

Included in the schedule above are costs totaling $197, $155, $155, $155, $155
and $596, respectively, for the years shown that were expensed in 2002, due to
the banking center reconfiguration strategy that included closure and
consolidation of several facilities.

Rentals under operating leases and data processing costs amounted to $3,593,
$3,362 and $3,214 in 2003, 2002 and 2001, respectively.

Low Income Housing Project

In 1993, the Bank began investing in low-income housing tax credit projects
designed to provide affordable housing for Ohio communities. The Bank has
invested $2,317 to date and is realizing tax credits and tax savings from the
investments. The Bank is committed to invest another $4,683 to the fund over
the next several years.

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Commitments

The following table details the amounts and expected maturities of significant
commitments as of December 31, 2003.

|                                            |       |                |         |           |  |           |        |              |  |       |       |       |  |   |     |     |  |   |         |         | 
|------------------------------------------- | ----- | -------------- | ------- | --------- |  | --------- | ------ | ------------ |  | ----- | ----- | ----- |  | - | --- | --- |  | - | ------- | ------- | 
|Amount of commitment                        |       |                |         |           |  |           |        |              |  |       |       |       |  |   |     |     |  |   |         |        
|Expiration by period                        |       | 1 year or Less |         | 1-3 Years |  | 3-5 Years |        | Over 5 Years |  | Total
|                                            |       |                |         |           |  |           |        |              |  |      
|Commitments to lend-commercial              |       | $              | 126,753 |           |  | $         | 29,788 |              |  | $     | 1,699 |       |  | $ |    |     |  | $ | 158,240 |        
|Commitments to lend-residential real estate |       |                | 34,376  |           |  |           |       |              |  |       |      |       |  |   |    |     |  |   | 34,376  |        
|Commitments to lend-consumer                |       |                | 88,243  |           |  |           |       |              |  |       |      |       |  |   |    |     |  |   | 88,243  |        
|Standby letters of credit                   |       |                | 16,914  |           |  |           | 64     |              |  |       | 5,185 |       |  |   | 262 |     |  |   | 22,425  |        
|                                            |       |                |         |           |  |           |        |              |  |       |       |       |  |   |     |     |  |   |         |         | 
|                                            | Total |                | $       | 266,286   |  |           | $      | 29,852       |  |       | $     | 6,884 |  |   | $   | 262 |  |   | $       | 303,284 | 
|                                            |       |                |         |           |  |           |        |              |  |       |       |       |  |   |     |     |  |   |         |         | 

There are no recourse provisions with third parties or balances recorded for
the standby letters of credit at December 31, 2003.

26. Line of Business Reporting

Management began using line of business reporting on January 1, 2002. The
Corporation operates three major lines of business: Retail, Commercial and
Mortgage.

Retail includes deposit gathering, direct and indirect consumer lending along
with a minor amount of small business banking services. Commercial includes
credit and related financial services to small- to large- sized corporations
and businesses. Mortgage includes mortgage banking activities, including the
ownership, origination, sale and servicing of mortgages.

The business units are identified by the product or services offered and the
channel through which the product or service is delivered. The accounting
policies of the individual business units are the same as those for the
Corporation.

The reported results reflect the underlying economics of the businesses.
Expenses for centrally provided services are allocated based upon estimated
usage of those services. The business units assets and liabilities are
matched-funded and interest rate risk is centrally managed. Transactions
between business
units are primarily conducted at fair value, resulting in gains or losses that
are eliminated for reporting consolidated results of operations.

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Parent and other are primarily comprised of the results of the investment
funding activities, inter-segment revenue (expense) eliminations and
unallocated corporate income and expense. Operating results of the business
units are discussed in the Results of Operations section of Managements
Discussion and Analysis of Financial Condition and Results of Operations.
Selected financial information by line of business is included in the table
below:

|                             |  |          |         |            |  |        |         |           |  |              |         |   |  |        |         |   |  |   |           |  
|---------------------------- |  | -------- | ------- | ---------- |  | ------ | ------- | --------- |  | ------------ | ------- | - |  | ------ | ------- | - |  | - | --------- | -
|                             |  |          |         |            |  |        |         |           |  |              |         |   |  | Parent |         |   |  |  
|Year Ended December 31, 2003 |  | Mortgage |         | Commercial |  | Retail |         | And Other |  | Consolidated
|                             |  |          |         |            |  |        |         |           |  |             
|Interest income              |  | $        | 18,319  |            |  | $      | 29,691  |           |  | $            | 25,974  |   |  | $      | 26,962  |   |  | $ | 100,946   |  
|Interest expense             |  |          |        |            |  |        |        |           |  |              | (18,310 | ) |  |        | (28,381 | ) |  |   | (46,691   | )
|Transfer pricing             |  |          | (11,023 | )          |  |        | (12,695 | )         |  |              | 24,931  |   |  |        | (1,213  | ) |  |   |          |  
|Loan fees                    |  |          | 530     |            |  |        | 899     |           |  |              | 221     |   |  |        | (34     | ) |  |   | 1,616     |  
|                             |  |          |         |            |  |        |         |           |  |              |         |   |  |        |         |   |  |   |           |  
|Net interest margin          |  |          | 7,826   |            |  |        | 17,895  |           |  |              | 32,816  |   |  |        | (2,666  | ) |  |   | 55,871    |  
|Provision for loan losses    |  |          | (114    | )          |  |        | (4,812  | )         |  |              | (2,684  | ) |  |        |        |   |  |   | (7,610    | )
|Non-interest income          |  |          | 13,318  |            |  |        | 2,020   |           |  |              | 14,511  |   |  |        | 8,718   |   |  |   | 38,567    |  
|Non-interest expense-direct  |  |          | (5,931  | )          |  |        | (6,400  | )         |  |              | (17,357 | ) |  |        | (25,075 | ) |  |   | (54,763   | )
|                             |  |          |         |            |  |        |         |           |  |              |         |   |  |        |         |   |  |   |           |  
|Direct contribution          |  |          | 15,099  |            |  |        | 8,703   |           |  |              | 27,286  |   |  |        | (19,023 | ) |  |   | 32,065    |  
|Allocations                  |  |          | (2,939  | )          |  |        | (749    | )         |  |              | (12,692 | ) |  |        | 16,380  |   |  |   |          |  
|                             |  |          |         |            |  |        |         |           |  |              |         |   |  |        |         |   |  |   |           |  
|Income before taxes          |  |          | 12,160  |            |  |        | 7,954   |           |  |              | 14,594  |   |  |        | (2,643  | ) |  |   | 32,065    |  
|Income taxes                 |  |          |        |            |  |        |        |           |  |              |        |   |  |        | 8,910   |   |  |   | 8,910     |  
|                             |  |          |         |            |  |        |         |           |  |              |         |   |  |        |         |   |  |   |           |  
|Net income                   |  | $        | 12,160  |            |  | $      | 7,954   |           |  | $            | 14,594  |   |  | $      | (11,553 | ) |  | $ | 23,155    |  
|                             |  |          |         |            |  |        |         |           |  |              |         |   |  |        |         |   |  |   |           |  
|Average assets               |  | $        | 322,843 |            |  | $      | 527,023 |           |  | $            | 413,563 |   |  | $      | 706,241 |   |  | $ | 1,969,670 |  
|                             |  |          |         |            |  |        |         |           |  |              |         |   |  |        |         |   |  |   |           |  

|                             |  |          |         |            |  |        |         |           |  |              |         |   |  |        |         |   |  |   |           |  
|---------------------------- |  | -------- | ------- | ---------- |  | ------ | ------- | --------- |  | ------------ | ------- | - |  | ------ | ------- | - |  | - | --------- | -
|                             |  |          |         |            |  |        |         |           |  |              |         |   |  | Parent |         |   |  |  
|Year Ended December 31, 2002 |  | Mortgage |         | Commercial |  | Retail |         | And Other |  | Consolidated
|                             |  |          |         |            |  |        |         |           |  |             
|Interest income              |  | $        | 19,770  |            |  | $      | 31,645  |           |  | $            | 27,116  |   |  | $      | 26,797  |   |  | $ | 105,328   |  
|Interest expense             |  |          |        |            |  |        |        |           |  |              | (30,028 | ) |  |        | (20,784 | ) |  |   | (50,812   | )
|Transfer pricing             |  |          | (14,053 | )          |  |        | (17,970 | )         |  |              | 32,111  |   |  |        | (88     | ) |  |   |          |  
|Loan fees                    |  |          | 175     |            |  |        | 1,347   |           |  |              | 458     |   |  |        | (36     | ) |  |   | 1,944     |  
|                             |  |          |         |            |  |        |         |           |  |              |         |   |  |        |         |   |  |   |           |  
|Net interest margin          |  |          | 5,892   |            |  |        | 15,022  |           |  |              | 29,657  |   |  |        | 5,889   |   |  |   | 56,460    |  
|Provision for loan losses    |  |          | (345    | )          |  |        | (2,560  | )         |  |              | (3,254  | ) |  |        |        |   |  |   | (6,159    | )
|Non-interest income          |  |          | 6,481   |            |  |        | 1,749   |           |  |              | 9,095   |   |  |        | 6,100   |   |  |   | 23,425    |  
|Non-interest expense-direct  |  |          | (3,138  | )          |  |        | (4,218  | )         |  |              | (17,419 | ) |  |        | (24,721 | ) |  |   | (49,496   | )
|                             |  |          |         |            |  |        |         |           |  |              |         |   |  |        |         |   |  |   |           |  
|Direct contribution          |  |          | 8,890   |            |  |        | 9,993   |           |  |              | 18,079  |   |  |        | (12,732 | ) |  |   | 24,230    |  
|Allocations                  |  |          | (2,633  | )          |  |        | (742    | )         |  |              | (16,352 | ) |  |        | 19,727  |   |  |   |          |  
|                             |  |          |         |            |  |        |         |           |  |              |         |   |  |        |         |   |  |   |           |  
|Income before taxes          |  |          | 6,257   |            |  |        | 9,251   |           |  |              | 1,727   |   |  |        | 6,995   |   |  |   | 24,230    |  
|Income taxes                 |  |          |        |            |  |        |        |           |  |              |        |   |  |        | (6,230  | ) |  |   | (6,230    | )
|                             |  |          |         |            |  |        |         |           |  |              |         |   |  |        |         |   |  |   |           |  
|Net income                   |  | $        | 6,257   |            |  | $      | 9,251   |           |  | $            | 1,727   |   |  | $      | 765     |   |  | $ | 18,000    |  
|                             |  |          |         |            |  |        |         |           |  |              |         |   |  |        |         |   |  |   |           |  
|Average assets               |  | $        | 302,551 |            |  | $      | 470,144 |           |  | $            | 368,990 |   |  | $      | 612,471 |   |  | $ | 1,754,156 |  
|                             |  |          |         |            |  |        |         |           |  |              |         |   |  |        |         |   |  |   |           |  

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REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Board of Directors of Second Bancorp Incorporated:

We have audited the accompanying consolidated balance sheets of Second Bancorp
Incorporated and subsidiaries as of December 31, 2003 and 2002, and the related
consolidated statements of income, shareholders equity, and cash flows for
each of the three years in the period ended December 31, 2003. These financial
statements are the responsibility of the Corporations Management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by Management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Second Bancorp
Incorporated and subsidiaries at December 31, 2003 and 2002, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2003, in conformity with
accounting principles generally accepted in the United States.

-s- (Ernst & young LLP)

Cleveland, Ohio
February 6, 2004

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REPORT OF MANAGEMENT

Financial Statements

Management of The Second National Bank of Warren (the Bank) is responsible for
the preparation, integrity, and fair presentation of its published financial
statements as of December 31, 2003 and the year then ended (as included in the
2003 consolidated financial statements of Second Bancorp Incorporated and the
Banks December 31, 2003 Call Report). The financial statements of the Bank
have been prepared in accordance with accounting principles generally accepted
in the United States and, as such, include some amounts that are based on
judgments and estimates of Management.

