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(NASDAQ:OSBC) | Exhibit 99.1 | |
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Contact: | Bradley S. Adams | For Immediate Release |
| Chief Financial Officer | October 18, 2017 |
| (630) 906-5484 |
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Old Second Reports Third Quarter 2017 Net Income of $8.1 million
AURORA, IL, October 18, 2017 – Old Second Bancorp, Inc. (the “Company” or “Old Second”) (NASDAQ: OSBC), parent company of Old Second National Bank (the “Bank”), today announced financial results for the third quarter of 2017. The Company’s net income was $8.1 million, or $0.27 per diluted share, for the third quarter of 2017, as compared to $5.1 million, or $0.17 per diluted share, for the second quarter of 2017, and $3.5 million, or $0.12 per diluted share, for the third quarter of 2016.
Operating Results
· | Third quarter 2017 net income was $8.1 million, reflecting an increase of $2.9 million, or 57.0%, from the second quarter of 2017, and an increase of $4.6 million, or 130.8%, from the third quarter of 2016. A nonrecurring income tax benefit of $1.6 million was recorded in the third quarter of 2017, stemming from the State of Illinois tax rate increase effective July 1, 2017, which increased the Company’s deferred tax asset. Excluding this nonrecurring item, third quarter earnings were $6.5 million, or $0.22 per share on a fully diluted basis. |
· | Net interest and dividend income was $19.3 million for the third quarter of 2017, reflecting an increase of $622,000, or 3.3%, from the $18.7 million recorded in the second quarter of 2017, and an increase of $3.9 million, or 25.6%, over the third quarter of 2016. Net interest income continued to be favorably impacted in the third quarter of 2017 due to the Company’s fourth quarter 2016 acquisition of $221.0 million of loans from the purchase of the Chicago branch of Talmer Bank and Trust. Purchase accounting accretion income realized in the third quarter of 2017 totaled $265,000, as compared to $495,000 in the second quarter of 2017 and $0 in the third quarter of 2016. |
· | A provision for loan losses expense of $300,000 and $750,000 was recorded in the third quarter of 2017 and the second quarter 2017, respectively. No provision for loan losses was recorded in the third quarter of 2016. |
· | Noninterest income was $7.8 million for the third quarter of 2017, which reflects growth of $526,000, or 7.2%, as compared to the second quarter of 2017, and an increase of $1.2 million, or 18.9%, over the third quarter of 2016. Growth was primarily driven by commercial swap fee income and decreases in security losses. |
· | Noninterest expense of $16.9 million in the third quarter of 2017 reflected a decrease of $1.1 million, or 5.9%, as compared to the second quarter of 2017, but an increase of $336,000, or 2.0%, from the third quarter of 2016. The variance in the current year linked quarter expense reflects certain one-time costs incurred in the second quarter of 2017, and the year over year variance is primarily due to an increased employee headcount associated with the Talmer branch acquisition in the fourth quarter of 2016. |
· | On October 17, 2017, the Company’s Board of Directors declared a cash dividend of $0.01 per share payable on November 6, 2017, to stockholders of record as of October 27, 2017. |
1
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Capital Ratios
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| September 30, |
| June 30, |
| September 30, | |||
| 2017 |
| 2017 |
| 2016 | |||
The Bank's common equity tier 1 capital ratio | 12.67 | % |
| 12.46 | % |
| 15.22 | % |
The Company's common equity tier 1 capital ratio | 8.88 | % |
| 8.55 | % |
| 10.68 | % |
The Bank's total capital ratio | 13.52 | % |
| 13.30 | % |
| 16.24 | % |
The Company's total capital ratio | 12.46 | % |
| 12.14 | % |
| 15.42 | % |
The Company's tier 1 leverage ratio | 9.69 | % |
| 9.09 | % |
| 9.32 | % |
· | The ratios shown above exceed levels required to be considered “well capitalized.” |
Asset Quality & Earning Assets
· | Nonperforming loans ended at $16.3 million at September 30, 2017, compared to $15.6 million at June 30, 2017, and $17.4 million at September 30, 2016. Credit metrics continue to be relatively stable regarding nonperforming loan levels, and management is carefully monitoring loans considered to be in a classified status. Nonperforming loans as a percent of total loans remained the same at 1.0% for September 30, 2017, and June 30, 2017, and was 1.4% as of September 30, 2016. |
· | OREO assets totaled $9.0 million as of September 30, 2017, which is a $2.7 million reduction compared to $11.7 million at June 30, 2017. Valuation writedowns continued in the third quarter of 2017 with a quarterly expense of $920,000 compared to $392,000 in the second quarter of 2017 and $365,000 in the third quarter of 2016. Nonperforming assets as a percent of total loans plus OREO decreased to 1.6% as of September 30, 2017, as compared to 1.8% as of June 30, 2017 and 2.6% as of September 30, 2016. |
· | Total loans at September 30, 2017, were $1.59 billion, reflecting an increase of $54.5 million when compared to June 30, 2017. Average loans (including loans held-for-sale) for the third quarter of 2017 were $1.55 billion, reflecting an increase of $44.3 million from quarterly average loans for the second quarter of 2017 and an increase of $361.9 million when compared to the third quarter of 2016. |
· | As of September 30, 2017, available-for-sale securities at fair value totaled $533.5 million, as compared to $568.2 million at June 30, 2017, and $531.1 million at September 30, 2016. The decline in securities from second quarter of 2017 was used to fund organic loan growth. Net gains of $102,000 pretax on the sale of securities were realized for the third quarter of 2017, as compared to losses of $131,000 in the second quarter of 2017 and $2.0 million in the third quarter of 2016. |
