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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



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Form 10-K

[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2001

[  ] 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                            |  | 34-1547453         
|(State or other jurisdiction of |  | (IRS Employer      
|incorporation or organization)  |  | 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:

|                           |  |                           
|-------------------------- |  | --------------------------
|                           |  | Name of each exchange     
|Title of each class        |  | 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 [x] No [  ]

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 of information
statements, incorporated by reference in Part III of this Form 10-K or any
amendment to this form 10-K. [x]

The aggregate market value of the Common Stock held by non-affiliates of the
registrant as of February 22, 2002 as reported on the NASDAQ National Market
System, was approximately $201,375,374. 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 February 22, 2002, the registrant had outstanding 9,936,971 shares of
Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual shareholders meeting to be held
on April 18, 2002 are incorporated by reference into Part III.

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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 4A. 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). QUANITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                        
|              | Item 8. Financial Statements and Supplementary Data                                          
|              | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
|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                                      
|PART IV      
|              | Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K                    
|SIGNATURES   
|EXHIBIT 10.10
|EXHIBIT 10.11
|EXHIBIT 10.12
|EXHIBTI 21   
|EXHIBIT 23.1 



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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 thirty-seven branches, 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
northeastern and east-central Ohio. At December 31, 2001, Second Bancorp had
consolidated total assets of $1.68 billion, deposits of $1.12 billion and
shareholders equity of $128 million. The Corporation also maintains another
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 subsidiary trust for the primary
purpose of funding our acquisition of Commerce Exchange Corporation.

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.

Primary Business Operations

We currently have four traditional primary business operations.

Commercial Lending.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 45% of our total
loan portfolio at December 31, 2001.

Consumer Lending.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 loans, credit cards and overdraft protection for checking
account customers. At December 31, 2001, approximately 42% of our consumer
loans consisted of indirect auto loans which are originated through auto
dealers in the local area. Consumer loans comprised approximately 28% of our
total loan portfolio at December 31, 2001.

Trust.Our trust department is a traditional provider of fiduciary services
with a focus on administration of estates, trusts and qualified employee
benefit plans. During 2001, personal trust accounts and employee benefit plan
accounts produced approximately 76% and 24% of the total revenues of the
department, respectively. The anticipated addition of a daily valuation service
for 401(k) plans is expected to position us well for future growth in employee
benefit plan assets and revenues. Our trust department had approximately $622
million in assets under management at December 31, 2001.

Mortgage Banking.Our mortgage banking department underwrites and originates
a wide range of retail 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
approximately $600 million of loans in 2001 and serviced $813 million in
mortgage loans for others at December 31, 2001.

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Operating Strategy

Reallocating our business mix to strengthen and stabilize our net interest
margin.We are focused on restructuring both the asset and liability side of
our balance sheet in order to increase our net interest margin and reduce net
interest margin volatility. We are actively working to improve profitability by
generating more core deposits in order to reduce our cost of funds. To achieve
this goal, we have launched a new product line of personal and business deposit
accounts including many new and innovative products, allocated more funding to
advertising, and introduced employee incentives focused on core deposit growth.
During 2001 (and excluding accounts acquired through acquisition), the number
of transaction accounts (demand deposit and NOW accounts) increased at an
annualized rate of 3.9%. On the asset side, we intend to return to a more
traditional commercial bank mix which had been impacted by our acquisition of a
large thrift in 1998. We are focused on making our loan portfolio more balanced
and our plan is to grow the higher yielding consumer loans, which were
approximately 28% of total loans at December 31, 2001, to at least 35% of total
loans within two years. Although we plan to reduce the size of our real estate
loan portfolio to help achieve this balance, we will continue to aggressively
develop the real estate side of our business, selling a large part of our
production while retaining the loan servicing rights.

Improving financial performance by leveraging our financial information system
and controls.We intend to improve our financial performance and efficiency
by leveraging our newly installed, state-of-the-art financial information
system which will allow us to budget and assess financial performance across
the entire organization. the use of this sophisticated tool throughout the
organization is a vital link in our efforts to rigorously control costs and
react quickly to changes in our markets. This financial information system
supports growth, efficiency and flexibility, by incorporating line-of-business
accountability, comprehensive budgeting, forecasting flexibility and
real-time reporting. This comprehensive new budgeting and forecasting system
will give us the ability to forecast on an 18-month time horizon and to
continuously update those forecasts as market conditions change. The value of
the financial information system is that it allows us to better manage our
business by the numbers, focusing on responsibility, accountability and the
ability to proactively manage our lines of business. We anticipate that the
financial information system will allow us to keep on budget and remain
responsive to market opportunities.

Improving efficiency.We are committed to improving our efficiency, including
implementing disciplined cost controls and aligning management incentives with
corporate goals. We are focused on streamlining, reorganizing and re-examining
our policies, processes and procedures. We believe we will be able to reduce
personnel costs through attrition and still maintain our high level of customer
service, due in part to the accountability and responsibility focus enabled by
our new financial information system. Evidence of success in these efficiency
measures are the reduction in our efficiency ratio from 62.2% for 2000 to 58.4%
for 2001 and the reduction in our non-interest expenses (on an operating basis,
exclusive of 2000 restructuring charges and 2001 merger-related costs) for 2001
by approximately 6% compared to the same period last year.

Creating a culture focused on building strong, profitable customer
relationships.Our business depends on increased relationship building in our
northeastern and east-central Ohio service area where we do all of our banking
business. We believe one of our key competitive products and services typically
offered by regional banks while, at the same time, allowing us the ability to
establish the closer customer relationships of a community bank. We focus on a
decentralized decision making structure which delegates increased authority to
the employees located in our 37 retail banking centers. This approach enables
us to develop long-term customer relationships, maintain high quality service
and respond quickly to customer needs.

Increasing emphasis on fee income.In order to diversify our revenues, we are
committed to movement toward greater fee income through enhancement and
extension of our financial services. Our mortgage banking business and our
trust department should contribute to fee income growth through market
expansion of our mortgage originations and increased sales of trust services.
In addition, we intend to increase fee income through the growth of our private
banking business and our investment center, which provides a wide variety of
mutual funds, annuities, stocks, bonds and insurance products. We believe there
will be opportunities to create synergies among trust, private banking and
investment center clients allowing us to become a more relationship-based
financial services provider. Non-interest income represented 27.3% of total
revenues during 2001 compared to 22.3% for the same period last year.

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Expansion Strategy

We have been committed to controlled expansion since 1988 by focusing on
strengthening market share in our existing
communities and expanding into new markets, many of them in high growth areas
with strong demographics. During this period, we have expanded our coverage
area from one county served by 9 retail banking centers to our current 9
counties covered by 37 retail banking centers. In the process, we have grown
from less than $300 million in assets in 1988 to $1.7 billion at December 31,
2001, specifically through our 1998 acquisitions of two financial institutions,
The Trumbull Savings and Loan Company also headquartered in Warren and
Enterprise Bank located in the dynamic suburban Cleveland market. Also, we
acquired Commerce Exchange Bank in 2001 to add to our presence in the Cuyahoga
County/Cleveland market.

In the future, we intend to explore and consider de novo branching
opportunities and potential acquisitions of community banks, thrifts and other
financial service businesses. We will focus on acquiring institutions which are
accretive to our earnings per share. Our de novo branching strategy will focus
primarily on high growth areas with strong market demographics in which we have
the potential to grow market share.

Acquisition of Commerce Exchange Corporation

On October 25, 2001 we acquired Commerce Exchange Corporation. Its subsidiary,
Commerce Exchange Bank, had two branches  one in Beachwood, Ohio and one in
North Olmsted, Ohio. Both became Second National Bank of Warren retail banking
centers upon completion of the transaction. The acquisition enhances our
presence in the attractive suburban Cleveland market. Commerce Exchange
Corporation, had total assets of $111 million, total loans of $91 million,
total deposits of $95 million and shareholders equity of $11 million at the
acquisition date. We paid $26.9 million in cash for Commerce Exchange
Corporation.

Cornerstones of Progress

In last years annual report, we established four cornerstones of our
continuing progress:

| |  |  | People               
| | - |  | ---------------------
| |  |  | Knowledge            
| |  |  | Products and Services
| |  |  | Communications       

During 2001, Second National Bank built upon this foundation in a concerted
effort to stretch higher than ever...to reach farther than our
competition...and to achieve objectives that will contribute to well-managed
future growth and profitability. Cornerstones are sometimes thought of as rigid
and unmoving. In reality, our cornerstones are dynamic and energized. They are
solid and time-tested to support our discipline and good business
practices...yet flexible enough to meet the changing needs of the markets we
serve. In short...they are patterns. Patterns of progress. What follows is an
overview of the shapes those patterns took during 2001.

People provide the energy that drives business forward. That seems like a
self-evident statement...but some businesses forget that it is true. Not us. At
Second National Bank we believe in the strong, reliable, fundamental principle
of managing by the numbers. At the same time we never forget that the
numbers, themselves, must be managed by well-trained, dedicated professional
people. One of the best examples of how people become part of our patterns of
progress is the Banks Trust Department which, during 2001, attracted and hired
a number of highly qualified professionals with considerable trust experience
in community banking environments. Second National Bank was the first choice of
these individuals because of our reputation for working directly and personally
with clients. Other trust departments have become characterized by impersonal
800-number-type transactions with little or no continuity in relationship
management. We are gratified that top-quality talent regards Second National
Bank as a business where people truly do make the difference in banking.

Once again, the U.S. Small Business Administration (SBA) recognized Second
National Bank for achieving the top position in SBA loan volume among community
bank lenders in the Cleveland District. During the SBAs fiscal 2001, Second
National originated 74 loans representing nearly $9 million. Our lending
expertise positions us to fulfill our commitment to business growth within our
communities, especially small businesses and women or minority entrepreneurs
who need an extra boost in getting started.

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Second National Banks new, highly innovative Client Advantage Program (CAP)
guides all Bank resources toward the highly focused goal of providing
maximum...but also highly individualized ...advantages to clients. CAP is built
on a three-part foundation:

1)  Cultivating positive, long-term relationships with clients.

To remain competitive we believe that our Bank can no longer be satisfied with
short-term customer business based on simple, periodic purchases of products
and services, but must enable customers to become clients through dedicated
relationship-building that accurately identifies their true preferences. That,
in turn, will determine which combination of our high-quality products and
services will best meet clients continuing needs.

2)   Discovering our clients preferences and needs through Client Preference
Interviews.

During this key process, comprehensive knowledge gathered by Second National
Bank associates replaces guesswork in the Banks ability to address current
client preferences and anticipate future needs. In order to build positive,
long-term client relationships we must develop a keen insight into client
needs. In order to increase cross-sell ratios we must have knowledge of what
product mixes are most valuable...and this knowledge must be specific to each
individual client. Educated selling means that every time we have contact with
a client we expand our knowledge of who they are, what their goals are, what
their financial circumstances are...even personal details having to do with
their families, jobs, hobbies, birthdays. Sometimes well gain this knowledge
through formal tools such as Client Preference Interviews. Other times, it will
be a simple matter of jotting down observations made during relatively informal
conversations. The key, of course, is learning to listen.

3)   Using detailed, reliable knowledge about our clients as the basis for
determining how our five major lines of business can be best used to the
advantage of all.

Second National Bank provides a diverse selection of products and services to
meet client needs. The strength of CAP is rooted in the organizations ability
to access, for the benefit of clients, combined resources from all areas: Retail and Commercial
Banking...Trust...Mortgage Lending...Deposit Generation. Enhanced flexibility in responding to client needs, based on solid knowledge of
how we can best provide advantages, will enable our Bank to work together
efficiently without traditional, territorial walls between lines of business.

Although other banking and financial organizations cite the process of
long-term relationship building as an objective, what differentiates our CAP
effort is the level to which it has been formalized and integrated into Second
Nationals superstructure. Our Client Preference Interviews, for example, are
highly detailed, demographically based surveys intended to be evolutionary and
long-term in nature. They are part of the Banks overall computer network so as
to be accessible by all who need the information as a way of knowing how and
when a client should be approached for cross-selling purposes. The client data
provided via this process will help ensure that we not only address individual
client needs in an educated fashion, but it also accommodates geographic and
other demographic differences between markets.

Moreover, we have built into the CAP program well defined methods for measuring
progress. A Monthly Achievement Results progress report gives us the ability to
evaluate each of our banking centers and the associates within those locations,
as to how effectively the CAP program is being initiated. This too is fully
integrated with our internal computer network as a way of capturing and
evaluating performance data as it relates to specific client needs.

Once CAP has been firmly established in the banking centers, throughout the
retail side of the business and encompasses all personal bankers and account
managers, the program will then be broadened into other areas including
Mortgage Lending, the Trust Department, and Private Banking. Our initial
experiences in retail sales will have, by that time, helped us to refine our
tracking methodology and our overall expectations. We will be able to establish
accurate benchmarks. We will understand where additional training is necessary.
We will have a firm foundation for effective communications within the
organization. Of most importance, we will be in a position to build upon the
success that comes from knowing our clients.

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Second National Bank is driven by facts...not by guesses, or hunches, or the
flip of a coin. Our success is based on the reality that knowledge is strength.
Strength is the ability to use resources to optimum efficiency. Efficiency
enables a competitive advantage. A competitive advantage results in improving
profitability.

2001 was a year of growing...through knowing...and a continued emphasis on
managing by the numbers.
The examples are numerous:



| |  | Implementation of the Financial Information System
(FIS) continues to provide improved accountability and responsibility for each
line of business. In 2002, results will be used to measure line of business
profitability.                                                                                                                                                                                                                                                                                                                                                                       
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | A more robust foundation for Second National Banks in-house document
preparation system was implemented in September. As a result, all retail Bank
associates now share information stored in a centralized database.                                                                                                                                                                                                                                                                                                                                                                             
| 
| |  | A Monthly Achievement Results progress report was designed and activated to
give up-to-date information regarding the performance of sales associates in
the banking centers. The information is collected from several tracking and
reporting systems bank-wide and is presented in a consolidated user-friendly
format by individual associate, by banking center, by region and by bank totals
for the current month, year-to-date, and a running 12 month period. This
initiative will assist in the ongoing professional development of sales
associates through our Client Advantage Program.

How specifically has knowledge resulted in gains for the organization?

An unwavering focus on efficiency resulted in notable achievements during 2001
including successful control of fixed asset spending. Outstanding fixed asset
balances have decreased by 9 percent at year-end compared to year-end 2000.
Control over expenses was also right on target.

Additionally, our command of the numbers, and ability to act correctly
according to what we learn from them, has enabled Second National to:



| |  | Implement pricing models allowing for profitable pricing in the face of lower
rates.                                                                                                                          
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Achieve strong investment performance on our portfolio during a year of
rapidly falling rates.                                                                                                                
| 
| |  | Maintain well-structured assets.                                                                                                                                                                              
| 
| |  | Successfully implement beneficial tax strategies.                                                                                                                                                             
| 
| |  | Effectively manage interest rate risk during a year of continuously falling
rates, allowing for improvement of the interest margin during the year and
projections for a stronger margin once rates stabilize.
| 
| |  | Implement new procedures for providing for loan losses, assuring proper
reserve levels and reducing risk of fluctuations in earnings going forward.                                                           

What we do is who we are. The diverse selection of high-quality products and
services, offered by Second National Bank to its growing base of clients, is a
reflection of the organization we strive to be: purposeful, responsive,
helpful, rewarding.

Second Nationals Personal Online Banking Program is exactly where we projected
it to be. Based on industry standards we initially anticipated that 5% of
Second National customers would opt into the online program during the first
year, with 5% of those participants signing up for the online bill payment
feature. In that regard, registrations are running true to expectations.

Moreover, with a few clicks on www.secondnationalbank.com, business clients of
Second National Bank can access balance and transaction information, initiate
transactions and perform other cash-management functions, all without leaving
the office...thanks to Second Nationals new Online Business Banking program.

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This new service will save our clients significant time by streamlining their
day-to-day banking tasks. Online Business Banking provides 24-hours-a-day
flexibility that features more control over cash balances and enables users to
increase their professional productivity by reducing physical trips to the
bank, leaving more time for other important business issues. Specific
attributes of Online Business Banking capabilities include the ability to
originate electronic debits and credits; pay bills, loans and taxes; transfer
funds between accounts; create payroll direct deposit transactions; and
request wire transfers. Accessible via a standard web browser, Second
Nationals Online Business Banking thoroughly secures client data and protects
deposits using an advanced technology that ensures proper authentication of
authorized users.

A business debit card is now available on Small Business Checking, Small
Business Interest Checking, Flex Business Checking and Flex Business Interest
Checking accounts. With the business debit card all purchases made are
conveniently debited from a Second National Bank business checking account.
Among the many benefits of the new business debit card: the fact that its more
convenient to carry than a business check book...is accepted worldwide by
stores, by mail, via the Internet and telephone...can be set by the user for
different spending limits and transaction capabilities for each employees
card...and, unlike a credit card, will incur no monthly finance charges.

A new Express Home Improvement Loan was made available for low-and-moderate
income families. This program makes home improvement financing more affordable.
That, in turn, builds property values and enhances our communities. This is yet
another example of the many ways in which Second National strives to be and
succeeds in being a true leader in meeting the credit needs of the communities
we serve.

Progress serves little purpose if it cannot be shared to the benefit of all. At
Second National Bank, the patterns of our business life link us together with
the clients we serve. We take this bond seriously. Our work is governed and
focused by a commitment to reach out beyond the norm...to be much, much more
than just another bank...to be exceptional in our care of clients...and to
share our opportunities throughout our marketplace.

Throughout the organization, during 2001, numerous communications initiatives
were enacted. These included a variety of direct mailings with follow-up
outbound calls to promote consumer loans, new and refinanced mortgages and
investment center offerings.

The Bank also gained high visibility within the communities we serve via
well-placed television, radio and newspaper advertising. Statement stuffers,
coupons and point-of-purchase materials supported product and service
promotions, as did sweepstakes focused on individual products or individual
banking centers.
Of key importance, a proactive emphasis was placed on the importance of
telemarketing, with outbound call training being provided to all retail banking
center associates. We believe that every person at Second National is a
relationship builder. In todays highly competitive environment, each of us
must evaluate how, in our particular jobs, he or she can use effective
communication techniques to first get the attention of a prospect or
client...second, gather information from that person so as to learn their
needs...and third, ask for their business based on what we know those needs to
be.

On July 23, Second Bancorp, Inc. and Commerce Exchange Corporation announced a
merger agreement for the acquisition of Commerce and its banking subsidiary
Commerce Exchange Bank by Second Bancorp. Commerce Exchange Bank merged into
Second Bancorp subsidiary Second National Bank. The acquisition contributed
more than $100 million in assets and two additional Second National Bank retail
banking centers.

This consolidation combines the traditional small- to mid-market commercial
lending strengths of both companies and will strengthen Second Nationals
presence in the attractive suburban Cleveland market. This represents our
organizations second acquisition in Cuyahoga County during the past four
years, demonstrating our commitment to this dynamic market.

On September 4, Second National Bank opened a facility in Hubbard, Ohio,
capitalizing on a solid existing customer base plus establishing closer
geographic ties to the Pennsylvania market.

With six banking centers in Summit County, the time came, during 2001, for
Second National to expand its downtown presence in Akron. Our banking center at
76 S. Main Street is under renovation and will more than double its physical
size. More importantly, additional professionals in the areas of commercial
lending, trust, private banking, and insurance and investments will support the
current staff. Second National has had a presence in Akron for over 10 years
and our expansion will help us to leverage the history that weve enjoyed
through the strong contact base we currently have.

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Progress in Akron is very important for our future. Summit and Stark Counties
are areas that offer true growth opportunities for us, especially with our
ability to provide face-to-face personalized service to clients whose past
experience has been dealing with large, impersonal banks.

The Streetsboro Banking Center is also on the move...and even though that move
is just a short distance, the reason and
result are very important. Streetsboros soon-to-be-previous location at the
corner of Routes 41 and 43 presented access difficulties for customers due to
widening of the intersection and elimination of a drive-thru lane. Because
Second National is committed to Streetsboro and its surrounding communities, a
new, more convenient banking center, complete with added drive-thru
capabilities, will be built fronting onto Route 303 slightly more than a
quarter of a mile west of the current property. The relocation will take place
late in the first quarter of 2002.

On January 16, the Boardman Banking Center officially was renamed the
Tippecanoe Banking Center and relocated a short distance from its prior
location. The new Tippecanoe Banking Center is located on the west-end of
Creekside Place, a mini-plaza on Route 224
at Tippecanoe.

The banking center provides a complete range of products and services with
three drive-thru lanes, a drive-up automated teller machine, night depository,
vault, safe deposit boxes, and ample parking. Representatives from Commercial
Banking, Private Banking, and Investments are also available to clients of this
banking center.

The Operations Division of Second National Bank contributed significantly
during 2001 to our objective of staying at the leading edge of advances in
banking technology. Specifically:



| |  | Enhancements to our in-house document preparation system included the
addition of an ever-expanding online forms library...an automated Client
Preference Interview form and a retail sales Monthly Achievement Results report
used in conjunction with our new Client Advantage Program...as well as other
automated sales tracking reports.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | In support of overall bank functions, Operations implemented a frame relay
data network, increasing processing speed and capacity with no increase in
monthly network cost.                                                                                                                                                                  
| 
| |  | A bank-wide e-mail system was implemented to optimize both internal and
external communications and reporting.                                                                                                                                                                                                                               
| 
| |  | Operations provided a reliable infrastructure for Second National Banks
Online Banking Program.                                                                                                                                                                                                                                             

Additionally, our Operations Division contributed to numerous efficiencies,
foremost among them a conversion of low volume ATM machines to dial-up mode
resulting in significant monthly savings. A review of all technology-related
service contracts led to significant annual cost savings. The development of an
acquisition conversion program model for multi-branch acquisitions (used with
the Commerce Exchange acquisition) enables us to assimilate smaller
acquisitions in-house at considerable cost savings and increased efficiencies.

During 2001, our Retail business line made strides toward its objectives of
adopting new technology, moving transactions and inquiries to automated
channels and streamlining operational activities.

During May we completed installation of a loan document preparation system that
improves direct consumer loan turnaround time and maximizes customer service by
reducing errors. Most direct loan clients now leave the banking center with
loan decisions made, documents signed and checks in hand the same day they
apply.

Second National clients have the ability to order or reorder and track their
checks via our web site: www.secondnationalbank.com. This service, free of
charge to clients, is not only a convenience to them but also cost savings to
the Bank.

Additional examples of client value-adds combined with benefits to Second
National include conversion of numerous ATM cardholders to debit cards
providing not only more features for clients but also increasing the Banks
potential income.

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More efficient scheduling and staffing in the banking centers during 2001
resulted in substantial savings without reduction of full-time employees and
allowed for extended business hours at no additional cost. Our service to
clients was further strengthened by enhancements to our Call Center operation
and our Interactive Voice Response (IVR) system that now handles approximately
60,000 calls per month. As a first line automated response to basic customer
inquiries, the IVR gives clients the option to transfer to Call Center personal
bankers who handle more in-depth issues and cross-sell bank
products and services.

2001 was a year of refocusing our efforts for deposit generation. The function
was raised to an official new line of business, recognizing the long-term
importance of deposit generation to the improved financial success of our Bank.
A three-pronged strategy was employed in 2001, which generated impressive
results. The strategy combined a new deposit line-up, an increased marketing
effort and internal incentives to produce the positive results.

Even excluding the acquisition of accounts from Commerce Exchange, core deposit
accounts, which are the lower cost transaction and savings accounts, increased
by 7.4% during the year. Non-interest bearing DDA accounts increased in number
by 5.5%. These accounts are particularly important, not only because they are
interest free, but because they help to generate service charge income through
client usage of ATM and debit cards. Deposit service charges increased an
impressive 20% from 2000.

Our Trust Department continues to explore and develop opportunities for moving
from a traditional fiduciary business to an investment management center
focused on the enhancement of business relationships throughout the
organization. Central to this goal is identifying and implementing ways of
integrating the functions of Private Banking, Investments, and Trust in such a
way that client needs can be addressed efficiently and professionally through
an effectively streamlined, highly-focused wealth management program.

Philosophically, our commitment remains: We will differentiate ourselves from
other providers by staying as close as possible to our clients...by keeping the
decision making process quick and effective...and by acting upon a
well-informed financial plan for each client. By living up to those benchmarks
we will remain competitive and will establish a reliable platform for
cross-selling products and services across all Second National business lines.

An upgrade of the Trust Departments accounting system to a Windows-based
operating system has resulted in significant improvements in the ease-of-use
and assimilation of data resulting in reports that are very readable and
understandable by clients.

Also, a new 401(k) plan will have numerous advantages for Bank associates and
clients, helping ensure a high level of management expertise resulting in the
ability of individuals to benefit from a range of investment options offered to
help meet unique, individual financial goals.

Second National Banks Mortgage business line continues to build upon its
emphasis for relationship growth, fee generation, origination of investment
quality mortgages, staff development and technological resources.

In total 1-4 family mortgage loan originations, Second National Bank closed
2001 at $598,099,650 versus $194,705,629 in 2000, an increase of 207%, with
funding in November representing the single largest funding month in Bank
history.

In Mortgage Servicing, Second National Bank crossed the $1 billion benchmark in
total mortgages serviced and reached the highest Tier 1 rating assigned by
Freddie Mac, while increasing dollars serviced for investors by 65%. This
mortgage banking activity significantly increased fee income for the Bank and
enabled us to obtain better interest rates for our customers.

Internally, the Mortgage Loan business line successfully launched new software
that restructured the flow of the application process and enhanced efficiency.
A first-ever pipeline report was created and made available on the bank-wide
network to monitor loan status on a daily basis for all mortgage originators
and banking center officers. A direct mail solicitation campaign was also
developed to target potential refinance customers.

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Second National Bank will continue to expand our commercial lending presence in
Ohio and Western Pennsylvania by leveraging opportunities brought about by
acquisitions, client calls, referral sources, new product introductions, and
growth by our individual clients. Our lenders are well-seasoned, from a
multitude of backgrounds, and experienced in working through volatile economic
conditions. The development of a commercial banking profitability model has
provided our commercial bankers with an objective pricing tool, placing each
loan transaction on an even playing field and focusing
on the clients relationship with us. The approval and administration process
for commercial credits generated by Private and Retail Banking was restructured
to provide ready access to experienced commercial lenders and a timely response
to credit needs. The addition of a leasing program, an accounts receivable
financing product, and enhancements to our cash management line-up, positions
our Commercial Banking business line for continued success.

We closed last years annual report by stating that True success is not a
random occurrence. So too, the patterns of progress do not simply happen. They
are the positive outcome of employing well-trained, dedicated
professionals...basing forward movement on knowledge and a factual
understanding of the numbers...developing products and services not because of
what others might be offering, but because we understand our clients
needs...and communicating to those we serve what they can expect from us and
how they will benefit from their confidence in our proven expertise.

Second Bancorp has no significant industry segments, which require disclosure.

Market Area

Second Nationals primary market area consists of Trumbull, Ashtabula, Portage,
Jefferson, Mahoning, Summit, Medina, Stark and Cuyahoga counties in the
northeastern 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
northeastern 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, 2001 and
2000 are presented in footnote 16 of Item 8; Financial Statements and
Supplementary Data and is hereby incorporated by reference.

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.

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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 $417
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.

The Graham-Leach-Bliley Act

The enactment of the Graham-Leach-Bliley Act of 1999 (the GLB Act"')
represents a pivotal point in the history of the financial services industry.
The GLB Act sweeps away large parts of a regulatory framework that had its
origins in the Depression Era of the 1930s. Effective March 11, 2000, new
opportunities were available for banks, other depository institutions,
insurance companies and securities firms to enter into combinations that permit
a single financial services organization to offer customers a more complete
array of financial products and services. The GLB Act provides a new regulatory
framework for regulation through the financial holding company, which will have
as its umbrella regulator the Federal Reserve Board. Functional regulation of
the financial holding companys separately regulated subsidiaries will be
conducted by their primary functional regulator. The GLB Act makes satisfactory
or above Community Reinvestment Act compliance for insured depository
institutions and their financial holding companies necessary in order for them
to engage in new financial activities. The GLB Act provides a federal right to
privacy of non-public personal information of individual customers.

FIRREA

FIRREA restructures the regulation, supervision and deposit insurance of
savings and loan associations and federal savings banks whose deposits were
formerly insured by the Federal Savings and Loans Insurance Corporation
(FSLIC). FSLIC was replaced by the Savings Association Insurance Fund
(SAIF) administered by the FDIC. A separate fund, the Bank Insurance Fund
(BIF), which was essentially a continuation of the FDICs then existing fund,
was established for banks and state savings banks. An acquired thrift generally
would be required to continue its deposit insurance with the SAIF unless
significant exit and entrance fees were paid in connection with a conversion to
BIF insurance.