Internal Control over Financial Reporting

Management is responsible for establishing and maintaining effective internal
control over financial reporting as it relates to the Banks financial
statements presented in conformity with accounting principles generally
accepted in the United States and the Federal Financial Institutions
Examination Council instructions for Consolidated Reports of Condition and
Income (call report instructions). Internal control is designed to provide
reasonable assurance to the Banks Management and Board of Directors regarding
the preparation of reliable published financial statements. Internal control
over financial reporting includes monitoring mechanisms, and actions are taken
to correct deficiencies as they are identified.

Because of inherent limitations in any internal control, no matter how well
designed, misstatements due to error or fraud may occur and not be detected,
including the possibility of human error and the circumvention or overriding of
controls. Accordingly, even effective internal control over financial reporting
can provide only reasonable assurance with respect to financial statement
preparation. Further, because of changes in conditions, the effectiveness of
internal control may vary over time.

Management assessed the Banks internal control over financial reporting
presented in conformity with accounting principles generally accepted in the
United States and call report instructions as of December 31, 2003. This
assessment was based on criteria for effective internal control over financial
reporting described in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on this
assessment, Management believes The Second National Bank of Warren maintained
effective internal control over financial reporting as it relates to financial
statements presented in conformity with accounting principles generally
accepted in the United States and call report instructions as of December 31,
2003 based on the specified criteria.

Compliance with Laws and Regulations

Management is also responsible for compliance with the federal and state laws
and regulations concerning dividend restrictions and federal laws and
regulations concerning loans to insiders designated by the FDIC as safety and
soundness laws and regulations.

Management assessed compliance by The Second National Bank of Warren with the
designated laws and regulations relating to safety and soundness. Based on this
assessment, Management believes that the Bank complied, in all significant
respects, with the designated laws and regulations related to safety and
soundness for the year ended December 31, 2003.

|                                      |  |                                      
|------------------------------------- |  | -------------------------------------
|-s- (R. L. (Rick) Blossom)            |  | -s- (David L. Kellerman)             
|R. L. (Rick) Blossom                  |  | David L. Kellerman                   
|President and Chief Executive Officer |  | Chief Financial Officer and Treasurer
|                                      |  |                                      
|Warren, Ohio                          |  |                                      
|February 6, 2004                      |  |                                      

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Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not Applicable.




Item 9 A. CONTROLS AND PROCEDURES

The Management of Second Bancorp Incorporated is responsible for establishing
and maintaining effective disclosure controls and procedures, as defined under
Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. As of
December 31, 2003, an evaluation was performed under the supervision and with
the participation of management, including the Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of
the Corporations disclosure controls and procedures. Based on that evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that such
disclosure controls and procedures as of December 31, 2003 were effective in
ensuring that material information relating to the Corporation and its
subsidiaries is made known to them, particularly during the period for which
our periodic reports, including this Annual Report on Form 10-K, are being
prepared.

Managements responsibilities related to establishing and maintaining
disclosure controls and procedures include maintaining effective internal
controls over financial reporting that are designed to produce reliable
financial statements in accordance with accounting principles generally
accepted in the United States. As disclosed in the Report of Management on page
73 of this Annual Report, management assessed Second Bancorps system of
internal control over financial reporting as of December 31, 2003, in relation
to criteria for effective internal control over financial reporting as
described in Internal Control  Integrated Framework, issued by the Committee
of Sponsoring Organizations of the Treadway Commission. Based on this
assessment, management believes that, as of December 31, 2003, its system of
internal control over financial reporting met those criteria.

Additionally, there were no significant changes in the Corporations internal
control over financial reporting that occurred during the quarter ended
December 31, 2003 that have materially affected, or are reasonably likely to
materially affect, the Corporations internal control over financial reporting.

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PART III




Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Board of Directors, as provided in the Corporations Articles of
Incorporation and Regulations, has fixed the number of directors at ten (10).
As further provided in the Articles of Incorporation of Second
Bancorp, the Board of Directors is divided into two classes, each consisting of
approximately one-half of the entire board. Directors serve staggered two-year
terms so that directors of only one class are generally elected at each Annual
Meeting. Each of the directors in Class I of the Board is currently serving a
term through the date of the Corporations 2005 Annual Meeting of Shareholders.
Each of the directors in Class II of the Board is currently serving a term
through the date of the Corporations 2004 Annual Meeting of Shareholders. The
Corporation intends to hold a 2004 Annual Meeting of Shareholders only if the
proposed merger agreement with Sky Financial is terminated.

The names of the director of Second Bancorp in Class I and Class II, together
with specific information about each of them, are as follows:

|                     |  |     |    |       |  |                         |  |                                                                                                                                                                                                                                                                     |  |          |      | 
|-------------------- |  | --- | -- | ----- |  | ----------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- | ---- | 
|                     |  |     |    |       |  |                         |  | Principal Occupation                                                                                                                                                                                                                                                |  |          |      | 
|                     |  |     |    |       |  |                         |  | During the Past Five                                                                                                                                                                                                                                                |  | Director
|Director             |  | Age |    | Class |  | Years and Directorships |  | Since                                                                                                                                                                                                                                                              
|                     |  |     |    |       |  |                         |  |                                                                                                                                                                                                                                                                    
|Cloyd J. Abruzzo     |  |     | 53 |       |  | II                      |  | Private Investor. Former
President and Chief Executive
Officer of Stoneridge, Inc.,
a manufacturer of automobile
components. Director of
Second National Bank.                                                                                                      |  |          | 2003 | 
|                     |  |     |    |       |  |                         |  |                                                                                                                                                                                                                                                                     |  |          |      | 
|David A. Allen, Jr.  |  |     | 63 |       |  | I                       |  | Vice President for Enrollment
Management, Hiram College.
Former Dean, Kent State University -
Trumbull Campus. Former Director
of Trumbull Financial
Corporation and the Trumbull
Savings and Loan Company                                                          |  |          | 1998 | 
|                     |  |     |    |       |  |                         |  |                                                                                                                                                                                                                                                                     |  |          |      | 
|John A. Anderson     |  |     | 66 |       |  | II                      |  | Chairman and Chief Executive
Officer, The Taylor-Winfield
Corporation, Ravenna Manufac-
turing Company and Hubbparts, Inc.
Director of Second National Bank.                                                                                                        |  |          | 1987 | 
|                     |  |     |    |       |  |                         |  |                                                                                                                                                                                                                                                                     |  |          |      | 
|R. L. (Rick)
Blossom |  |     | 56 |       |  | I                       |  | Chairman, President and Chief
Executive Officer of Second
Bancorp and Second
National Bank. Former Chief
Executive Officer and Director
of First National Bank of
Southwestern Ohio and Senior
Vice President and Chief Lending
Officer of First Financial Bancorp. |  |          | 1999 | 
|                     |  |     |    |       |  |                         |  |                                                                                                                                                                                                                                                                     |  |          |      | 
|Lynette M.
Cavalier  |  |     | 52 |       |  | II                      |  | Vice President of Human
Resources for FirstEnergy Service
Company, an affiliate of FirstEnergy
Corporation.                                                                                                                                                         |  |          | 2002 | 

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|                     |  |     |    |       |  |                         |  |                                                                                                                                                                                      |  |          |      | 
|-------------------- |  | --- | -- | ----- |  | ----------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------- | ---- | 
|                     |  |     |    |       |  |                         |  | Principal Occupation                                                                                                                                                                 |  |          |      | 
|                     |  |     |    |       |  |                         |  | During the Past Five                                                                                                                                                                 |  | Director
|Director             |  | Age |    | Class |  | Years and Directorships |  | Since                                                                                                                                                                               
|                     |  |     |    |       |  |                         |  |                                                                                                                                                                                     
|Norman C.
Harbert    |  |     | 70 |       |  | I                       |  | Senior Chairman and Founder
of The HAWK Corporation,
owner of several manufacturing
firms. Director of Second
National Bank.                                                         |  |          | 1987 | 
|                     |  |     |    |       |  |                         |  |                                                                                                                                                                                      |  |          |      | 
|James R. Izant       |  |     | 45 |       |  | II                      |  | Private Investor. Former
Executive Vice President
Secretary and director of
Trumbull Financial Corporation
and the Trumbull Savings and
Loan Company.                               |  |          | 1998 | 
|                     |  |     |    |       |  |                         |  |                                                                                                                                                                                      |  |          |      | 
|Phyllis J.
Izant     |  |     | 41 |       |  | I                       |  | Private Investor. Former
Development Associate for
Leadership Gifts, Purdue
University. Former Director
of Trumbull Financial
Corporation and the Trumbull
Savings and Loan Company. |  |          | 1998 | 
|                     |  |     |    |       |  |                         |  |                                                                                                                                                                                      |  |          |      | 
|John L.
Pogue        |  |     | 59 |       |  | I                       |  | Member of Harrington, Hoppe &
Mitchell, Ltd. (law firm).                                                                                                                             |  |          | 1987 | 
|                     |  |     |    |       |  |                         |  |                                                                                                                                                                                      |  |          |      | 
|Raymond J.
Wean, III |  |     | 55 |       |  | II                      |  | Business Consultant. Director
of Second National Bank.                                                                                                                               |  |          | 1987 | 

Directors James R. Izant and Phyllis J. Izant are brother and sister. There
are no other family relationships among any of the directors and executive
officers of the Corporation.

Information regarding executive officers is included under Item 4A hereof.

Information regarding certain contracts and arrangements with executive
officers is included under Item 11.

Section 16(a) Beneficial Ownership Reporting Compliance

Second Bancorps directors, its executives and certain other officers and any
persons holding more than ten percent of any class of Second Bancorp security
are required to report on a timely basis their ownership of Second Bancorp
securities and any changes in that ownership to the Securities and Exchange
Commission (the SEC) under Section 16(a) of the Securities Exchange Act of
1934 and to NASDAQ. Second Bancorp is required to report annually any failure
to make a required filing on a timely basis. Based solely upon the written
representations of its incumbent directors and officers and a review of copies
of reports known by the Corporation to have been filed with the SEC, all
required filings were made on a timely basis during 2003 with the exception of
(i) the inadvertent failure of Director James R. Izant to timely report his
ownership of 300 shares of Second Bancorp common stock held in trust for his
benefit and (ii) the inadvertent failure of Director Norman C. Harbert to
timely report the February 2002 purchase of 1,500 shares of Second Bancorp
trust preferred securities.

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Code of Ethics

The Corporation has had a Code of Ethics in place for several years which
covers all employees, including the Chief Executive Officer and Chief Financial
Officer. A copy of the Corporations Code of Ethics will be provided free of
charge, upon written request to:

|                                      
|--------------------------------------
|Christopher Stanitz                   
|Executive Vice President and Secretary
|Second Bancorp Incorporated           
|108 Main Avenue, S.W                  
|Warren, OH 44481                      

Audit Committee Financial Expert

The Board of Directors has determined that Mr. Cloyd J. Abruzzo is the audit
committee financial expert as defined by Item 401(h) of Regulation S-K of the
Securities Exchange Act of 1934, as amended (the Exchange Act) and is
independent as defined by Item 7(d)(3)(iv) of Schedule 14A of the Exchange Act.




Item 11. EXECUTIVE COMPENSATION

The following table contains a summary of annual and long-term compensation for
services in all capacities to Second Bancorp and its subsidiary for calendar
years 2003, 2002 and 2001 to those persons who were, at December 31, 2003, (i)
the chief executive officer and (ii) the four other most highly compensated
executive officers of Second Bancorp and its subsidiaries (the Named
Officers).