2
Net Interest Income
ANALYSIS OF AVERAGE BALANCES,
TAX EQUIVALENT INTEREST AND RATES
(Dollars in thousands - unaudited)
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| Quarters Ended | ||||||||||||||||||||||
| September 30, 2017 |
| June 30, 2017 |
| September 30, 2016 | ||||||||||||||||||
| Average |
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| Rate |
| Average |
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| Rate |
| Average |
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| Rate | |||
| Balance |
| Interest |
| % |
| Balance |
| Interest |
| % |
| Balance |
| Interest |
| % | ||||||
Assets |
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Interest bearing deposits with financial institutions | $ | 11,685 |
| $ | 37 |
| 1.24 |
| $ | 11,938 |
| $ | 31 |
| 1.03 |
| $ | 50,054 |
| $ | 64 |
| 0.50 |
Securities: |
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Taxable |
| 327,892 |
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| 2,424 |
| 2.96 |
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| 361,504 |
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| 2,607 |
| 2.88 |
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| 624,844 |
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| 3,954 |
| 2.53 |
Non-taxable (TE) |
| 220,540 |
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| 2,504 |
| 4.54 |
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| 225,182 |
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| 2,536 |
| 4.50 |
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| 35,046 |
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| 277 |
| 3.16 |
Total securities |
| 548,432 |
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| 4,928 |
| 3.59 |
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| 586,686 |
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| 5,143 |
| 3.51 |
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| 659,890 |
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| 4,231 |
| 2.56 |
Dividends from FHLBC and FRBC |
| 8,339 |
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| 94 |
| 4.51 |
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| 7,699 |
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| 92 |
| 4.78 |
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| 7,918 |
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| 83 |
| 4.19 |
Loans and loans held-for-sale1 |
| 1,553,473 |
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| 18,265 |
| 4.60 |
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| 1,509,188 |
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| 17,445 |
| 4.57 |
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| 1,191,574 |
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| 13,567 |
| 4.46 |
Total interest earning assets |
| 2,121,929 |
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| 23,324 |
| 4.32 |
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| 2,115,511 |
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| 22,711 |
| 4.26 |
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| 1,909,436 |
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| 17,945 |
| 3.70 |
Cash and due from banks |
| 31,028 |
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| - |
| - |
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| 39,425 |
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| - |
| - |
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| 41,344 |
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| - |
| - |
Allowance for loan losses |
| (16,478) |
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| - |
| - |
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| (15,779) |
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| - |
| - |
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| (15,767) |
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| - |
| - |
Other noninterest bearing assets |
| 185,906 |
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| - |
| - |
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| 189,928 |
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| - |
| - |
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| 190,213 |
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| - |
| - |
Total assets | $ | 2,322,385 |
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| $ | 2,329,085 |
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| $ | 2,125,226 |
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Liabilities and Stockholders' Equity |
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| �� |
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NOW accounts | $ | 422,913 |
| $ | 108 |
| 0.10 |
| $ | 432,248 |
| $ | 107 |
| 0.10 |
| $ | 384,588 |
| $ | 89 |
| 0.09 |
Money market accounts |
| 273,440 |
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| 85 |
| 0.12 |
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| 280,482 |
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| 86 |
| 0.12 |
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| 265,135 |
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| 64 |
| 0.10 |
Savings accounts |
| 262,573 |
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| 46 |
| 0.07 |
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| 265,066 |
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| 40 |
| 0.06 |
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| 257,808 |
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| 40 |
| 0.06 |
Time deposits |
| 389,037 |
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| 1,077 |
| 1.10 |
