Exhibit 99.1
Second Quarter 2004
Earnings Release and
Supplemental Financials
July 22, 2004
FOR IMMEDIATE RELEASE
CONTACT: | Kevin T. Thompson Executive Vice President Chief Financial Officer (419) 254-6068 |
Sky Reports Second Quarter Net Income Up 7.2%
July 22, 2004 (Bowling Green, Ohio, NASDAQ: SKYF) Sky Financial Group, Inc. today reported second quarter net income of $40.2 million, up 7.2% versus $37.5 million for the second quarter last year. Second quarter earnings per diluted share were $.43, up 2.4% from $.42 per diluted share for the second quarter last year. Return on average assets and return on average equity were 1.33% and 15.25%, respectively, for the second quarter of 2004, versus 1.24% and 16.78%, respectively, for the second quarter of 2003.
For the six months ended June 30, 2004, Sky reported net income of $98.9 million, or $1.05 per diluted share, increasing from $73.6 million, or $.83 per diluted share, reported for the first six months last year. The current year-to-date net income included $18.7 million, or $.20 per diluted share, from discontinued operations related to Sky’s dental finance unit, which was sold in the first quarter. For the prior year-to-date, discontinued operations contributed $0.9 million, or $.01 per diluted share.
“Our solid second quarter financial results included key accomplishments that will contribute to our continued future earnings growth,” stated Marty E. Adams, chairman and chief executive officer, “Our organic loan growth was very strong, increasing nearly $240 million during the quarter and our fee income, excluding mortgage banking, rose over 20% from last year’s second quarter.”
“As we start the third quarter, we were very pleased to complete our merger with Second Bancorp on July 1st and the core systems conversion on July 5th,” continued Mr. Adams. “This very successful integration reflects an outstanding effort by our employees and provides three of Sky’s regions with new clients, new employees and new opportunities for growth and improved profitability.”
Core operating earnings, which reflect income from continuing operations adjusted to exclude merger, integration and restructuring expenses and significant transactions not representative of ongoing operations, were $40.2 million for the second quarter, up 2.8% versus $39.1 million for the second quarter
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last year. Core operating earnings per diluted share for the second quarter were $.43, down 2.3% from $.44 for the second quarter last year. For the six months ended June 30, 2004, core operating earnings were $80.4 million, or $.85 per diluted share compared to $74.9 million, or $.85 per diluted share, for the same period last year. For the second quarter, on a core operating earnings basis, annualized return on assets and return on equity were 1.34% and 15.44%, respectively, compared with 1.38% and 17.37%, respectively for the same period last year.
Cash operating earnings, which reflect core operating earnings further adjusted to exclude the effects of amortization of intangibles, were $41.5 million, or $.44 per diluted share in the second quarter, compared to $40.2 million and $.45 respectively, for the second quarter last year. For the first six months of 2004, cash operating earnings were $82.9 million, or $.88 per diluted share, up 7.7% and 1.1% respectively versus the prior year. On a cash-operating basis, the annualized return on average tangible equity was 20.09% for the second quarter compared with 22.35% in the same period last year.
Second Quarter Results
Net interest income for the second quarter was $102.7 million, up 5.8% from $97.0 million in the second quarter last year. The net interest margin for the second quarter was 3.69%, the same as the previous quarter and an increase of 3 basis points from the second quarter a year ago. The higher net interest margin from the prior year primarily reflects improvements in funding mix and pricing, despite the lower rate environment versus last year.
Average earning assets increased 5.2% over the second quarter last year from a combination of organic growth and acquisitions. Average loans for the quarter increased 6.6% with organic growth on targeted portfolios contributing approximately 3.3%. Average deposits, excluding time deposits, grew 9.6% from the second quarter last year, which included organic growth of 3.3% in addition to the acquisitions. Including time deposits, average total deposits for the second quarter were up 4.3% from the second quarter last year, but declined 1.7% when the acquisitions were excluded.
Non-interest revenues were $49.6 million for the second quarter, up 5.4% from $47.1 million in the second quarter last year more than offsetting a reduction in mortgage banking revenues. Excluding mortgage banking and net securities transactions, non-interest revenues were up 20.3% with strong results compared to the same quarter last year. Brokerage and insurance commissions were up 24.4%, trust services income was up 12.3% and service charges on deposits increased 17.1%. For the quarter, in a less favorable rate environment, mortgage originations declined and mortgage banking revenues were down $7.0 million, or 50.5% from the year-ago quarter. Securities transactions included net gains of $2.9 million in the second quarter this year versus $0.1 million in the second quarter last year.
Non-interest expenses for the second quarter were $82.3 million compared to $80.1 million in the second quarter last year, which included $3.5 million in merger, integration and restructuring expenses to
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complete the acquisition of Metropolitan Financial Corp. Excluding merger, integration and restructuring expenses, non-interest expenses were $82.3 million compared to $76.6 million in the second quarter last year. Expenses have increased over the prior year’s second quarter mainly due to the acquisitions of Metropolitan Financial Corp., GLB Bancorp. and three insurance agencies over the last year. The efficiency ratio, on a core operating basis excluding the merger, integration and restructuring expenses, was 53.75% for the quarter, compared to 52.88% for the same quarter last year.
Credit Quality
The provision for credit losses for the second quarter was $11.0 million, increasing from $8.3 million in the same quarter last year. The higher provision compared to the second quarter last year was due to higher net charge-offs and strong growth in the loan portfolio. Net credit losses to average loans for the quarter were .48% up from .35% for the second quarter last year. At June 30, 2004, non-performing loans to total loans was 1.09% versus 1.04% a year ago and the allowance for credit losses to non-performing loans was 131% versus 140% last year. Non-performing loans for the second quarter continue to reflect the non-accrual status of loans with payments guaranteed by surety bonds or insurance policies issued by three insurance companies, which remain in litigation.
Continued Expansion
On July 1, 2004, Sky completed its acquisition of Second Bancorp, Incorporated, headquartered in Warren, Ohio, and its wholly-owned subsidiary Second National Bank with $2.1 billion in assets. Upon completion Sky had $14.2 billion in total assets and $10.0 billion in total deposits.
Outlook For 2004
Commenting on 2004, Kevin Thompson, chief financial officer stated, “Based on our solid performance for the first half of the year and with the completion of the Second Bancorp merger, we currently project 2004 GAAP earnings of $1.92 to $1.96 per diluted share, and core operating earnings of $1.76 to $1.80 per diluted share. The projected GAAP earnings results include the first quarter sale of Sky’s dental finance unit and the contribution to earnings of $.20 per diluted share from discontinued operations, as well as the merger-related charges of approximately $.04 per diluted share expected in the third quarter results.”
Conference Call and Supplemental Financial Information
Today, July 22, 2004 at 10:00 a.m., Mr.’s Adams and Thompson will host a conference call to provide an overview of second quarter performance and a business outlook. Participants are encouraged to call in beginning at 9:45 a.m. by dialing 1-800-289-0572 (confirmation code: 349026). A simultaneous web cast of the conference call will also be available and can be accessed via the Investor Relations section of the Sky website at www.skyfi.com. A replay of the call will be available beginning 7:00 p.m. on July 22, 2004 by calling 1-888-203-1112 (confirmation code: 349026). The event will also be archived on the Sky website indefinitely.
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For supplemental financial tables, please refer to the Investor Relations section on our web site at www.skyfi.com.
Non-GAAP Financial Measures
In addition to results presented in accordance with GAAP, this press release contains certain non-GAAP financial measures. Sky believes that providing certain non-GAAP financial measures provides investors with information useful in understanding Sky’s financial performance, its performance trends and financial position. Specifically, Sky provides measures based on “core operating earnings,” which excludes discontinued operations and merger, integration and restructuring expenses, as well as significant gains, losses or expenses that are not reflective of on-going operations or not expected to recur. In addition, Sky provides measures based on “cash operating earnings,” which further adjusts core operating earnings to exclude the effect of amortization of intangibles. These non-GAAP measures should not be considered a substitute for GAAP basis measures and results. A reconciliation of these non-GAAP measures to the most comparable GAAP equivalent is included in the attached financial tables.