SUMMARY COMPENSATION TABLE

|                                                             |  |                     |      |            |  |           |         |           |  |            |         |                  |  |        |  |        |        |              |  |   |        |  |  | 
|------------------------------------------------------------ |  | ------------------- | ---- | ---------- |  | --------- | ------- | --------- |  | ---------- | ------- | ---------------- |  | ------ |  | ------ | ------ | ------------ |  | - | ------ |  |  | 
|                                                             |  |                     |      |            |  |           |         |           |  |            |         |                  |  |        |  |        |        | Long Term    |  |   |        | 
|                                                             |  |                     |      |            |  |           |         |           |  |            |         |                  |  |        |  |        |        | Compensation |  |   |        | 
|                                                             |  | Annual Compensation |      |            |  |           |         |          
|                                                             |  |                     |      | Securities |  |           |         |          
|Name and                                                     |  |                     |      |            |  |           |         | Other     |  | Underlying |         | All             
|Principal                                                    |  |                     |      |            |  |           |         |           |  |            |         |                  |  | Annual |  | Option |        | Other       
|Position                                                     |  | Year                |      | Salary     |  | Bonus (1) |         | Comp. (2) |  | Awards     |         | Compensation (3)
|                                                             |  |                     |      |            |  |           |         |           |  |            |         |                 
|R. L. (Rick) Blossom, (4)                                    |  |                     | 2003 |            |  | $         | 453,750 |           |  | $          | 71,600  |                  |  | NA     |  |        | 30,000 |              |  | $ | 16,691 | 
|Chairman, President
and Chief Executive                      |  |                     | 2002 |            |  | $         | 438,125 |           |  | $          | 231,000 |                  |  | NA     |  |        | 34,000 |              |  | $ | 15,568 | 
|Officer of Second
Bancorp and Second                         |  |                     | 2001 |            |  | $         | 420,824 |           |  | $          | 219,406 |                  |  | NA     |  |        | 37,500 |              |  | $ | 14,841 | 
|National Bank                                                |  |                     |      |            |  |           |         |           |  |            |         |                  |  |        |  |        |        |              |  |   |        |  |  | 
|David L. Kellerman,                                          |  |                     | 2003 |            |  | $         | 199,250 |           |  | $          | 31,600  |                  |  | NA     |  |        | 20,000 |              |  | $ | 2,002  | 
|Treasurer and Chief
Financial Officer of                     |  |                     | 2002 |            |  | $         | 192,500 |           |  | $          | 93,363  |                  |  | NA     |  |        | 20,000 |              |  | $ | 6,938  | 
|Second Bancorp and
Executive Vice President,                 |  |                     | 2001 |            |  | $         | 180,833 |           |  | $          | 89,031  |                  |  | NA     |  |        | 22,500 |              |  | $ | 3,331  | 
|Chief Financial Officer
and Director of Second
National Bank |  |                     |      |            |  |           |         |           |  |            |         |                  |  |        |  |        |        |              |  |   |        |  |  | 
|Christopher Stanitz,                                         |  |                     | 2003 |            |  | $         | 168,563 |           |  | $          | 27,000  |                  |  | NA     |  |        | 20,000 |              |  | $ | 9,955  | 
|Executive Vice President,
General Counsel and                |  |                     | 2002 |            |  | $         | 155,000 |           |  | $          | 71,663  |                  |  | NA     |  |        | 20,000 |              |  | $ | 9,109  | 
|Secretary of Second
Bancorp and Senior Vice                  |  |                     | 2001 |            |  | $         | 144,400 |           |  | $          | 66,937  |                  |  | NA     |  |        | 22,500 |              |  | $ | 5,902  | 
|President of Second
National Bank                            |  |                     |      |            |  |           |         |           |  |            |         |                  |  |        |  |        |        |              |  |   |        |  |  | 
|Myron Filarski,                                              |  |                     | 2003 |            |  | $         | 144,750 |           |  | $          | 25,500  |                  |  | NA     |  |        | 15,000 |              |  | $ | 10,376 | 
|Executive Officer of
Second Bancorp and                      |  |                     | 2002 |            |  | $         | 138,833 |           |  | $          | 73,500  |                  |  | NA     |  |        | 12,000 |              |  | $ | 9,463  | 
|Senior Vice President
of Second National Bank                |  |                     | 2001 |            |  | $         | 126,125 |           |  | $          | 68,661  |                  |  | NA     |  |        | 15,000 |              |  | $ | 5,472  | 

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|                                              |  |      |                     |        |            |           |         |           |  |            |        |                  |  |        |  |        |        |              |  |   |       |  |  | 
|--------------------------------------------- |  | ---- | ------------------- | ------ | ---------- | --------- | ------- | --------- |  | ---------- | ------ | ---------------- |  | ------ |  | ------ | ------ | ------------ |  | - | ----- |  |  | 
|                                              |  |      |                     |        |            |           |         |           |  |            |        |                  |  |        |  |        |        | Long Term    |  |   |       | 
|                                              |  |      |                     |        |            |           |         |           |  |            |        |                  |  |        |  |        |        | Compensation |  |   |       | 
|                                              |  |      | Annual Compensation |        |            |           |         |           | 
|                                              |  |      |                     |        | Securities |           |         |           | 
|Name and                                      |  |      |                     |        |            |           |         | Other     |  | Underlying |        | All             
|Principal                                     |  |      |                     |        |            |           |         |           |  |            |        |                  |  | Annual |  | Option |        | Other       
|Position                                      |  | Year |                     | Salary |            | Bonus (1) |         | Comp. (2) |  | Awards     |        | Compensation (3)
|                                              |  |      |                     |        |            |           |         |           |  |            |        |                 
|Diane C. Bastic,                              |  |      | 2003                |        |            | $         | 141,750 |           |  | $          | 22,800 |                  |  | NA     |  |        | 10,000 |              |  | $ | 9,443 | 
|Executive Officer of
Second Bancorp and       |  |      | 2002                |        |            | $         | 136,750 |           |  | $          | 60,813 |                  |  | NA     |  |        | 12,000 |              |  | $ | 8,800 | 
|Senior Vice President
of Second National Bank |  |      | 2001                |        |            | $         | 128,433 |           |  | $          | 59,619 |                  |  | NA     |  |        | 15,000 |              |  | $ | 7,387 | 



---

|(1) |  | Includes amounts earned for the indicated year but actually paid in
the following year.                                                                                                                                                                                                                                                                                                           
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The Corporation is required to disclose Other Annual Compensation if it
exceeds, in the aggregate, the lesser of $50,000 or 10% of the Named
Officers total base salary and bonus for the year in question.                                                                                                                                                                                      
|   
|(3) |  | Amounts reported for 2003 include the sum of the Corporations
contributions on behalf of each of the Named Officers under the
Corporations employee savings plan ($9,000, $0, $9,000, $9,000 and $7,714
respectively for Blossom, Kellerman, Stanitz, Filarski and Bastic) and
executive long term disability plan ($7,691, $2,002, $955, $1,376 and
$1,729 respectively for those individuals).
|   
|(4) |  | Mr. Blossom joined the Corporation as President on December 6, 1999,
assumed the added responsibilities of Chief Executive Officer on May 9,
2000 and Chairman on May 8, 2001.                                                                                                                                                                                                                    

OPTION GRANTS DURING 2003

Second Bancorps Amended 1998 Non-Qualified Stock Option Plan (the NQSO
Plan) was approved by action of the Corporations shareholders at the May 12,
1998 Annual Meeting, amended by action of the Corporations board of directors
on January 25, 2001 and further amended by action of the Corporations
shareholders at the April 18, 2002 Annual Meeting. The following table
contains information on non-qualified stock options granted during 2003 under
that Plan (except as footnoted) to the Named Officers and their potential
realizable value.

|                |  |             |        |               |  |                |      |            |  |    |        |     |  |  |         |                             |  |                            |         |  |  |   |           | 
|--------------- |  | ----------- | ------ | ------------- |  | -------------- | ---- | ---------- |  | -- | ------ | --- |  |  | ------- | --------------------------- |  | -------------------------- | ------- |  |  | - | --------- | 
|                |  |             |        |               |  |                |      |            |  |    |        |     |  |  |         |                             |  | Potential Realizable Value
|                |  |             |        |               |  |                |      |            |  |    |        |     |  |  |         |                             |  | at Assumed Annual Rates   
|Number of       |  | % of Total  |        |               |  |                |      |            |  |    |        |     |  |  |         | of Stock Price Appreciation
|Securities      |  | Options     |        |               |  |                |      |            |  |    |        |     |  |  |         | for Option Term            
|Underlying      |  | Options     |        | Granted to    |  | Exercise or    |      | Expiration |  |   
|Name            |  | Granted (1) |        | Employees (2) |  | Base Price (3) |      | Date (4)   |  | 5% |        | 10%
|                |  |             |        |               |  |                |      |            |  |    |        |    
|R. L. Blossom   |  |             | 30,000 |               |  |                | 19.8 | %          |  | $  | 24.365 |     |  |  | 1/29/13 |                             |  | $                          | 459,690 |  |  | $ | 1,164,960 | 
|D. L. Kellerman |  |             | 20,000 |               |  |                | 13.2 | %          |  | $  | 24.365 |     |  |  | 1/29/13 |                             |  | $                          | 306,460 |  |  | $ | 776,640   | 
|C. Stanitz      |  |             | 20,000 |               |  |                | 13.2 | %          |  | $  | 24.365 |     |  |  | 1/29/13 |                             |  | $                          | 306,460 |  |  | $ | 776,640   | 
|M. Filarski     |  |             | 10,000 |               |  |                | 9.9  | %          |  | $  | 24.365 |     |  |  | 1/29/13 |                             |  | $                          | 153,230 |  |  | $ | 388,320   | 
|                |  |             | 5,000  | (5)           |  |                |      |            |  | $  | 25.150 |     |  |  | 6/4/13  |                             |  | $                          | 79,085  |  |  | $ | 200,415   | 
|D. C. Bastic    |  |             | 10,000 |               |  |                | 6.6  | %          |  | $  | 24.365 |     |  |  | 1/29/13 |                             |  | $                          | 153,230 |  |  | $ | 388,320   | 



---

|    |  |                                                                                                                                                                          
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) |  | Except as otherwise footnoted, the reported stock options were granted
January 30, 2003, are for a ten-year term and were not
exercisable until January 30, 2004.        
|   
|(2) |  | Options granted to non-employee directors are excluded from the
calculation.                                                                                             
|   
|(3) |  | The exercise or base price of each awarded option is equal to the mean of
the bid and ask price of the Corporations common
stock on the date the option was granted.