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| 392,779 |
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| 1,025 |
| 1.05 |
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| 401,999 |
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| 931 |
| 0.92 |
Interest bearing deposits |
| 1,347,963 |
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| 1,316 |
| 0.39 |
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| 1,370,575 |
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| 1,258 |
| 0.37 |
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| 1,309,530 |
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| 1,124 |
| 0.34 |
Securities sold under repurchase agreements |
| 32,800 |
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| 4 |
| 0.05 |
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| 35,652 |
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| 4 |
| 0.05 |
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| 31,892 |
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| 1 |
| 0.01 |
Other short-term borrowings |
| 72,065 |
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| 220 |
| 1.19 |
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| 58,572 |
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| 146 |
| 0.99 |
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| 22,174 |
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| 22 |
| 0.39 |
Junior subordinated debentures |
| 57,621 |
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| 930 |
| 6.46 |
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| 57,609 |
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| 1,059 |
| 7.35 |
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| 57,573 |
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| 1,084 |
| 7.53 |
Senior notes |
| 44,021 |
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| 672 |
| 6.11 |
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| 43,995 |
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| 672 |
| 6.11 |
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| - |
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| - |
| - |
Subordinated debt |
| - |
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| - |
| - |
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| - |
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| - |
| - |
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| 45,000 |
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| 245 |
| 2.13 |
Notes payable and other borrowings |
| - |
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| - |
| - |
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| - |
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| - |
| - |
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| 500 |
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| 2 |
| 1.57 |
Total interest bearing liabilities |
| 1,554,470 |
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| 3,142 |
| 0.80 |
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| 1,566,403 |
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| 3,139 |
| 0.80 |
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| 1,466,669 |
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| 2,478 |
| 0.67 |
Noninterest bearing deposits |
| 551,768 |
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| - |
| - |
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| 557,265 |
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| - |
| - |
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| 472,599 |
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| - |
| - |
Other liabilities |
| 19,395 |
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| - |
| - |
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| 18,047 |
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| - |
| - |
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| 15,539 |
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| - |
| - |
Stockholders' equity |
| 196,752 |
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| - |
| - |
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| 187,370 |
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| - |
| - |
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| 170,419 |
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| - |
| - |
Total liabilities and stockholders' equity | $ | 2,322,385 |
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| $ | 2,329,085 |
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| $ | 2,125,226 |
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Net interest income (TE) |
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| $ | 20,182 |
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| $ | 19,572 |
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| $ | 15,467 |
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Net interest income (TE) |
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to total earning assets |
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| 3.77 |
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| 3.71 |
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| 3.22 |
Interest bearing liabilities to earning assets |
| 73.26 | % |
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| 74.04 | % |
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| 76.81 | % |
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1 Interest income from loans is shown on a tax equivalent basis as discussed in the table on page 14 and includes fees of $722,000, $573,000 and $700,000 for the third quarter of 2017, the second quarter of 2017 and the third quarter of 2016, respectively. Nonaccrual loans are included in the above stated average balances. Tax equivalent basis is calculated using a marginal tax rate of 35%.
