Exhibit 99.1
Sandler O’Neill & PartnersFinancial Services Conference
November 10-12, 2004
Forward Looking Statement
This presentation contains forward-looking statements relating to the financial condition, results of operations and business of Sky Financial Group, Inc. Actual results could differ materially from those indicated. Among the important factors that could cause actual results to differ materially are interest rates, the success of the integration of acquisitions, changes in the mix of the company’s business, competitive pressures, general economic conditions and the risk factors detailed in the Company’s periodic reports and registration statements filed with the Securities and Exchange Commission. Sky Financial Group undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this presentation.
This presentation contains financial information adjusted to exclude the results of certain significant transactions or events not representative of ongoing operations (“non-operating items”). A reconciliation of these non-GAAP disclosures will be filed in a form 8-K.
2
Non-GAAP Financial Measures
In addition to results presented in accordance with GAAP, this presentation 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 can be found in the financial tables attached to our most recent earnings release available on our website www.skyfi.com.
3
Reconciliation of Cash & Operating Earnings to GAAP Earnings
Dollars in thousands. All numbers shown net of tax. Quarter ended
September 30, 2003 2002 2001 2000 1999 1998 2004 2003 Net Income as reported $156,617 127,807 $120,663 $114,373 $71,182 $51,963 $46,148 $41,568 Discontinued Operations 3,937 (4,341) (7,989) (6,560) 3,027 4,441 - 1,129
Income from continuing operations 152,680 132,148 128,652 120,933 68,155 47,522 46,148 40,439
Merger, integration and restructuring costs 2,975 6,784 519 2,514 51,051 39,966 2,490 -
Non operating gains (607) - (892) (1,406) - (3,184) Loss on the sale of securities due to restructuring of balance sheet 2,596 Provision for loan loss 1,560 10,400
Operating Earnings 155,048 138,932 128,279 124,637 120,766 94,704 48,638 40,439 Amortization of Intangibles 4,482 2,621 3,183 3,140 3,408 3,968 2,309 1,215 Cash Earnings $159,530 $141,553 $131,462 $127,777 $124,174 $98,672 $50,947 $41,654
4
Reconciliation of Cash & Operating Earnings to GAAP Earnings
Dollars in thousands. All numbers shown net of tax. Quarter ended
September 30, 2003 2002 2001 2000 1999 1998 2004 2003
Net Income as reported $1.73 $1.52 $1.45 $1.35 $0.82 $0.60 $0.43 $0.46
Discontinued Operations 0.04 (0.05) (0.10) (0.08) 0.03 0.05 - 0.01 Income from continuing operations 1.69 1.57 1.55 1.42 0.79 0.55 0.43 0.44 Merger, integration and restructuring costs 0.03 0.08 0.01 0.03 0.59 0.46 0.02 -Non operating gains (0.01) - (0.01) (0.02) - (0.04) - -
Loss on the sale of securities due to restructuring of balance sheet - - - 0.03 - - - -
Provision for loan loss - - - - 0.02 0.12 - -Operating Earnings 1.72 1.65 1.55 1.47 1.39 1.09 0.46 0.44 Amortization of Intangibles 0.05 0.03 0.04 0.04 0.04 0.05 0.02 0.01 Cash Earnings $1.76 $1.68 $1.58 $1.50 $1.43 $1.14 $0.48 $0.46
5
Sky Profile
$14.6 billion in total assets
Eight regions consolidated under Sky name
Over 280 financial centers serving communities in Ohio, Michigan, Pennsylvania, Indiana and West Virginia
Headquarters located in Bowling Green, Ohio
6
Sky Profile
40th largest publicly-owned holding company in U.S.