Forward-looking Statement
The information in this press release contains forward-looking statements including certain projections, plans and forecasts of expected future performance that are not historical facts and that are subject to a number of risks and uncertainties. Actual results and performance could differ materially from those contemplated or implied by these forward-looking statements. For a summary of important factors that could affect Sky’s forward-looking statements, please refer to Sky’s filings with the Securities and Exchange Commission (SEC) and available at the SEC’s Internet site (http://www.sec.gov). Sky undertakes no obligation to update or revise these statements following the date of this release.
About Sky Financial Group, Inc.
Sky Financial Group is a $14.3 billion diversified financial holding company with its headquarters located in Bowling Green, Ohio. Sky’s asset size places it among the 50 largest publicly-held bank holding companies in the nation. The company operates over 285 financial centers and over 300 ATMs serving communities in Ohio, Pennsylvania, Michigan, Indiana and West Virginia. Sky’s financial service affiliates include: Sky Bank, commercial and retail banking; Sky Trust, an asset management organization; and Sky Insurance and Stouffer-Herzog Insurance Agency, retail and commercial insurance agency services. Sky is located on the web at www.skyfi.com.
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Summary Financial Tables - Second Quarter 2004
SKY FINANCIAL GROUP, INC.
STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share data) | Three Months Ended June 30, | Percent Change | Six Months Ended June 30, | Percent Change | ||||||||||||||
| 2004 | 2003 | 2004 | 2003 | |||||||||||||||
Interest income | $ | 148,027 | $ | 150,229 | (1.5 | )% | $ | 297,048 | $ | 291,948 | 1.7 | % | ||||||
Interest expense | 45,340 | 53,208 | (14.8 | ) | 92,558 | 104,557 | (11.5 | ) | ||||||||||
Net interest income | 102,687 | 97,021 | 5.8 | 204,490 | 187,391 | 9.1 | ||||||||||||
Provision for credit losses | 11,020 | 8,325 | 32.4 | 17,685 | 15,825 | 11.8 | ||||||||||||
Net interest income after provision for credit losses | 91,667 | 88,696 | 3.3 | 186,805 | 171,566 | 8.9 | ||||||||||||
Non-interest income | ||||||||||||||||||
Trust services income | 4,101 | 3,652 | 12.3 | 8,206 | 6,991 | 17.4 | ||||||||||||
Service charges and fees on deposit accounts | 11,107 | 9,489 | 17.1 | 20,749 | 18,094 | 14.7 | ||||||||||||
Mortgage banking income | 6,879 | 13,884 | (50.5 | ) | 12,324 | 23,242 | (47.0 | ) | ||||||||||
Brokerage and insurance commissions | 13,451 | 10,815 | 24.4 | 27,759 | 21,406 | 29.7 | ||||||||||||
Net securities gains | 2,877 | 83 | 3,366.3 | 4,405 | 560 | 686.6 | ||||||||||||
Other income | 11,194 | 9,160 | 22.2 | 19,575 | 16,576 | 18.1 | ||||||||||||
Total non-interest income | 49,609 | 47,083 | 5.4 | 93,018 | 86,869 | 7.1 | ||||||||||||
Non-interest expenses | ||||||||||||||||||
Salaries and employee benefits | 43,740 | 41,083 | 6.5 | 87,938 | 79,473 | 10.7 | ||||||||||||
Occupancy and equipment expense | 13,436 | 11,890 | 13.0 | 26,310 | 23,726 | 10.9 | ||||||||||||
Merger, integration and restructuring expense | — | 3,486 | (100.0 | ) | 346 | 3,486 | (90.1 | ) | ||||||||||
Other operating expenses | 25,122 | 23,662 | 6.2 | 46,207 | 42,007 | 100.0 | ||||||||||||
Total non-interest expense | 82,298 | 80,121 | 2.7 | 160,801 | 148,692 | 8.1 | ||||||||||||
Income from continuing operations before income taxes | 58,978 | 55,658 | 6.0 | 119,022 | 109,743 | 8.5 | ||||||||||||
Income taxes from continuing operations | 18,777 | 18,836 | (0.3 | ) | 38,869 | 37,088 | 4.8 | |||||||||||
Income from continuing operations | 40,201 | 36,822 | 9.2 | 80,153 | 72,655 | 10.3 | ||||||||||||
Income from discontinued operations, net of tax | — | 687 | (100.0 | ) | 18,725 | 924 | 1,926.5 | |||||||||||
Net income | $ | 40,201 | $ | 37,509 | 7.2 | $ | 98,878 | $ | 73,579 | 34.4 | ||||||||
SHARE DATA: | ||||||||||||||||||
Earnings per share from continuing operations | ||||||||||||||||||
Basic | $ | 0.43 | $ | 0.41 | 4.9 | $ | 0.86 | $ | 0.83 | 4.0 | ||||||||
Diluted | 0.43 | 0.41 | 4.9 | 0.85 | 0.82 | 4.0 | ||||||||||||
Earnings per share from discontinued operations | ||||||||||||||||||
Basic | 0.00 | 0.01 | — | 0.20 | 0.01 | 1,900.0 | ||||||||||||
Diluted | 0.00 | 0.01 | — | 0.20 | 0.01 | 1,900.0 | ||||||||||||
Earnings per share | ||||||||||||||||||
Basic | 0.43 | 0.42 | 2.4 | 1.06 | 0.84 | 26.0 | ||||||||||||
Diluted | 0.43 | 0.42 | 2.4 | 1.05 | 0.83 | 27.0 | ||||||||||||
Core operating earnings per share* | ||||||||||||||||||
Basic | 0.43 | 0.44 | (2.3 | ) | 0.86 | 0.85 | 1.2 | |||||||||||
Diluted | 0.43 | 0.44 | (2.3 | ) | 0.85 | 0.85 | 0.0 | |||||||||||
Cash operating earnings per share* | ||||||||||||||||||
Basic | 0.44 | 0.45 | (2.2 | ) | 0.89 | 0.87 | 2.3 | |||||||||||
Diluted | 0.44 | 0.45 | (2.2 | ) | 0.88 | 0.87 | 1.2 | |||||||||||
Cash dividend declared per common share | 0.21 | 0.20 | — | 0.42 | 0.40 | — | ||||||||||||
Average shares outstanding | ||||||||||||||||||
Basic | 93,322,000 | 89,057,000 | — | 93,140,000 | 88,064,000 | — | ||||||||||||
Diluted | 94,314,000 | 89,659,000 | — | 94,274,000 | 88,632,000 | — | ||||||||||||
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Summary Financial Tables - Second Quarter 2004
PERFORMANCE RATIOS:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2004 | 2003 | 2004 | 2003 | |||||||||||||
ACTUAL | ||||||||||||||||
Return on average equity | 15.25 | % | 16.78 | % | 18.99 | % | 17.06 | % | ||||||||
Return on average assets | 1.33 | 1.24 | 1.59 | 1.28 | ||||||||||||
CONTINUING OPERATIONS | ||||||||||||||||
Return on average equity | 15.25 | 16.47 | 15.39 | 16.85 | ||||||||||||
Return on average assets | 1.33 | 1.29 | 1.34 | 1.34 | ||||||||||||
Efficiency ratio | 53.75 | 55.28 | 53.75 | 53.91 | ||||||||||||
Net interest margin (FTE) | 3.69 | 3.66 | 3.69 | 3.73 | ||||||||||||
CORE OPERATING * | ||||||||||||||||
Core operating earnings | $ | 40,201 | $ | 39,088 | $ | 80,378 | $ | 74,921 | ||||||||
Return on average equity | 15.25 | % | 17.49 | % | 15.44 | % | 17.37 | % | ||||||||
Return on average assets | 1.33 | 1.36 | 1.34 | 1.38 | ||||||||||||
Efficiency ratio | 53.75 | 52.88 | 53.63 | 52.63 | ||||||||||||
CASH OPERATING* | ||||||||||||||||
Return on average tangible equity | 20.09 | 22.35 | 20.40 | 22.99 | ||||||||||||