Tax equivalent net interest income increased $610,000 for the quarter ended September 30, 2017, as compared to the quarter ended June 30, 2017. Quarterly average earning assets increased $6.4 million from the second quarter of 2017 to a total of $2.12 billion for the period ended September 30, 2017, while yield on earning assets increased 6 basis points. Average loan growth, including loans held-for-sale, was $44.3 million for the period ended September 30, 2017, as compared to the quarter ended June 30, 2017, while the year over year third quarter average loans, including loans held-for-sale, increased $361.9 million. This year over year growth was primarily due to the Talmer branch acquisition, which resulted in $221.0 million of purchased loans. In addition, organic loan growth, driven by commercial portfolio originations, and a home equity loan portfolio purchase of $16.7 million occurred in the year over year period.
Growth in securities income in 2017 stemmed from portfolio repositioning to higher yielding tax exempt securities; in the first nine months of 2017, lower yielding securities were sold or called, and deposit growth was also utilized to fund the higher yielding securities purchases. These security purchases, as well as a rising interest rate environment, drove an 8 basis point increase for total securities income in the third quarter of 2017 as compared to the second quarter of 2017, and a 103 basis point increase from the like 2016 quarter.
3
ASU 2017-08, which was adopted by the Company in the third quarter of 2017, requires the premium on callable debt securities to be amortized to the call date as compared to the contractual maturity date. This ASU was adopted on a modified retrospective basis, which requires the Company to reflect its adoption effective January 1, 2017. The effect of amortizing the premium over a shorter period negatively impacted the net interest margin for the first six months of 2017, and will continue to decrease future quarterly net interest income until the premium, which is $25.0 million as of September 30, 2017, is fully amortized.
The cost on interest bearing liabilities for the third quarter of 2017 remained unchanged from the second quarter of 2017, and increased by 13 basis points from the third quarter of 2016. Total average deposits decreased in all categories during the third quarter 2017 from the linked quarter due to reductions in NOW and money market accounts. However, significant growth in demand deposits in the year over year period as compared to interest bearing deposits has resulted in a lower cost of funds stemming from average deposits. For the quarter ended September 30, 2017, average other short-term borrowings, which are Federal Home Loan Bank Chicago ( “FHLBC”) advances, increased by $13.5 million compared to the quarter ended June 30, 2017 and by $49.9 million as compared to the quarter ended September 30, 2016. The repayment of the subordinated note and simultaneous issuance of senior debt in the fourth quarter of 2016 resulted in an overall increase to the cost of funds in the year over year period. However, the growth in the yield on average earning assets more than offset this increase in the cost of funds, resulting in an overall increase of 55 basis points to net interest margin in the year over year period.