FDICIA

The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA)
substantially revised the bank regulatory and funding provisions of the Federal
Deposit Insurance Act and several other federal banking statutes. Among other
things, FDICIA requires federal banking agencies to broaden the scope of
regulatory corrective action taken with respect to banks that do not meet
minimum capital requirements and to take such actions promptly in order to
minimize losses to the FDIC. FDICIA established five capital tiers: well
capitalized; adequately capitalized; undercapitalized; significantly
capitalized; and critically undercapitalized and imposes significant
restrictions on the operations of a depository institution that is not in
either of the first two of such categories. A depository institutions capital
tier will depend upon the relationship of its capital to various capital
measures. A depository institution will be deemed to be well capitalized if
it significantly exceeds the minimum level required by regulation for each
relevant capital measure, adequately capitalized if it meets each such
measure, undercapitalized if it is significantly below any such measure and
critically undercapitalized if it fails to meet any critical capital level
set forth in regulations. An depository institution may be deemed to be in a
capitalization category that is lower than is indicated by its actual capital
position if it receives an unsatisfactory examination rating or is deemed to be
in an unsafe or unsound condition or to be engaging in unsafe or unsound
practices.

Under regulations adopted under these provisions, 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 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 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 or less
than 2%.

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FDICIA generally prohibits 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 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.

Under FDICIA, 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 FDICIA.

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 such other action
as the agency determines would better achieve the purposes of FDICIA. 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.

FDICIA also contains a variety of other provisions that could affect the
operations of Second Bancorp, including new reporting requirements, regulatory
standards for real estate lending, 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 and
guidelines governing regulatory examinations.

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, 2001, the projected
BIF and SAIF assessments for Second National for 2002 will be approximately
$213,000.

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, creating the possibility of branching
into that state. To date, Second National has taken no action to branch into
Pennsylvania or any other state, however Second National may do so in the
future.

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Employees

The number of full time equivalent employees of Second Bancorp as of December
31, 2001 was approximately 557. Second Bancorp considers its employee relations
to be good. None of the employees are covered by a collective bargaining
agreement.




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 10 of its banking center locations
and one administrative building, while Second Nationals 27 other banking
center locations are leased under lease and sublease agreements with remaining
terms of 1 to 13 years. Second National also has a lease for record retention
and office space with a remaining lease term of 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 4A. IDENTIFICATION OF EXECUTIVE OFFICERS

The following table sets forth the names and 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 |  |     | 54 |                         |  | Chairman, President, Chief Executive Officer and Director |  |  | 1999 | 
|                     |  |     |    |                         |  | 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.                       |  |  |      | 
|                    
|David L. Kellerman   |  |     | 44 |                         |  | Treasurer of Second Bancorp and Executive Vice            |  |  | 1987 | 
|                     |  |     |    |                         |  | President and Chief Financial Officer of                  |  |  |      | 
|                     |  |     |    |                         |  | Second National.                                          |  |  |      | 
|                    
|Christopher Stanitz  |  |     | 53 |                         |  | Executive Vice President and Secretary of Second          |  |  | 1992 | 
|                     |  |     |    |                         |  | Bancorp and Senior Vice President of Second National.     |  |  |      | 
|                    
|Thomas W. Allen      |  |     | 57 |                         |  | Executive Officer of Second Bancorp and Senior            |  |  | 2000 | 
|                     |  |     |    |                         |  | Vice President of Second National Bank, previously        |  |  |      | 
|                     |  |     |    |                         |  | Senior Vice President and Senior Fiduciary Officer        |  |  |      | 
|                     |  |     |    |                         |  | for Northern Indiana for Key Trust Company of             |  |  |      | 
|                     |  |     |    |                         |  | Indiana from 1997 to 2000 and as Chairman and             |  |  |      | 
|                     |  |     |    |                         |  | Chief Executive Officer of Midwest Trust Company,         |  |  |      | 
|                     |  |     |    |                         |  | NA of Joliet, Illinois from 1995 to 1997.                 |  |  |      | 
|                    
|Diane C. Bastic      |  |     | 58 |                         |  | Executive Officer of Second Bancorp and Senior            |  |  | 1985 | 
|                     |  |     |    |                         |  | Vice President of Second National.                        |  |  |      | 
|                    
|John L. Falatok      |  |     | 44 |                         |  | Executive Officer of Second Bancorp and Senior            |  |  | 2000 | 
|                     |  |     |    |                         |  | Vice President of Second National.                        |  |  |      | 
|                    
|Mike Filarski        |  |     | 53 |                         |  | Executive Officer of Second Bancorp and Senior            |  |  | 1999 | 
|                     |  |     |    |                         |  | Vice President of Second National. Former President       |  |  |      | 
|                     |  |     |    |                         |  | for Signal Mortgage (1998-99), previously President       |  |  |      | 
|                     |  |     |    |                         |  | for National Auto Credit (1996-1997)                      |  |  |      | 
|                    
|Darryl E. Mast       |  |     | 51 |                         |  | Executive Officer of Second Bancorp and Senior            |  |  | 1986 | 
|                     |  |     |    |                         |  | Vice President of Second National.                        |  |  |      | 
|                    
|Terry L. Myers       |  |     | 53 |                         |  | Executive Officer of Second Bancorp and Senior            |  |  | 1986 | 
|                     |  |     |    |                         |  | Vice President of Second National.                        |  |  |      | 

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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 February 22, 2002, the
number of shareholders of record of the Common Stock totaled 2,317. The detail
of stock prices and dividend payments are 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 16 of Item 8;
Second Bancorps Financial Statements and Supplementary Data are incorporated
herein by reference.

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 have traded to a high of
$11.25, and a low of $10.10 and closed at $11.00 on December 31, 2001.




Item 6.     SELECTED FINANCIAL DATA

The following is a summary of the quarterly results of operations for the years
ended December 31, 2001 and 2000.

|                                                         |                                                         |  |  |  |  |         |        |         |  |          |                    |         |  |   |        |       |   |   |        |      | 
|-------------------------------------------------------- | ------------------------------------------------------- |  |  |  |  | ------- | ------ | ------- |  | -------- | ------------------ | ------- |  | - | ------ | ----- | - | - | ------ | ---- | 
|                                                         |                                                         |  |  |  |  |         |        |         |  |          | Three Months Ended |         |  |   |       
|                                                         |                                                         |  |  |  |  | Mar. 31 |        | June 30 |  | Sept. 30 |                    | Dec. 31
|                                                         |                                                         |  |  |  | 
|2001                                                     |                                                         |  |  |  |  |         |        |         |  |          |                    |         |  |   |        |       |   |   |        |     
|Interest income                                          |                                                         |  |  |  |  | $       | 28,478 |         |  | $        | 28,405             |         |  | $ | 27,880 |       |   | $ | 27,794 |     
|Interest expense                                         |                                                         |  |  |  |  |         | 16,652 |         |  |          | 16,107             |         |  |   | 15,407 |       |   |   | 14,291 |     
|Net interest income                                      |                                                         |  |  |  |  |         | 11,916 |         |  |          | 12,298             |         |  |   | 12,473 |       |   |   | 13,503 |     
|Provision for loan losses                                |                                                         |  |  |  |  |         | 761    |         |  |          | 1,342              |         |  |   | 988    |       |   |   | 1,627  |     
|Other income                                             |                                                         |  |  |  |  |         | 4,030  |         |  |          | 4,643              |         |  |   | 4,368  |       |   |   | 5,845  |     
|Security gains (losses)                                  |                                                         |  |  |  |  |         | 529    |         |  |          | (12                | )       |  |   | 123    |       |   |   | 2      |     
|Merger-related costs                                     |                                                         |  |  |  |  |         |       |         |  |          |                   |         |  |   |       |       |   |   | 305    |     
|Other expenses                                           |                                                         |  |  |  |  |         | 10,051 |         |  |          | 9,805              |         |  |   | 10,082 |       |   |   | 11,696 |     
|Income before federal income taxes                       |                                                         |  |  |  |  |         | 5,663  |         |  |          | 5,782              |         |  |   | 5,894  |       |   |   | 5,722  |     
|Federal income taxes                                     |                                                         |  |  |  |  |         | 1,475  |         |  |          | 1,524              |         |  |   | 1,493  |       |   |   | 1,388  |     
|Net income before cumulative effect of accounting change |                                                         |  |  |  |  |         | 4,188  |         |  |          | 4,258              |         |  |   | 4,401  |       |   |   | 4,334  |     
|Cumulative effect of accounting change  SFAS No. 133    |                                                         |  |  |  |  |         | (101   | )       |  |          |                   |         |  |   |       |       |   |   |       |     
|Net income                                               |                                                         |  |  |  |  |         | 4,087  |         |  |          | 4,258              |         |  |   | 4,401  |       |   |   | 4,334  |     
|                                                        
|Earnings (loss) per common share: (1)                    |                                                         |  |  |  |  |         |        |         |  |          |                    |         |  |   |        |       |   |   |        |     
|Basic  before cumulative effect of accounting change    |                                                         |  |  |  |  | $       | 0.42   |         |  | $        | 0.42               |         |  | $ | 0.44   |       |   | $ | 0.43   |     
|                                                        
|                                                         | Diluted  before cumulative effect of accounting change |  |  |  |  |         |        | 0.41    |  |          |                    | 0.42    |  |   |        | 0.44  |   |   |        | 0.43 | 
|                                                         | Basic                                                   |  |  |  |  |         |        | 0.42    |  |          |                    | 0.42    |  |   |        | 0.43  |   |   |        | 0.43 | 
|                                                         | Diluted                                                 |  |  |  |  |         |        | 0.41    |  |          |                    | 0.42    |  |   |        | 0.43  |   |   |        | 0.43 | 
|                                                        
|2000                                                     |                                                         |  |  |  |  |         |        |         |  |          |                    |         |  |   |        |       |   |   |        |     
|Interest income                                          |                                                         |  |  |  |  | $       | 27,435 |         |  | $        | 29,179             |         |  | $ | 29,894 |       |   | $ | 29,790 |     
|Interest expense                                         |                                                         |  |  |  |  |         | 15,017 |         |  |          | 16,534             |         |  |   | 18,288 |       |   |   | 17,082 |     
|Net interest income                                      |                                                         |  |  |  |  |         | 12,418 |         |  |          | 12,645             |         |  |   | 11,606 |       |   |   | 12,708 |     
|Provision for loan losses                                |                                                         |  |  |  |  |         | 687    |         |  |          | 696                |         |  |   | 4,843  |       |   |   | 903    |     
|Other income (expense)                                   |                                                         |  |  |  |  |         | 3,704  |         |  |          | 3,240              |         |  |   | (56    | )     |   |   | 3,786  |     
|Security gains (losses)                                  |                                                         |  |  |  |  |         | 99     |         |  |          | 206                |         |  |   | (2,802 | )     |   |   | 98     |     
|Other expenses                                           |                                                         |  |  |  |  |         | 10,297 |         |  |          | 10,431             |         |  |   | 13,140 |       |   |   | 10,345 |     
|Income before federal income taxes                       |                                                         |  |  |  |  |         | 5,237  |         |  |          | 4,964              |         |  |   | (9,235 | )     |   |   | 5,344  |     
|Federal income taxes                                     |                                                         |  |  |  |  |         | 1,301  |         |  |          | 1,251              |         |  |   | (3,690 | )     |   |   | 1,314  |     
|Net income                                               |                                                         |  |  |  |  |         | 3,936  |         |  |          | 3,713              |         |  |   | (5,545 | )     |   |   | 4,030  |     
|                                                        
|Earnings per common share:                               |                                                         |  |  |  |  |         |        |         |  |          |                    |         |  |   |        |       |   |   |        |     
|                                                         | Basic                                                   |  |  |  |  |         | $      | 0.38    |  |          | $                  | 0.36    |  |   | $      | (0.54 | ) |   | $      | 0.40 | 
|                                                         | Diluted                                                 |  |  |  |  |         |        | 0.38    |  |          |                    | 0.36    |  |   |        | (0.54 | ) |   |        | 0.40 | 



---

|(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.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------

15



---



##### Table of Contents



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 footnotes.

|                                                             |  |                                                                   |                                         |      |            |            |     |      |            |            |     |   |            |            |     |   |            |            |     |   |            |            | 
|------------------------------------------------------------ |  | ----------------------------------------------------------------- | --------------------------------------- | ---- | ---------- | ---------- | --- | ---- | ---------- | ---------- | --- | - | ---------- | ---------- | --- | - | ---------- | ---------- | --- | - | ---------- | ---------- | 
|Selected Financial Data                                      |  |                                                                   |                                         |      |            |            |     |      |            |            |     |   |            |            |     |   |            |            |     |  
|Year ended December 31                                       |  | 2001                                                              |                                         | 2000 |            | 1999       |     | 1998 |            | 1997      
|                                                             |  |                                                                   |                                         |      |           
|Results of Operations:                                       |  |                                                                   |                                         |      |            |            |     |      |            |            |     |   |            |            |     |   |            |            |     |  
|                                                             |  | Interest Income                                                   |                                         | $    | 112,557    |            |     | $    | 116,298    |            |     | $ | 104,582    |            |     | $ | 106,997    |            |     | $ | 104,990    |           
|                                                             |  | Interest expense                                                  |                                         |      | 62,367     |            |     |      | 66,921     |            |     |   | 55,310     |            |     |   | 55,888     |            |     |   | 55,707     |           
|                                                             |  |                                                                   |                                         |      |           
|                                                             |  | Net interest income                                               |                                         |      | 50,190     |            |     |      | 49,377     |            |     |   | 49,272     |            |     |   | 51,109     |            |     |   | 49,283     |           
|                                                             |  | Provision for loan losses                                         |                                         |      | 4,718      |            |     |      | 7,129      |            |     |   | 3,195      |            |     |   | 10,579     |            |     |   | 4,205      |           
|                                                             |  | Other income                                                      |                                         |      | 19,528     |            |     |      | 8,275      |            |     |   | 14,792     |            |     |   | 12,754     |            |     |   | 11,101     |           
|                                                             |  | Other expense                                                     |                                         |      | 41,939     |            |     |      | 44,213     |            |     |   | 39,330     |            |     |   | 46,248     |            |     |   | 39,198     |           
|                                                             |  |                                                                   |                                         |      |           
|                                                             |  | Income before federal income taxes                                |                                         |      | 23,061     |            |     |      | 6,310      |            |     |   | 21,539     |            |     |   | 7,036      |            |     |   | 16,981     |           
|                                                             |  | Federal tax expense                                               |                                         |      | 5,880      |            |     |      | 176        |            |     |   | 5,361      |            |     |   | 1,403      |            |     |   | 3,745      |           
|                                                             |  | Net income before cumulative effect of                            |                                         |      |            |            |     |      |            |            |     |   |            |            |     |   |            |            |     |   |            |            | 
|                                                             |  | accounting change                                                 |                                         | $    | 17,181     |            |     | $    | 6,134      |            |     | $ | 16,178     |            |     | $ | 5,633      |            |     | $ | 13,236     |           
|                                                             |  |                                                                   |                                         |      |           
|                                                             |  | Cumulative effect of accounting change                            |                                         |      |            |            |     |      |            |            |     |   |            |            |     |   |            |            |     |   |            |           
|                                                             |  | SFAS No. 133                                                      |                                         | (101 | )          |            |     |     |            |            |     |  |            |            |     |  |            |            |     |  |           
|                                                             |  |                                                                   |                                         |      |           
|                                                             |  | Net income                                                        |                                         | $    | 17,080     |            |     | $    | 6,134      |            |     | $ | 16,178     |            |     | $ | 5,633      |            |     | $ | 13,236     |           
|                                                             |  |                                                                   |                                         |      |           
|                                                            
|Per Common Share Data: (1)                                   |  |                                                                   |                                         |      |            |            |     |      |            |            |     |   |            |            |     |   |            |            |     |  
|Basic earnings before cumulative effect of
accounting change |  | $                                                                 | 1.72                                    |      |            |            | N/A |      |            |            | N/A |   |            |            | N/A |   |            |            | N/A |  
|                                                             |  | Diluted earnings before cumulative                                |                                         |      | 1.70       |            |     |      | N/A        |            |     |   | N/A        |            |     |   | N/A        |            |     |   | N/A        |           
|                                                             |  |                                                                   | effect of accounting change             |      |            | 1.71       |     |      | $          | 0.60       |     |   | $          | 1.52       |     |   | $          | 0.53       |     |   | $          | 1.25       | 
|                                                             |  | Basic earnings                                                    |                                         |      | 1.69       |            |     |      | 0.60       |            |     |   | 1.51       |            |     |   | 0.52       |            |     |   | 1.25       |           
|                                                             |  | Diluted earnings                                                  |                                         |      | 0.68       |            |     |      | 0.64       |            |     |   | 0.56       |            |     |   | 0.48       |            |     |   | 0.40       |           
|                                                             |  | Cash dividends                                                    |                                         |      | 12.90      |            |     |      | 11.65      |            |     |   | 11.12      |            |     |   | 11.53      |            |     |   | 11.34      |           
|                                                             |  | Book value, December 31                                           |                                         |      | 21.61      |            |     |      | 14.50      |            |     |   | 22.38      |            |     |   | 22.25      |            |     |   | 25.38      |           
|                                                             |  | Market value, December 31
Weighted-average shares outstanding (1) |                                         |      | 10,013,068 |            |     |      | 10,247,025 |            |     |   | 10,635,852 |            |     |   | 10,655,597 |            |     |   | 10,555,921 |           
|                                                             |  |                                                                   | Basic                                   |      |            | 10,080,005 |     |      |            | 10,271,548 |     |   |            | 10,698,717 |     |   |            | 10,742,622 |     |   |            | 10,616,752 | 
|                                                             |  |                                                                   | Diluted                                 |      |            | 9,949,316  |     |      |            | 10,057,110 |     |   |            | 10,458,450 |     |   |            | 10,688,450 |     |   |            | 10,606,749 | 
|                                                             |  | Shares outstanding at year-end (1)                                |                                         |      |            |            |     |      |            |            |     |   |            |            |     |   |            |            |     |   |            |           
|                                                             |  | Balance Sheet Data:                                               |                                         |      |            |            |     |      |            |            |     |   |            |            |     |   |            |            |     |   |            |           
|                                                             |  | As of December 31:                                                |                                         | $    | 1,680,356  |            |     | $    | 1,546,290  |            |     | $ | 1,537,278  |            |     | $ | 1,430,233  |            |     | $ | 1,438,193  |           
|                                                             |  |                                                                   | Total assets                            |      |            | 1,105,197  |     |      |            | 1,054,872  |     |   |            | 1,060,493  |     |   |            | 960,114    |     |   |            | 858,321    | 
|                                                             |  |                                                                   | Loans, net of allowance for loan losses |      |            | 1,123,131  |     |      |            | 1,036,135  |     |   |            | 1,097,589  |     |   |            | 1,102,590  |     |   |            | 1,115,044  | 
|                                                             |  |                                                                   | Deposits                                |      |            | 128,299    |     |      |            | 117,197    |     |   |            | 116,347    |     |   |            | 123,273    |     |   |            | 120,318    | 
|                                                             |  |                                                                   | Shareholders equity                    |      |            |            |     |      |            |            |     |   |            |            |     |   |            |            |     |   |            |            | 
|                                                             |  |                                                                   | Averages:                               |      |            | 1,595,968  |     |      |            | 1,584,016  |     |   |            | 1,498,946  |     |   |            | 1,464,803  |     |   |            | 1,424,211  | 
|                                                             |  |                                                                   | Total assets                            |      |            | 1,502,164  |     |      |            | 1,488,334  |     |   |            | 1,405,195  |     |   |            | 1,386,894  |     |   |            | 1,351,117  | 
|                                                             |  |                                                                   | Earning assets                          |      |            | 1,078,196  |     |      |            | 1,107,948  |     |   |            | 1,005,998  |     |   |            | 938,408    |     |   |            | 869,333    | 
|                                                             |  |                                                                   | Loans                                   |      |            | 1,070,439  |     |      |            | 1,091,441  |     |   |            | 1,092,260  |     |   |            | 1,086,074  |     |   |            | 1,079,809  | 
|                                                             |  |                                                                   | Deposits                                |      |            | 124,773    |     |      |            | 114,652    |     |   |            | 121,369    |     |   |            | 126,748    |     |   |            | 112,127    | 
|                                                             |  |                                                                   | Shareholders equity                    |      |            |            |     |      |            |            |     |   |            |            |     |   |            |            |     |   |            |            | 
|                                                             |  |                                                                   | Ratios:                                 |      |            |            |     |      |            |            |     |   |            |            |     |   |            |            |     |   |            |            | 
|                                                             |  | Return on average assets                                          |                                         |      | 1.09%      |            |     |      | 0.39%      |            |     |   | 1.08%      |            |     |   | 0.38%      |            |     |   | 0.93%      |           
|                                                             |  | Return on average common
shareholders equity                     |                                         |      | 13.93      |            |     |      | 5.35       |            |     |   | 13.33      |            |     |   | 4.44       |            |     |   | 11.80      |           
|                                                             |  | Net interest margin                                               |                                         |      | 3.49       |            |     |      | 3.46       |            |     |   | 3.68       |            |     |   | 3.84       |            |     |   | 3.78       |           
|                                                             |  | Efficiency ratio                                                  |                                         |      | 58.35      |            |     |      | 70.67      |            |     |   | 59.45      |            |     |   | 70.11      |            |     |   | 63.04      |           
|                                                             |  | Dividend pay-out                                                  |                                         |      | 39.80      |            |     |      | 106.26     |            |     |   | 36.68      |            |     |   | 91.53      |            |     |   | 32.29      |           
|                                                             |  | Average loans to average deposits                                 |                                         |      | 100.72     |            |     |      | 101.51     |            |     |   | 92.10      |            |     |   | 86.40      |            |     |   | 80.51      |           
|                                                             |  | Allowance for loan losses as a percent of loans                   |                                         |      | 1.49       |            |     |      | 1.42       |            |     |   | 1.04       |            |     |   | 1.11       |            |     |   | 1.02       |           
|                                                             |  | Net charge-offs as a percent of average loans                     |                                         |      | 0.47       |            |     |      | 0.28       |            |     |   | 0.27       |            |     |   | 0.92       |            |     |   | 0.53       |           
|                                                             |  | Non-performing loans to total loans                               |                                         |      | 0.94       |            |     |      | 0.75       |            |     |   | 0.55       |            |     |   | 0.71       |            |     |   | 0.80       |           
|                                                             |  | Allowance for loans losses to
non-performing loans                |                                         |      | 158        |            |     |      | 191        |            |     |   | 188        |            |     |   | 155        |            |     |   | 128        |           
|                                                             |  | Tier I leverage ratio                                             |                                         |      | 8.22       |            |     |      | 7.47       |            |     |   | 8.15       |            |     |   | 8.65       |            |     |   | 7.87       |           



---

|(1) |  | Prior period amounts have been restated for stock splits and
pooling-of-interests transactions.
|--- |  | -----------------------------------------------------------------------------------------------

16



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##### Table of Contents



The table below details operating results excluding the impact of the 2000
restructuring activity, the 2001 and 1998 merger activity and the cumulative
effect of accounting change in 2001:

Selected Financial Data  Operating Results (Excludes Restructuring Charges,
Merger Costs and Cumulative effect of Accounting Change)

|                           |                                               |      |   |         |  |      |   |         |  |      |   |         |  |  |   |         |  |  |   |         | 
|-------------------------- | --------------------------------------------- | ---- | - | ------- |  | ---- | - | ------- |  | ---- | - | ------- |  |  | - | ------- |  |  | - | ------- | 
|Year ended December 31     |                                               | 2001 |   | 2000    |  | 1999 |   | 1998    |  | 1997
|                           |                                               |      |  
|Results of Operations:     |                                               |      |   |         |  |      |   |         |  |      |   |         |  |  |   |         |  |  |   |        
|                           | Interest Income                               |      | $ | 112,557 |  |      | $ | 116,950 |  |      | $ | 104,582 |  |  | $ | 106,997 |  |  | $ | 104,990 | 
|                           | Interest expense                              |      |   | 62,367  |  |      |   | 66,921  |  |      |   | 55,310  |  |  |   | 55,888  |  |  |   | 55,707  | 
|                           |                                               |      |  
|                           | Net interest income                           |      |   | 50,190  |  |      |   | 50,029  |  |      |   | 49,272  |  |  |   | 51,109  |  |  |   | 49,283  | 
|                           | Provision for loan losses                     |      |   | 4,718   |  |      |   | 3,029   |  |      |   | 3,195   |  |  |   | 10,579  |  |  |   | 4,205   | 
|                           | Other income                                  |      |   | 19,528  |  |      |   | 14,794  |  |      |   | 14,792  |  |  |   | 12,754  |  |  |   | 11,101  | 
|                           | Other expense                                 |      |   | 41,634  |  |      |   | 41,604  |  |      |   | 39,330  |  |  |   | 39,591  |  |  |   | 39,198  | 
|                           |                                               |      |  
|                           | Income before federal income taxes            |      |   | 23,366  |  |      |   | 20,190  |  |      |   | 21,539  |  |  |   | 13,693  |  |  |   | 16,981  | 
|                           | Federal tax expense                           |      |   | 5,987   |  |      |   | 5,034   |  |      |   | 5,361   |  |  |   | 3,063   |  |  |   | 3,745   | 
|                           |                                               |      |  
|                           | Net income                                    |      | $ | 17,379  |  |      | $ | 15,156  |  |      | $ | 16,178  |  |  | $ | 10,630  |  |  | $ | 13,236  | 
|                           |                                               |      |  
|                          
|Per Common Share Data: (1) |                                               |      |   |         |  |      |   |         |  |      |   |         |  |  |   |         |  |  |   |        
|                           | Basic earnings                                |      | $ | 1.74    |  |      | $ | 1.48    |  |      | $ | 1.52    |  |  | $ | 1.00    |  |  | $ | 1.25    | 
|                           | Diluted earnings                              |      |   | 1.72    |  |      |   | 1.48    |  |      |   | 1.51    |  |  |   | 0.99    |  |  |   | 1.25    | 
|                          
|Ratios:                    |                                               |      |   |         |  |      |   |         |  |      |   |         |  |  |   |         |  |  |   |        
|                           | Return on average assets                      |      |   | 1.09%   |  |      |   | 0.96%   |  |      |   | 1.08%   |  |  |   | 0.73%   |  |  |   | 0.93%   | 
|                           | Return on average common
shareholders equity |      |   | 13.93   |  |      |   | 13.22   |  |      |   | 13.33   |  |  |   | 8.39    |  |  |   | 11.80   | 
|                           | Net interest margin                           |      |   | 3.49    |  |      |   | 3.51    |  |      |   | 3.68    |  |  |   | 3.84    |  |  |   | 3.78    | 
|                           | Efficiency ratio                              |      |   | 58.35   |  |      |   | 62.17   |  |      |   | 59.45   |  |  |   | 60.95   |  |  |   | 63.04   | 



---

|(1) |  | Prior period amounts have been restated for stock splits and
pooling-of-interests transactions.
|--- |  | -----------------------------------------------------------------------------------------------

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 an operating basis before restructuring charges, merger costs and
cumulative effect of accounting changes, referred to in this analysis as
operating results or 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 Company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. Restructuring
charges, merger costs and cumulative effect of accounting change excluded from
net income to derive operation earnings may be significant and may not be
comparable to other companies.




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

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.

17



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##### Table of Contents



RESULTS OF OPERATIONS
Net income for 2001 totaled $17,080 and represents a $10,946, or a 178%,
increase over net income for 2000, which was significantly impacted by a major
balance sheet restructuring during the third quarter of that year. Net income
in 2001 was minimally impacted by $305 in pre-tax merger costs associated with
the fourth quarter acquisition of Commerce Exchange Corporation (Commerce)
and $(101) cumulative effect of accounting change associated with the adoption
of SFAS No. 133. The acquisition of Commerce gives the Corporation further
access to the attractive commercial lending market in the suburban Cleveland
market. Prominent amongst the factors positively impacting 2001 earnings were a
sharp increase in real estate lending and sales of loans into the secondary
mortgage market. Nearly $600 million residential mortgage loans were closed in
2001 with over $520 million in loans being sold generating $5.4 million in
gains. Also prominent in 2001 was the magnitude of interest rate changes
induced by the Federal Reserve Bank. Despite 11 rate declines in 2001, the
Corporations net interest margin was able to improve by 3 basis points over
2000s level and steadily improved during the course of the year.

The 2000 restructuring was designed to improved balance sheet flexibility and
liquidity, reduce the earnings drag caused by the large mortgage loan
portfolio, and improve net interest margin. The after-tax impact of the
restructuring totaled $9,022. Included in the restructuring was an additional
$4.1 million in provision for loan losses. The increased provisions resulted
from a specific analysis of commercial credits and reflect current managements
philosophy of loan analysis. Additionally, $2.8 million in security losses were
realized as the Corporation repositioned the security portfolio and improved
overall earning performance. An additional $4.4 million in losses were realized
on the disposition of $130 million in low yielding, fixed rate mortgage loans.
The effect of the sale was to minimally shrink the Corporations balance sheet
and reduce exposure to higher cost Federal Home Loan advances. Net income in
2000 was $15,156 excluding the restructuring charges, while net income in 1999
was $16,178.

The Corporations return on average assets (ROA) was 1.09%, .39% and 1.08%
for 2001, 2000 and 1999, respectively. The total shareholders return on
average equity (ROE) was 13.93%, 5.35% and 13.33% in 2001, 2000 and 1999,
respectively.