Return on average tangible assets | 1.40 | 1.34 | 1.41 | 1.45 | ||||||||||||
ACTUAL BALANCE SHEETS (Unaudited)
(Dollars in thousands)
| June 30, | Percent Change | ||||||||||
| 2004 | 2003 | ||||||||||
Cash and due from banks | $ | 223,255 | $ | 279,328 | (20.1 | )% | |||||
Interest-earning deposits with banks | 27,100 | 38,207 | (29.1 | ) | |||||||
Federal funds sold | — | — | — | ||||||||
Loans held for sale | 15,834 | 120,271 | (86.8 | ) | |||||||
Securities available for sale | 2,541,687 | 2,551,690 | (0.4 | ) | |||||||
Total loans | 8,794,596 | 8,457,338 | 4.0 | ||||||||
Allowance for credit losses | (125,661 | ) | (123,378 | ) | 1.9 | ||||||
Net loans | 8,668,935 | 8,333,960 | 4.0 | ||||||||
Premises and equipment | 145,315 | 153,060 | (5.1 | ) | |||||||
Assets of discontinued operations | — | 718,429 | |||||||||
Other assets | 619,757 | 574,392 | 7.9 | ||||||||
Total Assets | $ | 12,241,883 | $ | 12,769,337 | (4.1 | ) | |||||
Total interest-earning assets | $ | 11,379,217 | $ | 11,167,506 | 1.9 | ||||||
Non-interest-bearing deposits | $ | 1,297,942 | $ | 1,208,013 | 7.4 | ||||||
Interest-bearing deposits | 7,484,259 | 7,500,580 | (0.2 | ) | |||||||
Total deposits | 8,782,201 | 8,708,593 | 0.8 | ||||||||
Repos and federal funds purchased | 844,738 | 949,401 | (11.0 | ) | |||||||
Debt and FHLB advances | 1,436,707 | 1,342,210 | 7.0 | ||||||||
Liabilities of discontinued operations | — | 678,743 | — | ||||||||
Other liabilities | 138,029 | 175,380 | (21.3 | ) | |||||||
Shareholders’ equity | 1,040,208 | 915,010 | 13.7 | ||||||||
Total Liabilities and Shareholders’ Equity | $ | 12,241,883 | $ | 12,769,337 | (4.1 | ) | |||||
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Summary Financial Tables - Second Quarter 2004
AVERAGE BALANCE SHEETS (Unaudited)
(Dollars in thousands)
| Three Months Ended June 30, | Percent Change | Six Months Ended June 30, | Percent Change | |||||||||||||||||||
| 2004 | 2003 | 2004 | 2003 | |||||||||||||||||||
Cash and due from banks | $ | 198,246 | $ | 180,846 | 9.6 | % | $ | 207,910 | $ | 180,325 | 15.3 | |||||||||||
Interest-earning deposits with banks | 36,385 | 30,839 | 18.0 | 35,093 | 29,475 | 19.1 | ||||||||||||||||
Federal funds sold | 885 | 1,084 | (18.4 | ) | 3,025 | 1,455 | 107.9 | |||||||||||||||
Loans held for sale | 31,866 | 90,716 | (64.9 | ) | 31,793 | 88,139 | (63.9 | ) | ||||||||||||||
Securities available for sale | 2,570,976 | 2,497,796 | 2.9 | 2,510,057 | 2,376,861 | 5.6 | ||||||||||||||||
Total loans | 8,631,914 | 8,099,147 | 6.6 | 8,646,231 | 7,724,855 | 11.9 | ||||||||||||||||
Allowance for credit losses | (124,752 | ) | (117,832 | ) | 5.9 | (124,752 | ) | (112,566 | ) | 10.8 | ||||||||||||
Net loans | 8,507,162 | 7,981,315 | 6.6 | 8,521,479 | 7,612,289 | 11.9 | ||||||||||||||||
Premises and equipment | 147,058 | 147,703 | (0.4 | ) | 150,107 | 139,401 | 7.7 | |||||||||||||||
Assets of discontinued operations | — | 694,027 | (100.0 | ) | 432,389 | 674,735 | (35.9 | ) | ||||||||||||||
Other assets | 621,843 | 555,691 | 11.9 | 610,214 | 504,527 | 20.9 | ||||||||||||||||
Total Assets | $ | 12,114,421 | $ | 12,180,017 | (0.5 | ) | $ | 12,502,067 | $ | 11,607,207 | 7.7 | |||||||||||
Total interest-earning assets | $ | 11,272,026 | $ | 10,719,582 | 5.2 | $ | 11,226,199 | $ | 10,220,785 | 9.8 | ||||||||||||
Non-interest-bearing deposits | $ | 1,297,932 | $ | 1,081,124 | 20.1 | $ | 1,263,200 | $ | 1,016,879 | 24.2 | ||||||||||||
Interest-bearing deposits | 7,517,853 | 7,367,482 | 2.0 | 7,483,005 | 7,097,895 | 5.4 | ||||||||||||||||
Total deposits | 8,815,785 | 8,448,606 | 4.3 | 8,746,205 | 8,114,774 | 7.8 | ||||||||||||||||
Repos and federal funds purchased | 788,596 | 882,223 | (10.6 | ) | 888,612 | 827,595 | 7.4 | |||||||||||||||
Debt and FHLB advances | 1,309,167 | 1,184,516 | 10.5 | 1,278,520 | 1,041,485 | 22.8 | ||||||||||||||||
Liabilities of discontinued operations | — | 654,790 | (100.0 | ) | 405,903 | 635,232 | (36.1 | ) | ||||||||||||||
Other liabilities | 140,355 | 113,368 | 23.8 | 135,769 | 118,489 | 14.6 | ||||||||||||||||
Shareholders’ equity | 1,060,518 | 896,514 | 18.3 | 1,047,058 | 869,632 | 20.4 | ||||||||||||||||
Total Liabilities and Shareholders’ Equity | $ | 12,114,421 | $ | 12,180,017 | (0.5 | ) | $ | 12,502,067 | $ | 11,607,207 | 7.7 | |||||||||||
ASSET QUALITY DATA:
| June 30, | ||||||||
| 2004 | 2003 | |||||||
Non-accrual loans | $ | 95,674 | $ | 86,793 | ||||
Restructured loans | 575 | 1,266 | ||||||
Total non-performing loans | 96,249 | 88,059 | ||||||
Other real estate owned | 10,766 | 6,840 | ||||||
Total non-performing assets | $ | 107,015 | $ | 94,899 | ||||
Loans 90 days or more past due & still accruing | $ | 12,841 | $ | 11,809 | ||||
Allowance for credit losses | 125,661 | 123,378 | ||||||
ASSET QUALITY RATIOS: | ||||||||
Non-accrual loans to total loans | 108.79 | % | 102.62 | % | ||||
Non-performing loans to total loans | 1.09 | 1.04 | ||||||
Non-performing assets to total loans plus other real estate owned | 1.22 | 1.12 | ||||||
Loans 90 days or more past due and still accruing to total loans | 0.15 | 0.14 | ||||||
Allowance for credit losses to non-performing loans | 130.56 | 140.11 | ||||||
Allowance for credit losses to non-performing assets | 117.42 | 130.01 | ||||||
Allowance for credit losses to total loans | 1.43 | 1.46 | ||||||
NET CHARGE-OFFS
Three Months Ended June 30, | ||||
| 2004 | 2003 | |||
Net charge-offs | 10,402 | 7,075 | ||
Net charge-offs to average loans | 0.48 | 0.35 | ||
Six Months Ended June 30, | ||||
| 2004 | 2003 | |||
Net charge-offs | 16,968 | 14,327 | ||
Net charge-offs to average loans | 0.39 | 0.37 | ||
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Summary Financial Tables - Second Quarter 2004
SKY FINANCIAL GROUP, INC.
*NON-GAAP DISCLOSURE RECONCILIATIONS
(Dollars in thousands)
Core operating earnings are net income adjusted to exclude discontinued operations, merger, integration and restructuring expenses and the results of certain significant transactions or events not representative of ongoing operations (“non-operating items”). Cash operating earnings are core operating earnings adjusted to exclude the after-tax effect of amortizing core deposits and other intangibles. Management believes that both core operating earnings and cash operating earnings assist the investor in understanding the impact of non-operating items on reported results.