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|(4) |  | Notwithstanding the stated expiration date, all stock options held by an
individual terminate if that person ceases to be an employee for any
reason other than death, disability or retirement. In the event of death,
disability or retirement options must be exercised by the recipient or, as
the case may be, by the recipients representative no later than the
earlier of the expiration date of the option or the third anniversary date
of the event. Unexercisable options automatically and immediately become
fully exercisable on the date of any change-in-control of the Corporation.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(5) |  | Non-qualified stock options granted June 5, 2003 under the Second Bancorp
2003 Equity Ownership Plan approve and adopted by the Corporations
shareholders at Second Bancorps April 17, 2003 Annual Meeting of Shareholders.
The options are for a ten-year term and are not exercisable until June 5, 2004
except in the event of a change-in-control of the Corporation in which case
unexercisable options automatically and immediately become fully exercisable.                                                                                                                                

AGGREGATE OPTION EXERCISES IN 2003 AND
YEAR-END OPTION VALUES

The following table contains information on the value realized by the
Named Officers during 2003 on their exercise of stock options and the number
and value of unexercised stock options at year-end 2003. Except as footnoted
herein, the Named Officers held no other equity-based compensation units
outstanding at the end of 2003.

|                         |  |             |       |          |  |             |        |               |  |                        |        |                      |  |  |        |  |  |   |         |  |  |   |        | 
|------------------------ |  | ----------- | ----- | -------- |  | ----------- | ------ | ------------- |  | ---------------------- | ------ | -------------------- |  |  | ------ |  |  | - | ------- |  |  | - | ------ | 
|                         |  |             |       |          |  |             |        |               |  | Number of Securities   |        |                      |  |  |        |  |  |  
|                         |  |             |       |          |  |             |        |               |  | Underlying Unexercised |        | Value of Unexercised
|                         |  |             |       |          |  |             |        |               |  | Options at Year-End    |        | In-The-Money Options
|                         |  | Shares      |       |          |  |             |        | 2003(1)       |  | at Year-End 2003      
|                         |  | Acquired on |       | Value    |  |             |        |              
|Name                     |  | Exercise    |       | Realized |  | Exercisable |        | Unexercisable |  | Exercisable            |        | Unexercisable       
|                         |  |             |       |          |  |             |        |               |  |                        |        |                     
|R. L. (Rick) Blossom (2) |  |             | 0     |          |  | $           | 0      |               |  |                        | 91,500 |                      |  |  | 30,000 |  |  | $ | 617,625 |  |  | $ | 61,050 | 
|David L. Kellerman (2)   |  |             | 7,000 | (3)      |  | $           | 33,285 |               |  |                        | 40,700 |                      |  |  | 20,000 |  |  | $ | 113,146 |  |  | $ | 40,700 | 
|Christopher Stanitz (2)  |  |             | 3,200 | (4)      |  | $           | 45,859 |               |  |                        | 57,700 |                      |  |  | 20,000 |  |  | $ | 270,613 |  |  | $ | 40,700 | 
|Myron Filarski           |  |             | 0     |          |  | $           | 0      |               |  |                        | 18,500 |                      |  |  | 15,000 |  |  | $ | 97,865  |  |  | $ | 26,550 | 
|Diane C. Bastic          |  |             | 0     |          |  | $           | 0      |               |  |                        | 61,100 |                      |  |  | 10,000 |  |  | $ | 371,488 |  |  | $ | 20,350 | 



---

|(1) |  | Where appropriate, the number of options has been adjusted for stock splits.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Under the terms of separate agreements dated
June 5, 2003, executives Blossom, Kellerman and Stanitz are     entitled to receive
performance shares of Second Bancorp common stock upon the
Corporations attainment of        specified return on average asset and net after tax earnings goals as at the end of
calendar years 2003 and         2005. The executives earned
no performance shares under the agreements for 2003.
The agreements further  provide that in the event of a change-in-control of the
Corporation prior to the end of 2005, executive Blossom         will
be entitled to receive 10,000 shares of fully vested and unrestricted
Second Bancorp common stock and executives Kellerman and Stanitz will be
entitled to receive 6,000 shares each.
|   
|(3) |  | 7,000 share stock option with a base
price of $22.125 per share exercised July 29, 2003 on which date the price
of the Corporations common stock was $26.88 per share ($33,285 value realized).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(4) |  | Includes a 3,200 share stock option with a base price of $13.438 per share exercised July 31, 2003 (surrender of
owned Second Bancorp stock in payment of exercise price) on which
date the price of the Corporations common
stock was $27.769 per share ($45,859 value realized).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   

REPORT ON EXECUTIVE COMPENSATION BY THE COMPENSATION AND ORGANIZATION COMMITTEE
OF THE BOARD OF DIRECTORS

The Compensation and Organization Committee of the Board of Directors (the
Committee) is a standing committee of Second Bancorp Incorporated (the
Corporation) and is composed of independent directors John A. Anderson
(Committee Chairman), Cloyd J. Abruzzo, David A. Allen, Jr. and R. J. Wean,
III. The Committee reviews and approves all senior executive compensation
arrangements with a view toward

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attracting and retaining qualified, competent
executives to lead the Corporation in pursuit of its business objectives and to
enhance long-term shareholder value.

Executive Officer Compensation

The Corporations executive officer compensation program comprises base
salaries, cash incentive bonuses and long-term incentives in the form of stock
option grants and performance share awards.

Base Salary. Each executive officers salary level is reviewed annually based
upon performance of functional responsibilities, contribution to corporate
strategic goals, experience and demonstrated capabilities. Measurements of
performance may be quantitative and/or qualitative depending upon the content
of the job under evaluation.

Cash Incentive Bonus. The Corporation paid cash bonuses to its chief executive
officer and its other executive officers under a formal Performance Incentive
Compensation Program (PIC) adopted by the Committee in January 2003.Incentive
bonuses paid under the PIC were based primarily on objective criteria tied to
Second Bancorps consolidated financial performance (75%) and secondarily on
discretionary considerations focusing on the executives demonstrated
capabilities, individual contribution to the Corporation, and experience (25%).
Bonuses payable under the PIC range from 0% to 70% of the executives year-end
base salary with a target bonus of 35% of salary. The objective criteria used
for determining bonuses under the PIC in 2003 were, on an adjusted operating
basis, (i) actual return on assets and return on equity compared to budget,
(ii) the rate of earnings per share growth compared to a select group of high
performing peer companies, and (iii) actual efficiency ratio compared to
budget. Cash incentive bonuses were paid under the PIC during January 2004 for
performance in 2003 to eight individuals including the chief executive officer.
Given the pendency of the proposed acquisition of Second Bancorp by, and merger
into, Sky Financial Group, the PIC has not been re-adopted by the Committee for 2004.

Equity Compensation Program. To achieve long-term enhancement of shareholder
value, the Corporation has an incentive program under which equity or
near-equity awards may be granted to employees of the Corporation, including
executive officers. Equity or near-equity vehicles available for use under the
program include, without limitation, incentive stock options (ISOs),
non-qualified stock options (NQSOs) and performance share awards
(Performance Shares). Outstanding ISOs were issued under the Second Bancorp
Incorporated Stock Option Incentive Plan (the ISO Plan) adopted by the
Corporations shareholders May 14, 1991 as it has been amended from time to
time. The ISO Plan was replaced by Second Bancorps 1998 Non-Qualified Stock
Option Plan approved by shareholders on May 12, 1998 as amended from time to
time (the NQSO Plan) under which the large majority of currently outstanding
non-qualified stock options were granted. The NQSO Plan was replaced by the
Second Bancorp Incorporated 2003 Equity Ownership Plan (the Omnibus Plan)
upon shareholder approval given at the Corporations April 17, 2003 Annual
Meeting of Shareholders. Five thousand NQSOs and the right to receive an
indeterminate number of Performance Shares have been granted to certain
executive officers under the Omnibus Plan. The number of Performance Shares to
be issued is determined by the Corporations financial performance during
specified reporting periods or by a change-in-control of the Corporation during
those periods.

Options and rights to receive Performance Shares are awarded subjectively with
the Committee taking into consideration the same attributes that are considered
in setting salaries and determining the discretionary portion of cash incentive
bonuses. During 2003, a total of 140,000 NQSOs representing a like number of
Second Bancorp shares were awarded to executives under the NQSO Plan and the
Omnibus Plan. In the event the pending merger of Second Bancorp with and into
Sky Financial Group is completed during the current reporting period, 10,000
Performance Shares to be issued under a performance stock award agreement to
executive R. L. Blossom will cashed out and 6,000 shares to be issued
under performance stock award agreements to each of executives D. L. Kellerman and C.
Stanitz will cashed out. The right to receive Performance Shares granted to
Mr. Blossom in 2003 replaced performance share rights previously contained in
his employment agreement with the Corporation.

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Chief Executive Officer Compensation

Measurements employed in determining compensation paid to R. L. (Rick) Blossom,
the Corporations chief executive officer, are generally similar to those
applicable to other executive officers, but also include performance in
attracting, developing, retaining and motivating key management members
critical to the achievement of the Corporations short and long-term growth,
earnings and strategic goals. Elements of the chief executive officers
compensation thus set by the Committee are reviewed by the remaining
independent members of the Board.

The base salary paid Mr. Blossom in 2003 (as indicated in the Executive
Compensation Table contained in this filing) was a direct and indirect
reflection of his contribution to the Corporations progress and performance
during the year and, to a lesser extent, salaries and bonuses paid to chief
executive officers of banking institutions similar to the Corporation in size
and market area. As a result of a difficult operating environment for
community banks and other financial institutions largely resulting from
persistently depressed interest rates, no cash bonus was paid for 2003 to Mr.
Blossom or the Corporations other executives under the PICs objective
criteria tied to Second Bancorps consolidated financial performance. Cash
bonuses averaging 15.3% of base salaries were, however, paid in 2003 to the
Corporations executives (including Mr. Blossom) based upon the discretionary
provision of the PIC focusing on the executives demonstrated capabilities and
individual contributions to the Corporation.

The Committee believes the incentives inherent in Mr. Blossoms NQSOs and
Performance Share rights serve to align this key executives interest with the
financial interests of the shareholders by focusing on strategic and financial
issues which tend to have a direct, positive impact on the market value of the
Corporations stock.

| |                           
| | --------------------------
| | John A. Anderson, Chairman
| |                           
| | Cloyd J. Abruzzo          
| |                           
| | David A. Allen, Jr.       
| |                           
| | R. J. Wean, III           

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No current or former Second Bancorp executive officer serves on the
Corporations Compensation & Organization Committee. The Bank subleases space
in its main office building to various entities including the Raymond John Wean
Foundation which subleased office space in 2003 at a fair market annual rental
rate of $16,962. R. J. Wean, III, a Second Bancorp Director, is one of four
administrators of the Foundation. Mr. Wean served on the Compensation and
Organization Committee of the Board of Directors in 2003.

COMMON STOCK PERFORMANCE GRAPH

The following is a five-year comparison of total return to Second Bancorp
common shareholders with appropriate broad-based market indexes and an index of
stock performance by a peer group of publicly traded companies. The graph
compares year-end total shareholder returns, assuming dividends are reinvested,
for the five-year period ending December 31, 2003 for Second Bancorp common
stock with the Nasdaq Bank Stocks Index (Nasdaq Banks), and the Nasdaq Stock
Market Index (Nasdaq Market). The Nasdaq Bank Stocks Index is an index of
total stock return for all domestic banks traded on the Nasdaq National Market.
The Nasdaq Stock Market Index is a broad-based index of total stock return for
all U.S. companies traded on the Nasdaq National Market.

(COMMON STOCK PERFORMANCE GRAPH)

GRAPH POINTS

|               |  |       |        |       |  |       |        |       |  |       |        |       |  |   |        |  |  |   |        |  |  |   |        | 
|-------------- |  | ----- | ------ | ----- |  | ----- | ------ | ----- |  | ----- | ------ | ----- |  | - | ------ |  |  | - | ------ |  |  | - | ------ | 
|               |  | YE98 |        | YE99 |  | YE00 |        | YE01 |  | YE02 |        | YE03
|               |  |       |        |       |  |       |        |       |  |       |        |      
|Second Bancorp |  | $     | 100.00 |       |  | $     | 102.90 |       |  | $     | 69.30  |       |  | $ | 107.40 |  |  | $ | 135.60 |  |  | $ | 139.10 | 
|Nasdaq Banks   |  | $     | 100.00 |       |  | $     | 96.20  |       |  | $     | 109.80 |       |  | $ | 118.90 |  |  | $ | 121.70 |  |  | $ | 156.60 | 
|Nasdaq Market  |  | $     | 100.00 |       |  | $     | 185.40 |       |  | $     | 111.80 |       |  | $ | 88.80  |  |  | $ | 61.40  |  |  | $ | 91.80  | 

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DIRECTOR COMPENSATION

Each non-employee director of Second Bancorp received $5,000 for services as a
member of the Board of Directors in 2003 and $500 for each board or committee
meeting attended. Committee chairmen received an additional $2,500 annual fee
for services performed. In addition, each non-employee director participates
in the Second Bancorp Incorporated 2003 Equity Ownership Plan (the Plan).
Under the Plan, non-employee directors are entitled to receive options to
purchase 1,000 shares of Second Bancorp common stock (i) upon initial election
or appointment to the Board of Directors, and (ii) on the date of each annual
meeting of the Corporations shareholders provided, however, that non-employee
directors are not eligible to receive more than 1,000 options under the Plan
during any given calendar year. Options granted under the Plan are for ten
year periods, are not exercisable until the first anniversary date of the grant
and are exercisable at a price not less than the mean of the bid and ask
price of the Corporations stock on the date the options are awarded. On April
17, 2003, each non-employee director received 1,000 options to purchase
Corporation stock at $22.90 per share under the Plan.