Diluted earnings per share were $1.69 in 2001, $.60 in 2000 and $1.51 in 1999.
The market value of the Corporations common stock, trading under the NASDAQ
symbol of SECD, rebounded from its 2000 lows and increased to $21.61 per share
at the end of 2001. The common stock generally followed the path of most bank
stocks during 2000 finishing the year at $14.50 per share after reaching $22.38
at year-end 1999. The stock price at year-end 2001 represents a price of 168%
of book value, up significantly from 124% the prior year-end. In 2000, the
stock price was effected by higher interest rates and market concerns for a
slowing economy and potential increased loan losses in the banking industry
while in 2001 the stock price rebounded as the Corporation began showing
positive financial results in consecutive quarters. The price / earnings ratio
for the stock at year-end 2001 (based on the trailing twelve months earnings)
was 12.8X. Dividends declared in 2001 totaled $.68 per share compared to $.64
per share the prior year.

Revenue continues to be provided primarily from interest and fees on loans,
which totaled $86,723, $91,833 and $81,464 in 2001, 2000 and 1999,
respectively. This represents 66%, 74% and 68% of total revenues for those
years. The increase in 2000 was due to the restructuring activities, which
resulted in lower non-interest income for the year. Interest income on
securities is also a major source of revenue, contributing 19% of revenues in
all three years. The Corporation is making steady improvement in diversifying
its revenue source away from net interest income. Non-interest income
(exclusive of securities gains and losses and restructuring losses) has
increased as a percent of net revenues (net interest income plus non-interest
income) from 23% and 22% in 1999 and 2000, respectively to 27% in 2001.

On an operating basis, which excludes non-recurring items including merger
costs and cumulative effect of accounting change in 2001 and restructuring
activities in 2000, net income was $17,379 in 2001, or 14.7% greater than the
$15,156 earned in 2000. Operating earnings for 1999 were unchanged from GAAP
earnings at $16,178. Operating performance measures were 1.09%, .96% and 1.08%
for ROA, while ROE was 13.93, 13.22% and 13.33% for 2001, 2000 and 1999,
respectively. The operating efficiency ratio was 58.35% in 2001 versus 62.17%
in 2000 and 59.45% in 1999. Operating diluted earnings per share were $1.72,
$1.48 and $1.51 for those same periods.

18



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##### Table of Contents



NET INTEREST INCOME
Net interest income on a fully taxable equivalent (FTE) basis improved to
$52,467 in 2001 due both to a slight improvement in the net interest margin and
an increase in average earning assets. The net interest margin reached 3.49% in
2001 and improved as the quarters progressed. The rapid succession of rate
reductions initiated by the Federal Reserve Bank muted the potential
improvement in the net interest margin during 2001 as the Corporation is in a
positive interest rate gap position in a one month time frame and in a negative
interest rate gap position in a three month time frame. Average earning assets
were up only 1% in 2001 to $1,502,164 as average loans declined by $31 million
primarily due to the sale of $130 million in real estate loans during the third
quarter restructuring in 2000. Net interest income declined slightly in 2000
from 1999 due to a decline in net interest margin. Significantly impacting both
net interest income and net interest margin were steadily increasing interest
rates resulting from the Federal Reserve Bank monetary tightening and an
inverted yield curve environment. The yield on earning assets improved by 35
basis points to 7.96% in 2000, however, the cost of funds increased by 57 basis
points to 4.96%. The net interest margin declined to 3.46% from 3.68% in 1999.
Average earning assets increased by 5.9% in 2000 to $1,488,334 after averaging
$1,405,195 in 1999.

The relationship between net interest income, FTE net interest income, earning
assets and net interest margin for the past three years follows:

|                                               |  |      |           |      |  |      |           |  |  |   |           | 
|---------------------------------------------- |  | ---- | --------- | ---- |  | ---- | --------- |  |  | - | --------- | 
|                                               |  | 2001 |           | 2000 |  | 1999
|                                               |  |     
|Net interest income  per financial statements |  | $    | 50,190    |      |  | $    | 49,377    |  |  | $ | 49,272    | 
|Tax equivalent adjustment                      |  |      | 2,277     |      |  |      | 2,175     |  |  |   | 2,403     | 
|                                               |  |     
|Net interest income  FTE                      |  | $    | 52,467    |      |  | $    | 51,552    |  |  | $ | 51,675    | 
|                                               |  |     
|Average earning assets                         |  | $    | 1,502,164 |      |  | $    | 1,488,334 |  |  | $ | 1,405,195 | 
|Net interest margin                            |  |      | 3.49%     |      |  |      | 3.46%     |  |  |   | 3.68%     | 

19



---



##### 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                                |                                                                                        |   |           |           |  |          |        |         |        |         |         |          |   |      |           |           |  |          |        |         |  |  |      |      |   |        |           |           |  |   |        |         |  |  |      |      |  
|Year Ended December 31                         |                                                                                        |   |           |           |  | 2001     |        |         |        |         |         |          |   |      |           | 2000      |  |          |        |         |  |  |      |      |   | 1999   |           |           |  |   |        |         |  |  |     
|                                               |                                                                                        |   | Average   |           |  |          |        |         | Yield/ |         | Average |          |   |      |           |           |  | Yield/   |        | Average |  |  |      |      |   | Yield/ |          
|                                               |                                                                                        |   |           | Balance   |  | Interest |        | Rate    |        | Balance |         | Interest |   | Rate |           | Balance   |  | Interest |        | Rate    | 
|ASSETS
Interest earning assets:                |                                                                                        |   |           |           |  |          |        |         |        |         |         |          |   |      |           |           |  |          |        |         |  |  |      |      |   |        |           |           |  |   |        |         |  |  |      |      |  
|                                               | Taxable loans (1)(3)                                                                   |   | $         | 1,058,506 |  |          | $      | 85,361  |        |         |         | 8.09     | % |      | $         | 1,089,484 |  |          | $      | 90,819  |  |  |      | 8.34 | % |        | $         | 992,643   |  |   | $      | 80,783  |  |  |      | 8.14 | % | 
|                                              
|                                               | Tax-exempt loans (2)                                                                   |   |           | 19,690    |  |          |        | 1,680   |        |         |         | 8.53     |   |      |           | 18,464    |  |          |        | 1,536   |  |  |      | 8.32 |   |        |           | 13,355    |  |   |        | 1,048   |  |  |      | 7.84 |   | 
|                                               | Taxable securities                                                                     |   |           | 324,209   |  |          |        | 21,614  |        |         |         | 6.67     |   |      |           | 308,084   |  |          |        | 20,970  |  |  |      | 6.81 |   |        |           | 304,199   |  |   |        | 18,446  |  |  |      | 6.06 |   | 
|                                               | Tax-exempt securities                                                                  |   |           | 68,520    |  |          |        | 4,826   |        |         |         | 7.04     |   |      |           | 66,866    |  |          |        | 4,862   |  |  |      | 7.27 |   |        |           | 78,783    |  |   |        | 5,817   |  |  |      | 7.38 |   | 
|                                               | Federal funds sold and other                                                           |   |           | 31,239    |  |          |        | 1,083   |        |         |         | 3.47     |   |      |           | 5,436     |  |          |        | 286     |  |  |      | 5.26 |   |        |           | 16,215    |  |   |        | 891     |  |  |      | 5.49 |   | 
|                                               |                                                                                        |   |           |           | 
|                                               | Total interest earning assets                                                          |   |           | 1,502,164 |  |          |        | 114,834 |        |         |         | 7.64     |   |      |           | 1,488,344 |  |          |        | 118,473 |  |  |      | 7.96 |   |        |           | 1,405,195 |  |   |        | 106,985 |  |  |      | 7.61 |   | 
|                                               | Non-interest earning assets                                                            |   |           | 93,804    |  |          |        |         |        |         |         |          |   |      |           | 95,682    |  |          |        |         |  |  |      |      |   |        |           | 93,751    |  |   |        |         |  |  |      |      |   | 
|                                               |                                                                                        |   |           |           | 
|                                               | Total                                                                                  |   | $         | 1,595,968 |  |          |        |         |        |         |         |          |   |      | $         | 1,584,016 |  |          |        |         |  |  |      |      |   |        | $         | 1,498,946 |  |   |        |         |  |  |      |      |   | 
|                                               |                                                                                        |   |           |           | 
|                                              
|
|LIABILITIES AND SHAREHOLDERS EQUITY           |                                                                                        |   |           |           |  |          |        |         |        |         |         |          |   |      |           |           |  |         
|Interest bearing liabilities:                  |                                                                                        |   |           |           |  |          |        |         |        |         |         |          |   |      |           |           |  |         
|                                               | Demand deposits-interest
bearing                                                       |   | $         | 90,762    |  |          |        | 1,196   |        |         |         | 1.32     |   |      | $         | 86,818    |  |          |        | 1,290   |  |  |      | 1.49 |   |        | $         | 92,350    |  |   |        | 1,395   |  |  |      | 1.51 |   | 
|                                               | Savings deposits                                                                       |   |           | 242,242   |  |          |        | 5,918   |        |         |         | 2.44     |   |      |           | 266,863   |  |          |        | 8,561   |  |  |      | 3.21 |   |        |           | 279,305   |  |   |        | 8,252   |  |  |      | 2.95 |   | 
|                                               | Time deposits                                                                          |   |           | 621,578   |  |          |        | 34,896  |        |         |         | 5.61     |   |      |           | 625,575   |  |          |        | 36,385  |  |  |      | 5.82 |   |        |           | 611,827   |  |   |        | 32,291  |  |  |      | 5.28 |   | 
|                                               | Federal funds purchased
and securities sold under
agreements to repurchase             |   |           | 116,131   |  |          |        | 3,904   |        |         |         | 3.36     |   |      |           | 118,070   |  |          |        | 5,540   |  |  |      | 4.69 |   |        |           | 136,382   |  |   |        | 5,781   |  |  |      | 4.24 |   | 
|                                               | Note payable                                                                           |   |           | 740       |  |          |        | 47      |        |         |         | 6.35     |   |      |           | 292       |  |          |        | 25      |  |  |      | 8.56 |   |        |           | 921       |  |   |        | 64      |  |  |      | 6.95 |   | 
|                                               | Other borrowed funds                                                                   |   |           | 2,240     |  |          |        | 90      |        |         |         | 4.02     |   |      |           | 2,532     |  |          |        | 172     |  |  |      | 6.79 |   |        |           | 2,696     |  |   |        | 155     |  |  |      | 5.75 |   | 
|                                               | Federal Home Loan Bank
advances                                                        |   |           | 263,719   |  |          |        | 15,567  |        |         |         | 5.90     |   |      |           | 248,648   |  |          |        | 14,948  |  |  |      | 6.01 |   |        |           | 136,484   |  |   |        | 7,372   |  |  |      | 5.40 |   | 
|                                               | Corporation-obligated
mandatorily redeemable
capital securities of
of subsidiary trust |   |           | 7,765     |  |          |        | 749     |        |         |         | 9.65     |   |      |           |          |  |          |        |        |  |  |      |     |   |        |           |          |  |   |        |        |  |  |      |     |   | 
|                                               | Total interest bearing
liabilities                                                     |   |           | 1,345,177 |  |          |        | 62,367  |        |         |         | 4.64     |   |      |           | 1,348,798 |  |          |        | 66,921  |  |  |      | 4.96 |   |        |           | 1,259,965 |  |   |        | 55,310  |  |  |      | 4.39 |   | 
|Non-interest bearing liabilities:              |                                                                                        |   |           |           |  |          |        |         |        |         |         |          |   |      |           |           |  |          |        |         |  |  |      |      |   |        |           |           |  |   |        |         |  |  |      |      |  
|                                               | Demand deposits                                                                        |   |           | 115,857   |  |          |        |         |        |         |         |          |   |      |           | 112,185   |  |          |        |         |  |  |      |      |   |        |           | 108,778   |  |   |        |         |  |  |      |      |   | 
|                                               | Accrued expenses and
other liabilities                                                 |   |           | 10,161    |  |          |        |         |        |         |         |          |   |      |           | 8,381     |  |          |        |         |  |  |      |      |   |        |           | 8,834     |  |   |        |         |  |  |      |      |   | 
|                                               |                                                                                        |   |           |           | 
|Other liabilities                              |                                                                                        |   | 126,018   |           |  |          |        |         |        |         |         |          |   |      | 120,566   |           |  |          |        |         |  |  |      |      |   |        | 117,612   |           |  |   |        |         |  |  |      |      |  
|Shareholders equity                           |                                                                                        |   | 124,773   |           |  |          |        |         |        |         |         |          |   |      | 114,652   |           |  |          |        |         |  |  |      |      |   |        | 121,369   |           |  |   |        |         |  |  |      |      |  
|                                               |                                                                                        |   |           |           | 
|Total                                          |                                                                                        | $ | 1,595,968 |           |  |          |        |         |        |         |         |          |   | $    | 1,584,016 |           |  |          |        |         |  |  |      |      |   | $      | 1,498,946 |           |  |   |        |         |  |  |      |      |  
|                                               |                                                                                        |   |           |           | 
|Net interest earnings (FTE)                    |                                                                                        |   |           |           |  |          | 52,467 |         |        |         |         |          |   |      |           |           |  |          | 51,552 |         |  |  |      |      |   |        |           |           |  |   | 51,675 |         |  |  |      |      |  
|Taxable equivalent adjustment                  |                                                                                        |   |           |           |  |          | 2,277  |         |        |         |         |          |   |      |           |           |  |          | 2,175  |         |  |  |      |      |   |        |           |           |  |   | 2,403  |         |  |  |      |      |  
|                                               |                                                                                        |   |           |           | 
|Net interest income (per
financial statements) |                                                                                        |   |           |           |  | $        | 50,190 |         |        |         |         |          |   |      |           |           |  | $        | 49,377 |         |  |  |      |      |   |        |           |           |  | $ | 49,272 |         |  |  |      |      |  
|                                               |                                                                                        |   |           |           | 
|Net yield on interest earning
assets           |                                                                                        |   |           |           |  |          |        |         |        |         | 3.49    | %        |   |      |           |           |  |          |        |         |  |  | 3.46 | %    |   |        |           |           |  |   |        |         |  |  | 3.68 | %    |  
|                                               |                                                                                        |   |           |           | 



---

|(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%, 34% and 35% marginal Federal tax rates in effect during
2001, 2000 and 1999, respectively.
|   
|(3) |  | Loan fees are included in the interest reported for loans. Those fees
amounted to $2,835 in 2001, $2,326 in 2000 and $2,193 in 1999.                                          

20



---



##### 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:

|                                            |                                                                                     |   |        |        |                       |   |        |                       |        |                  |        |        |     |   |       |       |   |   |        |       |   |   |        |        |  
|------------------------------------------- | ----------------------------------------------------------------------------------- | - | ------ | ------ | --------------------- | - | ------ | --------------------- | ------ | ---------------- | ------ | ------ | --- | - | ----- | ----- | - | - | ------ | ----- | - | - | ------ | ------ | -
|                                            |                                                                                     |   |        |        | 2001 compared to 2000 |   |        | 2000 compared to 1999 |        |                 
|RATE / VOLUME ANALYSIS (1)                  |                                                                                     |   |        |        | Due to Change in      |   |        |                       |        | Due to Change in |        |        |     |  
|                                            |                                                                                     |   |       
|                                            |                                                                                     |   | Volume |        | Rate                  |   | Net    |                       | Volume |                  | Rate   |        | Net
|                                            |                                                                                     |   |       
|Increase (decrease) in FTE interest income: |                                                                                     |   |        |        |                       |   |        |                       |        |                  |        |        |     |   |       |       |   |   |        |       |   |   |        |       
|                                            | Taxable loans                                                                       |   | $      | (2,582 | )                     |   | $      | (2,606                | )      |                  | $      | (5,188 | )   |   | $     | 7,881 |   |   | $      | 2,155 |   |   | $      | 10,036 |  
|                                            | Tax-exempt loans                                                                    |   |        | 102    |                       |   |        | 42                    |        |                  |        | 144    |     |   |       | 400   |   |   |        | 88    |   |   |        | 488    |  
|                                            | Taxable securities                                                                  |   |        | 1,098  |                       |   |        | (454                  | )      |                  |        | 644    |     |   |       | 236   |   |   |        | 2,288 |   |   |        | 2,524  |  
|                                            | Tax-exempt securities                                                               |   |        | 120    |                       |   |        | (156                  | )      |                  |        | (36    | )   |   |       | (880  | ) |   |        | (75   | ) |   |        | (955   | )
|                                            | Federal funds sold                                                                  |   |        | 1,358  |                       |   |        | (561                  | )      |                  |        | 797    |     |   |       | (592  | ) |   |        | (13   | ) |   |        | (605   | )
|                                            |                                                                                     |   |       
|Total interest bearing assets               |                                                                                     |   | 96     |        |                       |   | (3,735 | )                     |        |                  | (3,639 | )      |     |   | 7,045 |       |   |   | 4,443  |       |   |   | 11,488 |       
|Interest bearing liabilities:               |                                                                                     |   |        |        |                       |   |        |                       |        |                  |        |        |     |   |       |       |   |   |        |       |   |   |        |       
|                                            | Demand deposits  interest bearing                                                  |   |        | 59     |                       |   |        | (153                  | )      |                  |        | (94    | )   |   |       | (84   | ) |   |        | (21   | ) |   |        | (105   | )
|                                            | Savings deposits                                                                    |   |        | (790   | )                     |   |        | (1,853                | )      |                  |        | (2,643 | )   |   |       | (368  | ) |   |        | 677   |   |   |        | 309    |  
|                                            | Time deposits                                                                       |   |        | (232   | )                     |   |        | (1,257                | )      |                  |        | (1,489 | )   |   |       | 726   |   |   |        | 3,368 |   |   |        | 4,094  |  
|                                            | Federal funds purchased and securities
sold under agreements to repurchase          |   |        | (91    | )                     |   |        | (1,545                | )      |                  |        | (1,636 | )   |   |       | (776  | ) |   |        | 535   |   |   |        | (241   | )
|                                            | Note payable                                                                        |   |        | 38     |                       |   |        | (16                   | )      |                  |        | 22     |     |   |       | (44   | ) |   |        | 5     |   |   |        | (39    | )
|                                            | Other borrowed funds                                                                |   |        | (20    | )                     |   |        | (62                   | )      |                  |        | (82    | )   |   |       | (9    | ) |   |        | 26    |   |   |        | 17     |  
|                                            | Federal Home Loan Bank advances                                                     |   |        | 906    |                       |   |        | (287                  | )      |                  |        | 619    |     |   |       | 6,058 |   |   |        | 1,518 |   |   |        | 7,576  |  
|                                            | Corporation-obligated mandatorily
redeemable capital securities of
subsidiary trust |   |        | 749    |                       |   |        |                      |        |                  |        | 749    |     |   |       |      |   |   |        |      |   |   |        |       |  
|                                            |                                                                                     |   |       
|Total interest bearing liabilities          |                                                                                     |   | 619    |        |                       |   | (5,173 | )                     |        |                  | (4,554 | )      |     |   | 5,503 |       |   |   | 6,108  |       |   |   | 11,611 |       
|                                            |                                                                                     |   |       
|Total effect on net interest income         |                                                                                     | $ | (523   | )      |                       | $ | 1,438  |                       |        | $                | 915    |        |     | $ | 1,542 |       |   | $ | (1,665 | )     |   | $ | (123   | )     
|                                            |                                                                                     |   |       



---

|(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.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

PROVISION FOR LOAN LOSSES
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. The provision for loan losses was $7,129 in
2000. Included in the third quarter 2000 restructuring activities was an
additional $4.1 million in provision for loan losses which helped increase the
reserve for loan losses to 1.42% of loans at year-end 2000. The increased
provision resulted from a specific analysis of commercial credits and reflects
Managements philosophy of loan analysis based on the current economic
environment. Excluding the third quarter additional provision, the provision
would have been a more normalized .27% of loans. The provision for loan losses
totaled $3,195 in 1999, representing .32% of average loans.

---

NON-INTEREST INCOME
The Corporation was well positioned to take advantage of the dramatically lower
market rates in 2001. Mortgage loan originations increased significantly,
totally nearly $600 million. Secondary market activities were also very strong
and sales of residential mortgage loans totaled over $520 million, realizing
$5.4 in gains. Gains on the sale of SBA loans generated an additional $.4
million in gains during the year. 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 2001, increasing by 20.3% to $5,302.
The increase was due to fee changes implemented in 2000 as well as a 5.5%
increase in the number of non interest-bearing demand deposit accounts during
2001. Trust fees were lower in 2001 as the market value of assets declined in
2001. Trust fees totaled $2,870 in 2001 versus $3,898 in 2000. Management added
several new experienced, sales-focused professionals to the Trust line of
business in 2001 and have solid plans for new business development for 2002.

21



---



##### Table of Contents



Total 2000 non-interest income was significantly impacted by the loan and
security losses realized during the third quarter restructuring of $3,711 and
$2,808, respectively. Absent the restructuring activity, non-interest income
would have totaled $14,794, virtually unchanged from the prior year total of
$14,792. Increases were realized in deposit service charges (up 2.2%), trust
income (up 10.3%) and other income (up 3.0%). Reducing non-interest income was
a loss on trading activity of $335 during the year.

Included in non-interest income over the past three years were pre-tax losses
and gains on the sale of securities. 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. During
2000, the security portfolio realized losses in the amount of $2,399. Absent
the restructuring activity, gains of $409 would have been realized. Security
gains in 1999 totaled $312.

---

NON-INTEREST EXPENSE
The Corporation continues to emphasize control and to be efficient in its
utilization of resources to manage assets. Non-interest expenses as a
percentage of average assets were 2.63%, 2.79% and 2.62% in 2001, 2000 and
1999, respectively. The overall level of expense reduction results in a 6%
decline in costs from 2000 to 2001. The two categories that realized increases,
salaries and benefits and net occupancy, were held to 3% and 2% increases,
respectively. Included in the 2000 expenses were professional service costs
incurred to facilitate restructuring and reengineering activities. Also in
2000, equipment costs increased by 17% due to an increase in the investment
into technology (both hardware and software designed to make the Corporation
more efficient) and its related service contracts. The amortization of
goodwill and other intangibles declined in both periods presented below due to
the accelerated nature of the amortization. The adoption of SFAS No. 142 will
result in a $158 reduction in amortization expense in 2002, however that
reduction will be offset by increased core deposit intangible amortization
resulting from the Commerce acquisition as detailed in footnote 3. The table
below details the percentage change in each non-interest expense category over
the past three years:

|                                             |  |                   |     |                |  |  |     |  
|-------------------------------------------- |  | ----------------- | --- | -------------- |  |  | --- | -
|                                             |  | Percentage Change
|                                             |  |                  
|                                             |  | 2001 over 2000    |     | 2000 over 1999
|                                             |  |                  
|Salaries and benefits                        |  |                   | 3   | %              |  |  | 9   | %
|Net occupancy                                |  |                   | 2   |                |  |  | 1   |  
|Equipment                                    |  |                   | (2  | )              |  |  | 17  |  
|Professional services                        |  |                   | (49 | )              |  |  | 59  |  
|Assessment on deposits and other taxes       |  |                   | (8  | )              |  |  | 0   |  
|Amortization of goodwill & other intangibles |  |                   | (32 | )              |  |  | (19 | )
|Other expenses                               |  |                   | (13 | )              |  |  | 17  |  



---

INCOME TAXES
The provision for income taxes was $5,880, $176 and $5,361 in 2001, 2000 and
1999, respectively. The effective tax rate for the Corporation was 25.5%, 2.8%
and 24.9% during the same periods. The reduction in the effective tax rate in
2000 was due to the reduced net income due to restructuring activities. 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.

22



---



##### Table of Contents



BALANCE SHEET
Average assets grew minimally (up .8%) in 2001 after increasing by 5.7% in
2000. The growth rate for 2001 was adversely affected by the bulk sale of $130
million in residential real estate loans in the third quarter of 2000 along
with
further declines in residential mortgage loans in 2001 due to advancing
pre-payments and strong secondary market activities. Additional loan balance
reductions occurred in indirect automobile loan balances. Underwriting
standards were strengthened during the 2001 and new loan volume and outstanding
balances declined as a result. Commercial loan growth reached 20.7% in 2001 and
was aided by the acquisition of $93 million in loans from Commerce. In 2000
the growth rate was influenced by strong growth in consumer lending. In 2001
core deposit balances (both interest-bearing and non interest-bearing demand
deposit and savings accounts) experienced strong growth, reflecting
managements focus on improving the net interest margin and reducing reliance
on higher cost funding. A re-energized deposit line-up, increased advertising,
internal incentives and the Commerce acquisition combined to allow core deposit
balances to increase by 18.8% over the course of 2001. Even excluding the
Commerce acquisition, core deposits increased by 9.4%. The number of non
interest-bearing demand deposit accounts increased by 5.5% (excluding acquired
Commerce accounts) in 2001, allowing for a greater potential for increased fee
income in future years. Also, a lower interest rate environment typically
accompanies deposit movement to more liquid accounts. The improvement in these
core deposit balances allowed the Corporation to de-emphasize as planned the
higher cost time deposit balances as a source of funding. Time deposits
increased by only .6% during 2001, however excluding the time deposits acquired
from Commerce, time deposit balances declined by 8.4%. Deposit growth in 2000
was influenced by low deposit growth rates. As an industry, financial
institutions are experiencing 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 $417,496 as of December 31, 2001 and is
classified entirely as available-for-sale. 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. The securities portfolio totaled $382,098 as of December 31, 2000
representing a 4% increase over the prior year-end. For 2000, the growth in
securities was concentrated in corporate issues that helped increase the
duration of the portfolio during a period of historically high rates. In 1999,
security balance growth was limited to leveraging activities that coupled
like-term FHLB advances with securities purchases designed to enhance net
income, earnings per share and return on equity. Growth in securities had
previously been concentrated in tax-exempt issues.

The average yield on the portfolio is 6.7% as of December 31, 2001, down 20
basis points from the prior year-end. During 2001, the Corporation realized
gains on security sales of $642. During 2000, the Corporation realized $2,399
in net losses on the sale of securities while in 1999 net security gains
totaled $312. While rates have moved down over the past year, the Corporation
now has an unrealized gain position for the portfolio of $5.4 million versus
$.4 million the prior year-end. It is anticipated that the Corporation will
move to shorten the average duration of the portfolio as rates are at historic
lows.

23



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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
2001.

|                                                                     |               |                  |         |            |         |       |     |          |     |            |            |            |         |  |         |        |         | 
|-------------------------------------------------------------------- | ------------- | ---------------- | ------- | ---------- | ------- | ----- | --- | -------- | --- | ---------- | ---------- | ---------- | ------- |  | ------- | ------ | ------- | 
|                                                                     |               |                  |         |            |         |       |     |          |     |            | Book Value |            |         |  |        
|                                                                     |               |                  |         |           
|                                                                     |               |                  |         | 2001       |         | 2001  |     | 2000     |     | 1999      
|                                                                     |               |                  |         |           
|                                                                     |               |                  |         | Available- |         |       |     |          |     | Available- |            | Available-
|                                                                     |               |                  |         | for-Sale   |         | Yield |     | for-Sale |     | for-Sale  
|                                                                     |               |                  |         |           
|U. S. Treasury and other U. S. Government
agencies and corporations: |               |                  |         |            |         |       |     |          |     |            |            |            |         |  |         |       
|                                                                     | Under 1 year  |                  | $       | 1,527      |         |       |     | 2.7      | %   |            | $          | 7,322      |         |  | $       | 3,180  |        
|                                                                     | 1 to 5 years  |                  |         | 5,413      |         |       |     | 5.1      |     |            |            | 28,128     |         |  |         | 60,349 |        
|                                                                     | 5 to 10 years |                  |         | 22,108     |         |       |     | 6.4      |     |            |            | 16,292     |         |  |         | 17,802 |        
|                                                                     | Over 10 years |                  |         |           |         |       |     |         |     |            |            |           |         |  |         |       |        
|                                                                     |               |                  |         |           
|                                                                     |               | Total            |         |            | 29,048  |       |     |          | 6.0 |            |            |            | 51,742  |  |         |        | 81,331  | 
|Obligations of states and political subdivisions:                    |               |                  |         |            |         |       |     |          |     |            |            |            |         |  |         |       
|                                                                     | Under 1 year  |                  |         | 1,498      |         |       |     | 6.7      |     |            |            | 1,076      |         |  |         | 259    |        
|                                                                     | 1 to 5 years  |                  |         | 19,858     |         |       |     | 7.4      |     |            |            | 13,458     |         |  |         | 11,065 |        
|                                                                     | 5 to 10 years |                  |         | 29,785     |         |       |     | 7.2      |     |            |            | 38,896     |         |  |         | 41,497 |        
|                                                                     | Over 10 years |                  |         | 17,069     |         |       |     | 7.1      |     |            |            | 13,406     |         |  |         | 24,334 |        
|                                                                     |               |                  |         |           
|                                                                     |               | Total            |         |            | 68,210  |       |     |          | 7.2 |            |            |            | 66,836  |  |         |        | 77,155  | 
|Corporate:                                                           |               |                  |         |            |         |       |     |          |     |            |            |            |         |  |         |       
|                                                                     | Under 1 year  |                  |         | 3,524      |         |       |     | 8.7      |     |            |            | 3,790      |         |  |         |       |        
|                                                                     | 1 to 5 years  |                  |         | 13,650     |         |       |     | 7.1      |     |            |            | 20,558     |         |  |         | 3,163  |        
|                                                                     | 5 to 10 years |                  |         | 15,368     |         |       |     | 7.2      |     |            |            | 7,947      |         |  |         |       |        
|                                                                     | Over 10 years |                  |         | 57,245     |         |       |     | 7.5      |     |            |            | 38,123     |         |  |         | 18,781 |        
|                                                                     |               |                  |         |           
|                                                                     |               | Total            |         |            | 89,787  |       |     |          | 7.4 |            |            |            | 70,418  |  |         |        | 21,944  | 
|Mortgage-backed securities                                           |               |                  | 211,096 |            |         |       | 6.4 |          |     |            | 175,294    |            |         |  | 173,750 |       
|Equity securities                                                    |               |                  | 19,355  |            |         |       | 5.5 |          |     |            | 17,808     |            |         |  | 13,407  |       
|                                                                     |               |                  |         |           
|                                                                     |               | Total securities |         | $          | 417,496 |       |     |          | 6.7 | %          |            | $          | 382,098 |  |         | $      | 367,587 | 
|                                                                     |               |                  |         |           

Mortgage-backed securities have various stated maturities through October 2031.
The estimated weighted-average maturity of this segment of the portfolio is
5.7 years.