Core operating earnings
The following reconciles GAAP income from continuing operations to core operating earnings for the three months and six months ended June 30, 2004 and 2003 presented in these tables:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
| 2004 | 2003 | 2004 | 2003 | ||||||||||||
Income from continuing operations | $ | 40,201 | $ | 36,822 | $ | 80,153 | $ | 72,655 | |||||||
Merger, integration and restructuring expense | — | 3,486 | 346 | 3,486 | |||||||||||
Non-operating gains | — | — | — | — | |||||||||||
Tax effect | — | (1,220 | ) | (121 | ) | (1,220 | ) | ||||||||
After-tax non-operating items | — | 2,266 | 225 | 2,266 | |||||||||||
Core operating earnings | $ | 40,201 | $ | 39,088 | $ | 80,378 | $ | 74,921 | |||||||
Merger, integration and restructuring expense in 2004 reflect charges associated with the sale of Sky Financial Solutions, Inc.
Merger, integration and restructuring expense in 2003 reflect the impact of charges for the acquisitions of Metropolitan Financial Corp. and GLB Bancorp, Inc. in the second and fourth quarters, respectively. The non-operating gain recognized in the fourth quarter of 2003 relates to a gain on the sale of a building.
Core operating earnings is used as the numerator to calculate core operating return on average assets, core operating return on average equity and core operating earnings per share. Additionally, non-operating items are deducted from non-interest expense in the numerator and non-interest income in the denominator of the core operating efficiency ratio disclosed in the tables. The comparable information on a GAAP basis is also provided in the tables.
Cash operating earnings
The following reconciles operating earnings to cash operating earnings for the three months and six months ended June 30, 2004 and 2003 presented in these tables:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2004 | 2003 | 2004 | 2003 | |||||||||||||
Core operating earnings | $ | 40,201 | $ | 39,088 | $ | 80,378 | $ | 74,921 | ||||||||
Amortization of core deposits and other intangible assets | 1,943 | 1,704 | 3,850 | 3,124 | ||||||||||||
Tax effect | (680 | ) | (596 | ) | (1,347 | ) | (1,094 | ) | ||||||||
After-tax non-operating items | 1,263 | 1,108 | 2,503 | 2,030 | ||||||||||||
Cash operating earnings | $ | 41,464 | $ | 40,196 | $ | 82,881 | $ | 76,951 | ||||||||
Cash operating earnings is used as the numerator to calculate the cash operating return on average tangible equity and the cash operating return on average tangible assets. The denominator of each ratio is adjusted to deduct the average balance of intangible assets during the period. The comparable GAAP information is also included in the tables.
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Summary Financial Tables - Second Quarter 2004
The following table reconciles average GAAP equity to average tangible equity for the three and six months ended June 30, 2004 and 2003, presented in the tables.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2004 | 2003 | 2004 | 2003 | |||||||||||||
Average GAAP equity | $ | 1,060,518 | $ | 896,514 | $ | 1,047,058 | $ | 869,632 | ||||||||
Goodwill | 198,414 | 142,630 | 198,364 | 159,765 | ||||||||||||
Core deposits and other intangibles | 49,056 | 50,191 | 48,596 | 53,664 | ||||||||||||
Deferred taxes | (17,170 | ) | (17,567 | ) | (17,009 | ) | (18,782 | ) | ||||||||
| 230,300 | 175,254 | 229,951 | 194,647 | |||||||||||||
Average tangible equity | $ | 830,218 | $ | 721,260 | $ | 817,107 | $ | 674,985 | ||||||||
The following table reconciles average GAAP assets to average tangible assets for the three months and six months ended June 30, 2004 and 2003, presented in the tables.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2004 | 2003 | 2004 | 2003 | |||||||||||||
Average GAAP assets | $ | 12,114,421 | $ | 12,180,017 | $ | 12,502,067 | $ | 11,607,207 | ||||||||
Goodwill | 198,414 | 142,630 | 198,364 | 159,765 | ||||||||||||
Core deposits and other intangibles | 49,056 | 50,191 | 48,596 | 53,664 | ||||||||||||
Deferred taxes | (17,170 | ) | (17,567 | ) | (17,009 | ) | (18,782 | ) | ||||||||
| 230,300 | 175,254 | 229,951 | 194,647 | |||||||||||||
| �� | ||||||||||||||||
Average tangible assets | $ | 11,884,121 | $ | 12,004,763 | $ | 12,272,116 | $ | 11,412,560 | ||||||||
The following table reconciles GAAP earnings per share to operating earnings per share, core operating earnings per share and cash operating earnings per share:
Basic EPS
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
| 2004 | 2003 | 2004 | 2003 | ||||||||||||
Net income | $ | 0.43 | $ | 0.42 | $ | 1.06 | $ | 0.84 | |||||||
After-tax earnings from discontinued operations | — | (0.01 | ) | (0.20 | ) | (0.01 | ) | ||||||||
After-tax merger, integration and restructuring | — | 0.03 | 0.00 | 0.03 | |||||||||||
Core operating earnings | 0.43 | 0.44 | 0.86 | 0.85 | |||||||||||
After-tax amortization of core deposits and other intangible assets | 0.01 | 0.01 | 0.03 | 0.02 | |||||||||||
Cash operating earnings | $ | 0.44 | $ | 0.45 | $ | 0.89 | $ | 0.87 | |||||||
Diluted EPS
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
| 2004 | 2003 | 2004 | 2003 | ||||||||||||
Net income | $ | 0.43 | $ | 0.42 | $ | 1.05 | $ | 0.83 | |||||||
After-tax earnings from discontinued operations | — | (0.01 | ) | (0.20 | ) | (0.01 | ) | ||||||||
After-tax merger, integration and restructuring | — | 0.03 | 0.00 | 0.03 | |||||||||||
Core operating earnings | 0.43 | 0.44 | 0.85 | 0.85 | |||||||||||
After-tax amortization of core deposits and other intangible assets | 0.01 | 0.01 | 0.03 | 0.02 | |||||||||||
Cash operating earnings | $ | 0.44 | $ | 0.45 | $ | 0.88 | $ | 0.87 | |||||||
— end —
9
Second Quarter 2004
Supplemental Financial Information
July 22, 2004
Supplemental Financial Information - Second Quarter 2004
SKY FINANCIAL GROUP, INC.
FIVE QUARTERS STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands)
| 2004 | 2003 | |||||||||||||||
| 2nd qtr | 1st qtr | 4th qtr | 3rd qtr | 2nd qtr | ||||||||||||
Fully taxable equivalent interest income | $ | 148,839 | $ | 149,872 | $ | 151,054 | $ | 152,635 | $ | 151,054 | ||||||
Interest income | $ | 148,027 | $ | 149,021 | $ | 150,407 | $ | 151,707 | $ | 150,229 | ||||||
Interest expense | 45,340 | 47,218 | 47,358 | 50,904 | 53,208 | |||||||||||
Net interest income | 102,687 | 101,803 | 103,049 | 100,803 | 97,021 | |||||||||||
Provision for credit losses | 11,020 | 6,665 | 9,975 | 8,325 | 8,325 | |||||||||||
Net interest income after provision for credit losses | 91,667 | 95,138 | 93,074 | 92,478 | 88,696 | |||||||||||
Non-interest income | ||||||||||||||||
Trust services income | 4,101 | 4,105 | 3,773 | 3,585 | 3,652 | |||||||||||
Service charges and fees on deposit accounts | 11,107 | 9,642 | 10,182 | 9,932 | 9,489 | |||||||||||
Mortgage banking income | 6,879 | 5,445 | 5,231 | 19,359 | 13,884 | |||||||||||
Brokerage and insurance commissions | 13,451 | 14,308 | 11,233 | 10,047 | 10,815 | |||||||||||
Net securities gains (losses) | 2,877 | 1,528 | 2,345 | (2,034 | ) | 83 | ||||||||||
Other income | 11,194 | 8,381 | 9,285 | 9,090 | 9,160 | |||||||||||
Total non-interest income | 49,609 | 43,409 | 42,049 | 49,979 | 47,083 | |||||||||||
Non-interest expenses | ||||||||||||||||
Salaries and employee benefits | 43,740 | 44,198 | 39,326 | 45,261 | 41,083 | |||||||||||
Occupancy and equipment expense | 13,436 | 12,874 | 13,312 | 12,987 | 11,890 | |||||||||||
Merger, integration and restructuring expense | — | 346 | 1,091 | — | 3,486 | |||||||||||
Other operating expenses | 25,122 | 21,085 | 22,913 | 23,604 | 23,662 | |||||||||||
Total non-interest expense | 82,298 | 78,503 | 76,642 | 81,852 | 80,121 | |||||||||||
Income from continuing operations before income taxes | 58,978 | 60,044 | 58,481 | 60,605 | 55,658 | |||||||||||
Income taxes from continuing operations | 18,777 | 20,092 | 18,896 | 20,166 | 18,836 | |||||||||||
Income from continuing operations | 40,201 | 39,952 | 39,585 | 40,439 | 36,822 | |||||||||||
Income from discontinued operations, net of tax | — | 18,725 | 1,883 | 1,131 | 687 | |||||||||||
Net income | $ | 40,201 | $ | 58,677 | $ | 41,468 | $ | 41,570 | $ | 37,509 | ||||||
Core operating earnings | $ | 40,201 | $ | 40,177 | $ | 39,687 | $ | 40,439 | $ | 39,088 | ||||||
1
Supplemental Financial Information - Second Quarter 2004
SKY FINANCIAL GROUP, INC.