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| 3rd Quarter 2017 |
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Noninterest Income |
| Quarters Ended |
| Percent Change From |
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(in thousands) |
| September 30, |
| June 30, |
| September 30, |
| June 30, |
| September 30, |
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| 2017 |
| 2017 |
| 2016 |
| 2017 |
| 2016 |
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Trust income |
| $ | 1,468 |
| $ | 1,638 |
| $ | 1,403 |
| (10.4) |
| 4.6 |
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Service charges on deposits |
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| 1,722 |
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| 1,615 |
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| 1,756 |
| 6.6 |
| (1.9) |
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Residential mortgage banking revenue |
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| 1,547 |
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| 1,711 |
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| 2,789 |
| (9.6) |
| (44.5) |
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Securities gain (loss), net |
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| 102 |
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| (131) |
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| (1,959) |
| 177.9 |
| 105.2 |
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Increase in cash surrender value of BOLI |
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| 362 |
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| 350 |
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| 383 |
| 3.4 |
| (5.5) |
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Debit card interchange income |
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| 1,075 |
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| 1,081 |
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| 1,013 |
| (0.6) |
| 6.1 |
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Gain on disposal and transfer of fixed assets |
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| - |
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| 12 |
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| - |
| N/M |
| N/M |
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Other income |
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| 1,567 |
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| 1,041 |
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| 1,209 |
| 50.5 |
| 29.6 |
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Total noninterest income |
| $ | 7,843 |
| $ | 7,317 |
| $ | 6,594 |
| 7.2 |
| 18.9 |
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N/M - Not Meaningful
Of the noninterest income categories, other income experienced the largest increases on both a linked quarter and year over year basis, as shown above, primarily due to an increase in commercial swap fee income. Security gains were realized in the third quarter of 2017, as compared to losses in prior periods presented; losses recorded in the prior year reflect security portfolio sales to fund the Talmer branch acquisition. Mortgage banking revenue also continued to be negatively impacted by the rising interest rate environment in 2017.
4
Noninterest Expense
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| 3rd Quarter 2017 |
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Noninterest Expense |
| Quarters Ended |
| Percent Change From |
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(in thousands) |
| September 30, |
| June 30, |
| September 30, |
| June 30, |
| September 30, |
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| 2017 |
| 2017 |
| 2016 |
| 2017 |
| 2016 |
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Salaries |
| $ | 7,704 |
| $ | 7,972 |
| $ | 7,205 |
| (3.4) |
| 6.9 |
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Bonus |
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| 1,114 |
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| 854 |
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| 521 |
| 30.4 |
| 113.8 |
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Benefits and other |
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| 1,231 |
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| 1,719 |
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| 1,288 |
| (28.4) |
| (4.4) |
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Total salaries and employee benefits |
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| 10,049 |
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| 10,545 |
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| 9,014 |
| (4.7) |
| 11.5 |
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Occupancy, furniture and equipment expense |
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| 1,482 |
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| 1,462 |
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| 1,500 |
| 1.4 |
| (1.2) |
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Computer and data processing |
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| 1,081 |
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| 1,112 |
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| 1,105 |
| (2.8) |
| (2.2) |
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FDIC insurance |
|
| 199 |
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| 165 |
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| 228 |
| 20.6 |
| (12.7) |
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General bank insurance |
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| 246 |
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| 264 |
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| 269 |
| (6.8) |
| (8.6) |
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Amortization of core deposit intangible asset |
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| 24 |
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| 25 |
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| - |
| (4.0) |
| N/M |
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Advertising expense |
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| 255 |
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| 452 |
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| 430 |
| (43.6) |
| (40.7) |
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Debit card interchange expense |
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| 285 |
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| 399 |
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| 363 |
| (28.6) |
| (21.5) |
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Legal fees |
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| 162 |
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| 184 |
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| 242 |
| (12.0) |
| (33.1) |
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Other real estate owned expense, net |
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| 680 |
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| 539 |
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| 426 |
| 26.2 |
| 59.6 |
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Other expense |
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| 2,455 |
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| 2,839 |
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| 3,005 |
| (13.5) |
| (18.3) |
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Total noninterest expense |
| $ | 16,918 |
| $ | 17,986 |
| $ | 16,582 |
| (5.9) |
| 2.0 |
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Efficiency ratio (defined below) |
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| 57.66 | % |
| 64.03 | % |
| 66.21 | % |
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N/M - Not Meaningful
The efficiency ratio shown in the table above is calculated as noninterest expense, excluding OREO expenses, amortization of core deposits and acquisition costs divided by the sum of net interest income on a fully tax equivalent basis, total noninterest income less net gains and losses on securities and includes a tax equivalent adjustment on the increase in cash surrender value of bank-owned life insurance.