$2.8 billion market cap
Serve 470,000 retail banking households
Serve over 58,000 commercial bank businesses
Pending acquisition – Prospect Bancshares – December 2004
7
Sky Profile—History
Built from Merger of Equals in 1998
Organic growth through sales and service process
Acquisition growth
Nine bank acquisitions
Nine insurance brokerage businesses
Divestiture of non-core businesses
Current focus on metro markets in footprint (Cleveland, Pittsburgh and Columbus)
8
A Record of Rapid Growth
CAGR =
20%
Assets in ($ Billions)*
Acquisitions
* Excluding discontinued operations
$4.2
$4.9
$8.3
$8.8
$9.3
$12.3
$3.1
$2.3
$10.6
$1.5
$1.1
$0.6
1998
1999
2000
2001
2002
2003
Sep-04
9
Solid Midwest Franchise
Ohio
7th largest
$7.8 billion in deposits
207 offices
Pennsylvania
17th largest
$2.4 billion in deposits
66 offices
MI-IN-WV
$140 million in deposits
9 offices
Source: SNL Financial LC
10
Sky Financial Market Area
Regions (L-R)
Mid Am
Ohio Bank
Greater Cleveland
Stark/Summit
Mahoning Valley
Ohio Valley
Western Pennsylvania
Pittsburgh
11
Ranked #1 & #2 15 $5.4B 54%
Ranked #3 & #4 9 $1.6B 16%
Other #5 plus 24 $3.0B 30%
Cleveland MSA $975MM 1.6%
Columbus MSA* $497MM 1.3%
Pittsburgh MSA $1.7B 3.2%
By Metro Market Deposits % of Market
Market Share
Deposit Rankings
By County Counties Deposits % of Sky
* Proforma with Prospect Bancshares
Source: SNL Financial LC – 2004 Deposit Market Share Data
12
Balance Sheet Strength—Assets
Other 4%
Intangibles 4%
Loans (Net) and HFS 69%
Securities21%
Total Assets
Residential Mortgage 10%
Commercial RE 39%
C&I 27%
Consumer24%
Loan Mix
Cash & Due 2%
13
Balance Sheet Strength—Funding
Total Funding
Deposits 69%
Borrowings 20%
Capital 10%
Other
1%
Interest DDA 4%
Non-Interest DDA 15%
Savings 39%
Time42%
Deposit Mix
14
Balance Sheet Strength
Sky’s board has authorized the purchase of up to $2 million shares by 9/15/05.
Tangible Equity/Tangible Assets
5.75%
5.99%
6.94%
6.62%
6.35%
3Q’03
4Q’03
1Q’04
2Q’04
3Q’04
15
Strategic Vision
A community-based, integrated financial services company
Led by strong regional presidents who “own” the delivery channels
Driven by aggressive sales and service process
Characterized by high-quality operations/technology and product/business line experts
16
Regional Accountabilities
Decentralized, local empowerment
Majority of lending decisions made at financial center or within region
Establish pricing for loans and deposits
Hiring and personnel management
Sky encourages local volunteerism and community leadership
Local boards provide community input
17
Central Support Capabilities
Risk Management
Credit standards
Large credit evaluation
Interest rate risk and liquidity
Legal and compliance department
Technology
One core data platform
Common network, data communications and technology support
Sales Support Operations
Call center, deposit and loan operations, marketing, finance, human resources, etc.
18
Sky Priorities
Organic growth
Growth of fee-based businesses
Organizational synergies
Sound asset quality
Acquisitions
One Company ~ One Culture
19
A Platform for Organic Growth
A focus on:
Regional delivery structure
Sky Trek process
Incentive compensation
Our goal is to be the premier sales and service organization in our regions
20
Building Relationships
September data impacted by addition of Second National clients.
54%
42%
35%
45%
11%
13%
Dec ‘01
Sept ‘04
Single-service
2-3 Services
4+ Services
21
Building Relationships
Metro Market – Pittsburgh Region
Metro Market – Greater Cleveland Region
60%
45%
36%
47%
5%
8%
November ‘02
September ‘04
Single-service
2-3 Services
4+ Services
71%
57%
26%
38%
3%
6%
May ‘03
September ‘04
Single-service
2-3 Services
4+ Services
22
Incentive Compensation Drives Performance
Every employee included in plan
All have goals in four categories:
Profitability
Growth
Asset quality
Client service
All receive monthly scorecards on performance
Variable pay comprised 27.2% of total 2003 compensation
23
Fee-Based Business Growth
Trust, Investments, Insurance and Mortgages
Growth platform based on community financial services relationship model
Delivery through Sky banking regions via bank CEOs
Significant organic growth via cross-sell opportunities to banking clients
24
Sky Trust/Investments
$4 billion in trust assets under administration
Centralized infrastructure supporting all regional relationship and sales teams
15-20% annualized revenue growth