24



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##### Table of Contents



Loans:

Listed in the two tables below is the Corporations loan distribution in
dollars as a percent of total loans at the end of each of the last five years:

|                          |  |      |           |      |  |      |           |      |  |      |           |  |  |   |         |  |  |   |         | 
|------------------------- |  | ---- | --------- | ---- |  | ---- | --------- | ---- |  | ---- | --------- |  |  | - | ------- |  |  | - | ------- | 
|Balance distribution      |  | 2001 |           | 2000 |  | 1999 |           | 1998 |  | 1997
|                          |  |     
|Commercial                |  | $    | 508,579   |      |  | $    | 421,229   |      |  | $    | 413,097   |  |  | $ | 373,244 |  |  | $ | 347,173 | 
|Consumer                  |  |      | 316,097   |      |  |      | 302,881   |      |  |      | 216,173   |  |  |   | 230,561 |  |  |   | 238,245 | 
|Real estate mortgage      |  |      | 297,216   |      |  |      | 345,979   |      |  |      | 442,392   |  |  |   | 367,048 |  |  |   | 281,729 | 
|Balance as of December 31 |  | $    | 1,121,892 |      |  | $    | 1,070,089 |      |  | $    | 1,071,662 |  |  | $ | 970,853 |  |  | $ | 867,147 | 

|
|
|
|
|
|
|
|
|
|
|

An analysis of maturity and interest rate sensitivity of commercial loans as of
December 31, 2001 follows:

|                                           |  |          |         |            |  |            |        |       |  |   |         |  |  |   |         | 
|------------------------------------------ |  | -------- | ------- | ---------- |  | ---------- | ------ | ----- |  | - | ------- |  |  | - | ------- | 
|                                           |  | One Year |         | One to     |  | Over       |        |       |  |  
|                                           |  | Or Less  |         | Five Years |  | Five Years |        | Total
|                                           |  |         
|Fixed rate                                 |  | $        | 19,224  |            |  | $          | 68,249 |       |  | $ | 77,753  |  |  | $ | 165,226 | 
|Variable rate (primarily prime rate based) |  |          | 107,198 |            |  |            | 52,964 |       |  |   | 183,191 |  |  |   | 343,353 | 
|                                           |  |         
|Total commercial loans                     |  | $        | 126,422 |            |  | $          | 21,213 |       |  | $ | 260,944 |  |  | $ | 508,579 | 
|                                           |  |         

The Corporation emphasizes on-balance sheet growth in direct consumer and
commercial. 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. The serviced portfolio of
mortgages totaled $813 and $472 million as of December 31, 2001 and 2000,
respectively.

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 $436 and $508 in net
revenues, including $144 and $191 in revenues from the value of the servicing
retained in 2001 and 2000, respectively. The amount of SBA loans being serviced
by the Corporation totaled approximately $13.1 and $13.3 million at December
31, 2001 and 2000, 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 2001:

|                       |  |        |         | 
|---------------------- |  | ------ | ------- | 
|Stratification         |  | Amount
|                      
|Under $1 million       |  | $      | 342,686 | 
|From $1 to $5 million  |  |        | 140,175 | 
|From $5 to $10 million |  |        | 25,718  | 
|Over $10 million       |  |        |        | 
|                       |  |        |        
|Total                  |  | $      | 508,579 | 
|                       |  |        |        

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##### Table of Contents



The Corporation monitors and controls concentrations within a particular
industry or segment. As of December 31, 2001, the Corporation had a
concentration in commercial real estate loans totaling approximately $342
million, approximately 68.3% of which were owner-occupied businesses, including
medical office buildings, retail and fast-food restaurants within the
Corporations market area. The table below details as of December 31, 2001 the
industry concentrations by SIC code that exceed 10% of tier I capital:

|                          |  |          |      |        |  |   |        | 
|------------------------- |  | -------- | ---- | ------ |  | - | ------ | 
|Industry                  |  | SIC Code |      | Amount
|                         
|Non-residential buildings |  |          | 6512 |        |  | $ | 71,520 | 
|Restaurants  retail      |  |          | 5812 |        |  |   | 22,032 | 
|Individuals               |  |          | 8811 |        |  |   | 21,617 | 
|Apartments                |  |          | 6513 |        |  |   | 19,692 | 
|Lessors  real property   |  |          | 6519 |        |  |   | 17,048 | 
|Nursing homes             |  |          | 8051 |        |  |   | 14,516 | 

---

ASSET QUALITY

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

|                                                                  |                                                 |      |        |       |  |      |        |       |  |      |        |       |  |   |        |        |  |   |       |       | 
|----------------------------------------------------------------- | ----------------------------------------------- | ---- | ------ | ----- |  | ---- | ------ | ----- |  | ---- | ------ | ----- |  | - | ------ | ------ |  | - | ----- | ----- | 
|Year Ended December 31                                            |                                                 | 2001 |        | 2000  |  | 1999 |        | 1998  |  | 1997
|                                                                  |                                                 |     
|Balance at January 1                                              |                                                 | $    | 15,217 |       |  | $    | 11,169 |       |  | $    | 10,739 |       |  | $ | 8,837  |        |  | $ | 9,235 |      
|Charge-offs:                                                      |                                                 |      |        |       |  |      |        |       |  |      |        |       |  |   |        |        |  |   |       |      
|                                                                  | Commercial                                      |      |        | 2,486 |  |      |        | 1,702 |  |      |        | 2,430 |  |   |        | 6,734  |  |   |       | 2,435 | 
|                                                                  | Real estate                                     |      |        | 175   |  |      |        | 164   |  |      |        | 86    |  |   |        | 820    |  |   |       | 12    | 
|                                                                  | Consumer                                        |      |        | 3,810 |  |      |        | 2,194 |  |      |        | 1,961 |  |   |        | 3,055  |  |   |       | 2,992 | 
|                                                                  |                                                 |     
|                                                                  |                                                 |      | 6,471  |       |  |      | 4,060  |       |  |      | 4,477  |       |  |   | 10,609 |        |  |   | 5,439 |      
|Recoveries:                                                       |                                                 |      |        |       |  |      |        |       |  |      |        |       |  |   |        |        |  |   |       |      
|                                                                  | Commercial                                      |      |        | 707   |  |      |        | 533   |  |      |        | 901   |  |   |        | 1,213  |  |   |       | 108   | 
|                                                                  | Real estate                                     |      |        | 5     |  |      |        | 8     |  |      |        | 4     |  |   |        | 50     |  |   |       |      | 
|                                                                  | Consumer                                        |      |        | 641   |  |      |        | 438   |  |      |        | 807   |  |   |        | 669    |  |   |       | 717   | 
|                                                                  |                                                 |     
|                                                                  |                                                 |      | 1,353  |       |  |      | 979    |       |  |      | 1,712  |       |  |   | 1,932  |        |  |   | 825   |      
|Net charge-offs                                                   |                                                 |      | 5,118  |       |  |      | 3,081  |       |  |      | 2,765  |       |  |   | 8,677  |        |  |   | 4,614 |      
|Acquired reserves:                                                |                                                 |      | 1,878  |       |  |      |       |       |  |      |       |       |  |   |       |        |  |   |      |      
|                                                                  | Provision for loan losses charged to
operations |      |        | 4,718 |  |      |        | 7,129 |  |      |        | 3,195 |  |   |        | 10,579 |  |   |       | 4,205 | 
|                                                                  |                                                 |     
|Balance at December 31                                            |                                                 | $    | 16,695 |       |  | $    | 15,217 |       |  | $    | 11,169 |       |  | $ | 10,739 |        |  | $ | 8,826 |      
|                                                                  |                                                 |     
|                                                                 
|Allowance for loan losses as a percentage
of year-end loans       |                                                 |      | 1.49   | %     |  |      | 1.42   | %     |  |      | 1.04   | %     |  |   | 1.11   | %      |  |   | 1.02  | %    
|Allowance for loan losses as a percentage
of non-performing loans |                                                 |      | 158    | %     |  |      | 191    | %     |  |      | 188    | %     |  |   | 155    | %      |  |   | 128   | %    

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

|                                       |  |      |      |      |  |      |      |      |  |      |      |   |  |  |      |   |  |  |      |  
|-------------------------------------- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- | - |  |  | ---- | - |  |  | ---- | -
|Year Ended December 31                 |  | 2001 |      | 2000 |  | 1999 |      | 1998 |  | 1997
|                                       |  |     
|Commercial                             |  |      | 0.44 | %    |  |      | 0.29 | %    |  |      | 0.40 | % |  |  | 1.55 | % |  |  | 0.68 | %
|Real estate mortgage                   |  |      | 0.04 | %    |  |      | 0.04 | %    |  |      | 0.02 | % |  |  | 0.23 | % |  |  |     |  
|Consumer                               |  |      | 1.22 | %    |  |      | 0.68 | %    |  |      | 0.53 | % |  |  | 0.98 | % |  |  | 0.85 | %
|Total net charge-offs to average
loans |  |      | 0.47 | %    |  |      | 0.28 | %    |  |      | 0.27 | % |  |  | 0.92 | % |  |  | 0.53 | %

26



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##### Table of Contents



The balance of the allowance for loan losses has increased steadily from 1997
to 2001 as outstanding loan balances
increased and the risk characteristics of the portfolios shifted from lower
risk residential real estate loans to higher risk consumer and commercial
loans. The allowance for loan losses was $16,695, or 1.49% of loans as of
December 31, 2001. The allowance represents 158% of non-performing loans, which
is lower than the coverage of non-performing loans at the end of the previous
two years. With approximately $3 million of the non-performing loan balances as
of December 31, 2001 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 .44% of commercial loans, representing a more normalized level of loss
experience. The .29% commercial charge-off rate in 2000 represented the low
point for these charge-offs for the past five years. Consumer charge-offs
increased by 74% from 2000 as losses on indirect automobile lending increased
starting in the second quarter of 2001. The increase was a result of increased
losses per vehicle due to a soft resell market and an increase in voluntary
surrender of vehicles. The underwriting standards were revised to include,
among other factors, a reduced level of loan advance to vehicle value. The
underwriting changes have resulted in a decline in new loan origination and a
subsequent decline in the indirect automobile concentration within the consumer
loan portfolio. Indirect automobile loans totaled $132 million at the end of
2001 as compared to $145 million as of December 31, 2000.

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

|              |  |      |        |      |  |      |        |      |  |             |        |  |  |   |        |  |  |   |       | 
|------------- |  | ---- | ------ | ---- |  | ---- | ------ | ---- |  | ----------- | ------ |  |  | - | ------ |  |  | - | ----- | 
|              |  |      |        |      |  |      |        |      |  | December 31 |        |  |  |   |        |  |  |  
|Loan Category |  | 2001 |        | 2000 |  | 1999 |        | 1998 |  | 1997       
|              |  |     
|Commercial    |  | $    | 11,673 |      |  | $    | 9,927  |      |  | $           | 7,449  |  |  | $ | 7,351  |  |  | $ | 4,817 | 
|Consumer      |  |      | 4,762  |      |  |      | 5,161  |      |  |             | 2,587  |  |  |   | 1,952  |  |  |   | 3,311 | 
|Real Estate   |  |      | 260    |      |  |      | 129    |      |  |             | 1,133  |  |  |   | 1,436  |  |  |   | 698   | 
|              |  |     
|Total         |  | $    | 16,695 |      |  | $    | 15,217 |      |  | $           | 11,169 |  |  | $ | 10,739 |  |  | $ | 8,826 | 
|              |  |     

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. 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, 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 individual loans 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.

Below is a table listing the non-accrual, past due and restructured loans at
the end of the last five years:

|                             |       |   |       |        |      |   |       |       |      |   |       |       |  |   |       |       |  |   |       |       | 
|---------------------------- | ----- | - | ----- | ------ | ---- | - | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- |  | - | ----- | ----- | 
|                             |       |   | 2001  |        | 2000 |   | 1999  |       | 1998 |   | 1997 
|                             |       |   |      
|Non-accrual loans            |       | $ | 5,004 |        |      | $ | 4,699 |       |      | $ | 2,743 |       |  | $ | 4,130 |       |  | $ | 5,819 |      
|Past due loans               |       |   | 5,304 |        |      |   | 3,239 |       |      |   | 3,132 |       |  |   | 2,725 |       |  |   | 1,075 |      
|Restructured loans           |       |   | 258   |        |      |   | 43    |       |      |   | 52    |       |  |   | 61    |       |  |   | 13    |      
|                             |       |   |      
|                             | Total |   | $     | 10,566 |      |   | $     | 7,981 |      |   | $     | 5,927 |  |   | $     | 6,916 |  |   | $     | 6,907 | 
|                             |       |   |      
|Percent of loans at year end |       |   | 0.94  | %      |      |   | 0.75  | %     |      |   | 0.55  | %     |  |   | 0.71  | %     |  |   | 0.80  | %    
|Other real estate owned      |       | $ | 1,399 |        |      | $ | 902   |       |      | $ | 281   |       |  | $ | 79    |       |  | $ |      |      

Loans 30 to 89 days past due, where the monthly payment is more than 30 days
past due but less than 89 days past the payment date, excluding non-accrual and
restructured loans included in the table above, amounted to $9,740 or 0.87% of
outstanding loans, as of December 31, 2001, as compared to $7,356, or .69% of
loans on December 31, 2000. Loans then current where some concerns existed as
to ability of the borrower to comply with loan repayment terms approximated
$62,429 at December 31, 2001 and $28,536 on December 31, 2000. Such loans have
been and are being closely monitored by Management.

27



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##### Table of Contents



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 portfolios 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 2001 was $4,718, compared to $7,129 for 2000 and $3,195 in 1999. The
changes in the provision for loan losses were attributable to changes in 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.



---

FUNDING SOURCES
Deposits:

|                                                      |  |      |           |      |  |      |           |  |  |   |           | 
|----------------------------------------------------- |  | ---- | --------- | ---- |  | ---- | --------- |  |  | - | --------- | 
|The average amounts of deposits are summarized below: |  | 2001 |           | 2000 |  | 1999
|                                                      |  |     
|Demand deposits  non-interest bearing                |  | $    | 115,857   |      |  | $    | 112,185   |  |  | $ | 108,778   | 
|Demand deposits  interest bearing                    |  |      | 90,762    |      |  |      | 86,818    |  |  |   | 92,350    | 
|Savings deposits                                      |  |      | 242,242   |      |  |      | 266,863   |  |  |   | 279,305   | 
|Time deposits                                         |  |      | 621,578   |      |  |      | 625,575   |  |  |   | 611,827   | 
|                                                      |  |     
|Total                                                 |  | $    | 1,070,439 |      |  | $    | 1,091,441 |  |  | $ | 1,092,260 | 
|                                                      |  |     

Average deposits declined slightly in 2001 after remaining virtually unchanged
in 2000. Increases in average non interest-bearing and interest-bearing demand
deposit balances did not offset the declines in average savings and time
deposit balances. Loan balance reductions, primarily in residential real estate
loans allowed the Corporation to reduce balances in higher cost time deposits
and be aggressive in pricing down other savings accounts during the period of
falling interest rates, resulting in some balance runoff. Average interest
bearing demand deposits and savings deposits declined during 2000 as the
Corporation utilized FHLB advances to supplement funding at rates and maturity
structures more favorable than what was available in the retail market.

The following is a maturity distribution for the $596,329 of time deposits
outstanding as of December 31, 2001:

|           |      |  |       |         | 
|---------- | ---- |  | ----- | ------- | 
|           | 2002 |  | $     | 441,885 | 
|           | 2003 |  |       | 112,585 | 
|           | 2004 |  |       | 28,224  | 
|           | 2005 |  |       | 5,859   | 
|           | 2006 |  |       | 5,635   | 
|Thereafter |      |  | 2,141 |        

On December 31, 2001 time deposits over $100 totaled $126,996. 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 was to supply
short-term funding during a period of declining interest rates. The maturity
schedule for time deposits over $100 as of December 31 is given in the table
below:

|             |                  |      |         |        |  |   |        |        | 
|------------ | ---------------- | ---- | ------- | ------ |  | - | ------ | ------ | 
|Maturing in: |                  | 2001 |         | 2000  
|             |                  |      |        
|             | 3 months or less |      | $       | 84,107 |  |   | $      | 42,168 | 
|             | 3 to 6 months    |      |         | 30,085 |  |   |        | 16,395 | 
|             | 6 to 12 months   |      |         | 9,995  |  |   |        | 27,065 | 
|             | Over 12 months   |      |         | 2,809  |  |   |        | 10,960 | 
|             |                  |      |        
|Total        |                  | $    | 126,996 |        |  | $ | 96,588 |       
|             |                  |      |        

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Other Sources of Funds:
The Corporation has the availability to borrow $36 million from correspondent
banks as overnight federal funds purchased. There were no federal funds
purchased at December 31, 2001, while $29 million and $0 were outstanding at
December 31, 2000 and 1999. 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 $107,160 and $100,609 as of December 31, 2001 and 2000,
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, 2001, 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:

|                                                           |  |      |         |      |  |      |         |   |  |   |         |  
|---------------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                                           |  | 2001 |         | 2000 |  | 1999
|                                                           |  |     
|Outstanding at December 31                                 |  | $    | 107,279 |      |  | $    | 100,895 |   |  | $ | 106,532 |  
|Weighted-average interest rate at December 31              |  |      | 3.58    | %    |  |      | 4.49    | % |  |   | 4.46    | %
|Maximum amount outstanding as of any month end             |  | $    | 133,743 |      |  | $    | 120,026 |   |  | $ | 166,043 |  
|Average amount outstanding                                 |  | $    | 109,476 |      |  | $    | 105,850 |   |  | $ | 135,259 |  
|Approximate weighted-average interest rate during the year |  |      | 3.40    | %    |  |      | 4.50    | % |  |   | 4.61    | %

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 $116.1 million in 2001 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. There
were no balances outstanding on the lines at the end of 2001. As of December
31, 2000, the Corporation had utilized $1 million in borrowings under these
lines.

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 $5,853 and $2,163 as of December 31,
2001 and 2000, respectively. The Corporation occasionally uses federal funds
purchased from other financial institutions as a source of short-term funding.
The Corporation had no federal funds purchased as of December 31, 2001 and $29
million outstanding as of December 31, 2000.

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. The balances of these advances were $275,152
and $251,733 as of December 31, 2001 and 2000, respectively.

Most recently, the Corporation has utilized the issuance of
corporation-obligated mandatorily redeemable securities of subsidiary trust,
more commonly known as trust preferred securities, to raise additional funding.
The securities are traded under the symbol SECDP on the NASDAQ National Market
System. The Corporation raised $32 million in these securities in 2001,
primarily to fund the Commerce acquisition. The securities qualify as tier I
capital for regulatory purposes and also bear interest that is tax deductible
to the Corporation.

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CAPITAL
The shareholders equity increased to $128,299 at December 31, 2001 from
$117,197 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 (SFAS No. 115 adjustment of $3,224 in 2001)
resulted in a net unrealized gain position within other comprehensive income of
$3,505 at December 31, 2001.

In 2000, total shareholders equity increased to $117,197 at December 31, 2000
from $116,347 a year earlier. The increase was attributable to the increase in
market values for the available-for-sale securities. The increase offset the
treasury share repurchase activities. The impact of the change in unrealized
market value adjustment on securities available-for-sale, net of tax (SFAS No.
115 adjustment of $8,072 in 2000) resulted in a net unrealized gain position of
$281 at December 31, 2000 versus a net unrealized loss position of $7,791 at
December 31, 1999.

As of December 31, 1998, the Corporation had 50,400 shares held in treasury at
a cost of $793. On August 10, 1999, the Board of Directors authorized the
discretionary buy-back of up to 500,000 shares of common stock. As of December
31, 1999, 254,100 shares had been repurchased bring the total shares in
treasury to 304,500. The number of shares authorized for repurchase was
increased to 600,000 on April 20, 2000. The 600,000-share repurchase was
completed on October 11, 2000. On October 12, 2000 the Board of Directors
authorized the repurchase of up to 2% of outstanding shares on an annual basis.
In 2001, the Corporation repurchased approximately 152,000 shares and the
authorization to repurchase up to 2% of outstanding shares was renewed. As of
December 31, 2001 there were 883,494 shares in treasury and another 133,756
remaining shares to be repurchased under the current authorization.

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 16.

The Corporation trades under the symbol SECD on the NASDAQ National Market
System. The total market capitalization of the Corporation was approximately
$215 million at December 31, 2001. 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
|                   |      |       |    
|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 |      
|2000:              |      |       |     |        |  |       |     |        |  |      |     |       |  |  |     |       |  |  |     |      
|                   | High |       | $   | 22.31  |  |       | $   | 18.13  |  |      | $   | 16.31 |  |  | $   | 16.94 |  |  | $   | 22.31 | 
|                   | Low  |       |     | 17.06  |  |       |     | 12.25  |  |      |     | 13.75 |  |  |     | 12.13 |  |  |     | 12.13 | 
|Dividends Declared |      |       | .16 |        |  |       | .16 |        |  |      | .16 |       |  |  | .16 |       |  |  | .64 |      
|1999               |      |       |     |        |  |       |     |        |  |      |     |       |  |  |     |       |  |  |     |      
|                   | High |       | $   | 24.00  |  |       | $   | 29.50  |  |      | $   | 30.75 |  |  | $   | 27.00 |  |  | $   | 30.75 | 
|                   | Low  |       |     | 19.06  |  |       |     | 21.00  |  |      |     | 24.00 |  |  |     | 22.38 |  |  |     | 19.06 | 
|Dividends Declared |      |       | .14 |        |  |       | .14 |        |  |      | .14 |       |  |  | .14 |       |  |  | .56 |      

The Corporations price for its common stock increased by 49% in 2001 while the
trading range of $13.75 to $23.00 per
share was virtually unchanged from the prior year. Steady improvement in the
common stock price paralleled the Corporations improved financial performance.
The Corporations stock has most recently traded slightly below the price
earnings ratio for peer banks. Bank stock prices in general were subject to
downward pressure in 2000 with the increase in market rates associated with
Federal Open Market Committee activities and some rebounded in 2001 as market
rates declined. Book value per common share was $12.90 and $11.65 at December
31, 2001 and 2000, respectively.

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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 2001, 2000 and 1999, the dividend-payout
ratio for the Corporation was 39.8%, 106.3%, and 36.7%, respectively. The
unusually high dividend payout ratios for 2000 were attributable to the impact
of restructuring activities.

---

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 $36 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 net cash provided by operating activities for 2001, 2000 and 1999
were approximately $22 million, $16 million and $20 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 and foreseeable future
liquidity. As discussed in Note 16, 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
stockholders.

---

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 review 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 pay downs of
securities and early withdrawals of deposits. Variable rate instruments
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.

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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 decrease by 4.7%
if interest rates would immediately fall by 200 basis points and increase by
2.0% if interest rates would immediately rise by 200 basis points. This
represents a similar interest rate risk position as the prior year. At December
31, 2000 the model projected net income would decrease by 3.5% if interest
rates would immediately fall by 200 basis points and would increase by 2.1% if
interest rates would immediately rise by 200 basis points. The reason for the
apparent mismatch in net income movement between the up 200 basis point shock
scenario and down 200 basis point shock scenario as of December 31, 2001 is due
to the low historical level of market rates, which may not permit some funding
instruments to fully reprice lower if rates were to fall another 200 basis
points. Management believes this asset sensitive position for the one-year
time horizon is within acceptable levels of risk tolerance and is also within
the Board approved levels of 5% variance in net income. 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.

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 off-balance sheet swaps, caps and floors.

---

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 Companys financial statements. The significant
accounting principles of the Corporation are described in the footnotes to the
consolidated financial statements. Certain accounting policies involve
significant judgements 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
judgements 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 judgements and assumptions made by
Management, actual results could differ from these judgements 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
judgements and estimates used in preparation of
its consolidated financial statements. Refer to the section entitled Allowance
for Loan Losses and Note 1. 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 Rights: The Corporation believes the valuations
of mortgage servicing rights is a critical accounting policy that requires
significant estimates in preparation of its consolidated financial statements.
The Company 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 Mortgage
Servicing Rights and Note 1, Statement of Accounting Policies, for a detailed
description of the Companys process and methodology.

FASB 91  Deferral of Fees: The Corporation believes that SFAS No. 91 
Deferral of fees is a critical accounting policy that utilizes estimates in its
preparation of its consolidated financial statements. The Company accounts for
loan origination and commitment fees and certain direct loan origination cost
by deferring the net fees, or net costs, and amortizing them as an adjustment
of the related loans yield. Refer to the section entitled Revenue Recognition
and
Note 1, Statement of Accounting Policies, for a detailed description of the
Companys process and methodology.