Noninterest expense for the third quarter of 2017 decreased $1.1 million, or 5.9%, on a linked quarter basis but increased $336,000 or 2.0%, year over year. The linked quarter decrease is primarily attributable to reductions in salaries and employee benefit costs as the prior quarter experienced certain one-time costs related to executive recruitment and relocation, as well as reduced advertising and debit card interchange expense. The year over year increase was driven by additional salaries and employee benefit costs primarily due to additional employees from the Talmer branch acquisition in late 2016; this negative variance was partially offset by a reduction in other expense stemming from a decrease in loan related costs.
Earning Assets
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| September 30, 2017 |
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Loans |
| As of |
| Percent Change From |
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(dollars in thousands) |
| September 30, |
| June 30, |
| September 30, |
| June 30, |
| September 30, |
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| 2017 |
| 2017 |
| 2016 |
| 2017 |
| 2016 |
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Commercial |
| $ | 257,356 |
| $ | 256,760 |
| $ | 136,819 |
| 0.2 |
| 88.1 |
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Real estate - commercial |
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| 739,136 |
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| 706,103 |
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| 617,280 |
| 4.7 |
| 19.7 |
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Real estate - construction |
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| 94,868 |
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| 93,661 |
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| 28,786 |
| 1.3 |
| 229.6 |
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Real estate - residential |
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| 419,583 |
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| 398,170 |
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| 357,846 |
| 5.4 |
| 17.3 |
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Consumer |
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| 2,770 |
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| 2,878 |
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| 3,325 |
| (3.8) |
| (16.7) |
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Overdraft |
|
| 370 |
|
| 316 |
|
| 403 |
| 17.1 |
| (8.2) |
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Lease financing receivables |
|
| 69,305 |
|
| 70,138 |
|
| 47,215 |
| (1.2) |
| 46.8 |
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Other |
|
| 10,180 |
|
| 10,943 |
|
| 10,114 |
| (7.0) |
| 0.7 |
|
|
|
| 1,593,568 |
|
| 1,538,969 |
|
| 1,201,788 |
| 3.5 |
| 32.6 |
|
Net deferred loan costs |
|
| 623 |
|
| 678 |
|
| 1,064 |
| (8.1) |
| (41.4) |
|
Total loans |
| $ | 1,594,191 |
| $ | 1,539,647 |
| $ | 1,202,852 |
| 3.5 |
| 32.5 |
|
Loans listed above were reclassified for September 30, 2016, to align with the credit quality disclosures for the year ended December 31, 2016.
5
Total loans increased by $54.5 million at the end of the third quarter of 2017 as compared to June 30, 2017, and $391.3 million as compared to the third quarter of 2016. The Talmer branch acquisition of $221.0 million of new loans, organic loan growth experienced over the past year, primarily in real estate – commercial and residential, and a second quarter 2017 purchase of $16.7 million of home equity loans, resulted in the favorable variance to prior periods. Growth was also experienced in the real estate-construction and lease financing receivables portfolios for the year to date and year over year periods, excluding the impact of the Talmer branch acquisition.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2017 |