PENSION PLAN

Second Bancorp has no pension plan but its officers and employees are
participants in subsidiary Second National Banks plan. That plan is a defined
benefit, non-contributory pension plan for all of the Corporations employees
and is identified as The Employees Retirement Plan of The Second National Bank
of Warren.

The following table sets forth the estimated annual benefits at normal
retirement age pursuant to the provisions of the Pension Plan to persons in
specified remuneration and years-of-service classifications:

|                 |  |                                                 |        |    |  |    |        |    |  |   |        |  |  |   |        | 
|---------------- |  | ----------------------------------------------- | ------ | -- |  | -- | ------ | -- |  | - | ------ |  |  | - | ------ | 
|                 |  | Estimated Annual Pension                       
|                 |  | For Representative Years of Credit Service     
|                 |  | (assuming retirement January 1, 2004 at age 65)
|Final Average    |  |                                                
|Remuneration (1) |  | 10                                              |        | 20 |  | 30 |        | 40
|                 |  |                                                 |        |    |  |    |        |   
|$100,000         |  | $                                               | 19,800 |    |  | $  | 39,500 |    |  | $ | 49,400 |  |  | $ | 49,400 | 
|125,000          |  |                                                 | 25,000 |    |  |    | 50,000 |    |  |   | 62,500 |  |  |   | 62,500 | 
|150,000          |  |                                                 | 30,300 |    |  |    | 60,500 |    |  |   | 75,700 |  |  |   | 75,700 | 
|175,000          |  |                                                 | 35,500 |    |  |    | 71,000 |    |  |   | 88,800 |  |  |   | 88,800 | 
|200,000          |  |                                                 | 36,600 |    |  |    | 73,100 |    |  |   | 91,400 |  |  |   | 91,400 | 



---

|    |  |                                                                                                                                  
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------
|(1) |  | Estimated annual pension does not change for final average remuneration
exceeding $200,000 regardless of years of credit service.

Retirement benefits under the Pension Plan are based primarily upon years of
service and remuneration and take into account, among other things, retirement
benefits paid under the Social Security Act. Remuneration, for purposes of the
Pension Plan, is the total of salaries, commissions and bonuses paid during the
year to Pension Plan participants. The normal retirement date for the Pension
Plan is age 65. No pension benefits were paid to the Named Officers in 2003.

As of December 31, 2003, officers Blossom, Kellerman, Stanitz, Filarski and
Bastic had 4, 22, 11, 4 and 18 years respectively of completed credited service
under the Pension Plan.

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CERTAIN AGREEMENTS WITH EXECUTIVE OFFICERS

Chairman, President and Chief Executive Officer R. L. (Rick) Blossom and the
Corporation are parties to an employment agreement and a deferred compensation
agreement, both effective as of December 6, 1999, and a performance stock award
agreement. The five-year employment agreement (as amended from time to time)
provides for an initial annual base salary of $400,000, a prorated bonus for
1999 and a
guaranteed $150,000 bonus for calendar year 2000, all subject to subsequent
annual review and adjustment as merited. In addition, the agreement provides
for (i) a lump sum payment to Mr. Blossom in the amount of $250,000 in
compensation for foregone benefits at his prior employment, and (ii) ten-year
options to purchase 20,000 shares of Corporation common stock (10,000 awarded
on the date of his employment and 10,000 in 2000) at prevailing market prices
on the dates of award. Mr. Blossoms deferred compensation agreement provides
him with an additional year of pension credit for every two years of service
without regard to the limits placed on executive compensation by the Internal
Revenue Code. Mr. Blossoms performance stock award agreement with the
Corporation was entered into on June 5, 2003 in consideration of an amendment
to Mr. Blossoms employment agreement eliminating certain long-term equity
compensation provisions contained therein. Under his performance stock award
agreement, Mr. Blossom is entitled to receive Second Bancorp common shares
based upon the Corporations return on average assets and net after tax
earnings performance as at the end of 2003 and 2005 (the Measurement Dates).
On target performance in any category during either year earns Mr. Blossom
5,000 shares of Second Bancorp stock (the On Target Award), half vesting on
the Measurement Date and the balance on the first anniversary thereof. No
performance shares were earned by Mr. Blossom for 2003. The performance stock
award agreement also provides that in the event of a change-in-control of the
Corporation prior to either Measurement Date, Mr. Blossom will be entitled to
receive fully-vested Second Bancorp shares equal to the number of shares he
would have earned for on target performance as at either Measurement Date.

The Corporation has also entered into performance stock award agreements with
Chief Financial Officer and Treasurer David L. Kellerman and Executive Vice
President, General Counsel and Secretary Christopher Stanitz. The terms of
those agreements are identical to those contained in Mr. Blossoms performance
stock award agreement except that the On Target Award for each of those
agreements is 3,000 shares of Second Bancorp common stock.

Second Bancorp has also entered into management severance agreements with Named
Officers Blossom, Kellerman and Stanitz. Those agreements generally provide
certain benefits in the event the executives employment with the Corporation
is terminated within three years after the date of any change-in-control of the
Corporation or if the executive resigns within that time frame as a result of a
significant reduction in job responsibilities or compensation, or significant
relocation of the covered executives place of employment. Upon any such
occurrence, the executive will be entitled to (i) a lump sum payment equal to
2.99 times his average gross compensation for the previous five years (or years
of employment if less), (ii) continuation of health and life insurance benefits
for three years, and (iii) credit for three additional years of service for
pension purposes. These agreements automatically terminate if the executive is
discharged for cause or retires or resigns under circumstances not related to a
change-in-control. Second Bancorp has also entered into management severance agreements with Named
Officers Filarski, Bastic and three other key executives. Those agreements
generally provide certain benefits in the event the executives employment with
the Corporation is terminated within two years after the date of any
change-in-control of the Corporation or if the executive resigns within that
time frame as a result of a significant reduction in job responsibilities or
compensation, or significant relocation of the covered executives place of
employment. Upon any such occurrence, the executive will be entitled to (i) a
lump sum payment equal to two times the executives average gross compensation
for the previous three years (or years of employment if less), (ii)
continuation of health and life insurance benefits for two years, and (iii)
credit for two additional years of service for pension purposes. These
agreements automatically terminate if the executive is discharged for cause or
retires or resigns under circumstances not related to a change-in-control.

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Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table furnishes information regarding the record and beneficial
ownership of shares of common stock, no par value, of Second Bancorp as of
January 31, 2004 for each of its directors, each of the Named Officers (as
defined in the Executive Compensation Section), all directors and executive
officers as a group and each person known to Second Bancorp to beneficially own
more than five percent of the outstanding shares of common stock.

|               |  |                                                                           |  |                         |  |             
|-------------- |  | ------------------------------------------------------------------------- |  | ----------------------- |  | ------------
|               |  | Name of Record                                                            |  | Shares and Nature       |  | Percent     
|Title of Class |  | or Beneficial Owner                                                       |  | of Beneficial Ownership |  | of Class (1)
|               |  |                                                                           |  |                         |  |             
|Common Stock   |  | Second National Bank of Warren
108 Main Avenue, S.W.
Warren, Ohio 44481   |  | 847,829 (2)             |  | 8.44 %      
|               |  |                                                                           |  |                         |  |             
|Common Stock   |  | Cloyd J. Abruzzo (director)                                               |  | 11,234 (3)              |  |            
|               |  |                                                                           |  |                         |  |             
|Common Stock   |  | Dr. David A. Allen, Jr. (director)                                        |  | 6,000 (4)               |  |            
|               |  |                                                                           |  |                         |  |             
|Common Stock   |  | John A. Anderson (director)                                               |  | 24,314 (5)              |  |            
|               |  |                                                                           |  |                         |  |             
|Common Stock   |  | Diane C. Bastic (executive)                                               |  | 89,480 (6)              |  |            
|               |  |                                                                           |  |                         |  |             
|Common Stock   |  | R. L. (Rick) Blossom (executive &
director)                               |  | 135,270 (7)             |  | 1.35%       
|               |  |                                                                           |  |                         |  |             
|Common Stock   |  | Lynette M. Cavalier (director)                                            |  | 2,000 (8)               |  |            
|               |  |                                                                           |  |                         |  |             
|Common Stock   |  | Myron Filarski (executive)                                                |  | 28,662 (9)              |  |            
|               |  |                                                                           |  |                         |  |             
|Common Stock   |  | Norman C. Harbert (director)                                              |  | 14,989 (10)             |  |            
|               |  |                                                                           |  |                         |  |             
|Common Stock   |  | James R. Izant (director)                                                 |  | 442,556 (11)            |  | 4.40%       
|               |  |                                                                           |  |                         |  |             
|Common Stock   |  | Phyllis J. Izant (director)                                               |  | 291,781 (12)            |  | 2.90%       
|               |  |                                                                           |  |                         |  |             
|Common Stock   |  | David L. Kellerman (executive)                                            |  | 65,985 (13)             |  |            
|               |  |                                                                           |  |                         |  |             
|Common Stock   |  | John L. Pogue (director)                                                  |  | 7,788 (14)              |  |            
|               |  |                                                                           |  |                         |  |             
|Common Stock   |  | Christopher Stanitz (executive)                                           |  | 87,290 (15)             |  |            
|               |  |                                                                           |  |                         |  |             
|Common Stock   |  | Raymond J. Wean, III (director)                                           |  | 12,685 (16)             |  |            
|               |  |                                                                           |  |                         |  |             
|Common Stock   |  | Second Bancorps executive
officers and directors as a group
(18 persons) |  | 1,412,415 (17)          |  | 14.05%      



---



|(1) |  | Percentage of outstanding common shares plus options exercisable within
60 days of January 31, 2004. Unless otherwise indicated, represents
ownership of less than 1% of the outstanding shares of common stock and
options.                                                                                                                                                                                                                                                                             
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Shares held beneficially as of December 31, 2003 in fiduciary capacity
for various trust customers of Second National Bank. None of the
beneficial owners through Second Nationals Trust Department individually
owns or controls five percent or more of the voting securities of the
Corporation.                                                                                                                                                                                                     
|   
|(3) |  | Includes 5,000 shares of stock to which Mr. Abruzzo has the right to
acquire beneficial ownership upon the exercise of options currently
exercisable or exercisable within 60 days of January 31, 2004. Options
outstanding as of the date on which the proposed merger of Second Bancorp
with and into Sky Financial Group is completed will be redeemed for cash
(subject to the consent of the option holder) and will not result in the
issuance of additional shares of Second Bancorp common stock.
|   
|(4) |  | Includes 5,000 shares of stock to which Mr. Allen has the right to
acquire beneficial ownership upon the exercise                                                                                                                                                                                                                                                                                                                                                                                        