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CONTRACTUAL OBLIGATIONS AND COMMITMENTS
As disclosed in the Notes to the Consolidated Financial Statements, the
Corporation has certain obligations and commitments to make future payments
under contracts. At December 31, 2001, the aggregate contractual obligations
and commitments are:

|                                                      |  |       |         |        |  |           |       |       |  |         |        |  |  |   |         | 
|----------------------------------------------------- |  | ----- | ------- | ------ |  | --------- | ----- | ----- |  | ------- | ------ |  |  | - | ------- | 
|Contractual obligations                               |  |       |         |        |  | Less than |       | 2-5   |  | After 5
|Principal due by period                               |  | Total |         | 1 year |  | Years     |       | Years
|                                                      |  |      
|Long-term debt                                        |  | $     | 305,594 |        |  | $         | 3,139 |       |  | $       | 25,000 |  |  | $ | 277,455 | 
|Annual rental commitments under
non-cancelable leases |  |       | 14,130  |        |  |           | 2,069 |       |  |         | 7,226  |  |  |   | 4,835   | 
|                                                      |  |      
|Total                                                 |  | $     | 319,724 |        |  | $         | 5,208 |       |  | $       | 32,226 |  |  | $ | 282,290 | 
|                                                      |  |      

|                                              |  |       |         |        |  |           |         |       |  |         |        |  |  |   |       | 
|--------------------------------------------- |  | ----- | ------- | ------ |  | --------- | ------- | ----- |  | ------- | ------ |  |  | - | ----- | 
|Amount of commitment                          |  |       |         |        |  | Less than |         | 2-5   |  | After 5
|Expiration by period                          |  | Total |         | 1 year |  | Years     |         | Years
|                                              |  |      
|Commitments to lend  commercial              |  | $     | 108,810 |        |  | $         | 93,667  |       |  | $       | 13,353 |  |  | $ | 1,790 | 
|Commitments to lend  residential real estate |  |       | 29,600  |        |  |           | 29,600  |       |  |         |       |  |  |   |      | 
|Commitments to lend  consumer                |  |       | 57,944  |        |  |           | 57,944  |       |  |         |       |  |  |   |      | 
|Stand-by letters of credit                    |  |       | 4,796   |        |  |           | 4,002   |       |  |         | 419    |  |  |   | 375   | 
|                                              |  |      
|Total                                         |  | $     | 201,150 |        |  | $         | 185,213 |       |  | $       | 13,772 |  |  | $ | 2,165 | 
|                                              |  |      




Item 7 (a).     QUANITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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Item 8.     Financial Statements and Supplementary Data

|                                                                                                                                 |                                      |                                             |                                            |         |      |           |           |         |   |           | 
|-------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------ | ------------------------------------------- | ------------------------------------------ | ------- | ---- | --------- | --------- | ------- | - | --------- | 
|Consolidated Balance Sheets                                                                                                      |                                      |                                             |                                            |         |      |           |           |        
|Second Bancorp Incorporated and Subsidiaries                                                                                     |                                      | Dollars in thousands, except per share data
|ASSETS                                                                                                                           |                                      | December 31                                
|                                                                                                                                 |                                      |                                             |                                            |         | 2001 |           | 2000     
|                                                                                                                                 |                                      |                                             |                                            |         |     
|Cash and due from banks                                                                                                          |                                      | $                                           | 40,837                                     |         |      | $         | 35,272    |        
|Federal funds sold and temporary investments                                                                                     |                                      |                                             | 24,016                                     |         |      |           |          |        
|Securities:                                                                                                                      |                                      |                                             |                                            |         |      |           |           |        
|                                                                                                                                 | Available-for-sale (at market value) |                                             |                                            | 417,496 |      |           |           | 382,098 |  
|                                                                                                                                 |                                      |                                             | Trading account                            |         |      |          |           |         |   | 328       | 
|                                                                                                                                 |                                      |                                             |                                            |         |     
|                                                                                                                                 |                                      |                                             | Total securities                           |         |      | 417,496   |           |         |   | 382,426   | 
|Loans                                                                                                                            |                                      |                                             | 1,121,892                                  |         |      |           | 1,070,089 |        
|Less allowance for loan losses                                                                                                   |                                      |                                             | 16,695                                     |         |      |           | 15,217    |        
|                                                                                                                                 |                                      |                                             |                                            |         |     
|                                                                                                                                 |                                      |                                             | Net loans                                  |         |      | 1,105,197 |           |         |   | 1,054,872 | 
|Premises and equipment                                                                                                           |                                      |                                             | 16,416                                     |         |      |           | 18,039    |        
|Accrued interest receivable                                                                                                      |                                      |                                             | 10,272                                     |         |      |           | 11,181    |        
|Goodwill and intangible assets                                                                                                   |                                      |                                             | 26,578                                     |         |      |           | 6,038     |        
|Other assets                                                                                                                     |                                      |                                             | 39,544                                     |         |      |           | 38,462    |        
|                                                                                                                                 |                                      |                                             |                                            |         |     
|                                                                                                                                 |                                      |                                             | Total assets                               |         | $    | 1,680,356 |           |         | $ | 1,546,290 | 
|                                                                                                                                 |                                      |                                             |                                            |         |     
|                                                                                                                                
|LIABILITIES AND SHAREHOLDERS EQUITY
Deposits:                                                                                   |                                      |                                             |                                            |         |      |           |           |        
|                                                                                                                                 | Demand  non-interest bearing        |                                             | $                                          | 144,953 |      |           | $         | 110,045 |  
|                                                                                                                                 | Demand  interest bearing            |                                             |                                            | 105,221 |      |           |           | 87,268  |  
|                                                                                                                                 | Savings                              |                                             |                                            | 276,628 |      |           |           | 246,056 |  
|                                                                                                                                 | Time deposits                        |                                             |                                            | 596,329 |      |           |           | 592,766 |  
|                                                                                                                                 |                                      |                                             |                                            |         |     
|                                                                                                                                 |                                      |                                             | Total deposits                             |         |      | 1,123,131 |           |         |   | 1,036,135 | 
|Federal funds purchased and securities sold
under agreements to repurchase                                                       |                                      |                                             | 107,279                                    |         |      |           | 129,895   |        
|Note payable                                                                                                                     |                                      |                                             |                                           |         |      |           | 1,000     |        
|Other borrowed funds                                                                                                             |                                      |                                             | 5,853                                      |         |      |           | 2,163     |        
|Federal Home Loan Bank advances                                                                                                  |                                      |                                             | 275,152                                    |         |      |           | 251,733   |        
|Accrued expenses and other liabilities                                                                                           |                                      |                                             | 10,200                                     |         |      |           | 8,167     |        
|Corporation-obligated mandatorily redeemable capital securities of subsidiary trust                                              |                                      |                                             | 30,442                                     |         |      |           |          |        
|                                                                                                                                 |                                      |                                             |                                            |         |     
|                                                                                                                                 |                                      |                                             | Total liabilities                          |         |      | 1,552,057 |           |         |   | 1,429,093 | 
|Shareholders equity:                                                                                                            |                                      |                                             |                                            |         |      |           |           |        
|Common Stock, no par value; 30,000,000 shares authorized;
10,832,810 and 10,787,310 shares issued in 2001 and 2000, respectively |                                      |                                             | 37,453                                     |         |      |           | 36,935    |        
|Treasury stock, at cost; 883,494 and 730,200 shares, respectively                                                                |                                      |                                             | (16,798                                    | )       |      |           | (13,947   | )      
|Accumulated other comprehensive income                                                                                           |                                      |                                             | 3,434                                      |         |      |           | 281       |        
|Retained earnings                                                                                                                |                                      |                                             | 104,210                                    |         |      |           | 93,928    |        
|                                                                                                                                 |                                      |                                             |                                            |         |     
|                                                                                                                                 |                                      |                                             | Total shareholders equity                 |         |      | 128,299   |           |         |   | 117,197   | 
|                                                                                                                                 |                                      |                                             |                                            |         |     
|                                                                                                                                 |                                      |                                             | Total liabilities and shareholders equity |         | $    | 1,680,356 |           |         | $ | 1,546,290 | 
|                                                                                                                                 |                                      |                                             |                                            |         |     

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|                                                                                    |                                                         |                                                     |        |                       |         |      |        |            |         |   |        |            |         | 
|----------------------------------------------------------------------------------- | ------------------------------------------------------- | --------------------------------------------------- | ------ | --------------------- | ------- | ---- | ------ | ---------- | ------- | - | ------ | ---------- | ------- | 
|Consolidated Statements of Income                                                   |                                                         |                                                     |        |                       |         |      |        |            |         |   |        |           
|Second Bancorp Incorporated and Subsidiaries                                        |                                                         | Dollars in thousands, except per share data        
|                                                                                   
|                                                                                    |                                                         |                                                     |        | For the Calendar Year
|INTEREST INCOME                                                                     |                                                         | 2001                                                |        | 2000                  |         | 1999
|                                                                                    |                                                         |                                                     |        |                      
|Loans (including fees):                                                             |                                                         |                                                     |        |                       |         |      |        |            |         |   |        |           
|                                                                                    | Taxable                                                 |                                                     | $      | 85,631                |         |      | $      | 90,819     |         |   | $      | 80,873     |        
|                                                                                    | Exempt from federal income taxes                        |                                                     |        | 1,092                 |         |      |        | 1,014      |         |   |        | 681        |        
|Securities:                                                                         |                                                         |                                                     |        |                       |         |      |        |            |         |   |        |           
|                                                                                    | Taxable                                                 |                                                     |        | 21,614                |         |      |        | 20,970     |         |   |        | 18,446     |        
|                                                                                    | Exempt from federal income taxes                        |                                                     |        | 3,137                 |         |      |        | 3,209      |         |   |        | 3,781      |        
|Federal funds sold and other                                                        |                                                         |                                                     | 1,083  |                       |         |      | 286    |            |         |   | 891    |           
|                                                                                    |                                                         |                                                     |        |                      
|                                                                                    |                                                         | Total interest income                               |        |                       | 112,557 |      |        |            | 116,298 |   |        |            | 104,582 | 
|                                                                                    |                                                         |                                                     |        |                       |         |      |        |            |         |   |        |           
|INTEREST EXPENSE                                                                    |                                                         |                                                     |        |                       |         |      |        |            |         |   |        |           
|Deposits                                                                            |                                                         |                                                     | 42,010 |                       |         |      | 46,236 |            |         |   | 41,938 |           
|Federal funds purchased and securities
sold under agreements to repurchase          |                                                         |                                                     | 3,904  |                       |         |      | 5,540  |            |         |   | 5,781  |           
|Note payable                                                                        |                                                         |                                                     | 47     |                       |         |      | 25     |            |         |   | 64     |           
|Other borrowed funds                                                                |                                                         |                                                     | 90     |                       |         |      | 172    |            |         |   | 155    |           
|Federal Home Loan Bank advances                                                     |                                                         |                                                     | 15,567 |                       |         |      | 14,948 |            |         |   | 7,372  |           
|Corporation-obligated mandatorily redeemable
capital securities of subsidiary trust |                                                         |                                                     | 749    |                       |         |      |       |            |         |   |       |           
|                                                                                    |                                                         |                                                     |        |                      
|                                                                                    |                                                         | Total interest expense                              |        |                       | 62,367  |      |        |            | 66,921  |   |        |            | 55,310  | 
|                                                                                    |                                                         |                                                     |        |                      
|Net interest income                                                                 |                                                         |                                                     | 50,190 |                       |         |      | 49,377 |            |         |   | 49,272 |           
|Provision for loan losses                                                           |                                                         |                                                     | 4,718  |                       |         |      | 7,129  |            |         |   | 3,195  |           
|                                                                                    |                                                         |                                                     |        |                      
|                                                                                    |                                                         | Net interest income after provision for loan losses |        |                       | 45,472  |      |        |            | 42,248  |   |        |            | 46,077  | 
|                                                                                    |                                                         |                                                     |        |                       |         |      |        |            |         |   |        |           
|NON-INTEREST INCOME                                                                 |                                                         |                                                     |        |                       |         |      |        |            |         |   |        |           
|Service charges on deposit accounts                                                 |                                                         |                                                     | 5,302  |                       |         |      | 4,406  |            |         |   | 4,309  |           
|Trust fees                                                                          |                                                         |                                                     | 2,870  |                       |         |      | 3,898  |            |         |   | 3,534  |           
|Security gains (losses)                                                             |                                                         |                                                     | 642    |                       |         |      | (2,399 | )          |         |   | 312    |           
|Gain (loss) on sale of loans                                                        |                                                         |                                                     | 5,814  |                       |         |      | (2,001 | )          |         |   | 2,066  |           
|Trading gains (losses)                                                              |                                                         |                                                     | 19     |                       |         |      | (335   | )          |         |   |       |           
|Other operating income                                                              |                                                         |                                                     | 4,881  |                       |         |      | 4,706  |            |         |   | 4,571  |           
|                                                                                    |                                                         |                                                     |        |                      
|                                                                                    |                                                         | Total non-interest income                           |        |                       | 19,528  |      |        |            | 8,275   |   |        |            | 14,792  | 
|                                                                                    |                                                         |                                                     |        |                       |         |      |        |            |         |   |        |           
|NON-INTEREST EXPENSE                                                                |                                                         |                                                     |        |                       |         |      |        |            |         |   |        |           
|Salaries and employee benefits                                                      |                                                         |                                                     | 21,544 |                       |         |      | 20,817 |            |         |   | 19,054 |           
|Net occupancy                                                                       |                                                         |                                                     | 4,263  |                       |         |      | 4,191  |            |         |   | 4,134  |           
|Equipment                                                                           |                                                         |                                                     | 3,891  |                       |         |      | 3,985  |            |         |   | 3,418  |           
|Professional services                                                               |                                                         |                                                     | 1,776  |                       |         |      | 3,476  |            |         |   | 2,192  |           
|Assessment on deposits and other taxes                                              |                                                         |                                                     | 1,542  |                       |         |      | 1,684  |            |         |   | 1,689  |           
|Amortization of goodwill and other intangibles                                      |                                                         |                                                     | 377    |                       |         |      | 555    |            |         |   | 685    |           
|Merger-related costs                                                                |                                                         |                                                     | 305    |                       |         |      |       |            |         |   |       |           
|Other operating expenses                                                            |                                                         |                                                     | 8,241  |                       |         |      | 9,505  |            |         |   | 8,158  |           
|                                                                                    |                                                         |                                                     |        |                      
|                                                                                    |                                                         | Total non-interest expense                          |        |                       | 41,939  |      |        |            | 44,213  |   |        |            | 39,330  | 
|                                                                                    |                                                         |                                                     |        |                      
|Income before federal income taxes                                                  |                                                         |                                                     | 23,061 |                       |         |      | 6,310  |            |         |   | 21,539 |           
|Income tax expense (benefit):                                                       |                                                         |                                                     |        |                       |         |      |        |            |         |   |        |           
|                                                                                    | Current                                                 |                                                     |        | 4,050                 |         |      |        | 1,415      |         |   |        | 4,516      |        
|                                                                                    | Deferred                                                |                                                     |        | 1,830                 |         |      |        | (1,239     | )       |   |        | 845        |        
|                                                                                    |                                                         |                                                     |        |                      
|                                                                                    |                                                         | Total federal income tax expense                    |        |                       | 5,880   |      |        |            | 176     |   |        |            | 5,361   | 
|                                                                                    |                                                         |                                                     |        |                      
|Net income before cumulative effect of
accounting change                            |                                                         | $                                                   | 17,181 |                       |         | $    | 6,134  |            |         | $ | 16,178 |           
|                                                                                    |                                                         |                                                     |        |                      
|Cumulative effect of accounting change, net of tax  SFAS No. 133                   |                                                         |                                                     | (101   | )                     |         |      |       |            |         |   |       |           
|Net income                                                                          |                                                         | $                                                   | 17,080 |                       |         | $    | 6,134  |            |         | $ | 16,178 |           
|                                                                                    |                                                         |                                                     |        |                      
|Earnings per common share:                                                          |                                                         |                                                     |        |                       |         |      |        |            |         |   |        |           
|                                                                                    | Basic  before cumulative effect of accounting change   |                                                     | $      | 1.72                  |         |      | $      | 0.60       |         |   | $      | 1.52       |        
|                                                                                    | Diluted  before cumulative effect of accounting change |                                                     |        | 1.70                  |         |      |        | 0.60       |         |   |        | 1.51       |        
|                                                                                    | Basic                                                   |                                                     |        | 1.71                  |         |      |        | 0.60       |         |   |        | 1.52       |        
|                                                                                    | Diluted                                                 |                                                     |        | 1.69                  |         |      |        | 0.60       |         |   |        | 1.51       |        
|Average common shares outstanding:                                                  |                                                         |                                                     |        |                       |         |      |        |            |         |   |        |           
|                                                                                    | Basic                                                   |                                                     |        | 10,247,025            |         |      |        | 10,247,025 |         |   |        | 10,635,852 |        
|                                                                                    | Diluted                                                 |                                                     |        | 10,271,548            |         |      |        | 10,271,548 |         |   |        | 10,698,717 |        

35



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##### Table of Contents



|                                                                                                                                                           |                               |   |        |   |          |                                             |               |   |          |   |             |   |        |   |               |        |   |   |          |        |   |   |          |   |  |  |  |  | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------- | - | ------ | - | -------- | ------------------------------------------- | ------------- | - | -------- | - | ----------- | - | ------ | - | ------------- | ------ | - | - | -------- | ------ | - | - | -------- | - |  |  |  |  | 
|Consolidated Statements of Cash Flows                                                                                                                      |                               |   |        |   |          | Dollars in thousands, except per share data
|Second Bancorp Incorporated and Subsidiaries                                                                                                               |                               |   |        |   |          |                                             |               |   |          |   |             |   |        |   |               |        |   |   |          |        |   |   |          |   |  |  |  | 
|                                                                                                                                                           |                               |   |        |   |          |                                             |               |   |          |   | Accumulated |   |        |   |               |        |   |   |          |        |   |   |          |   |  |  | 
|                                                                                                                                                           |                               |   |        |   |          |                                             |               |   |          |   | Other       |   |        |   |               |        |   |   |          |        |   |   |          |   |  |  | 
|                                                                                                                                                           |                               |   | Common |   | Treasury |                                             | Comprehensive |   | Retained |   |             |   |        |   | Comprehensive |        |   |   |         
|                                                                                                                                                           |                               |   | Stock  |   | Stock    |                                             | Income        |   | Earnings |   | Total       |   | Income |   |               |        |  
|                                                                                                                                                           |                               |  
|Balance, January 1, 1999                                                                                                                                   |                               | $ | 36,901 |   |          | $                                           | (793          | ) |          | $ | 3,097       |   |        | $ | 84,068        |        |   | $ | 123,273  |        |   |   |          |  
|Comprehensive income:                                                                                                                                      |                               |   |        |   |          |                                             |               |   |          |   |             |   |        |   |               |        |   |   |          |        |   |   |          |  
|Net income                                                                                                                                                 |                               |   |        |   |          |                                             |               |   |          |   |             |   |        |   | 16,178        |        |   |   | 16,178   |        |   | $ | 16,178   |  
|Change in unrealized gain on
securities of $17,063, net of reclassification adjustment for gains included
in net income of $312 and net of
tax of $(5,863) |                               |   |        |   |          |                                             |               |   |          |   | (10,888     | ) |        |   |               |        |   |   | (10,888) |        |   |   | (10,888) |  
|                                                                                                                                                           |                               |   |        |   |          |                                             |               |   |          |   |             |   |        |   |               |        |   |   |          |        |   |   |         
|Comprehensive income                                                                                                                                       |                               |   |        |   |          |                                             |               |   |          |   |             |   |        |   |               |        |   |   |          |        |   | $ | 5,290    |  
|                                                                                                                                                           |                               |   |        |   |          |                                             |               |   |          |   |             |   |        |   |               |        |   |   |          |        |   |   |          |  
|Cash dividends declared:                                                                                                                                   |                               |   |        |   |          |                                             |               |   |          |   |             |   |        |   |               |        |   |   |          |        |   |   |          |  
|Common stock ($.56 per share)                                                                                                                              |                               |   |        |   |          |                                             |               |   |          |   |             |   |        |   | (5,934        | )      |   |   | (5,934   | )      |   |   |          |  
|Purchase of treasury stock                                                                                                                                 |                               |   |        |   |          |                                             | (6,347        | ) |          |   |             |   |        |   |               |        |   |   | (6,347   | )      |   |   |          |  
|Common stock issued 
dividend reinvestment
and stock option plans                                                                                         |                               |   | 65     |   |          |                                             |               |   |          |   |             |   |        |   |               |        |   |   | 65       |        |   |   |          |  
|                                                                                                                                                           |                               |   |       
|
|Balance, December 31, 1999                                                                                                                                 |                               | $ | 36,966 |   |          | $                                           | (7,140        | ) |          | $ | (7,791      | ) |        | $ | 94,312        |        |   | $ | 116,347  |        |   |   |          |  
|Comprehensive income:                                                                                                                                      |                               |   |        |   |          |                                             |               |   |          |   |             |   |        |   |               |        |   |   |          |        |   |   |          |  
|Net income                                                                                                                                                 |                               |   |        |   |          |                                             |               |   |          |   |             |   |        |   | 6,134         |        |   |   | 6,134    |        |   | $ | 6,134    |  
|Change in unrealized loss on
securities of $10,019 net of reclassification adjustment for losses included in net income of $2,399 and net of tax
of $4,346 |                               |   |        |   |          |                                             |               |   |          |   | 8,072       |   |        |   |               |        |   |   | 8,072    |        |   |   | 8,072    |  
|                                                                                                                                                           |                               |   |        |   |          |                                             |               |   |          |   |             |   |        |   |               |        |   |   |          |        |   |   |         
|Comprehensive income                                                                                                                                       |                               |   |        |   |          |                                             |               |   |          |   |             |   |        |   |               |        |   |   |          |        |   | $ | 14,206   |  
|                                                                                                                                                           |                               |   |        |   |          |                                             |               |   |          |   |             |   |        |   |               |        |   |   |          |        |   |   |          |  
|Cash dividends declared:                                                                                                                                   |                               |   |        |   |          |                                             |               |   |          |   |             |   |        |   |               |        |   |   |          |        |   |   |          |  
|                                                                                                                                                           | Common stock ($.64 per share) |   |        |   |          |                                             |               |   |          |   |             |   |        |   |               | (6,518 | ) |   |          | (6,518 | ) |   |          |   | 
|Purchase of treasury stock                                                                                                                                 |                               |   |        |   |          |                                             | (6,807        | ) |          |   |             |   |        |   |               |        |   |   | (6,807   | )      |   |   |          |  
|Net common stock issued 
dividend reinvestment
and stock option plans                                                                                     |                               |   | (31    | ) |          |                                             |               |   |          |   |             |   |        |   |               |        |   |   | (31      | )      |   |   |          |  
|                                                                                                                                                           |                               |   |       
|
|Balance, December 31, 2000                                                                                                                                 |                               | $ | 36,935 |   |          | $                                           | (13,947       | ) |          | $ | 281         |   |        | $ | 93,928        |        |   | $ | 117,197  |        |   |   |          |  
|Comprehensive income:                                                                                                                                      |                               |   |        |   |          |                                             |               |   |          |   |             |   |        |   |               |        |   |   |          |        |   |   |          |  
|Net income                                                                                                                                                 |                               |   |        |   |          |                                             |               |   |          |   |             |   |        |   | 17,080        |        |   |   | 17,080   |        |   | $ | 17,080   |  
|Change in other comprehensive
income  deferred compensation plan, net of tax of $38                                                                       |                               |   |        |   |          |                                             |               |   |          |   | (71         | ) |        |   |               |        |   |   | (71      | )      |   |   | (71      | )
|Change in unrealized gain on
securities of $5,602, net of reclassification adjustment for losses
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   | )      |   |   |          |  
|Net 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  |        |   |   |          |  
|                                                                                                                                                           |                               |   |       
|

36



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##### Table of Contents



|                                                                                                              |                                                                                                                        |                       |         |          |   |                                             |         |          |   |         |          |   |  |  |  |  | 
|------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------- | --------------------- | ------- | -------- | - | ------------------------------------------- | ------- | -------- | - | ------- | -------- | - |  |  |  |  | 
|Consolidated Statements of Cash Flows                                                                         |                                                                                                                        |                       |         |          |   |                                             |         |          |   |         |          |   |  |  |  | 
|Second Bancorp Incorporated and Subsidiaries                                                                  |                                                                                                                        |                       |         |          |   | Dollars in thousands, except per share data |         |          |   |        
|                                                                                                             
|                                                                                                              |                                                                                                                        | For the Calendar Year |         |          |   |                                            
|OPERATING ACTIVITIES                                                                                          |                                                                                                                        | 2001                  |         | 2000     |   | 1999                                        |         |          |   |        
|                                                                                                              |                                                                                                                        |                       |         |          |   |                                            
|Net Income                                                                                                    |                                                                                                                        | $                     | 17,080  |          |   | $                                           | 6,134   |          | $ | 16,178  |         
|                                                                                                              | Adjustments to reconcile net income to net
cash provided by operating activities:                                      |                       |         |          |   |                                             |         |          |   |         |          |  
|                                                                                                              | Provision for loan losses                                                                                              |                       |         | 4,718    |   |                                             |         | 7,129    |   |         | 3,195    |  
|                                                                                                              | Provision for depreciation                                                                                             |                       |         | 3,487    |   |                                             |         | 3,444    |   |         | 2,985    |  
|                                                                                                              | Provision for amortization of intangibles                                                                              |                       |         | 377      |   |                                             |         | 556      |   |         | 685      |  
|                                                                                                              | Amortization of servicing rights                                                                                       |                       |         | 1,320    |   |                                             |         | 868      |   |         | 1,029    |  
|                                                                                                              | Amortization (accretion) of investment
discount and premium                                                            |                       |         | (441     | ) |                                             |         | 185      |   |         | (293     | )
|                                                                                                              | Amortization of underwriting costs-Corporation-obligated mandatorily
redeemable capital securities of subsidiary trust |                       |         | 13       |   |                                             |         |         |   |         |         |  
|                                                                                                              | Increase (decrease) in allowance for servicing rights                                                                  |                       |         | 810      |   |                                             |         |         |   |         | (451     | )
|                                                                                                              | Deferred income taxes                                                                                                  |                       |         | 1,830    |   |                                             |         | (1,239   | ) |         | 845      |  
|                                                                                                              | Securities losses (gains)                                                                                              |                       |         | (642     | ) |                                             |         | 2,399    |   |         | (312     | )
|                                                                                                              | Other losses (gains), net                                                                                              |                       |         | (5,796   | ) |                                             |         | 2,046    |   |         | (2,112   | )
|                                                                                                              | Net increase in trading account securities                                                                             |                       |         | 328      |   |                                             |         | (328     | ) |         |         |  
|                                                                                                              | (Increase) decrease in interest receivable                                                                             |                       |         | 1,463    |   |                                             |         | (1,904   | ) |         | (568     | )
|                                                                                                              | Increase (decrease) in interest payable                                                                                |                       |         | (975     | ) |                                             |         | 476      |   |         | 609      |  
|                                                                                                              | Originations of loans held-for-sale                                                                                    |                       |         | (527,498 | ) |                                             |         | (83,888  | ) |         | (119,047 | )
|                                                                                                              | Proceeds from sale of loans held-for-sale                                                                              |                       |         | 527,041  |   |                                             |         | 81,890   |   |         | 121,159  |  
|                                                                                                              | Net change in other assets & other liabilities                                                                         |                       |         | (824     | ) |                                             |         | (2,027   | ) |         | (4,066   | )
|                                                                                                              |                                                                                                                        |                       |         |          |   |                                            
|                                                                                                              | Net cash provided by operating activities                                                                              |                       |         | 22,291   |   |                                             |         | 15,741   |   |         | 19,836   |  
|                                                                                                             
|INVESTING ACTIVITIES
Proceeds from maturities of securities  available for sale                              |                                                                                                                        |                       | 143,976 |          |   |                                             | 31,765  |          |   | 163,240 |         
|                                                                                                              | Proceeds from sales of securities  available-for-sale                                                                 |                       |         | 76,420   |   |                                             |         | 138,831  |   |         | 52,415   |  
|                                                                                                              | Purchases of securities-available-for-sale                                                                             |                       |         | (234,001 | ) |                                             |         | (175,273 | ) |         | (244,921 | )
|                                                                                                              | Cash paid for acquisition of Commerce Exchange Corporation, net of
cash acquired                                       |                       |         | (24,522  | ) |                                             |         |         |   |         |         |  
|                                                                                                              | Net (decrease) increase in loans                                                                                       |                       |         | 36,232   |   |                                             |         | (1,508   | ) |         | (103,574 | )
|                                                                                                              | Net increase in premises and equipment                                                                                 |                       |         | (1,812   | ) |                                             |         | (2,956   | ) |         | (4,441   | )
|                                                                                                              |                                                                                                                        |                       |         |          |   |                                            
|                                                                                                              | Net cash (used by) provided by investing activities                                                                    |                       |         | (3,707   | ) |                                             |         | (9,141   | ) |         | (137,281 | )
|                                                                                                             
|FINANCING ACTIVITIES
Net (decrease) increase in demand deposits, interest bearing
demand and savings deposits |                                                                                                                        |                       | 41,534  |          |   |                                             | (28,556 | )        |   | (19,507 | )       
|                                                                                                              | Net (decrease) increase in time deposits                                                                               |                       |         | (49,657  | ) |                                             |         | (32,898  | ) |         | 14,506   |  
|                                                                                                              | Net increase (decrease) in federal funds purchased and securities
sold under agreements to repurchase                  |                       |         | (27,896  | ) |                                             |         | 23,363   |   |         | (15,950  | )
|                                                                                                              | (Decrease) increase in note payable                                                                                    |                       |         | (1,000   | ) |                                             |         | (3,000   | ) |         | 4,000    |  
|                                                                                                              | Net (decrease) increase in borrowings                                                                                  |                       |         | 3,299    |   |                                             |         | (3,576   | ) |         | 4,878    |  
|                                                                                                              | Net advances (repayments) from Federal Home Loan Bank                                                                  |                       |         | 23,419   |   |                                             |         | 51,457   |   |         | 127,494  |  
|                                                                                                              | Issuance of Corporation-obligated mandatorily redeemable capital
securities of subsidiary trust                        |                       |         | 30,429   |   |                                             |         |         |   |         |         |  
|                                                                                                              | Cash dividends                                                                                                         |                       |         | (6,798   | ) |                                             |         | (6,518   | ) |         | (5,934   | )
|                                                                                                              | Purchase of treasury stock                                                                                             |                       |         | (2,851   | ) |                                             |         | (6,807   | ) |         | (6,347   | )
|                                                                                                              | Net issuance of common stock                                                                                           |                       |         | 518      |   |                                             |         | (31      | ) |         | 65       |  
|                                                                                                              |                                                                                                                        |                       |         |          |   |                                            
|                                                                                                              | Net cash (used by) provided by financing activities                                                                    |                       |         | 10,997   |   |                                             |         | (6,566   | ) |         | 103,205  |  
|                                                                                                              |                                                                                                                        |                       |         |          |   |                                            
|                                                                                                              | Increase (decrease) in cash and cash equivalents                                                                       |                       |         | 29,581   |   |                                             |         | 34       |   |         | (14,240  | )
|                                                                                                              | Cash and cash equivalents at beginning of year                                                                         |                       |         | 35,272   |   |                                             |         | 35,238   |   |         | 49,478   |  
|                                                                                                              |                                                                                                                        |                       |         |          |   |                                            
|                                                                                                              | Cash and cash equivalents at end of year                                                                               |                       | $       | 64,853   |   |                                             | $       | 35,272   |   | $       | 35,238   |  
|                                                                                                              |                                                                                                                        |                       |         |          |   |                                            

Supplementary Cash Flow Information:

Cash paid for: 1) Federal income taxes  $5,880, $2,810, and $3,924 for the 12
months ended December 31, 2001, 2000 and 1999, respectively and 2) Interest -
$63,342, $66,867, and $55,310 for the 12 months ended December 31, 2001, 2000,
and 1999, respectively.

37



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|                                                                                        |  |                                                              
|--------------------------------------------------------------------------------------- |  | -------------------------------------------------------------
|Notes to Consolidated Financial Statements
Second Bancorp Incorporated and Subsidiaries |  | December 31, 2001
Dollars in thousands, except per share data

1.     Statement of 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 37
banking centers 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. The Corporation also maintains
another 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 subsidiary
trust for the primary purpose of funding our acquisition of Commerce Exchange
Corporation (see note 3).