| ||
Securities |
| As of |
| Percent Change From |
| |||||||||
(dollars in thousands) |
| September 30, |
| June 30, |
| September 30, |
| June 30, |
| September 30, |
| |||
|
| 2017 |
| 2017 |
| 2016 |
| 2017 |
| 2016 |
| |||
Securities available-for-sale, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
| $ | 3,990 |
| $ | - |
| $ | - |
| N/M |
| N/M |
|
U.S. government agencies |
|
| 13,451 |
|
| - |
|
| 1,503 |
| N/M |
| 794.9 |
|
U.S. government agency mortgage-backed |
|
| 11,030 |
|
| 20,846 |
|
| 43,723 |
| (47.1) |
| (74.8) |
|
States and political subdivisions |
|
| 229,032 |
|
| 225,518 |
|
| 22,254 |
| 1.6 |
| 929.2 |
|
Corporate bonds |
|
| 10,577 |
|
| 12,616 |
|
| 10,730 |
| (16.2) |
| (1.4) |
|
Collateralized mortgage obligations |
|
| 80,386 |
|
| 100,913 |
|
| 204,390 |
| (20.3) |
| (60.7) |
|
Asset-backed securities |
|
| 131,759 |
|
| 140,385 |
|
| 140,173 |
| (6.1) |
| (6.0) |
|
Collateralized loan obligations |
|
| 53,259 |
|
| 67,949 |
|
| 108,284 |
| (21.6) |
| (50.8) |
|
Total securities available-for-sale |
| $ | 533,484 |
| $ | 568,227 |
| $ | 531,057 |
| (6.1) |
| 0.5 |
|
N/M - Not Meaningful
The investment portfolio ended the third quarter of 2017 at $533.5 million, a decrease of $34.7 million from $568.2 million at June 30, 2017, but $2.4 million more than $531.1 million as of September 30, 2016. During the fourth quarter of 2016 and during the 2017 year to date period, select collateralized mortgage obligations, mortgage-backed securities, and asset-backed securities were liquidated to allow for portfolio repositioning in favor of high quality state and municipal securities. These sales resulted in $165,000 of net security losses in the first nine months of 2017, but the resultant security purchases with the funds from security sales and deposit growth impacted the net interest margin favorably as the funds were invested in higher yielding assets. In addition, there was a significant decline in collateralized loan obligations (“CLOs”) during 2017 due to calls of a number of issues held by the Company. This call activity occurred because the contractual spreads of the securities held in the portfolio were materially higher than those for newly-issued CLOs, which created a financial incentive for issuers to call existing CLO’s and re-use the underlying loan collateral for newly-created issues.
Asset Quality
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
| September 30, 2017 | ||
Nonperforming assets |
| As of |
| Percent Change From | |||||||||
(dollars in thousands) |
| September 30, |
| June 30, |
| September 30, |
| June 30, |
| September 30, | |||
|
| 2017 |
| 2017 |
| 2016 |
| 2017 |
| 2016 | |||
Nonaccrual loans |
| $ | 14,124 |
| $ | 14,683 |
| $ | 16,736 |
| (3.8) |
| (15.6) |
Nonperforming troubled debt restructured loans accruing interest |
|
| 978 |
|
| 935 |
|
| 161 |
| 4.6 |
| 507.5 |
Loans past due 90 days or more and still accruing interest |
|
| 1,169 |
|
| - |
|
| 483 |
| N/M |
| 142.0 |
Total nonperforming loans |
|
| 16,271 |
|
| 15,618 |
|
| 17,380 |
| 4.2 |
| (6.4) |
Other real estate owned |
|
| 9,024 |
|
| 11,724 |
|
| 14,144 |
| (23.0) |
| (36.2) |
Total nonperforming assets |
| $ | 25,295 |
| $ | 27,342 |
| $ | 31,524 |
| (7.5) |
| (19.8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 days past due loans |
| $ | 3,297 |
| $ | 6,088 |
| $ | 3,386 |
|
|
|
|
Nonaccrual loans to total loans |
|
| 0.9 | % |
| 1.0 | % |
| 1.4 | % |
|
|
|
Nonperforming loans to total loans |
|
| 1.0 | % |
| 1.0 | % |
| 1.4 | % |
|
|
|