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|     |  | of options currently
exercisable or exercisable within 60 days of January 31, 2004. Options
outstanding as of the date on which the proposed merger of Second Bancorp
with and into Sky Financial Group is completed will be redeemed for
cash (subject to the consent of the option holder) and will not result in
the issuance of additional shares of Second Bancorp common stock.                                                                                                                                                                                                                     
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(5)  |  | Includes 5,000 shares of stock to which Mr. Anderson has the right to
acquire beneficial ownership upon the exercise of options currently
exercisable or exercisable within 60 days of January 31, 2004. Options
outstanding as of the date on which the proposed merger of Second Bancorp
with and into Sky Financial Group is completed will be redeemed for cash
(subject to the consent of the option holder) and will not result in the
issuance of additional shares of Second Bancorp common stock.                                                                                                
|    
|(6)  |  | Includes 16,561 shares of stock held for Ms. Bastics benefit in the
Corporations Savings Plan, and 71,100 shares of stock to which Ms. Bastic
has the right to acquire beneficial ownership upon the exercise of options
currently exercisable or exercisable within 60 days of January 31, 2004.
Options outstanding as of the date on which the proposed merger of Second
Bancorp with and into Sky Financial Group is completed will be redeemed
for cash
(subject to the consent of the option holder) and will not result in the
issuance of additional shares of Second Bancorp common stock.     
|    
|(7)  |  | Includes 5,527 shares of stock held for Mr. Blossoms benefit in the
Corporations Savings Plan, and 121,500 shares of stock to which Mr.
Blossom has the right to acquire beneficial ownership upon the exercise of
options currently exercisable or exercisable within 60 days of January 31,
2004. Options outstanding as of the date on which the proposed merger of
Second Bancorp with and into Sky Financial Group is completed will be
redeemed for cash (subject to the consent of the option holder) and will
not result in the issuance of additional shares of Second Bancorp common
stock.   
|    
|(8)  |  | Includes 1,000 shares of stock to which Ms. Cavalier has the right to
acquire beneficial ownership upon the exercise of options currently
exercisable or exercisable within 60 days of January 30, 2004. Options
outstanding as of the date on which the proposed merger of Second Bancorp
with and into Sky Financial Group is completed will be redeemed for cash
(subject to the consent of the option holder) and will not result in the
issuance of additional shares of Second Bancorp common stock.                                                                                                
|    
|(9)  |  | Includes 161 shares of stock held for Mr. Filarskis benefit in the
Corporations Savings Plan, and 28,500 shares of stock to which Mr.
Filarski has the right to acquire beneficial ownership upon the exercise
of options currently exercisable or exercisable within 60 days of January
31, 2004. Options outstanding as of the date on which the proposed merger
of Second Bancorp with and into Sky Financial Group is completed will be
redeemed for cash (subject to the consent of the option holder) and will
not result in the issuance of additional shares of Second Bancorp common
stock.    
|    
|(10) |  | Includes 5,000 shares of stock to which Mr. Harbert has the right to
acquire beneficial ownership upon the exercise of options currently
exercisable or exercisable within 60 days of the record date. Options
outstanding as of the date on which the proposed merger of Second Bancorp
with and into Sky Financial Group is completed will be redeemed for cash
(subject to the consent of the option holder) and will not result in the
issuance of additional shares of Second Bancorp common stock.                                                                                                  
|    
|(11) |  | Includes 5,000 shares of stock to which Mr. Izant has the right to
acquire beneficial ownership upon the exercise of options currently
exercisable or exercisable within 60 days of January 31, 2004 and 2,231
shares held in trust for the benefit of various individuals. Options
outstanding as of the date on which the proposed merger of Second Bancorp
with and into Sky Financial Group is completed will be redeemed for cash
(subject to the consent of the option holder) and will not result in the
issuance of additional shares of Second Bancorp common stock.                             
|    
|(12) |  | Includes 5,000 shares of stock to which Ms. Izant has the right to
acquire beneficial ownership upon the exercise of options currently
exercisable or exercisable within 60 days of January 31, 2004. Options
outstanding as of the date on which the proposed merger of Second Bancorp
with and into Sky Financial Group is completed will be redeemed for cash
(subject to the consent of the option holder) and will not result in the
issuance of additional shares of Second Bancorp common stock.                                                                                                   
|    
|(13) |  | Includes 5,036 shares of stock held for Mr. Kellermans benefit in the
Corporations Savings Plan, and 60,700 shares of stock to which Mr.
Kellerman has the right to acquire beneficial ownership upon the exercise
of options currently exercisable or exercisable within 60 days of January
31, 2004. Options outstanding as of the date on which the proposed merger
of Second Bancorp with and into Sky Financial Group is completed will be
redeemed for cash (subject to the consent of the option holder) and will
not result in the issuance of additional shares of Second Bancorp common
stock.
|    
|(14) |  | Includes 5,000 shares of stock to which Mr. Pogue has the right to
acquire beneficial ownership upon the exercise of options currently
exercisable or exercisable within 60 days of January 31, 2004; 446 shares
of stock held in a SEP IRA for Mr. Pogues benefit; and 909 shares held in
trust for his fathers benefit. Mr. Pogue also                                                                                                                                                                                                                                                                

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|     |  | owns 4,308 shares of
non-voting trust preferred securities issued by Second Bancorp Capital
Trust I in September 2001. Options outstanding as of the date on which the
proposed merger of Second Bancorp with and into Sky Financial Group is
completed will be redeemed for cash (subject to the consent of the option
holder) and will not result in the issuance of additional shares of Second
Bancorp common stock.                                                                                                                                                                                                                                                                 
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(15) |  | Includes 2,952 shares of stock held for Mr. Stanitzs benefit in the
Corporations Savings Plan, and 77,700 shares of stock to which Mr.
Stanitz has the right to acquire beneficial ownership upon the exercise of
options currently exercisable or exercisable within 60 days of January 31,
2004. Options outstanding as of the date on which the proposed merger of
Second Bancorp with and into Sky Financial Group is completed will be
redeemed for cash (subject to the consent of the option holder) and will
not result in the issuance of additional shares of Second Bancorp common
stock.                                                                                   
|    
|(16) |  | Includes 5,000 shares of stock to which Mr. Wean has the right to acquire
beneficial ownership upon the exercise of options currently exercisable or
exercisable within 60 days of January 31, 2004, 990 shares owned by Mr.
Weans spouse and 999 shares owned for the benefit of a minor child.
Options outstanding as of the date on which the proposed merger of Second
Bancorp with and into Sky Financial Group is completed will be redeemed
for cash (subject to the consent of the option holder) and will not result
in the issuance of additional shares of Second Bancorp common stock.                                                                                      
|    
|(17) |  | Officer and director shareholdings include 570,800 shares of stock
subject to outstanding stock options currently exercisable or exercisable
within 60 days of January 31, 2003. Figure includes all directly owned
shares and all shares deemed beneficially owned by individuals in the officer and director
group, whether or not disclaimed by the officer or director in question.
Options outstanding as of the date on which the proposed merger of Second
Bancorp with and into Sky Financial Group is completed will be redeemed for
cash (subject to the consent of the option holder) and will not result in
the issuance of additional shares of Second Bancorp common stock.

EQUITY COMPENSATION PLAN INFORMATION

The following table contains information as of year-end 2003 regarding the
number of securities subject to outstanding options, warrants and rights, the
weighted-average exercise price of such outstanding options, warrants and
rights and the number of securities that remain available for issuance under
the Corporations equity compensation plans:

|                                                           |  |                              |         |                               |  |                         |       |  |  |                         |         | 
|---------------------------------------------------------- |  | ---------------------------- | ------- | ----------------------------- |  | ----------------------- | ----- |  |  | ----------------------- | ------- | 
|                                                           |  |                              |         |                               |  |                         |       |  |  | (c)                    
|                                                           |  |                              |         |                               |  |                         |       |  |  | Number of securities   
|                                                           |  |                              |         |                               |  |                         |       |  |  | remaining available for
|                                                           |  |                              |         |                               |  |                         |       |  |  | future issuance under  
|                                                           |  | (a)                          |         | (b)                           |  | equity compensation    
|                                                           |  | Number of securities to be   |         | Weighted-average exercise     |  | plans (excluding       
|                                                           |  | issued upon exercise of      |         | price of outstanding options, |  | securities reflected in
|Plan Category                                              |  | options, warrants and rights |         | warrants and rights           |  | column (a))            
|                                                           |  |                              |         |                               |  |                        
|Equity compensation
plans approved by security
holders     |  |                              | 707,700 | (1)                           |  | $                       | 21.77 |  |  |                         | 936,960 | 
|Equity compensation plans
not approved by
security holders |  | None                         |         | NA                            |  | NA                     
|Total                                                      |  |                              | 707,700 |                               |  | $                       | 21.77 |  |  |                         | 936,960 | 



|(1) |  | Includes 685,700 non-qualified and incentive stock options granted to
employees and directors and 22,000 performance shares to be issued to
executives Blossom, Kellerman and Stanitz in the event of a
change-in-control. 8,000 options have been exercised since December 31,
2003 resulting in an equivalent increase in the number of Second Bancorp
common shares outstanding.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

TRANSACTIONS WITH DIRECTORS AND MANAGEMENT

All directors and officers of Second Bancorp and certain immediate family
members and certain companies with which non-employee directors are associated,
were customers of, and transacted banking business with, Second National Bank
in the ordinary course of the Banks business during calendar year 2003 and to
date. Loans and loan commitments included among such transactions were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other unrelated
persons. Such transactions did not involve more than the normal risk of

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collectibility or present other features unfavorable to the Bank.

The Bank subleases space in its main office building to various entities
including the Raymond John Wean Foundation which subleased office space in 2003
at a fair market annual rental rate of $16,962. R. J. Wean, III, a Second
Bancorp Director, is one of four administrators of the Foundation.

The law firm of Harrington, Hoppe & Mitchell, Ltd., of which Second Bancorp
Director John L. Pogue is a member, was paid fees for various legal services
performed for the Corporation and the Bank in the normal course of their
business during 2003 and it is anticipated that such arrangement will continue.
Legal fees paid the firm for services performed in 2003 were $89,714. In
addition, the firm subleased space from the Bank in its main office building
during 2003 at the fair market annual rental rate of $80,765.




Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

A summary of the fees paid to Ernst & Young, LLP, the Corporations external
auditor, for the years ended December 31, 2003 and 2002 is included below:

|                       |  |      |         |      |  |  |         | 
|---------------------- |  | ---- | ------- | ---- |  |  | ------- | 
|                       |  | 2003 |         | 2002
|                       |  |      |         |     
|Audit Fees (1)         |  | $    | 212,150 |      |  |  | 165,050 | 
|                       |  |      |         |      |  |  |         | 
|Audit-Related Fees (2) |  |      | 13,350  |      |  |  |        | 
|                       |  |      |         |      |  |  |         | 
|Tax Fees (2)           |  |      | 38,125  |      |  |  | 116,456 | 
|                       |  |      |         |      |  |  |         | 
|All Other Fees (2)     |  |      | 29,820  |      |  |  | 9,630   | 
|                       |  |      |         |      |  |  |         | 



|(1) |  | Includes fees and expenses related to the fiscal year audit and
interim reviews, notwithstanding when the fees and expenses were billed
or when the services rendered.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Includes fees and expenses for services rendered from January 1
through December 31 of the fiscal year, notwithstanding when the fees
and expenses were billed.       

2002 amounts have been reclassified to conform to the 2003 presentation.

The Audit Committee of the Second Bancorp Incorporateds Board of Directors has
adopted the following Audit and Non-Audit Services Pre-Approval Policy:

I.    Statement of Principles

Under the Sarbanes-Oxley Act of 2002 (the Act), the Audit Committee of the
Board of Directors is responsible for the appointment, compensation and
oversight of the work of the independent auditor. As part of this
responsibility, the Audit Committee is required to pre-approve the audit and
non-audit services performed by the independent auditor in order to assure that
they do not impair the auditors independence from the Corporation. To
implement these provisions of the Act, the Securities and Exchange Commission
(the SEC) has issued rules specifying the types of services that an
independent auditor may not provide to its audit client, as well as the audit
committees administration of the engagement of the independent auditor.
Accordingly, the Audit Committee has adopted, and the Board of Directors has
ratified, the Audit and Non-Audit Services Pre-Approval Policy (the Policy),
which sets forth the procedures and the conditions pursuant to which services
proposed to be performed by the independent auditor may be pre-approved.

The SECs rules establish two different approaches to pre-approving services,
which the SEC considers to be equally valid. Proposed services either: may be
pre-approved without consideration of specific case-by-case services by the
Audit Committee (general pre-approval); or require the specific pre-approval
of the Audit Committee (specific pre-approval). The Audit Committee believes
that the combination of these two approaches in this Policy will result in an
effective and efficient procedure to pre-approve services

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performed by the
independent auditor. As set forth in this Policy, unless a type of service has
received general pre-approval, it will require specific pre-approval by the
Audit Committee if it is to be provided by the independent auditor. Any
proposed services exceeding pre-approved cost levels or budgeted amounts will
also require specific pre-approval by the Audit Committee.