FIVE QUARTER PERFORMANCE RATIOS AND SHARE DATA
(Unaudited)
PERFORMANCE RATIOS
ACTUAL
| 2004 | 2003 | ||||||||||||||
| 2nd qtr | 1st qtr | 4th qtr | 3rd qtr | 2nd qtr | |||||||||||
Return on average equity | 15.25 | % | 22.83 | % | 16.82 | % | 18.00 | % | 16.78 | % | |||||
Return on average assets | 1.33 | 1.83 | 1.28 | 1.31 | 1.24 | ||||||||||
| CONTINUING OPERATIONS | |||||||||||||||
| 2004 | 2003 | ||||||||||||||
| 2nd qtr | 1st qtr | 4th qtr | 3rd qtr | 2nd qtr | |||||||||||
Return on average equity | 15.25 | % | 15.55 | % | 16.05 | % | 17.51 | % | 16.47 | % | |||||
Return on average assets | 1.33 | 1.34 | 1.31 | 1.35 | 1.29 | ||||||||||
Net interest rate spread (FTE) | 3.41 | 3.43 | 3.45 | 3.41 | 3.39 | ||||||||||
Net interest rate margin (FTE) | 3.69 | 3.69 | 3.70 | 3.66 | 3.66 | ||||||||||
Efficiency ratio | 53.75 | 53.75 | 52.59 | 53.95 | 55.28 | ||||||||||
| CORE OPERATING * | |||||||||||||||
| 2004 | 2003 | ||||||||||||||
| 2nd qtr | 1st qtr | 4th qtr | 3rd qtr | 2nd qtr | |||||||||||
Return on average equity | 15.25 | % | 15.63 | % | 16.09 | % | 17.51 | % | 17.49 | % | |||||
Return on average assets | 1.33 | 1.34 | 1.32 | 1.35 | 1.36 | ||||||||||
Efficiency ratio | 53.75 | 53.51 | 51.84 | 53.95 | 52.88 | ||||||||||
| CASH OPERATING* | |||||||||||||||
| 2004 | 2003 | ||||||||||||||
| 2nd qtr | 1st qtr | 4th qtr | 3rd qtr | 2nd qtr | |||||||||||
Return on average tangible equity | 20.09 | % | 20.64 | % | 21.13 | % | 22.99 | % | 22.35 | % | |||||
Return on average assets | 1.40 | 1.32 | 1.29 | 1.33 | 1.34 | ||||||||||
2
Supplemental Financial Information - Second Quarter 2004
SKY FINANCIAL GROUP, INC.
FIVE QUARTER SHARE DATA
(Unaudited)
| 2004 | 2003 | ||||||||||||||
| 2nd qtr | 1st qtr | 4th qtr | 3rd qtr | 2nd qtr | |||||||||||
Earnings per share from continuing operations | |||||||||||||||
Basic | $ | 0.43 | $ | 0.43 | $ | 0.43 | $ | 0.45 | $ | 0.41 | |||||
Diluted | 0.43 | 0.42 | 0.43 | 0.44 | 0.41 | ||||||||||
Earnings per share from discontinued operations | |||||||||||||||
Basic | — | 0.20 | 0.02 | 0.01 | 0.01 | ||||||||||
Diluted | — | 0.20 | 0.02 | 0.01 | 0.01 | ||||||||||
Earnings per share | |||||||||||||||
Basic | $ | 0.43 | $ | 0.63 | $ | 0.45 | $ | 0.46 | $ | 0.42 | |||||
Diluted | 0.43 | 0.62 | 0.45 | 0.46 | 0.42 | ||||||||||
Core operating earnings per share* | |||||||||||||||
Basic | 0.43 | 0.43 | 0.43 | 0.45 | 0.44 | ||||||||||
Diluted | 0.43 | 0.43 | 0.43 | 0.44 | 0.44 | ||||||||||
Cash operating earnings per share* | |||||||||||||||
Basic | 0.44 | 0.44 | 0.44 | 0.46 | 0.45 | ||||||||||
Diluted | 0.44 | 0.44 | 0.44 | 0.46 | 0.45 | ||||||||||
Cash dividend declared per common share | 0.21 | 0.21 | 0.21 | 0.20 | 0.20 | ||||||||||
Book value per share | 11.13 | 11.46 | 10.80 | 10.31 | 10.16 | ||||||||||
Average shares outstanding | |||||||||||||||
Basic | 93,322,000 | 92,957,000 | 92,019,000 | 90,303,000 | 89,057,000 | ||||||||||
Diluted | 94,314,000 | 94,226,000 | 93,122,000 | 91,204,000 | 89,659,000 | ||||||||||
Book value calculation shares outstanding | 93,420,000 | 93,063,000 | 92,459,000 | 90,383,000 | 90,070,000 | ||||||||||
3
Supplemental Financial Information - Second Quarter 2004
SKY FINANCIAL GROUP, INC.
FIVE QUARTER AVERAGE BALANCE SHEETS (Unaudited)
(Dollars in thousands)
| 2004 | 2003 | |||||||||||||||||||
| 2nd qtr | 1st qtr | 4th qtr | 3rd qtr | 2nd qtr | ||||||||||||||||
Cash and due from banks | $ | 198,246 | $ | 217,575 | $ | 202,720 | $ | 202,099 | $ | 180,846 | ||||||||||
Interest-earning deposits with banks | 36,385 | 33,800 | 39,238 | 35,814 | 30,839 | |||||||||||||||
Federal funds sold | 885 | 5,165 | 8,497 | 1,337 | 1,084 | |||||||||||||||
Loans held for sale | 31,866 | 31,720 | 28,980 | 81,493 | 90,716 | |||||||||||||||
Securities available for sale | 2,570,976 | 2,449,138 | 2,508,711 | 2,499,421 | 2,497,796 | |||||||||||||||
Total loans | 8,631,914 | 8,660,549 | 8,546,675 | 8,406,189 | 8,099,147 | |||||||||||||||
Allowance for credit losses | (124,752 | ) | (124,751 | ) | (123,629 | ) | (123,766 | ) | (117,832 | ) | ||||||||||
Net loans | 8,507,162 | 8,535,798 | 8,423,046 | 8,282,423 | 7,981,315 | |||||||||||||||
Premises and equipment | 147,058 | 153,155 | 153,866 | 152,393 | 147,703 | |||||||||||||||
Assets of discontinued operations | — | 864,779 | 837,579 | 760,808 | 694,027 | |||||||||||||||
Other assets | 621,843 | 598,585 | 605,606 | 610,294 | 555,691 | |||||||||||||||
Total Assets | $ | 12,114,421 | $ | 12,889,715 | $ | 12,808,243 | $ | 12,626,082 | $ | 12,180,017 | ||||||||||
Total interest-earning assets | $ | 11,272,026 | $ | 11,180,372 | $ | 11,132,101 | $ | 11,024,254 | $ | 10,719,582 | ||||||||||
Non-interest-bearing deposits | $ | 1,297,932 | $ | 1,228,468 | $ | 1,214,825 | $ | 1,180,213 | $ | 1,081,124 | ||||||||||
Interest-bearing deposits | 7,517,853 | 7,448,158 | 7,427,640 | 7,541,423 | 7,367,482 | |||||||||||||||
Total deposits | 8,815,785 | 8,676,626 | 8,642,465 | 8,721,636 | 8,448,606 | |||||||||||||||
Repos and federal funds purchased | 788,596 | 988,628 | 917,789 | 824,163 | 882,223 | |||||||||||||||
Debt and FHLB advances | 1,309,167 | 1,247,874 | 1,359,818 | 1,318,043 | 1,184,516 | |||||||||||||||
Liabilities of discontinued operations | — | 811,805 | 787,410 | 716,249 | 654,790 | |||||||||||||||
Other liabilities | 140,355 | 131,183 | 122,437 | 129,682 | 113,368 | |||||||||||||||
Shareholders’ equity | 1,060,518 | 1,033,599 | 978,324 | 916,309 | 896,514 | |||||||||||||||
Total Liabilities and Shareholders’ Equity | $ | 12,114,421 | $ | 12,889,715 | $ | 12,808,243 | $ | 12,626,082 | $ | 12,180,017 | ||||||||||
4
Supplemental Financial Information - Second Quarter 2004
SKY FINANCIAL GROUP, INC.