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:



|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|a. | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  
|b. | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|c. | Business Combinations: Business combinations which have been accounted
for under the pooling-of-interests method of accounting require the
assets, liabilities, shareholders equity and operations of the merged
entity to be retroactively combined with the Corporations respective
accounts at recorded value. Prior period financial statements have been
restated to give effect to business combinations accounted for under this
method. 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 company
were recorded at their estimated fair value as of the date of acquisition.                                                                                                                                                                                                                                                                                                                                            
|  
|d. | Cash Equivalents: Cash equivalents include amounts due from banks and
federal funds sold. Generally, federal funds are purchased and sold for
periods of less than thirty days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|e. | Securities: Debt and equity securities are classified as
held-to-maturity, available-for-sale, or trading. Securities classified as
held-to-maturity are measured at amortized or historical cost, whereas
securities available-for-sale and trading 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. Adjustments to fair value of securities
classified as trading are included in earnings. Management determines the
appropriate classification of debt securities at the time of purchase and
reevaluates such designation as of each balance sheet date. Debt
securities are classified as held-to-maturity when the Corporation has the
positive intent and ability to hold the securities to maturity.
Classifying securities as available-for-sale allows the Corporation to
sell securities to fund liquidity and manage the Corporations interest
rate risk.



|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | The amortized cost of the debt securities classified as held-to-maturity or
available-for-sale is adjusted for amortization of premiums and accretion
of discounts to maturity or, in the case of mortgage-backed securities,
over the estimated life of the security. Such amortization is included in
interest income from investments. Interest and dividends are included in
interest income from investments. 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.                                                                                                                                                                                        
|  
|f. | Revenue Recognition: 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. 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. The accrual of interest income
generally is discontinued when a loan becomes, in Managements opinion,
doubtful of being collectible. 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.

38



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|                                                                                        |  |                                                              
|--------------------------------------------------------------------------------------- |  | -------------------------------------------------------------
|Notes to Consolidated Financial Statements
Second Bancorp Incorporated and Subsidiaries |  | December 31, 2001
Dollars in thousands, except per share data



|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | 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 loans, were
$3,683 and $4,636 at December 31, 2001 and 2000, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|g. | 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 by loan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|h. | Allowance for Loan Losses: The allowance for loan losses is maintained at
a level believed adequate by Management to absorb potential 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 expected
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 and commitments 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
general and specific economic conditions of the markets in which the
Corporation operates. The determination arrived at inherently involve a
high degree of uncertainty and that 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.



|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | Certain loans are accounted for under Statement of Financial Accounting
Standards (SFAS) No. 114, Accounting by Creditors for Impairment of a
Loan, as amended by SFAS No. 118, Accounting by Creditors for Impairment of
a Loan  Income Recognition and Disclosures. These standards address the
accounting for certain loans 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 net present value of expected cash
flows is less than the carrying amount of an individual loan, the loan
balance is included as impaired loans and a specific allowance is maintained.
|  
|i. | Premises and Equipment: Premises and equipment are stated at cost, less
accumulated depreciation and amortization. The provision for 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. Leasehold improvements are amortized over the shorter of the
terms of the respective leases or the estimated useful lives.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|j. | Intangible Assets: Intangible assets resulting from the excess of the
purchase price over net identifiable tangible
assets acquired through acquisitions are specifically identified when
deerminable. The excess goodwill is amortized based on the estimated
useful life of the long-term assets acquired and on an accelerated basis. The
core deposit intangible is amortized both on an accelerated basis and
on a straight-line basis over the estimated useful life. Original
estimated useful lives for the core deposit intangible and goodwill range from
10 to 14 years and 8 to 22 years, respectively.                                                                                                                                                                                                                                                                                                                                                                                     
|  
|k. | Mortgage Servicing Rights: 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 rights are carried at the
lower of initial carrying amount, adjusted for amortization, or fair estimated value.
Management stratifies servicing rights based on term, pass-through rate and method of
acquisition. Capitalized mortgage servicing rights are amortized on an accelerated basis
over the estimated life of the loans sold. Management evaluates the recoverability of the
mortgage servicing rights in relation to the impact of actual and anticipated loan portfolio
prepayments, foreclosures and delinquency experience.                                                                                                                                                                                                                   

39



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|                                                                                        |  |                                                              
|--------------------------------------------------------------------------------------- |  | -------------------------------------------------------------
|Notes to Consolidated Financial Statements
Second Bancorp Incorporated and Subsidiaries |  | December 31, 2001
Dollars in thousands, except per share data



|l. | Interest Rate Risk Management: 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.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Prior to the adoption of SFAS No. 133, the Corporation utilized derivative
financial instruments (interest rate swaps, caps and floors) to manage
interest rate risk, hedge market values and alter the cash flow
characteristics of certain on-balance sheet instruments. The derivative
financial instruments were linked with a specific asset or liability or a
group of related assets or liabilities and had a high degree of correlation
with the associated balance sheet item during the hedge period. Net interest
income or expense on derivative contracts used for interest rate risk
management is accrued. Deferred amounts are amortized into interest income or
expensed over either the remaining original life of the derivative financial
instrument or the expected life of the associated asset or liability.
Unrealized gains or losses were not recognized on the balance sheet.

40



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|                                                                                        |  |                                                              
|--------------------------------------------------------------------------------------- |  | -------------------------------------------------------------
|Notes to Consolidated Financial Statements
Second Bancorp Incorporated and Subsidiaries |  | December 31, 2001
Dollars in thousands, except per share data



|m. | 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.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|n. | Treasury Stock: Acquisitions of treasury stock are recorded on the cost
method with the full amount of the cash paid deducted from shareholders
equity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

2.     Recent Accounting Pronouncements
Accounting for Derivative Instruments and Hedging Activities: Effective January
1, 2001, the Corporation adopted SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended, which requires all derivative
instruments to be carried at fair value on the balance sheet. At the time of
adoption, the Corporation designated certain derivative instruments used for
risk management into hedging relationships in accordance with the requirements
of the new standard. Derivative instruments used to hedge changes in the fair
value of assets and liabilities due to changes in interest rates were
designated fair value hedge relationships. Derivative instruments
used to hedge the variability of forecasted cash flows attributable to interest
rate risk were designated in cash flow hedge relationships. As a result of
adopting the new standard, the Corporation recorded transition amounts with
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.

Although not having a material impact, SFAS No. 133 as applied to the
Corporations risk management strategies, has caused reported net income and
shareholders equity to be different from what they otherwise would have been
under the prior accounting rules, with the impact in any period depending on
levels of interest rates and other variables affecting fair values of
derivative instruments and hedged items. Although recorded results are
affected, SFAS No. 133s requirements do not change the cash flows or economic
risk associated with any derivatives the Corporation is holding.

Notes 1 and 22 provide additional detail on the accounting for derivative
instruments and the derivative instruments held by the Corporation during 2001.

Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities: SFAS No. 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities, was issued in September
2000 and replaces SFAS No. 125. The guidance in SFAS No. 140, while not
changing most of the guidance originally issued in SFAS No. 125, revises the
standards for accounting for securitizations and other transfers of financial
assets and collateral and requires certain additional disclosures related to
transferred assets.

Certain provisions of the statement related to the recognition,
reclassification and disclosure of collateral, as well as the disclosure of
securitization transactions, became effective for the Corporation for 2000
year-end reporting. Other provisions related to the transfer and servicing of
financial assets and extinguishments of liabilities are effective for
transactions occurring after March 31, 2001.

Application of the new rules did not have a material impact on the
Corporations results of operations, financial position or liquidity.

Business Combinations: In June 2001, the Financial Accounting Standards Board
(FASB) issued SFAS No. 141, Business Combinations, which replaces
Accounting Principles Board (APB), Opinion 16. SFAS No. 141 requires all
business combinations to be accounted for by the purchase method by prohibiting
the application of the pooling-of-interests method of accounting for business
combinations after June 30, 2001.

While SFAS No. 141 will affect how future business combinations, if undertaken,
are accounted for and disclosed in the financial statements, the issuance of
the new standard had no material effect on the Corporations results of
operations, financial position or liquidity during 2001.

41



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|                                                                                        |  |                                                              
|--------------------------------------------------------------------------------------- |  | -------------------------------------------------------------
|Notes to Consolidated Financial Statements
Second Bancorp Incorporated and Subsidiaries |  | December 31, 2001
Dollars in thousands, except per share data

Goodwill and Other Intangible Assets: in conjunction with the issuance of SFAS
No. 141, the FASB also issued SFAS No. 142, Goodwill and Other Intangible
Assets, which addresses the accounting and reporting for acquired goodwill and
other intangible assets and supercedes APB Opinion17.

Under the provisions of SFAS No. 142, goodwill and certain other intangible
assets which do not possess finite useful lives will no longer be amortized
into net income over an estimated life but rather will be tested at least
annually for impairment based on specific guidance provided in the new
standard. Intangible assets determined to have finite lives will continue to be
amortized over their useful lives and also continue to be subject to impairment
testing.

The provisions of SFAS No. 142 were adopted by the Corporation as required
effective January 1, 2002. Application of the non-amortization provisions of
the standard is expected to reduce non-interest expense by approximately $158,
resulting in an increase in net income of $103, or $.01 per diluted share in
2002 as compared to 2001. SFAS No. 142, as a part of its adoption provisions,
requires a transitional impairment test to be applied to all goodwill and other
indefinite-lived intangible assets within the first half of 2002 and any
resulting impairment loss to be reported as a change in accounting principle.
The majority of the goodwill recorded by the Corporation arose from the
recently completed acquisition of Commerce Exchange Corporation (see note 3)
and as such, Management does not expect an impairment loss to be recorded in
2002 as a result of this test. The Corporation currently does not have any
other indefinite-lived assets on its balance sheet. It is also anticipated that
there will be no material categorical reclassifications or adjustments to the
useful lives of finite-lived intangible assets as a result of adopting the new
standard.

In general, application of the new standard may result in more income statement
volatility due to the potential recognition of impairment losses only, which
are likely to vary in amount and regularity, for goodwill and other
indefinite-lived intangible assets, versus reducing those assets through the
recognition of regularly recurring, consistent amortization amounts.

Asset Retirement Obligations: In August 2001, the FASB issued SFAS No. 143,
Accounting for Asset Retirement Obligations. SFAS No. 143 requires an entity
to record a liability for an obligation associated with the retirement of an
asset at the time the liability is incurred by capitalizing the cost as part of
the carrying value of the related asset and depreciating it over the remaining
useful life of that asset. The standard is effective for the Corporation
beginning January 1, 2003, and its adoption is not expected to have a material
impact on the Corporations results of operations, financial position or
liquidity.

Accounting for Long-Lived Assets: SFAS No. 144, Accounting for Long-Lived
Assets to be Disposed of, was issued in October 2001 and addresses how to
account for long-lived assets and how to account for long-lived assets that an
entity plans to dispose of either through sale, abandonment, exchange or a
distribution to owners. The new standard supercedes SFAS No. 121, which
addressed asset impairment, and certain provisions of APB Opinion 30 related to
reporting the effects of the disposal of a business segment and requires
expected future operating losses from discontinued operations to be recorded in
the period in which the losses are incurred rather than the measurement date.
Under SFAS No. 144, more dispositions may qualify for discontinued operations
treatment in the income statement. The provisions of SFAS No. 144 become
effective for the Corporation January 1, 2002 and are not expected to have a
material impact on the Corporations results of operations, financial position
or liquidity.

---



|3. | Mergers and
Acquisitions
|-- | ------------------------

42



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|                                                                                        |  |                                                              
|--------------------------------------------------------------------------------------- |  | -------------------------------------------------------------
|Notes to Consolidated Financial Statements
Second Bancorp Incorporated and Subsidiaries |  | December 31, 2001
Dollars in thousands, except per share data

The condensed balance sheet at fair value of Commerce as of the acquisition
date was as follows:

|                                       |                               |   |        |         | 
|-------------------------------------- | ----------------------------- | - | ------ | ------- | 
|Assets:                                |                               |   |        |        
|Cash and due from banks                |                               | $ | 2,407  |        
|Investments                            |                               |   | 15,739 |        
|Loans (net of allowance of $1,878)     |                               |   | 91,419 |        
|Other assets                           |                               |   | 1,336  |        
|                                       |                               |   |        |        
|                                       | Total Assets                  |   | $      | 110,901 | 
|                                       |                               |   |        |        
|Liabilities and capital:               |                               |   |        |        
|Deposits                               |                               | $ | 94,721 |        
|Other borrowings and other liabilities |                               |   | 5,578  |        
|Capital                                |                               |   | 10,602 |        
|                                       |                               |   |        |        
|                                       | Total liabilities and capital |   | $      | 110,901 | 
|                                       |                               |   |        |        

In order to finance the acquisition of Commerce, the Corporation sold, through
Second Bancorp Capital Trust I (a newly formed subsidiary), $32 million of
9.00% corporation-obligated mandatorily redeemable capital securities of
subsidiary trust (Trust Preferred Securities). The proceeds of the offering
of the Trust Preferred Securities were used by the Trust to purchase, from the
Company, Subordinated Debentures due December 31, 2031. The Company used the
proceeds from the offering of the Subordinated Debentures to fund the $26.9
acquisition cost for Commerce Exchange Corporation. The remaining net proceeds
are being used to repay outstanding debt and to fund the Companys continuing
repurchase of its common stock.

---

4.     Restrictions on Cash and Due from Bank Accounts
The Bank is required to maintain average reserve balances with the Federal
Reserve Bank. The average amount of those reserve balances for the years ended
December 31, 2001 and 2000 were approximately $1,967 and $1,964, respectively,
which represents compensating balances for services provided by the Federal
Reserve Bank during 2001.

---

5.     Securities
The following is a summary of securities:

|                                                                                              |                                     |      |           |         |            |        |            |       |        |   |           |        |   |   |         |         |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | ----------------------------------- | ---- | --------- | ------- | ---------- | ------ | ---------- | ----- | ------ | - | --------- | ------ | - | - | ------- | ------- |  |  |  |  | 
|                                                                                              |                                     |      |           |         |            |        | Gross      |       | Gross  |   | Estimated
|                                                                                              |                                     |      | Amortized |         | Unrealized |        | Unrealized |       | Market
|December 31, 2001                                                                             |                                     | Cost |           | Gains   |            | Losses |            | Value
|                                                                                              |                                     |      |          
|Available for Sale:                                                                           |                                     |      |           |         |            |        |            |       |        |   |           |        |   |   |         |        
|U. S. Treasury securities and obligations of other
U. S. government agencies and corporations |                                     | $    | 27,940    |         |            | $      | 1,137      |       |        | $ | (29       | )      |   | $ | 29,048  |        
|Obligations of states and political subdivisions                                              |                                     |      | 67,068    |         |            |        | 1,476      |       |        |   | (333      | )      |   |   | 68,211  |        
|Corporate securities                                                                          |                                     |      | 89,924    |         |            |        | 1,737      |       |        |   | (1,874    | )      |   |   | 89,787  |        
|Mortgage-backed securities                                                                    |                                     |      | 207,883   |         |            |        | 4,145      |       |        |   | (933      | )      |   |   | 211,095 |        
|                                                                                              |                                     |      |          
|                                                                                              | Total debt securities               |      |           | 392,815 |            |        |            | 8,495 |        |   |           | (3,169 | ) |   |         | 398,141 | 
|Equity securities                                                                             |                                     |      | 19,288    |         |            |        | 159        |       |        |   | (92       | )      |   |   | 19,355  |        
|                                                                                              |                                     |      |          
|                                                                                              | Total available-for-sale securities |      | $         | 412,103 |            |        | $          | 8,654 |        |   | $         | (3,261 | ) |   | $       | 417,496 | 
|                                                                                              |                                     |      |          

|                                                                                              |                                     |      |           |         |            |        |            |       |        |   |           |        |   |   |         |         |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | ----------------------------------- | ---- | --------- | ------- | ---------- | ------ | ---------- | ----- | ------ | - | --------- | ------ | - | - | ------- | ------- |  |  |  |  | 
|                                                                                              |                                     |      |           |         |            |        | Gross      |       | Gross  |   | Estimated |        |   |   |        
|                                                                                              |                                     |      | Amortized |         | Unrealized |        | Unrealized |       | Market |   |           |        |  
|December 31, 2000                                                                             |                                     | Cost |           | Gains   |            | Losses |            | Value |        |   |           |       
|                                                                                              |                                     |      |          
|Available for Sale:                                                                           |                                     |      |           |         |            |        |            |       |        |   |           |        |   |   |         |        
|U. S. Treasury securities and obligations of other
U. S. government agencies and corporations |                                     | $    | 51,123    |         |            | $      | 657        |       |        | $ | (38       | )      |   | $ | 51,742  |        
|Obligations of states and political subdivisions                                              |                                     |      | 65,780    |         |            |        | 1,236      |       |        |   | (180      | )      |   |   | 66,836  |        
|Corporate securities                                                                          |                                     |      | 72,756    |         |            |        | 733        |       |        |   | (3,071    | )      |   |   | 70,418  |        
|Mortgage-backed securities                                                                    |                                     |      | 174,206   |         |            |        | 1,707      |       |        |   | (619      | )      |   |   | 175,294 |        
|                                                                                              |                                     |      |          
|                                                                                              | Total debt securities               |      |           | 363,865 |            |        |            | 4,333 |        |   |           | (3,908 | ) |   |         | 364,290 | 
|Equity securities                                                                             |                                     |      | 17,800    |         |            |        | 183        |       |        |   | (175      | )      |   |   | 17,808  |        
|                                                                                              |                                     |      |          
|                                                                                              | Total available-for-sale securities |      | $         | 381,665 |            |        | $          | 4,516 |        |   | $         | (4,083 | ) |   | $       | 382,098 | 
|                                                                                              |                                     |      |          

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|                                                                                        |  |                                                              
|--------------------------------------------------------------------------------------- |  | -------------------------------------------------------------
|Notes to Consolidated Financial Statements
Second Bancorp Incorporated and Subsidiaries |  | December 31, 2001
Dollars in thousands, except per share data

There were no holdings of trading securities at December 31, 2001. The
amortized cost of trading securities was $332 and had a market value of $328 as
of December 31, 2000. The amortized cost and estimated market value of
securities at December 31, 2001 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.

|                           |  |           |         |        |  |           |         | 
|-------------------------- |  | --------- | ------- | ------ |  | --------- | ------- | 
|                           |  |           |         |        |  | Estimated
|                           |  | Amortized |         | Market
|                           |  | Cost      |         | Value 
|                           |  |           |         |       
|Under 1 year               |  | $         | 6,365   |        |  | $         | 6,549   | 
|1 to 5 years               |  |           | 37,394  |        |  |           | 38,922  | 
|5 to 10 years              |  |           | 65,465  |        |  |           | 67,261  | 
|Over 10 years              |  |           | 75,708  |        |  |           | 74,314  | 
|                           |  |           |         |       
|                           |  |           | 184,932 |        |  |           | 187,046 | 
|Mortgage-backed securities |  |           | 207,883 |        |  |           | 211,095 | 
|Equity securities          |  |           | 19,288  |        |  |           | 19,355  | 
|                           |  |           |         |       
|                           |  | $         | 412,103 |        |  | $         | 417,496 | 
|                           |  |           |         |       

Information relating to sales of available-for-sale securities for the three
years ended December 31, 2001 is as follows:

|                                                     |  |      |        |      |  |      |         |   |  |   |        | 
|---------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------- | - |  | - | ------ | 
|                                                     |  | 2001 |        | 2000 |  | 1999
|                                                     |  |     
|Proceeds from sales of available-for-sale securities |  | $    | 76,420 |      |  | $    | 138,831 |   |  | $ | 52,415 | 
|                                                     |  |     
|Gross realized gains                                 |  | $    | 724    |      |  | $    | 961     |   |  | $ | 351    | 
|Gross realized losses                                |  |      | 82     |      |  |      | 3,360   |   |  |   | 39     | 
|Income tax associated with net (losses) gains        |  |      | 225    |      |  |      | (816    | ) |  |   | 109    | 
|                                                     |  |     
|After tax (losses) gains                             |  | $    | 417    |      |  | $    | (1,583  | ) |  | $ | 203    | 
|                                                     |  |     
|Impact on earnings per share                         |  | $    | 0.04   |      |  | $    | (0.15   | ) |  | $ | 0.02   | 
|                                                     |  |     

At December 31, 2001 and 2000, securities with a carrying value of $252,074 and
$211,840, respectively, were pledged to secure repurchase agreements, deposits
of public funds and for other purposes.

---

6.     Loans
Loans consist of the following:

|                           |  |      |           |      |  |   |           | 
|-------------------------- |  | ---- | --------- | ---- |  | - | --------- | 
|December 31                |  | 2001 |           | 2000
|                           |  |     
|Commercial                 |  | $    | 508,579   |      |  | $ | 421,229   | 
|Consumer                   |  |      | 316,097   |      |  |   | 302,881   | 
|Real Estate                |  |      | 247,221   |      |  |   | 300,526   | 
|Real Estate  Construction |  |      | 49,995    |      |  |   | 45,453    | 
|                           |  |     
|Total                      |  | $    | 1,121,892 |      |  | $ | 1,070,089 | 
|                           |  |     

At December 31, 2001, 2000 and 1999 the Corporation serviced mortgage loans for
others totaling $812,774, $472,120 and $343,756, respectively. Following is an
analysis of the activity for capitalized mortgage loan servicing rights during
the years ending December 31:

|                              |  |      |        |      |  |      |       |   |  |   |       |  
|----------------------------- |  | ---- | ------ | ---- |  | ---- | ----- | - |  | - | ----- | -
|                              |  | 2001 |        | 2000 |  | 1999
|                              |  |     
|Balance at January 1          |  | $    | 4,065  |      |  | $    | 3,490 |   |  | $ | 2,683 |  
|Additions                     |  |      | 6,270  |      |  |      | 1,340 |   |  |   | 1,302 |  
|Sales                         |  |      |       |      |  |      |      |   |  |   |      |  
|Amortizations                 |  |      | (1,212 | )    |  |      | (765  | ) |  |   | (946  | )
|Change in valuation allowance |  |      | (810   | )    |  |      |      |   |  |   | 451   |  
|                              |  |     
|Balance at December 31        |  | $    | 8,313  |      |  | $    | 4,065 |   |  | $ | 3,490 |  
|                              |  |     

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|                                                                                        |  |                                                              
|--------------------------------------------------------------------------------------- |  | -------------------------------------------------------------
|Notes to Consolidated Financial Statements
Second Bancorp Incorporated and Subsidiaries |  | December 31, 2001
Dollars in thousands, except per share data

The fair value of mortgage servicing rights 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
rights. The risk characteristics used to stratify the recognized servicing
assets include method of origination and interest rate. The fair value of the
servicing rights was $8,844, $5,385 and $4,152 as of December 31, 2001, 2000
and 1999, respectively. Following is an analysis of the aggregate changes in
the valuation allowances for mortgage servicing rights for the years ended
December 31:

|                       |  |      |     |      |  |      |   |  |  |   |      |  
|---------------------- |  | ---- | --- | ---- |  | ---- | - |  |  | - | ---- | -
|                       |  | 2001 |     | 2000 |  | 1999
|                       |  |     
|Balance at January 1   |  | $    |    |      |  | $    |  |  |  | $ | 451  |  
|Additions              |  |      | 810 |      |  |      |  |  |  |   |     |  
|Reductions             |  |      |    |      |  |      |  |  |  |   | (451 | )
|                       |  |     
|Balance at December 31 |  | $    | 810 |      |  | $    |  |  |  | $ |     |  
|                       |  |     

The Corporation also services Small Business Administration (SBA) loans for
others totaling $13,112, $13,448 and $11,484 as of December 31, 2001, 2000 and
1999, respectively. Amounts capitalized as originated servicing rights were
$144, $191, and $143 in 2001, 2000 and 1999, respectively. Capitalized
servicing rights amortized were $108, $103 and $83 in 2001, 2000 and 1999,
respectively.

The Bank has granted loans to the officers and directors of both the
Corporation and the Bank and their associates. 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 $14,045 and $3,458 at December 31,
2001 and 2000, respectively. New loans and advances totaled $24,259 and
payments were $23,593 in 2001. Loans to directors who left the Corporation in
2001 totaled $79. During 2001, the Bank leased one of its banking centers from
a partnership that is 50% owned by a director of the Corporation. The fair
market annual rental rate on the lease totals $40 and expires in 2004.

---

7.     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:

|                                                      |                 |   |        |        |      |   |        |        |   |   |        |        |  
|----------------------------------------------------- | --------------- | - | ------ | ------ | ---- | - | ------ | ------ | - | - | ------ | ------ | -
|                                                      |                 |   | 2001   |        | 2000 |   | 1999  
|                                                      |                 |   |       
|Balance at beginning of year                          |                 | $ | 15,217 |        |      | $ | 11,169 |        |   | $ | 10,739 |       
|Charge-offs                                           |                 |   | (6,471 | )      |      |   | (4,059 | )      |   |   | (4,477 | )     
|Recoveries                                            |                 |   | 1,353  |        |      |   | 978    |        |   |   | 1,712  |       
|                                                      |                 |   |       
|                                                      | Net charge-offs |   |        | (5,118 | )    |   |        | (3,081 | ) |   |        | (2,765 | )
|Provision for loan losses                             |                 |   | 6,596  |        |      |   | 7,129  |        |   |   | 3,195  |       
|Acquired                                              |                 |   | 1,878  |        |      |   |       |        |   |   |       |       
|                                                      |                 |   |       
|Balance at end of year                                |                 | $ | 16,695 |        |      | $ | 15,217 |        |   | $ | 11,169 |       
|                                                      |                 |   |       
|Allowance for loan losses as a percent of total loans |                 |   | 1.49   | %      |      |   | 1.42   | %      |   |   | 1.04   | %     

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 is 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.

45



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|                                                                                        |  |                                                              
|--------------------------------------------------------------------------------------- |  | -------------------------------------------------------------
|Notes to Consolidated Financial Statements
Second Bancorp Incorporated and Subsidiaries |  | December 31, 2001
Dollars in thousands, except per share data

|                                                         |                                    |   |             |      |      |   |       |      |  
|-------------------------------------------------------- | ---------------------------------- | - | ----------- | ---- | ---- | - | ----- | ---- | -
|                                                         |                                    |   | December 31
|                                                         |                                    |   |            
|                                                         |                                    |   | 2001        |      | 2000
|                                                         |                                    |   |            
|Non-accrual loans                                        |                                    | $ | 5,004       |      |      | $ | 4,699 |     
|Past-due loans                                           |                                    |   | 5,304       |      |      |   | 3,238 |     
|Restructured loans                                       |                                    |   | 258         |      |      |   | 43    |     
|                                                         |                                    |   |            
|Total                                                    |                                    | $ | 10,566      |      |      | $ | 7,980 |     
|                                                         |                                    |   |            
|                                                         | Percent of total loans at year end |   |             | 0.94 | %    |   |       | 0.75 | %
|Other real estate owned (net of estimated costs to sell) |                                    | $ | 1,399       |      |      | $ | 902   |     

For the year ended December 31, 2001, 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 $398. No interest income
was realized on these loans for 2001. Loans that were considered to be impaired
under SFAS No. 114, all of which had a specific allowance, totaled $2,337 and
$1,397 as of December 2001 and 2000, respectively, all of which were included
in non-performing assets as of those dates. The year-end balances are
reflective of the average balance of impaired loans during those years. The
related allowance allocated to impaired loans for 2001 and 2000 was $1,585 and
$562, respectively.

---

8.     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, 2001, the Bank had a concentration in commercial
real estate loans totaling approximately $334,085, approximately 64.8% of which
were owner-occupied business, including medical office buildings and retail and
fast-food restaurants within the Banks market area. Of the $334,085 of
commercial real estate loans, $3,083 or 0.92% were on non-accrual status as of
December 31, 2001.

---

9.     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 5, 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.