For both types of pre-approval, the Audit Committee will consider whether such
services are consistent with the SECs rules on auditor independence. The Audit
Committee will also consider whether the independent auditor is best positioned
to provide the most effective and efficient service, for reasons such as its
familiarity with the Corporations business, people, culture, accounting
systems, risk profile and other factors, and whether the service might enhance
the Corporations ability to manage or control risk or improve audit quality.
All such factors will be considered as a whole, and no one factor should
necessarily be determinative.

The Audit Committee is also mindful of the relationship between fees for audit
and non-audit services in deciding whether to pre-approve any such services and
may determine, for each fiscal year, the appropriate ratio between the total
amount of fees for Audit, Audit-related and Tax services and the total amount
of fees for certain permissible non-audit services classified as All Other
services.

The appendix to this Policy describe the Audit, Audit-related, Tax and All
Other services that have the general pre-approval of the Audit Committee. The
term of any general pre-approval is 12 months from the date of pre-approval,
unless the Audit Committee considers a different period and states otherwise.
The Audit Committee will annually review and pre-approve the services that may
be provided by the independent auditor without obtaining specific pre-approval
from the Audit Committee. The Audit
Committee will add or subtract to the list of general pre-approved services
from time to time, based on subsequent determinations.

The purpose of this Policy is to set forth the procedures by which the Audit
Committee intends to fulfill its responsibilities. It does not delegate the
Audit Committees responsibilities to pre-approve services performed by the
independent auditor to management.

The independent auditor has reviewed this Policy and believes that
implementation of the policy will not adversely affect the auditors
independence.

II.     Delegation

As provided in the Act and the SECs rules, the Audit Committee may delegate
either type of pre-approval authority to one or more of its members. The member
to whom such authority is delegated must report, for informational purposes
only, any pre-approval decisions to the Audit Committee at its next scheduled
meeting.

III.     Audit Services

The annual Audit services engagement terms and fees will be subject to the
specific pre-approval of the Audit Committee. Audit services include the annual
financial statement audit (including required quarterly reviews), subsidiary
audits, equity investment audits and other procedures required to be performed
by the independent auditor to be able to form an opinion on the Corporations
consolidated financial statements. These other procedures include information
systems and procedural reviews and testing performed in order to understand and
place reliance on the systems of internal control, and consultations relating
to the audit or quarterly review. Audit services also include the attestation
engagement for the independent auditors report on managements report on
internal controls for financial reporting. The Audit Committee will monitor the
Audit services engagement as necessary, but no less than on a quarterly basis,
and will also approve, if necessary, any changes in terms, conditions and fees
resulting from changes in audit scope, Corporation structure or other items.

In addition to the annual Audit services engagement approved by the Audit
Committee, the Audit Committee may grant general pre-approval to other Audit
services, which are those services that only the independent auditor reasonably
can provide. Other Audit services may include statutory audits or financial

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audits for subsidiaries or affiliates of the Corporation and services
associated with SEC registration statements, periodic reports and other
documents filed with the SEC or other documents issued in connection with
securities offerings.

The Audit Committee has pre-approved the Audit services in Appendix A.

IV.     Audit-related Services

Audit-related services are assurance and related services that are reasonably
related to the performance of the audit or review of the Corporations
financial statements or that are traditionally performed by the independent
auditor. Because the Audit Committee believes that the provision of
Audit-related services does not impair the independence of the auditor and is
consistent with the SECs rules on auditor independence, the Audit Committee
may grant general pre-approval to Audit-related services. Audit-related
services include, among others, due diligence services pertaining to potential
business acquisitions/dispositions; accounting consultations related to
accounting, financial reporting or disclosure matters not classified as Audit
services; assistance with understanding and implementing new accounting and
financial reporting guidance from rulemaking authorities; financial audits of
employee benefit plans; agreed-upon or expanded audit procedures related to
accounting and/or billing records required to respond to or comply with
financial, accounting or regulatory reporting matters; and assistance with
internal control reporting requirements.

The Audit Committee has pre-approved the Audit-related services in Appendix A.

V.     Tax Services

The Audit Committee believes that the independent auditor can provide Tax
services to the Corporation such as tax compliance, tax planning and tax advice
without impairing the auditors independence, and the SEC has stated that the
independent auditor may provide such services. Hence, the Audit Committee
believes it may grant general pre-approval to those Tax services that have
historically been provided by the auditor, that the Audit Committee has
reviewed and believes would not impair the independence of the auditor, and
that are consistent with the SECs rules on auditor independence. The Audit
Committee will not permit the retention of the independent auditor in
connection with a transaction initially recommended by the independent auditor,
the sole business purpose of which may be tax avoidance and the tax treatment
of which may not be supported in the Internal Revenue Code and related
regulations. The Audit Committee will consult with the Chief Financial Officer
or outside counsel to determine that the tax planning and reporting positions
are consistent with this policy.

Pursuant to the preceding paragraph, the Audit Committee has pre-approved the
Tax services in Appendix A. All Tax services involving large and complex
transactions not listed in Appendix A must be specifically pre-approved by the
Audit Committee, including: tax services proposed to be provided by the
independent auditor to any executive officer or director of the Corporation, in
his or her individual capacity, where such services are paid for by the
Corporation.

VI.     All Other Services

The Audit Committee believes, based on the SECs rules prohibiting the
independent auditor from providing specific non-audit services, that other
types of non-audit services are permitted. Accordingly, the Audit Committee
believes it may grant general pre-approval to those permissible non-audit
services classified as All Other services that it believes are routine and
recurring services, would not impair the independence of the auditor and are
consistent with the SECs rules on auditor independence.

The Audit Committee has pre-approved the All Other services in Appendix A.

A list of the SECs prohibited non-audit services is attached to this policy as
Exhibit 1. The SECs rules and relevant guidance will be consulted to determine
the precise definitions of these services and the applicability of exceptions.

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VII.      Pre-Approval Fee Levels or Budgeted Amounts

Pre-approval fee levels or budgeted amounts for all services to be provided by
the independent auditor will be established annually by the Audit Committee.
Any proposed services exceeding these levels or amounts will require specific
pre-approval by the Audit Committee. The Audit Committee is mindful of the
overall relationship of fees for audit and non-audit services in determining
whether to pre-approve any such services. For each fiscal year, the Audit
Committee may determine the appropriate ratio between the total amount of fees
for Audit, Audit-related and Tax services, and the total amount of fees for
services classified as All Other services.

VIII.      Procedures

All requests or applications for services to be provided by the independent
auditor that do not require specific approval by the Audit Committee will be
submitted to the Chief Financial Officer and must include a detailed
description of the services to be rendered. The Chief Financial Officer will
determine whether such services are included within the list of services that
have received the general pre-approval of the Audit Committee. The Audit
Committee will be informed on a timely basis of any such services rendered by
the independent auditor.

Requests or applications to provide services that require specific approval by
the Audit Committee will be submitted to the Audit Committee by both the
independent auditor and the Chief Financial Officer, and must include a joint
statement as to whether, in their view, the request or application is
consistent with the SECs rules on auditor independence.

The Audit Committee has designated the General Auditor to monitor the
performance of all services provided by the independent auditor and to
determine whether such services are in compliance with this policy. The General
Auditor will report to the Audit Committee on a periodic basis on the results
of its monitoring. Both the General Auditor and management will immediately
report to the chairman of the Audit
Committee any breach of this policy that comes to the attention of the General
Auditor or any member of management.

The Audit Committee will also review the General Auditors annual internal
audit plan to determine that the plan provides for the monitoring of the
independent auditors services.

IX.     Additional Requirements

The Audit Committee has determined to take additional measures on an annual
basis to meet its responsibility to oversee the work of the independent auditor
and to assure the auditors independence from the Corporation, such as
reviewing a formal written statement from the independent auditor delineating
all relationships between the independent auditor and the Corporation,
consistent with Independence Standards Board Standard No. 1, and discussing
with the independent auditor its methods and procedures for ensuring
independence.

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Exhibit 1

Prohibited Non-Audit Services



| |  | Bookkeeping or other services related to the accounting records or financial statements of the audit client
|- |  | -----------------------------------------------------------------------------------------------------------
| 
| |  | Financial information systems design and implementation                                                    
| 
| |  | Appraisal or valuation services, fairness opinions or contribution-in-kind reports                         
| 
| |  | Actuarial services                                                                                         
| 
| |  | Internal audit outsourcing services                                                                        
| 
| |  | Management functions                                                                                       
| 
| |  | Human resources                                                                                            
| 
| |  | Broker-dealer, investment adviser or investment banking services                                           
| 
| |  | Legal services                                                                                             
| 
| |  | Expert services unrelated to the audit                                                                     

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PART IV




Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1) The following consolidated financial statements of Second Bancorp,
Incorporated and subsidiaries are incorporated herein by reference from Item 8:

Consolidated Balance Sheets - December 31, 2003 and 2002.

Consolidated Statements of Income - years ended December 31, 2003, 2002 and
2001.

Consolidated Statements of Shareholders Equity - years ended December 31,
2003, 2002 and 2001.

Consolidated Statements of Cash Flows - years ended December 31, 2003, 2002 and
2001.

Notes to Consolidated Financial Statements.

Report of Independent Auditors.

(2)  Schedules to the consolidated financial statements required by Article 9 of
Regulation S-X are not required under the related instructions or are
inapplicable, and therefore have been omitted.

(3)  The following Exhibits required by Item 601 of Regulation S-K are filed
as part of this report.

|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1 |  | Agreement and Plan of Merger, dated as of January 8, 2004 by and between
Second Bancorp Incorporated and Sky Financial Group, Inc. Incorporated
herein by reference to Exhibit 2 of Current Report on Form 8-K/A dated
January 15, 2004.                                                                                                                                                                         
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                  
|3.1 |  | Amended and Restated Articles of Incorporation of the Registrant. (As
updated to include Amendments dated March 17, 1987; January 7, 1991; June
20, 1997; September 18, 1998; and November 10, 1998). Incorporated herein
by reference to Exhibit 3.1 to Second Bancorp Incorporateds annual report
on Form 10-K for the year ended December 31, 1998 (File No. 0-15624).                                       
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                  
|3.2 |  | Code of Regulations of the Registrant. Incorporated herein by reference
to exhibit 3.2 to Second Bancorp Incorporateds annual report on Form 10-K
for the year ended December 31, 1994 (File No. 0-15624).                                                                                                                                                                                                      
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.1 |  | Indenture, dated as of September 28, 2001, by and between Second Bancorp
Incorporated and Wilmington Trust Company, as Indenture Trustee, relating
to 9.00% Subordinated Debentures due 2031 of Second Bancorp Incorporated.
Incorporated herein by reference to Exhibit 4.1 to Second Bancorp
Incorporateds Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2001 (File No. 0-15624).
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.2 |  | Form of 9.00% Subordinated Debenture due 2031 of Second Bancorp
Incorporated. Incorporated herein by reference to Exhibit 4.1 to Second
Bancorp Incorporateds Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 2001 (included as Exhibit A to Exhibit 4.1)
(File No. 0-15624).                                                                                                        
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.3 |  | Certificate of Trust of Second Bancorp Capital Trust I. Incorporated
herein by reference to Exhibit 4.3 to the 2001 Form S-3.                                                                                                                                                                                                                                                                                    
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.4 |  | Trust Agreement of Second Bancorp Capital Trust I, dated August 29, 2001,
by and among Wilmington Trust Company, as Trustee, R. L. Blossom, David L.
Kellerman and Christopher Stanitz. Incorporated herein by reference to
Exhibit 4.4 to the 2001 Form S-3.                                                                                                                                                    
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                  