FIVE QUARTER ACTUAL BALANCE SHEETS (Unaudited)
(Dollars in thousands)
| 2004 | 2003 | |||||||||||||||||||
| 2nd qtr | 1st qtr | 4th qtr | 3rd qtr | 2nd qtr | ||||||||||||||||
Cash and due from banks | $ | 223,255 | $ | 200,783 | $ | 251,364 | $ | 184,782 | $ | 279,328 | ||||||||||
Interest-earning deposits with banks | 27,100 | 29,051 | 22,808 | 39,564 | 38,207 | |||||||||||||||
Federal funds sold | — | — | — | — | — | |||||||||||||||
Loans held for sale | 15,834 | 57,650 | 28,062 | 46,332 | 120,271 | |||||||||||||||
Securities available for sale | 2,541,687 | 2,613,816 | 2,511,369 | 2,573,009 | 2,551,690 | |||||||||||||||
Total loans | 8,794,596 | 8,555,651 | 8,643,862 | 8,406,735 | 8,457,338 | |||||||||||||||
Allowance for credit losses | (125,661 | ) | (125,043 | ) | (124,943 | ) | (122,617 | ) | (123,378 | ) | ||||||||||
Net loans | 8,668,935 | 8,430,608 | 8,518,919 | 8,284,118 | 8,333,960 | |||||||||||||||
Premises and equipment | 145,315 | 152,621 | 153,285 | 152,219 | 153,060 | |||||||||||||||
Assets of discontinued operations | — | — | 874,765 | 802,702 | 718,429 | |||||||||||||||
Other assets | 619,757 | 608,862 | 585,623 | 579,896 | 574,392 | |||||||||||||||
Total Assets | $ | 12,241,883 | $ | 12,093,391 | $ | 12,946,195 | $ | 12,662,622 | $ | 12,769,337 | ||||||||||
Total interest-earning assets | $ | 11,379,217 | $ | 11,256,168 | $ | 11,206,101 | $ | 11,065,640 | $ | 11,167,506 | ||||||||||
Non-interest-bearing deposits | $ | 1,297,942 | $ | 1,229,981 | $ | 1,233,272 | $ | 1,158,281 | $ | 1,208,013 | ||||||||||
Interest-bearing deposits | 7,484,259 | 7,541,365 | 7,282,261 | 7,453,863 | 7,500,580 | |||||||||||||||
Total deposits | 8,782,201 | 8,771,346 | 8,515,533 | 8,612,144 | 8,708,593 | |||||||||||||||
Repos and federal funds purchased | 844,738 | 931,792 | 994,896 | 780,608 | 949,401 | |||||||||||||||
Debt and FHLB advances | 1,436,707 | 1,156,419 | 1,475,781 | 1,447,478 | 1,342,210 | |||||||||||||||
Liabilities of discontinued operations | — | — | 822,498 | 755,365 | 678,743 | |||||||||||||||
Other liabilities | 138,029 | 167,677 | 138,911 | 135,083 | 175,380 | |||||||||||||||
Shareholders’ equity | 1,040,208 | 1,066,157 | 998,576 | 931,944 | 915,010 | |||||||||||||||
Total Liabilities and Shareholders’ Equity | $ | 12,241,883 | $ | 12,093,391 | $ | 12,946,195 | $ | 12,662,622 | $ | 12,769,337 | ||||||||||
5
Supplemental Financial Information - Second Quarter 2004
SKY FINANCIAL GROUP, INC.
FIVE QUARTER LOAN TABLES (Unaudited)
(Dollars in thousands)
Actual
| 2004 | 2003 | |||||||||||||||||||
| 2nd qtr | 1st qtr | 4th qtr | 3rd qtr | 2nd qtr | ||||||||||||||||
Residential Mortgage | $ | 905,249 | $ | 891,088 | $ | 905,007 | $ | 783,003 | $ | 803,747 | ||||||||||
Home Equity | 1,266,508 | 1,176,581 | 1,140,310 | 1,057,301 | 996,140 | |||||||||||||||
Consumer | 694,732 | 717,789 | 770,901 | 787,436 | 814,710 | |||||||||||||||
Commercial Real Estate | 3,417,236 | 3,455,525 | 3,387,202 | 3,321,713 | 3,296,428 | |||||||||||||||
Commercial & Industrial | 2,510,871 | 2,314,668 | 2,440,442 | 2,457,282 | 2,546,313 | |||||||||||||||
Total Loans | $ | 8,794,596 | $ | 8,555,651 | $ | 8,643,862 | $ | 8,406,735 | $ | 8,457,338 | ||||||||||
Residential Mortgage | 10 | % | 10 | % | 10 | % | 9 | % | 10 | % | ||||||||||
Home Equity | 14 | % | 13 | % | 13 | % | 12 | % | 11 | % | ||||||||||
Consumer | 8 | % | 8 | % | 9 | % | 9 | % | 10 | % | ||||||||||
Commercial Real Estate | 39 | % | 40 | % | 39 | % | 40 | % | 39 | % | ||||||||||
Commercial & Industrial | 29 | % | 27 | % | 28 | % | 29 | % | 30 | % | ||||||||||
Total Loans | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||
| Average | ||||||||||||||||||||
| 2004 | 2003 | |||||||||||||||||||
| 2nd qtr | 1st qtr | 4th qtr | 3rd qtr | 2nd qtr | ||||||||||||||||
Residential Mortgage | $ | 896,779 | $ | 897,703 | $ | 780,998 | $ | 794,756 | $ | 800,027 | ||||||||||
Home Equity | 1,219,822 | 1,159,333 | 1,163,658 | 1,026,317 | 925,892 | |||||||||||||||
Consumer | 710,848 | 751,371 | 778,355 | 797,113 | 812,765 | |||||||||||||||
Commercial Real Estate | 3,523,316 | 3,483,466 | 3,440,354 | 3,312,295 | 3,246,384 | |||||||||||||||
Commercial & Industrial | 2,281,149 | 2,368,676 | 2,383,310 | 2,475,708 | 2,314,079 | |||||||||||||||
Total Loans | $ | 8,631,914 | $ | 8,660,549 | $ | 8,546,675 | $ | 8,406,189 | $ | 8,099,147 | ||||||||||
Residential Mortgage | 10 | % | 10 | % | 9 | % | 9 | % | 10 | % | ||||||||||
Home Equity | 14 | % | 13 | % | 13 | % | 12 | % | 11 | % | ||||||||||
Consumer | 8 | % | 9 | % | 9 | % | 9 | % | 10 | % | ||||||||||
Commercial Real Estate | 41 | % | 40 | % | 40 | % | 39 | % | 40 | % | ||||||||||
Commercial & Industrial | 26 | % | 27 | % | 28 | % | 29 | % | 29 | % | ||||||||||
Total Loans | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||
6
Supplemental Financial Information - Second Quarter 2004
SKY FINANCIAL GROUP, INC.