46



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|                                                                                        |  |                                                              
|--------------------------------------------------------------------------------------- |  | -------------------------------------------------------------
|Notes to Consolidated Financial Statements
Second Bancorp Incorporated and Subsidiaries |  | December 31, 2001
Dollars in thousands, except per share data

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

|                   |  |                                                                              |  |                   |           |                   |  |          |           |       |  |   |           |   |  |   |           |  
|------------------ |  | ---------------------------------------------------------------------------- |  | ----------------- | --------- | ----------------- |  | -------- | --------- | ----- |  | - | --------- | - |  | - | --------- | -
|                   |  |                                                                              |  | December 31, 2001 |           | December 31, 2000
|                   |  |                                                                              |  | Carrying          |           | Fair              |  | Carrying |           | Fair 
|                   |  |                                                                              |  | Value             |           | Value             |  | Value    |           | Value
|                   |  |                                                                              |  |                   |           |                   |  |          |           |      
|Assets:            |  |                                                                              |  |                   |           |                   |  |          |           |       |  |   |           |   |  |  
|                   |  | Cash and cash equivalents                                                    |  | $                 | 64,853    |                   |  | $        | 64,853    |       |  | $ | 35,272    |   |  | $ | 35,272    |  
|                   |  | Trading account                                                              |  |                   |          |                   |  |          |          |       |  |   | 328       |   |  |   | 328       |  
|                   |  | Securities                                                                   |  |                   | 417,496   |                   |  |          | 417,496   |       |  |   | 382,098   |   |  |   | 382,098   |  
|                   |  | Loans                                                                        |  |                   | 1,121,892 |                   |  |          | 1,142,376 |       |  |   | 1,070,089 |   |  |   | 1,064,820 |  
|                   |  | Allowance for loan losses                                                    |  |                   | (16,695   | )                 |  |          |           |       |  |   | (15,217   | ) |  |   |           |  
|                   |  | Mortgage servicing rights                                                    |  |                   | 8,313     |                   |  |          | 8,844     |       |  |   | 4,065     |   |  |   | 5,385     |  
|Liabilities:       |  |                                                                              |  |                   |           |                   |  |          |           |       |  |   |           |   |  |  
|                   |  | Demand deposits  non-interest bearing                                       |  |                   | 144,953   |                   |  |          | 144,953   |       |  |   | 110,045   |   |  |   | 110,045   |  
|                   |  | Demand deposits  interest bearing                                           |  |                   | 105,221   |                   |  |          | 105,221   |       |  |   | 87,268    |   |  |   | 87,268    |  
|                   |  | Savings deposits                                                             |  |                   | 276,628   |                   |  |          | 276,628   |       |  |   | 246,056   |   |  |   | 246,056   |  
|                   |  | Time deposits                                                                |  |                   | 596,329   |                   |  |          | 602,870   |       |  |   | 592,766   |   |  |   | 595,299   |  
|                   |  | Federal funds purchased and securities
sold under agreements to repurchase   |  |                   | 107,279   |                   |  |          | 107,279   |       |  |   | 129,895   |   |  |   | 129,895   |  
|                   |  | Note payable                                                                 |  |                   |          |                   |  |          |          |       |  |   | 1,000     |   |  |   | 1,000     |  
|                   |  | Other borrowed funds                                                         |  |                   | 5,853     |                   |  |          | 5,853     |       |  |   | 2,163     |   |  |   | 2,163     |  
|                   |  | FHLB advances                                                                |  |                   | 275,152   |                   |  |          | 323,222   |       |  |   | 251,733   |   |  |   | 255,987   |  
|                   |  | Corporation-obligated manditorily redeemable
obligations of subsidiary trust |  |                   | 30,442    |                   |  |          | 33,514    |       |  |   |          |   |  |   |          |  
|                   |  | Interest rate swap liability                                                 |  |                   | 247       |                   |  |          | 247       |       |  |   |          |   |  |   |          |  
|Off-balance sheet: |  |                                                                              |  |                   |           |                   |  |          |           |       |  |   |           |   |  |  
|                   |  | Interest rate caps and floors                                                |  |                   |          |                   |  |          |          |       |  |   | 555       |   |  |   | 400       |  
|                   |  | Interest swaps                                                               |  |                   |          |                   |  |          |          |       |  |   |          |   |  |   | (168      | )

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.

Mortgage servicing rights: The fair value for the cost of mortgage servicing
rights was determined via an independent quote from a third party. Fair value
assumptions regarding prepayment speeds, discount rates, servicing costs,
delinquency, ancillary income and foreclosure costs arrived at from third party
sources and internal historical records.

Deposit liabilities: The fair values disclosed for demand deposits, insured
money market and interest checking accounts and savings 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 a
discounted cash flow calculation.

47



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|                                             |  |                                            
|-------------------------------------------- |  | -------------------------------------------
|Notes to Consolidated Financial Statements   |  | December 31, 2001                          
|Second Bancorp Incorporated and Subsidiaries |  | Dollars in thousands, except per share data

Corporation-obligated mandatorily redeemable obligations of subsidiary trusts:
The fair value for the Corporation-obligated mandatorily redeemable obligations
of subsidiary trusts was based on market prices of comparable instruments.

10. Premises and Equipment

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

|                                          |  |      |        |      |  |   |        | 
|----------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | 
|                                          |  | 2001 |        | 2000
|                                          |  |      |        |     
|Land and buildings                        |  | $    | 6,437  |      |  | $ | 6,438  | 
|Leasehold improvements                    |  |      | 10,491 |      |  |   | 9,683  | 
|Furniture and equipment                   |  |      | 27,147 |      |  |   | 24,974 | 
|                                          |  |      |        |      |  |   |        | 
|                                          |  |      | 44,075 |      |  |   | 41,095 | 
|Less:                                     |  |      |        |      |  |   |        | 
|Accumulated depreciation and amortization |  |      | 27,659 |      |  |   | 23,056 | 
|                                          |  |      |        |      |  |   |        | 
|                                          |  | $    | 16,416 |      |  | $ | 18,039 | 
|                                          |  |      |        |      |  |   |        | 

11. Goodwill and Intangible Assets

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

|                          |       |   |        |        |      |   |       |       | 
|------------------------- | ----- | - | ------ | ------ | ---- | - | ----- | ----- | 
|                          |       |   | 2001   |        | 2000
|                          |       |   |        |        |     
|Goodwill                  |       | $ | 14,645 |        |      | $ | 1,154 |      
|Core deposit intangible   |       |   | 3,211  |        |      |   | 447   |      
|Mortgage servicing rights |       |   | 8,313  |        |      |   | 4,065 |      
|Other servicing rights    |       |   | 409    |        |      |   | 372   |      
|                          |       |   |        |        |      |   |       |      
|                          | Total |   | $      | 26,578 |      |   | $     | 6,038 | 
|                          |       |   |        |        |      |   |       |      

Mortgage and other servicing rights activity for 2001 and 2000 are discussed in
Note 6 to the financial statements.

Core deposit intangible accumulated amortization as of December 31, 2001 is
$6,424. Core deposit intangible amortization expense for 2001 was $190.
Estimated annual amortization expense of core deposit intangibles is as
follows:

|     |  |   |     | 
|---- |  | - | --- | 
|2002 |  | $ | 447 | 
|2003 |  |   | 417 | 
|2004 |  |   | 350 | 
|2005 |  |   | 344 | 
|2006 |  |   | 340 | 

The changes to the carrying amount of goodwill for the year ended December 31,
2001, are as follows:

|                                  |  |   |        |  
|--------------------------------- |  | - | ------ | -
|Balance, December 31, 2000        |  | $ | 1,154  |  
|Goodwill acquired during the year |  |   | 13,678 |  
|Amortization expense              |  |   | (187   | )
|                                  |  |   |        |  
|Balance December 31, 2001         |  | $ | 14,645 |  
|                                  |  |   |        |  

48



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|                                             |  |                                            
|-------------------------------------------- |  | -------------------------------------------
|Notes to Consolidated Financial Statements   |  | December 31, 2001                          
|Second Bancorp Incorporated and Subsidiaries |  | Dollars in thousands, except per share data

12.     Federal Funds Purchased and Securities Sold Under Agreements to Repurchase
The Corporation has the availability to borrow $36 million from correspondent
banks as overnight federal funds purchased. There were no federal funds
purchased at December 31, 2001, while $29 million and $0 were outstanding at
December 31, 2000 and 1999. 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 $107,160 and $100,609 as of December 31, 2001 and 2000,
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, 2001, 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:

|                                                           |  |      |         |      |  |   |         | 
|---------------------------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | 
|                                                           |  | 2001 |         | 2000
|                                                           |  |      |         |     
|Outstanding at December 31                                 |  | $    | 107,279 |      |  | $ | 100,895 | 
|Weighted-average interest rate at December 31              |  |      | 3.58%   |      |  |   | 4.49%   | 
|Maximum amount outstanding as of any month end             |  | $    | 133,743 |      |  | $ | 120,026 | 
|Average amount outstanding                                 |  | $    | 109,476 |      |  | $ | 105,850 | 
|Approximate weighted-average interest rate during the year |  |      | 3.40%   |      |  |   | 4.50%   | 

13. Notes Payable
As of December 31, 2001, 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, 2000 the Corporation had $1 million in
outstanding notes payable to a correspondent bank.

There were no outstanding balances as of December 31, 2001.

14. Other Borrowed Funds and Federal Home Loan Bank Advances
The Corporation has a Treasury Note Option Agreement with the Federal
Government, which allows the 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, 2001 the book
value of pledged collateral totaled $396 million and consisted of $314 million
in residential mortgage loans, $48 million in home equity loans and $34 million
in junior lien installment loans. As of December 31, 2000, the book value of
pledged collateral was $358 million and consisted entirely of residential
mortgage loans. The detail of these borrowings on December 31, 2001 and 2000 is
as follows:

|                                                                                               |  |                  |      |         |         |      |       |   |         |   |       | 
|---------------------------------------------------------------------------------------------- |  | ---------------- | ---- | ------- | ------- | ---- | ----- | - | ------- | - | ----- | 
|                                                                                               |  | Current Interest |      | Balance
|Description                                                                                    |  | Rates            |      | 2001    |         | 2000
|                                                                                               |  |                  |      |         |         |     
|Treasury note option account                                                                   |  |                  | 1.40 | %       |         | $    | 5,853 |   |         | $ | 2,163 | 
|Fixed rate FHLB advances with monthly principal and
interest payments
Advances due in 2002     |  | 4.60% to 6.95%   |      | $       | 113,139 |      |       | $ | 64,000  |  
|Fixed rate FHLB advances with monthly principal and
interest payments
Advance due 2003 to 2007 |  | 4.29% to 6.87%   |      | $       | 155,013 |      |       | $ | 180,733 |  
|Variable rate FHLB advance with monthly interest payments
Advance due in 2005                  |  |                  | 1.88 | %       |         | $    | 7,000 |   |         | $ | 7,000 | 

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|                                             |  |                                            
|-------------------------------------------- |  | -------------------------------------------
|Notes to Consolidated Financial Statements   |  | December 31, 2001                          
|Second Bancorp Incorporated and Subsidiaries |  | Dollars in thousands, except per share data

The table below provides a maturity distribution for the Corporations $305,594
long-term debt, which includes the FHLB advances and the Corporation-obligated
mandatorily redeemable capital securities of subsidiary trust discussed in
Note 15:

|           |      |  |         |        | 
|---------- | ---- |  | ------- | ------ | 
|           | 2002 |  | $       | 3,139  | 
|           | 2003 |  |         | 10,000 | 
|           | 2004 |  |         | 8,000  | 
|           | 2005 |  |         | 7,000  | 
|           | 2006 |  |         |       | 
|Thereafter |      |  | 277,455 |       

15. Corporation-Obligated Mandatorily Redeemable Capital Securities of Subsidiary Trust
The corporation-obligated mandatorily redeemable capital securities (the
capital securities) of 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 of the trust 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 qualify as
Tier I capital under Federal Reserve Board guidelines and are first redeemable,
in whole or in part, by the Corporation on December 31, 2006 and mature on
December 31, 2031. The amount outstanding, net of offering costs, as of
December 31, 2001 is $30,442.

The effect of the capital securities will impact several key performance
indicators of the Corporations future financial results. Among those ratios
impacted will be the net interest margin, which is expected to decline with the
addition of the capital trust securities.

16. Shareholders Equity
As of January 1, 1999, the Corporation had 50,400 shares held in treasury. On
August 10, 1999, the Board of Directors authorized the discretionary buy-back
of up to 500,000 shares of common stock. As of December 31, 1999, 254,100
shares had been repurchased bringing the total shares in treasury to 304,500.
During 2000, the Board of Directors authorized an increase to 600,000 the
number of authorized shares to be repurchased. The repurchase of the 600,000
shares authorized was completed on October 11, 2000. The Board of Directors
subsequently authorized the repurchase of up to 2% of shares outstanding
annually. During 2000, 79,800 shares had been repurchased bringing the total
shares in treasury to 730,200 as of December 31, 2000. During 2001, 151,812
shares had been repurchased bringing the total shares in treasury to 883,494 as
of December 31, 2001.

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, 2001, the Bank had retained earnings of $98,942, of
which $19,725 was available for distribution to the Corporation as dividends
without prior regulatory approval.

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.

50



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|                                                                                        |  |                                                              
|--------------------------------------------------------------------------------------- |  | -------------------------------------------------------------
|Notes to Consolidated Financial Statements
Second Bancorp Incorporated and Subsidiaries |  | December 31, 2001
Dollars in thousands, except per share data

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, 2001, that the Corporation and the Bank meet all capital adequacy
requirements to which it is subject.

As of December 31, 2001, 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 also presented in the table.

|                                          |                      |  |        |         |                   |  |                   |       |       |  |             |         |                   |  |  |       |  |  |                   |          |  |  |  |        | 
|----------------------------------------- | -------------------- |  | ------ | ------- | ----------------- |  | ----------------- | ----- | ----- |  | ----------- | ------- | ----------------- |  |  | ----- |  |  | ----------------- | -------- |  |  |  | ------ | 
|                                          |                      |  |        |         |                   |  |                   |       |       |  |             |         |                   |  |  |       |  |  | To Be Well-      
|                                          |                      |  |        |         |                   |  |                   |       |       |  |             |         |                   |  |  |       |  |  | Capitalized Under
|                                          |                      |  |        |         |                   |  |                   |       |       |  | For Capital |         | Prompt Corrective
|                                          |                      |  | Actual |         | Adequacy Purposes |  | Action Provisions
|                                          |                      |  |        |         |                   |  |                  
|                                          |                      |  | Amount |         | Ratio             |  | Amount            |       | Ratio |  | Amount      |         | Ratio            
|                                          |                      |  |        |         |                   |  |                   |       |       |  |             |         |                  
|As of December 31, 2001:                  |                      |  |        |         |                   |  |                   |       |       |  |             |         |                   |  |  |       |  |  |                   |          |  |  |  |       
|Total capital (to risk-weighted assets):  |                      |  |        |         |                   |  |                   |       |       |  |             |         |                   |  |  |       |  |  |                   |          |  |  |  |       
|                                          | Second Bancorp       |  | $      | 152,550 |                   |  |                   | 12.6% |       |  | $           | *96,869 |                   |  |  | *8.0% |  |  |                   | N/A      |  |  |  | N/A    | 
|                                          | Second National Bank |  |        | 149,170 |                   |  |                   | 12.3  |       |  |             | *96,730 |                   |  |  | *8.0  |  |  | $                 | *120,913 |  |  |  | *10.0% | 
|Tier I capital (to risk-weighted assets): |                      |  |        |         |                   |  |                   |       |       |  |             |         |                   |  |  |       |  |  |                   |          |  |  |  |       
|                                          | Second Bancorp       |  |        | 137,395 |                   |  |                   | 11.4  |       |  |             | *48,434 |                   |  |  | *4.0  |  |  |                   | N/A      |  |  |  | N/A    | 
|                                          | Second National Bank |  |        | 134,036 |                   |  |                   | 11.1  |       |  |             | *48,365 |                   |  |  | *4.0  |  |  |                   | *72,548  |  |  |  | *6.0   | 
|Tier I leverage:                          |                      |  |        |         |                   |  |                   |       |       |  |             |         |                   |  |  |       |  |  |                   |          |  |  |  |       
|                                          | Second Bancorp       |  |        | 137,395 |                   |  |                   | 8.2   |       |  |             | *66,689 |                   |  |  | *4.0  |  |  |                   | N/A      |  |  |  | N/A    | 
|                                          | Second National Bank |  |        | 134,036 |                   |  |                   | 8.1   |       |  |             | *66,289 |                   |  |  | *4.0  |  |  |                   | *82,861  |  |  |  | *5.0   | 
|                                          |                      |  |        |         |                   |  |                   |       |       |  |             |         |                   |  |  |       |  |  |                   |          |  |  |  |       
|As of December 31, 2000:                  |                      |  |        |         |                   |  |                   |       |       |  |             |         |                   |  |  |       |  |  |                   |          |  |  |  |       
|Total capital (to risk-weighted assets):  |                      |  |        |         |                   |  |                   |       |       |  |             |         |                   |  |  |       |  |  |                   |          |  |  |  |       
|                                          | Second Bancorp       |  | $      | 129,366 |                   |  |                   | 11.5% |       |  | $           | *89,926 |                   |  |  | *8.0% |  |  |                   | N/A      |  |  |  | N/A    | 
|                                          | Second National Bank |  |        | 127,001 |                   |  |                   | 11.3  |       |  |             | *89,725 |                   |  |  | *8.0  |  |  | $                 | *112,156 |  |  |  | *10.0% | 
|Tier I capital (to risk-weighted assets): |                      |  |        |         |                   |  |                   |       |       |  |             |         |                   |  |  |       |  |  |                   |          |  |  |  |       
|                                          | Second Bancorp       |  |        | 115,315 |                   |  |                   | 10.3  |       |  |             | *41,479 |                   |  |  | *4.0  |  |  |                   | N/A      |  |  |  | N/A    | 
|                                          | Second National Bank |  |        | 112,982 |                   |  |                   | 10.1  |       |  |             | *44,862 |                   |  |  | *4.0  |  |  |                   | *67,294  |  |  |  | *6.0   | 
|Tier I leverage:                          |                      |  |        |         |                   |  |                   |       |       |  |             |         |                   |  |  |       |  |  |                   |          |  |  |  |       
|                                          | Second Bancorp       |  |        | 115,315 |                   |  |                   | 7.5   |       |  |             | *61,788 |                   |  |  | *4.0  |  |  |                   | N/A      |  |  |  | N/A    | 
|                                          | Second National Bank |  |        | 112,982 |                   |  |                   | 7.2   |       |  |             | *63,163 |                   |  |  | *4.0  |  |  |                   | *78,954  |  |  |  | *5.0   | 



---

|* |  | greater than or equal to
|- |  | ------------------------

51



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|                                             |  |                                            
|-------------------------------------------- |  | -------------------------------------------
|Notes to Consolidated Financial Statements   |  | December 31, 2001                          
|Second Bancorp Incorporated and Subsidiaries |  | Dollars in thousands, except per share data

17.     Earnings Per Share
The following table sets forth the computation of basic and diluted earnings
per share:

|                                                    |                                          |                                    |                           |        |            |            |      |       |            |            |      |        |            |            | 
|--------------------------------------------------- | ---------------------------------------- | ---------------------------------- | ------------------------- | ------ | ---------- | ---------- | ---- | ----- | ---------- | ---------- | ---- | ------ | ---------- | ---------- | 
|                                                    |                                          |                                    |                           |        | 2001       |            | 2000 |       | 1999      
|                                                    |                                          |                                    |                           |        |            |            |      |       |           
|Numerator for basic and diluted earnings per share: |                                          |                                    |                           |        |            |            |      |       |            |            |      |       
|                                                    | Net income                               |                                    | $                         | 17,080 |            |            | $    | 6,134 |            |            | $    | 16,178 |           
|                                                    |                                          |                                    |                           |        |            |            |      |       |            |            |      |       
|Denominator:                                        |                                          |                                    |                           |        |            |            |      |       |            |            |      |       
|                                                    | Denominator for basic earnings per share |                                    |                           |        |            |            |      |       |            |            |      |        |           
|                                                    |                                          |                                    | - weighted-average shares |        |            | 10,013,068 |      |       |            | 10,247,025 |      |        |            | 10,635,852 | 
|                                                    | Effect of dilutive securities:           |                                    |                           |        |            |            |      |       |            |            |      |        |           
|                                                    |                                          |                                    | Employee stock options    |        |            | 66,937     |      |       |            | 24,523     |      |        |            | 62,865     | 
|                                                    |                                          |                                    |                           |        |            |            |      |       |            |            |      |       
|Denominator for diluted earnings per share          |                                          |                                    |                           |        |            |            |      |       |            |            |      |       
|                                                    |                                          | - adjusted weighted-average shares |                           |        | 10,080,005 |            |      |       | 10,271,548 |            |      |        | 10,698,717 |           
|                                                    |                                          |                                    |                           |        |            |            |      |       |            |            |      |       
|Basic earnings per share                            |                                          | $                                  | 1.71                      |        |            | $          | 0.60 |       |            | $          | 1.52 |       
|                                                    |                                          |                                    |                           |        |            |            |      |       |            |            |      |       
|Diluted earnings per share                          |                                          | $                                  | 1.69                      |        |            | $          | 0.60 |       |            | $          | 1.51 |       
|                                                    |                                          |                                    |                           |        |            |            |      |       |            |            |      |       

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

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

|                                                  |  |      |         |      |  |      |         |  |  |   |         | 
|------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|                                                  |  | 2001 |         | 2000 |  | 1999
|                                                  |  |      |         |      |  |     
|Statutory rate                                    |  |      | 35%     |      |  |      | 34%     |  |  |   | 35%     | 
|Income before federal income taxes (1)            |  | $    | 23,061  |      |  | $    | 6,310   |  |  | $ | 21,539  | 
|Tax at statutory rate                             |  | $    | 8,071   |      |  | $    | 2,146   |  |  | $ | 7,539   | 
|Non-taxable interest                              |  |      | (1,480) |      |  |      | (1,188) |  |  |   | (1,558) | 
|Increase in cash surrender value  life insurance |  |      | (545)   |      |  |      | (496)   |  |  |   | (535)   | 
|Disallowed interest expense                       |  |      | 245     |      |  |      | 248     |  |  |   | 235     | 
|Other items, net                                  |  |      | (411)   |      |  |      | (534)   |  |  |   | (320)   | 
|                                                  |  |      |         |      |  |      |         |  |  |   |         | 
|                                                  |  | $    | 5,880   |      |  | $    | 176     |  |  | $ | 5,361   | 
|                                                  |  |      |         |      |  |      |         |  |  |   |         | 



---

|(1) |  | Excludes the cumulative effect adjustment of accounting change for SFAS
No. 133. 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:

|                          |                                               |                           |                                |       |       |       |       |       |       |       | 
|------------------------- | --------------------------------------------- | ------------------------- | ------------------------------ | ----- | ----- | ----- | ----- | ----- | ----- | ----- | 
|                          |                                               |                           |                                |       | 2001  |       | 2000 
|                          |                                               |                           |                                |       |       |       |      
|Deferred tax assets:      |                                               |                           |                                |       |       |       |       |      
|                          | Provision for loan losses                     |                           | $                              | 5,685 |       |       | $     | 5,105 |      
|                          | Goodwill and intangible amortization          |                           |                                |      |       |       |       | 722   |      
|                          | Non-accrual interest                          |                           |                                | 380   |       |       |       | 132   |      
|                          | Valuation allowance mortgage servicing rights |                           |                                | 284   |       |       |       |      |      
|                          | Other                                         |                           |                                | 1,500 |       |       |       | 1,377 |      
|                          |                                               | Total deferred tax assets |                                |       | 7,849 |       |       |       | 7,336 |      
|                          |                                               |                           |                                |       |       |       |       |      
|Deferred tax liabilities: |                                               |                           |                                |       |       |       |       |      
|                          | SFAS No. 115 adjustment                       |                           |                                | 1,887 |       |       |       | 151   |      
|                          | FHLB dividends                                |                           |                                | 2,326 |       |       |       | 1,912 |      
|                          | Capitalized mortgage servicing rights         |                           |                                | 2,918 |       |       |       | 989   |      
|                          | Goodwill and intangible amortization          |                           |                                | 332   |       |       |       |      |      
|                          | Other                                         |                           |                                | 343   |       |       |       | 466   |      
|                          |                                               |                           |                                |       |       |       |       |      
|                          |                                               |                           | Total deferred tax liabilities |       |       | 7,806 |       |       |       | 3,518 | 
|Net deferred tax assets   |                                               | $                         | 43                             |       |       | $     | 3,818 |      
|                          |                                               |                           |                                |       |       |       |       |      

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|                                             |  |                                            
|-------------------------------------------- |  | -------------------------------------------
|Notes to Consolidated Financial Statements   |  | December 31, 2001                          
|Second Bancorp Incorporated and Subsidiaries |  | Dollars in thousands, except per share data

19.     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. 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 plan assets at December 31, 2001 are invested
primarily in common stock, preferred stock and corporate bonds. Included in
those investments are 9,822 and 16,762 shares of Corporation common stock with
a market value of $212 and $243 as of December 31, 2001 and 2000, respectively.
The Bank also has a supplemental retirement deferred benefit plan for certain
employees, which provides benefits in excess of the defined benefit plan.

The following table sets forth the plans pension benefits as of December 31:

|                                                |                                          |            |         |            |      |   |         |        | 
|----------------------------------------------- | ---------------------------------------- | ---------- | ------- | ---------- | ---- | - | ------- | ------ | 
|                                                |                                          |            | 2001    |            | 2000
|                                                |                                          |            |         |            |     
|Change in benefit obligation:                   |                                          |            |         |            |      |   |         |       
|Benefit obligation at beginning of year         |                                          | $          | 8,802   |            |      | $ | 7,473   |       
|Service cost                                    |                                          |            | 727     |            |      |   | 617     |       
|Interest cost                                   |                                          |            | 694     |            |      |   | 594     |       
|Amendments                                      |                                          |            | 15      |            |      |   |        |       
|Actuarial loss                                  |                                          |            | 965     |            |      |   | 438     |       
|Disbursements                                   |                                          |            | (441)   |            |      |   | (320)   |       
|                                                |                                          |            |         |            |      |   |         |       
|                                                | Benefit obligation at end of year        |            | $       | 10,762     |      |   | $       | 8,802  | 
|                                                |                                          |            |         |            |      |   |         |       
|                                                |                                          |            |         |            |      |   |         |       
|Change in plan assets:                          |                                          |            |         |            |      |   |         |       
|Fair value of plan assets at beginning of year  |                                          | $          | 10,956  |            |      | $ | 10,361  |       
|Actual return on plan assets                    |                                          |            | (1,008) |            |      |   | (350)   |       
|Employer contribution                           |                                          |            | 86      |            |      |   | 1,265   |       
|Disbursements                                   |                                          |            | (441)   |            |      |   | (320)   |       
|                                                |                                          |            |         |            |      |   |         |       
|                                                | Fair value of plan assets at end of year |            | $       | 9,593      |      |   | $       | 10,956 | 
|                                                |                                          |            |         |            |      |   |         |       
|                                                |                                          |            |         |            |      |   |         |       
|Funded status                                   |                                          | $          | (1,169) |            |      | $ | 2,154   |       
|Unrecognized net actuarial loss (gain)          |                                          |            | 350     |            |      |   | (2,739) |       
|Unrecognized prior service cost                 |                                          |            | 15      |            |      |   | 6       |       
|Unrecognized initial net obligation             |                                          |            | (28)    |            |      |   | (49)    |       
|                                                | Net amount recognized                    |            | $       | (832)      |      |   | $       | (628)  | 
|                                                |                                          |            |         |            |      |   |         |       
|                                                | Accrued benefit liability recognized     |            | $       | (832)      |      |   | $       | (628)  | 
|                                                |                                          |            |         |            |      |   |         |       
|Weighted average assumptions as of December 31: |                                          |            |         |            |      |   |         |       
|Discount rate                                   |                                          |            | 7.375   | %          |      |   | 7.75    | %     
|Expected return on plan assets                  |                                          |            | 9.75    | %          |      |   | 9.75    | %     
|Rate of compensation increase                   |                                          | Age-graded |         | Age-graded

|                                         |                              |   |         |     |      |   |       |     |  |   |       |     | 
|---------------------------------------- | ---------------------------- | - | ------- | --- | ---- | - | ----- | --- |  | - | ----- | --- | 
|                                         |                              |   | 2001    |     | 2000 |   | 1999 
|                                         |                              |   |         |     |      |   |      
|Components of net periodic benefit cost: |                              |   |         |     |      |   |       |     |  |   |       |    
|Service cost                             |                              | $ | 727     |     |      | $ | 617   |     |  | $ | 798   |    
|Interest cost                            |                              |   | 694     |     |      |   | 594   |     |  |   | 541   |    
|Expected return on plan assets           |                              |   | (1,008) |     |      |   | (832) |     |  |   | (685) |    
|Amortization of prior service cost       |                              |   | 6       |     |      |   | 6     |     |  |   | 6     |    
|Amortization of initial net asset        |                              |   | (21)    |     |      |   | (21)  |     |  |   | (22)  |    
|Recognized net actuarial loss (gain)     |                              |   | (109)   |     |      |   | (181) |     |  |   | 6     |    
|                                         |                              |   |         |     |      |   |       |     |  |   |       |    
|                                         | Net periodic pension expense |   | $       | 289 |      |   | $     | 183 |  |   | $     | 644 | 
|                                         |                              |   |         |     |      |   |       |     |  |   |       |    

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 $782, $782 and $0, respectively, as
of December 31, 2001, and $781, $781, and $0, respectively as of December 31,
2000. The actual return on plan assets in 2001 represented a 9.2% decline in
the fair value of plan assets. The decline is attributable to the reduction in
the values of plan equity investments during the year.

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|                                             |  |                                            
|-------------------------------------------- |  | -------------------------------------------
|Notes to Consolidated Financial Statements   |  | December 31, 2001                          
|Second Bancorp Incorporated and Subsidiaries |  | Dollars in thousands, except per share data

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 $813, $813, and $0, respectively, as of December 31, 2001,
and $781, $781, and $0, respectively as of December 31, 2000. For the years
ended December 31, 2001, 2000 and 1999, expenses related to these plans were
$95, $62 and $132, respectively.