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|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.5   |  | Amended and Restated Trust Agreement of Second Bancorp Capital Trust I,
dated as of September 28, 2001, by and among Second Bancorp Incorporated,
as Depositor, Wilmington Trust Company as Property Trustee, Wilmington
Trust Company, as Delaware Trustee, and the Administrative Trustees named
therein. Incorporated herein by reference to Exhibit 4.2 to Second Bancorp
Incorporateds Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2001 (File No. 0-15624).
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.6   |  | Form of 9.00% Cumulative Trust Preferred Securities of Second Bancorp
Capital Trust I. Incorporated herein by reference to Exhibit 4.2 to Second
Bancorp Incorporateds Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 2001 (included as Exhibit D to Exhibit 4.2)
(File No. 0-15624).                                                                                                                                                                              
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.7   |  | Preferred Securities Guarantee Agreement, dated as of September 28, 2001,
by and between Second Bancorp Incorporated and Wilmington Trust Company.
Incorporated herein by reference to Exhibit 4.3 to Second Bancorp
Incorporateds Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2001 (File No. 0-15624).                                                                                                                                                         
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|9.1   |  | Form of Voting Agreements by and between Sky Financial Group, Inc. and
each of the Second Bancorp Executive Officers and Directors and certain other
shareholders of Second Bancorp. Included herewith.                                                                                                                                                                                                                                                                                         
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.1* |  | 1998 Non-qualified Stock Option Plan. Incorporated herein by reference
to the Registration Statement on Form S-8 (Registration No. 333-68104) as
filed on August 22, 2001.                                                                                                                                                                                                                                                                                                                      
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.2* |  | Amended Stock Option Incentive Plan. Incorporated herein by reference to
the Registration Statement on Form S-8 (Registration No. 333-32431) as
filed on July 30, 1997.                                                                                                                                                                                                                                                                                                                         
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.3* |  | Form of Incentive Stock Option Agreement. Incorporated herein by
reference to Exhibit 10.2 to Second Bancorp Incorporateds annual report
on Form 10-K for the year ended December 31, 1994 (File No. 0-15624).                                                                                                                                                                                                                                                                                 
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.4* |  | Deferred Compensation Agreement between Second Bancorp and Alan G.
Brant, dated November 9, 1995. Incorporated herein by reference to Exhibit
10.9 to Second Bancorp Incorporateds annual report on Form 10-K for the
year ended December 31, 1995. (File No. 0-15624).                                                                                                                                                                                                                        
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.5  |  | Lease Agreement between Arden Associates Limited Partnership and Second
National, dated October 1, 1979. Incorporated herein by reference to
Exhibit 10.10 to Second Bancorp Incorporateds annual report on Form 10-K
for the year ended December 31, 1994 (File No. 0-15624).                                                                                                                                                                                                                 
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.6  |  | Amendment to Lease Agreement between Arden Associates Limited Partnership
and Second National. Incorporated herein by reference to Exhibit 10.11 to
Second Bancorp Incorporateds annual report on Form 10-K for the year
ended December 31, 1995 (File No. 0-15624).                                                                                                                                                                                                                           
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.7  |  | Revolving Credit Agreement (excluding exhibits), dated September 15,
1998, between Second Bancorp and The Northern Trust Company. Incorporated
herein by reference to the Exhibit filed with the Registrants
registration statement on Form S-4 (Registration No. 333-62365) as filed
on September 22, 1998 with the Securities and Exchange Commission.                                                                                                                                       
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.8  |  | First Amendment to Revolving Credit Agreement (excluding exhibits), dated
March 11, 1997, between Second Bancorp and The Northern Trust Company.
Incorporated herein by reference to the Exhibit filed with the
Registrants registration statement on Form S-4 (Registration No.
333-62365) as filed on September 22, 1998 with the Securities and Exchange
Commission.                                                                                                                        

| |  | 
| |  | 

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|        |  |                                                                                                                                                                                                                                                                                                                             
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.9    |  | Second Amendment to Revolving Credit Agreement (excluding exhibits),
dated December 4, 1998, between Second Bancorp and The Northern Trust
Company. Incorporated herein by reference to Exhibit 10.10 to Second
Bancorp Incorporateds annual report on Form 10-K for the year ended
December 31, 2001. (File No. 0-15624). 
|        |  |                                                                                                                                                                                                                                                                                                                             
|10.10   |  | Third Amendment to Revolving Credit Agreement (excluding exhibits),
dated February 16, 2000, between Second Bancorp and The Northern Trust
Company. Incorporated herein by reference to Exhibit 10.11 to Second
Bancorp Incorporateds annual report on Form 10-K for the year ended
December 31, 2001. (File No. 0-15624). 
|        |  |                                                                                                                                                                                                                                                                                                                             
|10.11   |  | Fourth Amendment to Revolving Credit Agreement (excluding exhibits),
dated February 16, 2001, between Second Bancorp and The Northern Trust
Company. Incorporated herein by reference to Exhibit 10.12 to Second
Bancorp Incorporateds annual report on Form 10-K for the year ended
December 31, 2001. (File No. 0-15624).
|        |  |                                                                                                                                                                                                                                                                                                                             
|10.12   |  | Fifth Amendment to Revolving Credit Agreement (excluding exhibits),
dated April 3, 2002, between Second Bancorp and The Northern Trust
Company. Incorporated herein by reference to Exhibit 10.13 to Second
Bancorp Incorporateds annual report on Form 10-K for the year ended
December 31, 2002. (File No. 0-15624).     
|        |  |                                                                                                                                                                                                                                                                                                                             
|10.13*  |  | Form of Non-qualified Stock Option Agreement. Incorporated herein by
reference to Exhibit 10.15 to Second Bancorp Incorporateds annual report
on Form 10-K for the year ended December 31, 1998 (File No. 0-15624).                                                                                                        
|        |  |                                                                                                                                                                                                                                                                                                                             
|10.14*  |  | Employment Agreement by and between Second Bancorp and Rick L. Blossom,
dated December 6, 1999. Incorporated herein by reference to Exhibit 10.16
to Second Bancorp Incorporateds annual report on Form 10-K for the year
ended December 31, 1999 (File No. 0-15624).                                                      
|        |  |                                                                                                                                                                                                                                                                                                                             
|10.15*  |  | Deferred Compensation Agreement by and between Second Bancorp and Rick
L. Blossom, dated December 6, 1999. Incorporated herein by reference to
Exhibit 10.17 to Second Bancorp Incorporateds annual report on Form 10-K
for the year ended December 31, 1999 (File No. 0-15624).                                           
|        |  |                                                                                                                                                                                                                                                                                                                             
|10.16 * |  | Management Severance Agreement by and between Second Bancorp and Rick
L. Blossom, dated December 6, 1999. Incorporated herein by reference to
Exhibit 10.18 to Second Bancorp Incorporateds annual report on Form 10-K
for the year ended December 31, 1999 (File No. 0-15624).                                            
|        |  |                                                                                                                                                                                                                                                                                                                             
|10.17*  |  | Amended 1998 Non-qualified Stock Option Plan. Incorporated herein by
reference to Exhibit 10.18 to Second Bancorp Incorporateds annual report on
Form 10-K for the year ended December 31, 2002. (File No. 0-15624).                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                             
|10.18   |  | Sixth Amendment to Revolving Credit Agreement (excluding exhibits),
dated April 2, 2003, between Second Bancorp and The Northern Trust
Company. Incorporated herein by reference to Exhibit 10.1 to Second
Bancorp Incorporateds quarterly report on Form 10-Q for the quarter ended
June 30, 2003. (File No. 0-15624).    
|        |  |                                                                                                                                                                                                                                                                                                                             
|10.19*  |  | 2003 Equity Ownership Plan. Incorporated herein by reference to
Attachment A to Second Bancorp Incorporateds definitive proxy statement
for the annual meeting of shareholders held April 17, 2003.                                                                                                                        
|        |  |                                                                                                                                                                                                                                                                                                                             
|10.20*  |  | Amendment to Employment Agreement by and between Rick L. Blossom and
Second Bancorp Incorporated, dated June 5, 2003. Included herein.                                                                                                                                                                                      

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|       |  |                                                                                                                                                                                                                                                       
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.21* |  | Form of Amended Management Severance Agreement dated June 1, 2003 by and
between Second Bancorp Incorporated and the following executive officers: Rick
L. Blossom, David L. Kellerman and Christopher Stanitz. Included herein.                      
|       |  |                                                                                                                                                                                                                                                       
|10.22* |  | Form of Amended Management Severance Agreement dated June 1, 2003 by and
between Second Bancorp Incorporated and the following executive
officers: Thomas W. Allen, Diane C. Bastic, John L. Falatok, Myron Filarski and Darryl
Mast. Included herein.
|       |  |                                                                                                                                                                                                                                                       
|11.1   |  | Statement Re: Computation of Per Share Earnings. Included in Note 19 of
the Notes to the Consolidated Financial Statements of Registrant in the
financial statements portion of this annual report on Form 10-K.                                      
|       |  |                                                                                                                                                                                                                                                       
|21.1   |  | Subsidiaries of the registrant.                                                                                                                                                                                                                       
|       |  |                                                                                                                                                                                                                                                       
|23.1   |  | Consent of Ernst & Young.                                                                                                                                                                                                                             
|       |  |                                                                                                                                                                                                                                                       
|31.1   |  | Certification of Chief Executive Officer pursuant to Exchange Act Rule
13a-14(a)/15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.                                                                                      
|       |  |                                                                                                                                                                                                                                                       
|31.2   |  | Certification of Chief Financial Officer pursuant to Exchange Act Rule
13a-14(a)/15d-14(a) as adopted pursuant to Section 302 of the Sarbanes Oxley
Act of 2002.                                                                                      
|       |  |                                                                                                                                                                                                                                                       
|32.1   |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                    
|       |  |                                                                                                                                                                                                                                                       
|32.2   |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                    

*     Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this Form 10-K pursuant to Item 15(c).



(b)  The Corporation filed one report on Form 8-K during the three months ended
December 31, 2003. A Form 8-K was filed on October 16, 2003 to disclose
earnings for the third quarter of 2003.


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SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

| |  |                             |  |                                     |  |                  
| |  | --------------------------- |  | ----------------------------------- |  | -----------------
| |  | SECOND BANCORP INCORPORATED |  |                                    
| |  |                             |  |                                     |  |                  
| |  | /s/                         |  | David L. Kellerman                  |  | February 27, 2004
| |  |                             |  |                                    
| |  |                             |  | David L. Kellerman,                 |  | (date)           
| |  |                             |  | Chief Financial Officer & Treasurer |  |                  

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:

|    |  |                                                 |  |                  
|--- |  | ----------------------------------------------- |  | -----------------
|By: |  | /s/ Rick L. Blossom                             |  | February 27, 2004
|    |  |                                                 |  |                  
|    |  | Rick L. Blossom, Chairman, President & CEO      |  | (date)           
|    |  |                                                 |  |                  
|By: |  | /s/ David L. Kellerman                          |  | February 27, 2004
|    |  |                                                 |  |                  
|    |  | David L. Kellerman, Principal Financial Officer |  | (date)           
|    |  | & Principal Accounting Officer                  |  |                  
|    |  |                                                 |  |                  
|By: |  | /s/ Cloyd J. Abruzzo                            |  | February 27, 2004
|    |  |                                                 |  |                  
|    |  | Cloyd J. Abruzzo, Director                      |  | (date)           
|    |  |                                                 |  |                  
|By: |  | /s/ John A. Anderson                            |  | February 27, 2004
|    |  |                                                 |  |                  
|    |  | John A. Anderson, Director                      |  | (date)           
|    |  |                                                 |  |                  
|By: |  | /s/ Norman C. Harbert                           |  | February 27, 2004
|    |  |                                                 |  |                  
|    |  | Norman C. Harbert, Director                     |  | (date)           
|    |  |                                                 |  |                  
|By: |  | /s/ James R. Izant                              |  | February 27, 2004
|    |  |                                                 |  |                  
|    |  | James R. Izant                                  |  | (date)           
|    |  |                                                 |  |                  
|By: |  | /s/ John L. Pogue                               |  | February 27, 2004
|    |  |                                                 |  |                  
|    |  | John L. Pogue, Director                         |  | (date)           

96