FIVE QUARTER FUNDING TABLES (Unaudited)
(Dollars in thousands)
Actual
| 2004 | 2003 | |||||||||
| 2nd qtr | 1st qtr | 4th qtr | 3rd qtr | 2nd qtr | ||||||
Non-interest-bearing demand deposits | 1,297,942 | 1,229,981 | 1,233,272 | 1,158,281 | 1,208,013 | |||||
Interest-bearing demand deposits | 238,646 | 257,931 | 223,096 | 258,845 | 220,825 | |||||
Savings deposits | 3,493,196 | 3,610,996 | 3,447,033 | 3,488,911 | 3,417,686 | |||||
Time deposits | 3,752,417 | 3,672,439 | 3,612,132 | 3,706,107 | 3,862,069 | |||||
Total deposits | 8,782,201 | 8,771,347 | 8,515,533 | 8,612,144 | 8,708,593 | |||||
Short-term borrowings | 844,738 | 931,792 | 994,896 | 780,608 | 949,401 | |||||
Trust preferred securities | 145,583 | 169,669 | 164,805 | 171,176 | 164,494 | |||||
Debt and FHLB advances | 1,291,123 | 986,750 | 1,310,976 | 1,276,302 | 1,177,716 | |||||
Total funding sources | 11,063,645 | 10,859,558 | 10,986,210 | 10,840,230 | 11,000,204 | |||||
| Average | ||||||||||
| 2004 | 2003 | |||||||||
| 2nd qtr | 1st qtr | 4th qtr | 3rd qtr | 2nd qtr | ||||||
Non-interest-bearing demand deposits | 1,297,932 | 1,228,468 | 1,214,825 | 1,180,213 | 1,081,124 | |||||
Interest-bearing demand deposits | 239,174 | 238,777 | 262,812 | 252,475 | 215,687 | |||||
Savings deposits | 3,554,212 | 3,558,869 | 3,517,407 | 3,489,416 | 3,344,855 | |||||
Time deposits | 3,724,467 | 3,650,512 | 3,647,421 | 3,799,532 | 3,806,940 | |||||
Total deposits | 8,815,785 | 8,676,626 | 8,642,465 | 8,721,636 | 8,448,606 | |||||
Short-term borrowings | 788,596 | 988,628 | 917,789 | 824,163 | 882,223 | |||||
Trust preferred securities | 163,503 | 164,859 | 165,800 | 164,569 | 152,419 | |||||
Debt and FHLB advances | 1,145,664 | 1,083,015 | 1,194,018 | 1,153,474 | 1,032,097 | |||||
Total funding sources | 10,913,548 | 10,913,128 | 10,920,072 | 10,863,842 | 10,515,345 | |||||
7
Supplemental Financial Information - Second Quarter 2004
SKY FINANCIAL GROUP, INC.
FIVE QUARTER ASSET QUALITY (Unaudited)
(Dollars in thousands)
The following asset quality information does not include Sky Financial Solutions.
ASSET QUALITY DATA:
| 2004 | 2003 | |||||||||||||||||||
| 2nd qtr | 1st qtr | 4th qtr | 3rd qtr | 2nd qtr | ||||||||||||||||
Non-accrual loans | $ | 95,674 | $ | 90,132 | $ | 81,979 | $ | 87,188 | $ | 86,793 | ||||||||||
Restructured loans | 575 | 585 | 599 | 1,245 | 1,266 | |||||||||||||||
Total non-performing loans | 96,249 | 90,717 | 82,578 | 88,433 | 88,059 | |||||||||||||||
Other real estate owned | 10,766 | 10,775 | 10,441 | 7,583 | 6,840 | |||||||||||||||
Total non-performing assets | $ | 107,015 | $ | 101,492 | $ | 93,019 | $ | 96,016 | $ | 94,899 | ||||||||||
Loans 90 days or more past due & still accruing | $ | 12,841 | $ | 26,039 | $ | 13,841 | $ | 11,906 | $ | 11,809 | ||||||||||
Net charge-offs | 10,402 | 6,565 | 9,330 | 9,086 | 7,075 | |||||||||||||||
Allowance for credit losses | 125,661 | 125,043 | 124,943 | 122,617 | 123,378 | |||||||||||||||
| ASSET QUALITY RATIOS: | ||||||||||||||||||||
| 2004 | 2003 | |||||||||||||||||||
| 2nd qtr | 1st qtr | 4th qtr | 3rd qtr | 2nd qtr | ||||||||||||||||
Non-accrual loans to total loans | 1.09 | % | 1.05 | % | 0.95 | % | 1.04 | % | 1.03 | % | ||||||||||
Non-performing loans to total loans | 1.09 | 1.06 | 0.96 | 1.05 | 1.04 | |||||||||||||||
Non-performing assets to total loans plus other real estate owned | 1.22 | 1.18 | 1.07 | 1.14 | 1.12 | |||||||||||||||
Loans 90 days or more past due and still accruing to total loans | 0.15 | 0.30 | 0.16 | 0.14 | 0.14 | |||||||||||||||
Net charge-offs to average loans | 0.48 | 0.30 | 0.43 | 0.43 | 0.35 | |||||||||||||||
Allowance for credit losses to non-performing loans | 130.56 | 137.84 | 151.30 | 138.66 | 140.11 | |||||||||||||||
Allowance for credit losses to non-performing assets | 117.42 | 123.20 | 134.32 | 127.70 | 130.01 | |||||||||||||||
Allowance for credit losses to total loans | 1.43 | 1.46 | 1.45 | 1.46 | 1.46 | |||||||||||||||
8
Supplemental Financial Information - Second Quarter 2004
SKY FINANCIAL GROUP, INC.
*NON-GAAP DISCLOSURE RECONCILIATIONS
(Dollars in thousands)
Core operating earnings are net income adjusted to exclude discontinued operations, merger, integration and restructuring expenses and the results of certain significant transactions or events not representative of ongoing operations (“non-operating items”). Cash operating earnings are core operating earnings adjusted to exclude the after-tax effect of amortizing core deposits and other intangibles. Management believes that both core operating earnings and cash operating earnings assist the investor in understanding the impact of non-operating items on reported results.
Core operating earnings
The following reconciles GAAP income from continuing operations to core operating earnings for the six months ended June 30, 2004 and 2003 as well as for each of the five quarters presented in these tables:
| June 30, | ||||||||
| 2004 | 2003 | |||||||
Income from continuing operations | $ | 80,153 | $ | 72,655 | ||||
Merger, integration and restructuring expense | 346 | 3,486 | ||||||
Non-operating gains | — | — | ||||||
Tax effect | (121 | ) | (1,220 | ) | ||||
After-tax non-operating items | 225 | 2,266 | ||||||
Core operating earnings | $ | 80,378 | $ | 74,921 | ||||
| 2004 | 2003 | |||||||||||||||||
| 2nd qtr | 1st qtr | 4th qtr | 3rd qtr | 2nd qtr | ||||||||||||||
Income from continuing operations | $ | 40,201 | $ | 39,952 | $ | 39,585 | $ | 40,439 | $ | 36,822 | ||||||||
Merger, integration and restructuring expense | — | 346 | 1,091 | — | 3,486 | |||||||||||||
Non-operating gains | — | — | (934 | ) | — | — | ||||||||||||
Tax effect | — | (121 | ) | (55 | ) | — | (1,220 | ) | ||||||||||
After-tax non-operating items | — | 225 | 102 | — | 2,266 | |||||||||||||
Core operating earnings | $ | 40,201 | $ | 40,177 | $ | 39,687 | $ | 40,439 | $ | 39,088 | ||||||||
Merger, integration and restructuring expense in 2004 reflect charges associated with the sale of Sky Financial Solutions, Inc.
Merger, integration and restructuring expense in 2003 reflect the impact of charges for the acquisitions of Metropolitan Financial Corp. and GLB Bancorp, Inc. in the second and fourth quarters, respectively. The non-operating gain recognized in the fourth quarter of 2003 relates to a gain on the sale of a building.
Core operating earnings is used as the numerator to calculate core operating return on average assets, core operating return on average equity and core operating earnings per share. Additionally, non-operating items are deducted from non-interest expense in the numerator and non-interest income in the denominator of the core operating efficiency ratio disclosed in the tables. The comparable information on a GAAP basis is also provided in the tables.