The Bank had a stock appreciation rights plan that was used to grant certain
officers stock appreciation rights upon their employment. The Corporation has
not issued any rights since 1987 and all rights were fully exercised by the end
of 1999. The plan expense for 1999 was $7.

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
participants 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 limited solely to the stock fund.
Employees contributions vest immediately while the employer contribution vests
at 50% after 3 years, 75% after 4 years and 100% after 5 years. Contributions
in 2001, 2000 and 1999 were $524, $442 and $416, 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, 2001, none of the shares authorized have been
issued.

20. 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.
The non-qualified plan authorizes 650,000 shares of common stock to be reserved
and subject to issuance. Until January 2001, the maximum annual grant was
10,000 shares per employee and 1,000 shares per director. The awards currently
have no maximum. The options are also exercisable one year after issuance and
expire after 10 years.

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. The Corporation has elected,
as the standard allows, to continue to measure compensation costs for its plans
as prescribed in Accounting Principles Board (APB) Opinion No. 25, Accounting
for Stock Issued to Employees because the alternative fair value accounting
provided under SFAS No. 123 requires use of option valuation models that were
not developed for use in valuing employee stock options. 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 grant, no compensation
expense is recognized. Pro forma disclosure of net income and earnings per
share is made in the accompanying footnotes as if the fair-value method of
accounting, as defined by SFAS No. 123, had been adopted.

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:

|                                                                         |  |        |      |        |  |        |      |  |  |  |      | 
|------------------------------------------------------------------------ |  | ------ | ---- | ------ |  | ------ | ---- |  |  |  | ---- | 
|                                                                         |  | 2001   |      | 2000   |  | 1999  
|                                                                         |  |        |      |        |  |       
|Risk-free interest rate                                                  |  |        | 4.0% |        |  |        | 5.5% |  |  |  | 6.5% | 
|Dividend yield                                                           |  |        | 3.0% |        |  |        | 4.0% |  |  |  | 3.0% | 
|Volatility factor of expected market
price of Corporations common stock |  |        | .302 |        |  |        | .301 |  |  |  | .274 | 
|Weighted-average expected life                                           |  | 6years |      | 6years |  | 6years

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|                                             |  |                                            
|-------------------------------------------- |  | -------------------------------------------
|Notes to Consolidated Financial Statements   |  | December 31, 2001                          
|Second Bancorp Incorporated and Subsidiaries |  | Dollars in thousands, except per share data

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.

For purposes of the pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options vesting period. The
Corporations pro forma information follows:

|                              |         |   |        |      |      |   |       |      |  |   |        |      | 
|----------------------------- | ------- | - | ------ | ---- | ---- | - | ----- | ---- |  | - | ------ | ---- | 
|                              |         |   | 2001   |      | 2000 |   | 1999 
|                              |         |   |        |      |      |   |      
|Pro forma net income          |         | $ | 16,662 |      |      | $ | 5,797 |      |  | $ | 15,583 |     
|Pro forma earnings per share: |         |   |        |      |      |   |       |      |  |   |        |     
|                              | Basic   |   | $      | 1.66 |      |   | $     | 0.57 |  |   | $      | 1.47 | 
|                              | Diluted |   | $      | 1.65 |      |   | $     | 0.56 |  |   | $      | 1.46 | 

A summary of stock option activity is as follows:

|                                 |           |  |                  |          |           |   |              |               |  |   |       |         | 
|-------------------------------- | --------- |  | ---------------- | -------- | --------- | - | ------------ | ------------- |  | - | ----- | ------- | 
|                                 |           |  |                  |          |           |   | Option Price |               |  |   |      
|                                 |           |  | Number of Shares |          | Per Share |   | Total       
|                                 |           |  |                  |          |           |   |             
|Outstanding at January 1, 1999   |           |  | 276,450          |          |           | $ | 7.33-$25.44  |               |  | $ | 5,388 |        
|                                 | Granted   |  |                  | 108,400  |           |   |              | 22.72 - 24.22 |  |   |       | 2,478   | 
|                                 | Exercised |  |                  | (24,100) |           |   |              | 9.21 - 22.13  |  |   |       | (273)   | 
|                                 |           |  |                  |          |           |   |              |               |  |   |       |        
|Outstanding at December 31, 1999 |           |  | 360,750          |          |           |   | 7.33 - 25.44 |               |  |   | 7,593 |        
|                                 | Granted   |  |                  | 92,000   |           |   |              | 13.66 - 22.34 |  |   |       | 1,412   | 
|                                 | Forfeited |  |                  | (54,050) |           |   |              | 13.44 - 25.44 |  |   |       | (1,281) | 
|                                 |           |  |                  |          |           |   |              |               |  |   |       |        
|                                 | Exercised |  |                  | (2,500)  |           |   |              | 13.44         |  |   |       | (34)    | 
|                                 |           |  |                  |          |           |   |              |               |  |   |       |        
|Outstanding at December 31, 2000 |           |  | 396,200          |          |           |   | 7.33 - 25.44 |               |  |   | 7,690 |        
|                                 | Granted   |  |                  | 167,500  |           |   |              | 14.44 - 20.19 |  |   |       | 2,510   | 
|                                 | Forfeited |  |                  | (5,500)  |           |   |              | 22.13 - 25.44 |  |   |       | (125)   | 
|                                 | Exercised |  |                  | (47,500) |           |   |              | 7.33 - 13.66  |  |   |       | (540)   | 
|                                 |           |  |                  |          |           |   |              |               |  |   |       |        
|Outstanding at December 31, 2001 |           |  | 510,700          |          |           | $ | 10.58-$25.44 |               |  | $ | 9,535 |        
|                                 |           |  |                  |          |           |   |              |               |  |   |       |        
|Exercisable at December 31, 2001 |           |  | 343,200          |          |           | $ | 10.58-$25.44 |               |  | $ | 7,025 |        

The weighted-average fair value of the options granted during 2001, 2000 and
1999 were $3.79, $3.68 and $7.03, respectively. The weighted-average remaining
contractual life of the outstanding options is 7.6 years.

Restricted Stock Awards: The restricted stock plan provides for the issuance of
up to 50,000 shares of common stock to key employees. The restriction expires
after five years and the Corporation recognizes expense over the restricted
period. Compensations expense recognized in 2001, 2000 and 1999 totaled $72,
$32 and $10.

A summary of restricted stock activity is as follows:

|                                          |           |  |           |         |           |   |               |               |  |   |     |      | 
|----------------------------------------- | --------- |  | --------- | ------- | --------- | - | ------------- | ------------- |  | - | --- | ---- | 
|                                          |           |  | Number of |         | Price Per |   |               |               | 
|                                          |           |  | Shares    |         | Share     |   | Value        
|                                          |           |  |           |         |           |   |              
|Outstanding at December 31, 1998 and 1999 |           |  | 1,600     |         |           | $ | 28.38-$32.63  |               |  | $ | 48  |     
|                                          | Granted   |  |           | 24,910  |           |   |               | 16.38 - 19.00 |  |   |     | 443  | 
|                                          | Forfeited |  |           | (3,050) |           |   |               | 19.00 - 28.38 |  |   |     | (67) | 
|                                          |           |  |           |         |           |   |               |               |  |   |     |     
|Outstanding at December 31, 2000          |           |  | 23,460    |         |           |   | 16.38 - 32.63 |               |  |   | 424 |     
|                                          | Granted   |  |           | 1,500   |           |   |               | 21.38 - 21.82 |  |   |     | 33   | 
|                                          | Forfeited |  |           | (3,500) |           |   |               | 16.38 - 19.00 |  |   |     | (58) | 
|                                          |           |  |           |         |           |   |               |               |  |   |     |     
|Outstanding at December 31, 2001          |           |  | 21,460    |         |           | $ | 16.38-$32.63  |               |  | $ | 399 |     
|                                          |           |  |           |         |           |   |               |               |  |   |     |     

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|                                             |  |                                            
|-------------------------------------------- |  | -------------------------------------------
|Notes to Consolidated Financial Statements   |  | December 31, 2001                          
|Second Bancorp Incorporated and Subsidiaries |  | Dollars in thousands, except per share data

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

Condensed Balance Sheets

|                                      |                                                                                               |                                                                                                                 |       |             |         |      |       |          |         | 
|------------------------------------- | --------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------- | ----- | ----------- | ------- | ---- | ----- | -------- | ------- | 
|                                      |                                                                                               |                                                                                                                 |       | December 31
|                                      |                                                                                               |                                                                                                                 |       |            
|                                      |                                                                                               |                                                                                                                 |       | 2001        |         | 2000
|                                      |                                                                                               |                                                                                                                 |       |             |         |     
|Assets:                               |                                                                                               |                                                                                                                 |       |             |         |      |       |         
|                                      | Cash                                                                                          |                                                                                                                 | $     | 1,227       |         |      | $     | 117      |        
|                                      | Trading account                                                                               |                                                                                                                 |       |            |         |      |       | 328      |        
|                                      | Available-for-sale securities                                                                 |                                                                                                                 |       | 1,040       |         |      |       | 1,355    |        
|                                      | Loans                                                                                         |                                                                                                                 |       | 586         |         |      |       | 612      |        
|                                      | Investment in and advances to subsidiaries, at equity
in underlying value of their net assets |                                                                                                                 |       | 155,328     |         |      |       | 115,226  |        
|                                      | Fixed assets                                                                                  |                                                                                                                 |       | 4           |         |      |       | 6        |        
|                                      | Accumulated other assets                                                                      |                                                                                                                 |       | 2,348       |         |      |       | 1,999    |        
|                                      |                                                                                               |                                                                                                                 |       |             |         |      |       |         
|                                      |                                                                                               | Total assets                                                                                                    |       | $           | 160,533 |      |       | $        | 119,643 | 
|                                      |                                                                                               |                                                                                                                 |       |             |         |      |       |         
|Liabilities and Shareholders Equity: |                                                                                               |                                                                                                                 |       |             |         |      |       |         
|Accrued and other liabilities         |                                                                                               | $                                                                                                               | 1,792 |             |         | $    | 1,446 |         
|                                      | Note payable                                                                                  |                                                                                                                 |       |            |         |      |       | 1,000    |        
|                                      | Subordinated debentures                                                                       |                                                                                                                 |       | 30,442      |         |      |       |         |        
|                                      | Shareholders Equity:                                                                         |                                                                                                                 |       |             |         |      |       |          |        
|                                      |                                                                                               | Common stock, no par value; 30,000,000 shares
authorized; 10,832,810 and 10,787,310 shares
issued, respectively |       |             | 37,453  |      |       |          | 36,935  | 
|                                      | Treasury stock, 883,494 and 730,200 shares, respectively                                      |                                                                                                                 |       | (16,798)    |         |      |       | (13,947) |        
|                                      | Accumulated other comprehensive income                                                        |                                                                                                                 |       | 3,434       |         |      |       | 281      |        
|                                      | Retained earnings                                                                             |                                                                                                                 |       | 104,210     |         |      |       | 93,928   |        
|                                      |                                                                                               |                                                                                                                 |       |             |         |      |       |         
|                                      |                                                                                               | Total Liabilities and Shareholders Equity                                                                      |       | $           | 160,533 |      |       | $        | 119,643 | 
|                                      |                                                                                               |                                                                                                                 |       |             |         |      |       |         

Condensed Statements of Income

|                                                                                |                                      |                |        |       |        |      |       |       |       |  |        |       |        | 
|------------------------------------------------------------------------------- | ------------------------------------ | -------------- | ------ | ----- | ------ | ---- | ----- | ----- | ----- |  | ------ | ----- | ------ | 
|Years ended December 31                                                         |                                      | 2001           |        | 2000  |        | 1999
|                                                                                |                                      |                |        |       |        |     
|Income:                                                                         |                                      |                |        |       |        |      |       |       |       |  |        |      
|                                                                                | Cash dividends from subsidiaries     |                | $      | 8,150 |        |      | $     | 7,952 |       |  | $      | 6,345 |       
|                                                                                | Interest income                      |                |        | 161   |        |      |       | 259   |       |  |        | 939   |       
|                                                                                | Trading account losses               |                |        | (10)  |        |      |       | (309) |       |  |        |      |       
|                                                                                | Gains (losses) on sale of securities |                |        | 37    |        |      |       | (10)  |       |  |        | 101   |       
|                                                                                | Other income                         |                |        |      |        |      |       | 9     |       |  |        |      |       
|                                                                                |                                      |                |        |       |        |      |       |       |       |  |        |      
|                                                                                |                                      | Total income   |        |       | 8,338  |      |       |       | 7,901 |  |        |       | 7,385  | 
|Expenses:                                                                       |                                      |                |        |       |        |      |       |       |       |  |        |      
|                                                                                | Interest expense                     |                |        | 796   |        |      |       | 25    |       |  |        | 64    |       
|                                                                                | Merger costs                         |                |        | 305   |        |      |       |      |       |  |        |      |       
|                                                                                | Other expenses                       |                |        | 962   |        |      |       | 2,108 |       |  |        | 1,468 |       
|                                                                                |                                      |                |        |       |        |      |       |       |       |  |        |      
|                                                                                |                                      | Total expenses |        |       | 2,063  |      |       |       | 2,133 |  |        |       | 1,532  | 
|                                                                                |                                      |                |        |       |        |      |       |       |       |  |        |      
|Income before income taxes and equity in
undistributed earnings of subsidiaries |                                      |                | 6,275  |       |        |      | 5,768 |       |       |  | 5,853  |      
|Income tax benefit                                                              |                                      |                | 739    |       |        |      | 780   |       |       |  | 252    |      
|                                                                                |                                      |                |        |       |        |      |       |       |       |  |        |      
|Income before and equity in undistributed earnings
of subsidiaries              |                                      |                | 7,014  |       |        |      | 6,548 |       |       |  | 6,105  |      
|Equity in undistributed earnings of subsidiaries                                |                                      |                | 10,066 |       |        |      | (414) |       |       |  | 10,073 |      
|                                                                                |                                      |                |        |       |        |      |       |       |       |  |        |      
|                                                                                |                                      | Net income     |        | $     | 17,080 |      |       | $     | 6,134 |  |        | $     | 16,178 | 
|                                                                                |                                      |                |        |       |        |      |       |       |       |  |        |      

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|                                             |  |                                            
|-------------------------------------------- |  | -------------------------------------------
|Notes to Consolidated Financial Statements   |  | December 31, 2001                          
|Second Bancorp Incorporated and Subsidiaries |  | Dollars in thousands, except per share data

|                                   |                                                               |                                                 |   |          |          |      |   |          |        |  |   |          |       | 
|---------------------------------- | ------------------------------------------------------------- | ----------------------------------------------- | - | -------- | -------- | ---- | - | -------- | ------ |  | - | -------- | ----- | 
|Condensed Statements of Cash Flows |                                                               |                                                 |   |          |          |      |   |          |        |  |   |         
|Years ended December 31            |                                                               |                                                 |   |          |          |      |   |          |        |  |   |         
|                                   |                                                               |                                                 |   |          |          |      |   |          |        |  |   |         
|                                   |                                                               |                                                 |   | 2001     |          | 2000 |   | 1999    
|                                   |                                                               |                                                 |   |          |          |      |   |         
|Operating Activities:              |                                                               |                                                 |   |          |          |      |   |          |        |  |   |         
|                                   | Net income                                                    |                                                 | $ | 17,080   |          |      | $ | 6,134    |        |  | $ | 16,178   |      
|                                   | Less: Equity in undistributed net (income) loss of subsidiary |                                                 |   | (10,066) |          |      |   | 414      |        |  |   | (10,073) |      
|                                   | Provision for depreciation                                    |                                                 |   | 2        |          |      |   | 13       |        |  |   | 30       |      
|                                   | Net decrease (increase) in trading account securities         |                                                 |   | 328      |          |      |   | (328)    |        |  |   |         |      
|                                   | (Gain) loss on sale of securities                             |                                                 |   | (37)     |          |      |   | 10       |        |  |   | (101)    |      
|                                   | (Gain) loss on disposal of fixed assets                       |                                                 |   |         |          |      |   | (9)      |        |  |   | 2        |      
|                                   | Amortization of debt issuance costs                           |                                                 |   | 13       |          |      |   |         |        |  |   |         |      
|                                   | Other (net)                                                   |                                                 |   | (25)     |          |      |   | (818)    |        |  |   | (1,627)  |      
|                                   |                                                               |                                                 |   |          |          |      |   |          |        |  |   |         
|                                   |                                                               | Cash provided by operations                     |   |          | 7,295    |      |   |          | 5,416  |  |   |          | 4,409 | 
|                                   |                                                               |                                                 |   |          |          |      |   |          |        |  |   |         
|Investing Activities:              |                                                               |                                                 |   |          |          |      |   |          |        |  |   |         
|                                   | Repayment of loan to subsidiary                               |                                                 |   |         |          |      |   | 11,000   |        |  |   |         |      
|                                   | Net decrease in loans                                         |                                                 |   | 26       |          |      |   | 26       |        |  |   | 22       |      
|                                   | Sale of securities                                            |                                                 |   | 417      |          |      |   | 17       |        |  |   | 251      |      
|                                   | Purchase of securities                                        |                                                 |   |         |          |      |   | (126)    |        |  |   | (43)     |      
|                                   | Acquisition of financial institution                          |                                                 |   | (26,926) |          |      |   |         |        |  |   |         |      
|                                   | Sale of premises and equipment                                |                                                 |   |         |          |      |   | 11       |        |  |   | 25       |      
|                                   | Purchase of premises and equipment                            |                                                 |   |         |          |      |   | (5)      |        |  |   |         |      
|                                   |                                                               |                                                 |   |          |          |      |   |          |        |  |   |         
|                                   |                                                               | Cash (used by) provided by investing activities |   |          | (26,483) |      |   |          | 10,923 |  |   |          | 256   | 
|                                   |                                                               |                                                 |   |          |          |      |   |          |        |  |   |         
|Financing Activities:              |                                                               |                                                 |   |          |          |      |   |          |        |  |   |         
|                                   | Issuance of note payable                                      |                                                 |   |         |          |      |   | 1,000    |        |  |   | 4,000    |      
|                                   | Repayment of note payable                                     |                                                 |   | (1,000)  |          |      |   | (4,000)  |        |  |   |         |      
|                                   | Issuance of subordinated debentures to
non-bank subsidiary    |                                                 |   | 30,429   |          |      |   |         |        |  |   |         |      
|                                   | Net issuance of common stock                                  |                                                 |   | 518      |          |      |   | (31)     |        |  |   | 65       |      
|                                   | Purchase of treasury stock                                    |                                                 |   | (2,851)  |          |      |   | (6,807)  |        |  |   | (6,347)  |      
|                                   | Payment of dividend                                           |                                                 |   | (6,798)  |          |      |   | (6,518)  |        |  |   | (5,934)  |      
|                                   |                                                               |                                                 |   |          |          |      |   |          |        |  |   |         
|                                   | Cash provided by (used by) financing activities               |                                                 |   | 20,298   |          |      |   | (16,356) |        |  |   | (8,216)  |      
|                                   |                                                               |                                                 |   |          |          |      |   |          |        |  |   |         
|                                   | Increase (decrease) in cash                                   |                                                 |   | 1,110    |          |      |   | (17)     |        |  |   | (3,551)  |      
|                                   | Cash at beginning of year                                     |                                                 |   | 117      |          |      |   | 134      |        |  |   | 3,685    |      
|                                   |                                                               |                                                 |   |          |          |      |   |          |        |  |   |         
|                                   |                                                               | Cash at end of year                             |   | $        | 1,227    |      |   | $        | 117    |  |   | $        | 134   | 
|                                   |                                                               |                                                 |   |          |          |      |   |          |        |  |   |         

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|                                             |  |                                            
|-------------------------------------------- |  | -------------------------------------------
|Notes to Consolidated Financial Statements   |  | December 31, 2001                          
|Second Bancorp Incorporated and Subsidiaries |  | Dollars in thousands, except per share data

22.     Derivative Instruments
The Corporation uses derivative instruments primarily to protect against the
risk of adverse price 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.

As discussed in Note 2, 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. 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.
Note 1 provides further detail on how derivative instruments are accounted for
in the financial statements. 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, net present
value estimation and value-at-risk methodologies.

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 2001, the Corporation utilized a pay-fixed interest
rate swap for a commercial loan for changes in interest rates. The swap has a
$5 million notional amount with a $(247) fair market value as of December 31,
2001 with no net ineffectiveness hedge gain or loss. As of December 31, 2000,
the swap had a fair market value of $(168). Additionally, 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. As of December 31, 2000, these caps had a cost of
$424 and a fair value of $130 based on $80.9 million notional value, an average
strike rate of 6.0% and an average life of 1.6 years.

CASH FLOW HEDGES: During 2001, the Corporation hedged cash flow variability
related to floating rate loans. The Corporation used interest rate floors to
mitigate the risk of a decline in interest receipts on floating rate loans due
to a decline in the Banks prime rate. 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 were
generated when the floors were terminated during 2001. As of December 31, 2000,
the floors had a cost of $131 and a fair value of $270 based on the $50 million
notional value.

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|                                             |  |                                            
|-------------------------------------------- |  | -------------------------------------------
|Notes to Consolidated Financial Statements   |  | December 31, 2001                          
|Second Bancorp Incorporated and Subsidiaries |  | Dollars in thousands, except per share data

23.     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:

|                          |  |      |         |      |  |   |         | 
|------------------------- |  | ---- | ------- | ---- |  | - | ------- | 
|                          |  | 2001 |         | 2000
|                          |  |      |         |     
|Commercial                |  | $    | 108,810 |      |  | $ | 101,450 | 
|Real Estate               |  |      | 29,600  |      |  |   | 29,818  | 
|Consumer                  |  |      | 57,944  |      |  |   | 44,741  | 
|Standby Letters of Credit |  |      | 4,796   |      |  |   | 3,546   | 
|                          |  |      |         |      |  |   |         | 
|                          |  | $    | 201,150 |      |  | $ | 179,555 | 
|                          |  |      |         |      |  |   |         | 

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 renewal periods at the fair market value in
existence at that time.

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

|           |      |  |       |       | 
|---------- | ---- |  | ----- | ----- | 
|           | 2002 |  | $     | 2,069 | 
|           | 2003 |  |       | 1,905 | 
|           | 2004 |  |       | 1,713 | 
|           | 2005 |  |       | 1,813 | 
|           | 2006 |  |       | 1,795 | 
|Thereafter |      |  | 4,835 |      

Rentals under operating leases and data processing costs amounted to $3,214,
$3,020 and $2,893 in 2001, 2000 and 1999, 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 $1,645 to date and is realizing tax credits
and tax savings from the investments. The Bank is committed to invest another
$3,355 to the fund over the next several years.

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Report of Independent Auditors
Second Bancorp Incorporated and Subsidiaries

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, 2001 and 2000, and the related
consolidated statements of income, shareholders equity, and cash flows for
each of the three years in the period ended December 31, 2001. 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, 2001 and 2000, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States.



Cleveland, Ohio
January 24, 2002

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Item 9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

Not Applicable.







PART III







Item 10.     Directors and Executive Officers of the Registrant

In accordance with General Instruction G(3), the information called for in this
Item 10 is incorporated herein by reference to Second Bancorps definitive
proxy statement for the annual meeting of shareholders to be held April 18,
2002 (the Proxy Statement). Such Proxy Statement has been filed with the
Securities and Exchange Commission on March 5, 2002. Information regarding
executive officers is included under item 4a hereof.







Item 11.     Executive Compensation

In accordance with General Instruction G(3), the information called for in this
Item 11 is incorporated herein by reference to Second Bancorps definitive
proxy statement for the annual meeting of shareholders to be held April 18,
2002 (the Proxy Statement). Such Proxy Statement has been filed with the
Securities and Exchange Commission on March 5, 2002.







Item 12.     Security Ownership of Certain Beneficial Owners and Management

In accordance with General Instruction G(3), the information called for in this
Item 12 is incorporated herein by reference to Second Bancorps definitive
proxy statement for the annual meeting of shareholders to be held April 18,
2002 (the Proxy Statement). Such Proxy Statement has been filed with the
Securities and Exchange Commission on March 5, 2002







Item 13.     Certain Relationships and Related Transactions

In accordance with General Instruction G(3), the information called for in this
Item 13 is incorporated herein by reference to Second Bancorps definitive
proxy statement for the annual meeting of shareholders to be held April 18,
2002 (the Proxy Statement). Such Proxy Statement has been filed with the
Securities and Exchange Commission on March 5, 2002.

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PART IV







Item 14.     Exhibits, Financial Statement Schedules, and Reports on Form 8-K

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

Consolidated Balance Sheets  December 31, 2001 and 2000.

Consolidated Statements of Income  years ended December 31, 2001, 2000 and
1999.

Consolidated Statements of Shareholders Equity  years ended December 31,
2001, 2000 and 1999.

Consolidated Statement of Cash Flows  years ended December 31, 2001, 2000 and
1999.

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) |  | Listing of Exhibits.The exhibits listed on the accompanying Index to
Exhibits immediately following the financial statement schedules are filed
as part of, or incorporated by reference into, this report.                                                                                                                                                                                                              
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|2.1 |  | Agreement and Plan of Merger, dated as of July 23, 2001, by and among
Second Bancorp Incorporated, Second Merger Corp. and Commerce Exchange
Corporation. Incorporated herein by reference to Exhibit 2.1 to the
Registration Statement on Form S-3 (Registration Nos. 333-68910 and
333-68910-01) as filed on September 4, 2001 by Second Bancorp Incorporated
and Second Bancorp Capital Trust I (the 2001 Form S-3).
|   
|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 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).                                 
|   
|3.3 |  | Code of Regulations of the Registrant. Incorporated 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).                                                                                                                                                         
|     
|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 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 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.                                                                                                                                                                               
|     
|10.5  |  | Lease Agreement between Arden Associates Limited Partnership and Second
National, dated October 1, 1979. Incorporated 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  |  | Form of Amended Management Severance Agreement with executive officers.
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,
1995 (File No. 0-15624).                                                                                                                                                                                                                                                  
|     
|10.8  |  | Revolving Credit Agreement (excluding exhibits), dated September 15,
1998, between Second Bancorp and The Northern Trust Company. Incorporated
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.                                                                                                                                              
|     
|10.9  |  | First Amendment to Revolving Credit Agreement (excluding exhibits), dated
March 11, 1997, between Second Bancorp and The Northern Trust Company.
Incorporated 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.                                                                                                                               
|     
|10.10 |  | Second Amendment to Revolving Credit Agreement (excluding exhibits), dated December 4, 1998, between
Second Bancorp and The Northern Trust Company.                                                                                                                                                                                                                                                                                                                                             
|     
|10.11 |  | Third Amendment to Revolving Credit Agreement (excluding exhibits), dated February 16, 2000, between                                                                                                                                                                                                                                                                                                                                                                                            
|     
|      |  | Second Bancorp and The Northern Trust Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     
|10.12 |  | Fourth Amendment to Revolving Credit Agreement (excluding exhibits),
dated February 16, 2001, between Second Bancorp and The Northern Trust
Company.                                                                                                                                                                                                                                                                                                                                            

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|10.13 |  | Form of Non-qualified Stock Option Agreement. Incorporated 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 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 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 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). 
|     
|11    |  | Statement Re: Computation of Per Share Earnings. Included in Note 17 of
the Notes to the Consolidated Financial Statements of Registrant in the
financial statements portion of this annual report on Form 10-K.                                                          
|     
|21    |  | Subsidiaries of the registrant.                                                                                                                                                                                                                                           
|     
|23.1  |  | Consent of Ernst & Young.                                                                                                                                                                                                                                                 

(b)  The Corporation filed three reports on Form 8-K during the three months
ended December 31, 2001. A Form 8-K was filed on October 1, 2001 to announce
the issuance of 2,800,000 shares of 9.00% Cumulative Trust preferred
Securities. A Form 8-K was filed on October 22, 2001 to disclose the earnings
for the third quarter of 2001. A Form 8-K was filed on October 31, 2001 to
announce the completion of the acquisition of Commerce Exchange Corporation.

(c)  Exhibits -The response to this portion of Item 14 is included at Item
14(a)(3) of this report.

(d)  Financial Statement Schedules -None.

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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. KellermanDavid L. Kellerman, Treasurer |  | March 25, 2002(date)

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                                                          |  | March 26, 2002
|                                                                                 |  |               
|Rick L. Blossom, Chairman, President & CEO                                       |  | (date)        
|                                                                                 |  |               
|By: /s/ David L. Kellerman                                                       |  | March 25, 2002
|                                                                                 |  |               
|David L. Kellerman, Principal Financial Officer
and Principal Accounting Officer |  | (date)        
|                                                                                 |  |               
|By: /s/ David A. Allen                                                           |  | March 25, 2002
|                                                                                 |  |               
|David A. Allen, Director                                                         |  | (date)        
|                                                                                 |  |               
|By: /s/ John A. Anderson                                                         |  | March 25, 2002
|                                                                                 |  |               
|John A. Anderson, Director                                                       |  | (date)        
|                                                                                 |  |               
|By: /s/ John L. Pogue                                                            |  | March 25, 2002
|                                                                                 |  |               
|John L. Pogue, Director                                                          |  | (date)        
|                                                                                 |  |               
|By: /s/ John c. gibson                                                           |  | March 25, 2002
|                                                                                 |  |               
|John C. Gibson, Director                                                         |  | (date)        

65