Ohio's Second Bancorp is exapanding outward as the economy of its home base shrinks.

The $664 million-asset company is based in Warren, a city of 60,000 just outside Youngstown -- where the automotive and steel industries have been on and off the ropes for years.

But Second Bancorp, which is adding offices as far as 100 miles beyond its Rust Belt headquarters, is enjoying Sun Belt earnings. It earned $1.5 million in the third quarter, 26% more than in the year-earlier period and 54% more than in the third quarter of 1991.

From One County to Five

Not surprisingly, the bank intends to stick to its strategy of external growth. In the last five years, it has expanded its market area from one county to five.

This year, it's added a branch in Kent, a university town outside Akron, and one in Hudson -- on the outskirts of the Cuyahoga National Recreation Area and the many "Heights" that make up the suburbs of Cleveland.

"We're going to where the customer base is that we want to attract," says president and chief executive Alan G. Brant. "We have an active acquisition program under way."

Beachhead by the Lake

In 1992, Second Bancorp acquired four branches of Ameritrust, establishing the bank in rural and suburban towns on, or near, Lake Erie.

The bank also is pursuing de novo "mini-branching," which is the least expensive way of entering new markets, says Michael Durante, an analyst with McDonald & Co., Cleveland.

Mr. Durante views Second Bancorp, which has a 10.77% Tier 1 risk-based capital ratio, as healthy -- and maintains a hold rating on its stock.

|Solid Deposit Base'

He adds that the bank, though its third-quarter return on assets was a slightly below average 0.95%, might well be a takeover target because of "its very solid deposit base."

He also thinks that Second Bancorp has been wise to branch out. "The best strategy for them would be to move toward stronger economic areas and try to grow there," he said.

The I-77 corridor, which runs between Cleveland and Akron -- on the opposite side of the Cuyahoga park -- is one area Mr. Durante suggests.

There, the bank would have an opportunity to exploit a niche, like indirect auto lending, in which it already has extensive experience, Mr. Durante said.

Others Have Similar Strategies

Second Bancorp's expansion strategy is similar to those of small banks in nearby western Pennsylvania, which are branching east, towards Pittsburgh, for the appealing opportunities near the rebounding city and its new airport, he added.

Like Second Bancorp, they're focusing on other smaller cities and suburbs, avoiding the intense competition in the metropolis.

Mr. Grant attributes this year's loan growth to the customers he's picked up through just this kind of expansion.

"Either no one was servicing them before, or we were filling their needs [better]," he said.

Second Bancorp's loan total grew 14% since the third quarter of 1992. Commercial and consumer loan portfolios each exceeded $200 million as of Sept. 30, having jumped 16% and 18%, respectively, over the year earlier period.

Area's Economy Improving

Unemployment in the Youngstown/Warren area likely has peaked. After reaching 9.4% in March, when state and national averages were 7.3% and 7.0%, it dropped in September to a seasonally unajusted figure of 7.9%. The national average at the end of October was 6.8%.

Mr. Durante attributes the improvement to a cyclical upswing in auto sales. At best, these upswings will provide a measure of slow growth for the Warren/Youngstown area.

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