Cash operating earnings
The following reconciles operating earnings to cash operating earnings for the six months ended June 30, 2004 and 2003 as well as for each of the five quarters presented in these tables:
| June 30, | ||||||||
| 2004 | 2003 | |||||||
Core operating earnings | $ | 80,378 | $ | 74,921 | ||||
Amortization of core deposits and other intangible assets | 3,850 | 3,124 | ||||||
Tax effect | (1,347 | ) | (1,094 | ) | ||||
After-tax non-operating items | 2,503 | 2,030 | ||||||
Cash operating earnings | $ | 82,881 | $ | 76,951 | ||||
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Supplemental Financial Information - Second Quarter 2004
| 2004 | 2003 | |||||||||||||||||||
| 2nd qtr | 1st qtr | 4th qtr | 3rd qtr | 2nd qtr | ||||||||||||||||
Core operating earnings | $ | 40,201 | $ | 40,177 | $ | 39,687 | $ | 40,439 | $ | 39,088 | ||||||||||
Amortization of core deposits and other intangible assets | 1,943 | 1,907 | 1,903 | 1,869 | 1,704 | |||||||||||||||
Tax effect | (680 | ) | (667 | ) | (666 | ) | (654 | ) | (596 | ) | ||||||||||
After-tax non-operating items | 1,263 | 1,240 | 1,237 | 1,215 | 1,108 | |||||||||||||||
Cash operating earnings | $ | 41,464 | $ | 41,417 | $ | 40,924 | $ | 41,654 | $ | 40,196 | ||||||||||
Cash operating earnings is used as the numerator to calculate the cash operating return on average tangible equity and the cash operating return on average tangible assets. The denominator of each ratio is adjusted to deduct the average balance of intangible assets during the period. The comparable GAAP information is also included in the tables.
The following table reconciles average GAAP equity to average tangible equity for the six months ended June 30, 2004 and 2003, as well as for each of the period ends presented in the tables.
| June 30, | ||||||||
| 2004 | 2003 | |||||||
Average GAAP equity | $ | 1,047,058 | $ | 869,632 | ||||
Goodwill | 198,364 | 159,765 | ||||||
Core deposits and other intangibles | 48,596 | 53,664 | ||||||
Deferred taxes | (17,009 | ) | (18,782 | ) | ||||
| 229,951 | 194,647 | |||||||
Average tangible equity | $ | 817,107 | $ | 674,985 | ||||
| 2004 | 2003 | |||||||||||||||||||
| 2nd qtr | 1st qtr | 4th qtr | 3rd qtr | 2nd qtr | ||||||||||||||||
Average GAAP equity | $ | 1,060,518 | $ | 1,033,599 | $ | 978,324 | $ | 916,309 | $ | 896,514 | ||||||||||
Goodwill | 198,414 | 193,561 | 174,660 | 162,568 | 142,630 | |||||||||||||||
Core deposits and other intangibles | 49,056 | 50,474 | 54,176 | 53,626 | 50,191 | |||||||||||||||
Deferred taxes | (17,170 | ) | (17,666 | ) | (18,962 | ) | (18,769 | ) | (17,567 | ) | ||||||||||
| 230,300 | 226,369 | 209,874 | 197,425 | 175,254 | ||||||||||||||||
Average tangible equity | $ | 830,218 | $ | 807,230 | $ | 768,450 | $ | 718,884 | $ | 721,260 | ||||||||||
The following table reconciles average GAAP assets to average tangible assets for the six months ended June 30, 2004 and 2003, as well as for each of the period ends presented in the tables.
| June 30, | ||||||||
| 2004 | 2003 | |||||||
Average GAAP assets | $ | 12,502,067 | $ | 11,607,207 | ||||
Goodwill | 198,364 | 159,765 | ||||||
Core deposits and other intangibles | 48,596 | 53,664 | ||||||
Deferred taxes | (17,009 | ) | (18,782 | ) | ||||
| 229,951 | 194,647 | |||||||
Average tangible assets | $ | 12,272,116 | $ | 11,412,560 | ||||
| 2004 | 2003 | |||||||||||||||||||
| 2nd qtr | 1st qtr | 4th qtr | 3rd qtr | 2nd qtr | ||||||||||||||||
Average GAAP assets | $ | 12,114,421 | $ | 12,889,715 | $ | 12,808,243 | $ | 12,626,082 | $ | 12,180,017 | ||||||||||
Goodwill | 198,414 | 193,561 | 174,660 | 162,568 | 142,630 | |||||||||||||||
Core deposits and other intangibles | 49,056 | 50,474 | 54,176 | 53,626 | 50,191 | |||||||||||||||
Deferred taxes | (17,170 | ) | (17,666 | ) | (18,962 | ) | (18,769 | ) | (17,567 | ) | ||||||||||
| 230,300 | 226,369 | 209,874 | 197,425 | 175,254 | ||||||||||||||||
Average tangible assets | $ | 11,884,121 | $ | 12,663,346 | $ | 12,598,369 | $ | 12,428,657 | $ | 12,004,763 | ||||||||||
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Supplemental Financial Information - Second Quarter 2004
The following table reconciles GAAP earnings per share to operating earnings per share, core operating earnings per share and cash operating earnings per share (certain information does not add due to rounding):
Basic EPS
| June 30, | ||||||||
| 2004 | 2003 | |||||||
Net income | $ | 1.06 | $ | 0.84 | ||||
After-tax earnings from discontinued operations | (0.20 | ) | (0.01 | ) | ||||
After-tax merger, integration and restructuring | 0.00 | 0.03 | ||||||
Core operating earnings | 0.86 | 0.85 | ||||||
After-tax amortization of core deposits and other intangible assets | 0.03 | 0.02 | ||||||
Cash operating earnings | $ | 0.89 | $ | 0.87 | ||||
| 2004 | 2003 | ||||||||||||||||||
| 2nd qtr | 1st qtr | 4th qtr | 3rd qtr | 2nd qtr | |||||||||||||||
Net income | $ | 0.43 | $ | 0.63 | $ | 0.45 | $ | 0.46 | $ | 0.42 | |||||||||
After-tax earnings from discontinued operations | — | (0.20 | ) | (0.02 | ) | (0.01 | ) | (0.01 | ) | ||||||||||
After-tax merger, integration and restructuring | — | 0.00 | 0.00 | — | 0.03 | ||||||||||||||
Core operating earnings | 0.43 | 0.43 | 0.43 | 0.45 | 0.44 | ||||||||||||||
After-tax amortization of core deposits and other intangible assets | 0.01 | 0.01 | 0.01 | 0.01 | 0.01 | ||||||||||||||
Cash operating earnings | $ | 0.44 | $ | 0.44 | $ | 0.44 | $ | 0.46 | $ | 0.45 | |||||||||
Diluted EPS
| June 30, | ||||||||
| 2004 | 2003 | |||||||
Net income | $ | 1.05 | $ | 0.83 | ||||
After-tax earnings from discontinued operations | (0.20 | ) | (0.01 | ) | ||||
After-tax merger, integration and restructuring | 0.00 | 0.03 | ||||||
Core operating earnings | 0.85 | 0.85 | ||||||
After-tax amortization of core deposits and other intangible assets | 0.03 | 0.02 | ||||||
Cash operating earnings | $ | 0.88 | $ | 0.87 | ||||
| 2004 | 2003 | ||||||||||||||||||
| 2nd qtr | 1st qtr | 4th qtr | 3rd qtr | 2nd qtr | |||||||||||||||
Net income | $ | 0.43 | $ | 0.62 | $ | 0.45 | $ | 0.46 | $ | 0.42 | |||||||||
After-tax earnings from discontinued operations | — | (0.20 | ) | (0.02 | ) | (0.01 | ) | (0.01 | ) | ||||||||||
After-tax merger, integration and restructuring | — | 0.01 | 0.00 | — | 0.03 | ||||||||||||||
Core operating earnings | 0.43 | 0.43 | 0.43 | 0.45 | 0.44 | ||||||||||||||
After-tax amortization of core deposits and other intangible assets | 0.01 | 0.01 | 0.01 | 0.01 | 0.01 | ||||||||||||||
Cash operating earnings | $ | 0.44 | $ | 0.44 | $ | 0.44 | $ | 0.46 | $ | 0.45 | |||||||||
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