$200 million in investment brokerage volume
25
Sky Insurance
$700 million in annual premium volume
Aggressive acquisition strategy to consolidate multiple agencies under Sky brand
Agency integration process to strengthen selling potential and operational efficiencies
Ability to cross-sell insurance products through bank delivery channel
17% cross-sold to date in mature regions
Market clout – provides for better pricing to clients
Represent the best A-rated insurance companies
26
Change in Fee Mix*
$93
$120
$148
(Millions)
CAGR = 17.7%
$243
$162
$81
$0
*Excluding discontinued/sold operations
1999
2000
2001
2002
2003
$179
$98
27
YTD Change in Fee Mix*
(Millions)
*Excluding discontinued/sold operations
$137
(Millions)
Growth up 6.5%
$146
$0
$81
$162
Sept. 2003
Sept. 2004
Insurance
Mortg. Banking
Service Charges
Trust/Brokerage
Other
28
Organization Synergies
Investment in technology:
Merger-related system conversions completed within 30 days
New CRM system in place
Investment in people
Sky Trek implementations completed within 60 days
Sky Trek process improvements saved $2.1 MM in 2003
Investment in process upgrades
Improved small business lending model
Consolidated insurance businesses under Sky name
Dedicated change-management team in place
Scalable Common Processes
29
A Consistent Level of Efficiency
Efficiency Ratio*
* Excluding discontinued operations, non-operating items and amortization of intangibles
52.7%
51.2%
52.2%
52.5%
51.4%
3Q’03
4Q’03
1Q’04
2Q’04
3Q ‘04
30
Sound Asset Quality
* Represents non-performing commercial loans backed by sureties
0.73
0.74
0.65
0.86
0.75
0.43
0.43
0.30
0.48
1.05
0.96
1.06
1.09
1.19
1.46
1.45
1.46
1.43
1.44
0.32
3Q’03
4Q’03
1Q’04
2Q’04
3Q’04
Net Charge-offs as% of Average Loans
NPL as% of Total Loans
Reserves to Total Loans
31
A Successful Acquisition Strategy
Bank expansion of geography into contiguous markets
Three Rivers – closed October 2002
Metropolitan Bancorp – closed May 2003
Great Lakes Bancorp – closed December 2003
Second National Bancorp – closed July 2004
Prospect Bancshares – pending December 2004
Enhancement of financial services product lines – primarily insurance brokerage businesses
Nine acquisitions since 1999
32
Acquisitions: A Core Competency
Experienced team to manage processes
Conservative discipline
Accretive in year one – cost saves only
Must meet financial expectations
Proven integration tactics
All Sky acquisitions have met financial expectations
33
Sky Performance Goals
Committed to perform among the top 25% of
the 100 largest banks in the U.S. in terms of:
ROTE
ROTA
Efficiency ratio
Sound asset quality
Operating EPS growth of 10-12%
34
Record Operating Earnings
Core Operating Earnings Per Share
$1.09
$1.39
$1.47
$1.55
$1.65
$1.72
$1.78
1998
1999
2000
2001
2002
2003
2004 Est.
35
2004 3rd Quarter Results
Core Operating Results Q3 2003 Q3 2004 % Change
Core Operating Earnings $40.4MM $48.6MM +20.3%
Core Oper. EPS $.44 $.46 +4.5%
Cash Earnings $41.7MM 50.9MM +22.3%
Cash EPS $.46 $.48 +4.3%
ROTE 22.99% 22.52% -
ROTA 1.33% 1.44%
Net Interest Margin 3.66% 3.69%
Efficiency - Cash 52.72% 51.38% -
* Excluding discontinued operations, non-operating items and amortization of intangibles
36
Net Interest Margin (%)
3.66%
3.70%
3.69%
3.69%
3.69%
3Q’03
4Q’03
1Q’04
2Q’04
3Q’04
37
Net Interest Margin
Positioned for Rising Rates
-4.1%
1.6%
3.1%
4.1%
Down 100
Up 100
Up 200
Up 300
38
Diversified Revenue Growth
Fees as% of Total Revenues
($ Millions)
20.3%
24.9%
26.2%
28.0%
12.8%
3.6%
3.7%
4.5%
3.0%
26.2%
$0
$40
$80
$120
$160
$200
3Q’03
4Q’03
1Q’04
2Q’04
3Q’04
Net-interest income
Other income
Mortgage income
39
Earnings Outlook
Core operating earnings for 4th quarter estimated to be $.46 to $.48 per fully-diluted share
Full-year estimate = $1.77 to $1.79
Driven by:
Solid core growth
Exceptional DDA Growth
Margin improvement from rising rates
Accelerating fee businesses
Net charge-offs being well controlled
Disciplined expense control
40
SKYF: An Attractive Investment Opportunity*
P/E 2004 2005
SKYF 15.5x 13.9x
100 Largest Banks 17.1x 15.6x
Banks $10-20 billion 16.6x 14.8x
Price/Book: 206%
Price/Tangible Book: 326%
Dividend yield: 3.0%
*Book information based 9/30/04 financial report. Stock prices as of 11/4/04
41
Why Buy Sky
Solid operating performance
Balance sheet strength
Aggressive performance goals
Strong growth profile
42
Under One Sky
www.skyfi.com