Nonperforming assets to total loans plus OREO |
|
| 1.6 | % |
| 1.8 | % |
| 2.6 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses |
| $ | 16,465 |
| $ | 15,836 |
| $ | 14,983 |
|
|
|
|
Allowance for loan losses to loans |
|
| 1.0 | % |
| 1.0 | % |
| 1.3 | % |
|
|
|
Allowance for loan losses to nonaccrual loans |
|
| 116.6 | % |
| 107.9 | % |
| 89.5 | % |
|
|
|
N/M - Not Meaningful
6
Nonperforming loans consist of nonaccrual loans, nonperforming restructured accruing loans and loans 90 days or greater past due but still accruing. Nonperforming loans to total loans of 1.0% remained unchanged in the third and second quarter of 2017 and a decrease compared to the third quarter of 2016, primarily due to the transfer of certain nonaccrual loans to OREO in 2017. Nonperforming assets to total loans plus OREO also reflected a reduction due to the Talmer branch purchase, as well as the continued OREO liquidations and write-downs recorded in 2016 and 2017. Finally, the allowance for loan losses to loans was 1.0% as of September 30, 2017, which is unchanged from second quarter 2017 and a decrease compared to the third quarter of 2016; the allowance excludes the purchase accounting credit marks recorded on the Talmer branch purchased loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2017 |
| ||
Classified loans |
| As of |
| Percent Change From |
| |||||||||
(dollars in thousands) |
| September 30, |
| June 30, |
| September 30, |
| June 30, |
| September 30, |
| |||
|
| 2017 |
| 2017 |
| 2016 |
| 2017 |
| 2016 |
| |||
Real estate-construction |
| $ | 380 |
| $ | 397 |
| $ | 254 |
| (4.3) |
| 49.6 |
|
Real estate-residential: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor |
|
| 648 |
|
| 843 |
|
| 1,171 |
| (23.1) |
| (44.7) |
|
Multifamily |
|
| 4,757 |
|
| 4,824 |
|
| - |
| (1.4) |
| N/M |
|
Owner occupied |
|
| 4,418 |
|
| 4,935 |
|
| 6,432 |
| (10.5) |
| (31.3) |
|
Revolving and junior liens |
|
| 1,977 |
|
| 1,963 |
|
| 3,078 |
| 0.7 |
| (35.8) |
|
Real estate-commercial, nonfarm |
|
| 7,633 |
|
| 7,494 |
|
| 13,220 |
| 1.9 |
| (42.3) |
|
Real estate-commercial, farm |
|
| 2,495 |
|
| 1,305 |
|
| 1,801 |
| 91.2 |
| 38.5 |
|
Commercial |
|
| 382 |
|
| 255 |
|
| 1,519 |
| 49.8 |
| (74.9) |
|
Leases |
|
| 1,031 |
|
| 460 |
|
| 783 |
| 124.1 |
| 31.7 |
|
Consumer |
|
| 8 |
|
| 9 |
|
| 1 |
| (11.1) |
| N/M |
|
Total classified loans |
| $ | 23,729 |
| $ | 22,485 |
| $ | 28,259 |
| 5.5 |
| (16.0) |
|
N/M - Not Meaningful
Classified loans include nonaccrual, performing troubled debt restructurings and all other loans considered substandard, as shown above. Classified loans totaled $23.7 million as of September 30, 2017, which reflects an increase of $1.2 million, or 5.5%, from prior quarter, and a decrease of $4.5 million, or 16.0%, from the like quarter of 2016. This reduction is primarily due to an increase in total loans due to the Talmer branch acquisition, as well as success in remediating a number of classified loans. Management’s review of the loan portfolio concluded that a $300,000 loan loss provision was necessary for the third quarter of 2017. A loan loss provision of $750,000 was recorded in the second quarter of 2017; no provision expense was taken in the third quarter of 2016.
7
Net Charge-off Summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan Charge-offs, net of recoveries | Quarters Ended | |||||||||||||
(dollars in thousands) | September 30, |
| % of |
| June 30, |
| % of |
| September 30, |
| % of | |||
| 2017 |
| Total1 |
| 2017 |
| Total1 |
| 2016 |
| Total1 | |||
Real estate-construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilder | $ | - |
| - |
| $ | (1) |
| (0.2) |
| $ | (7) |
| (0.8) |
Land |
| - |
| - |
|
| (48) |
| (7.3) |
|
| (2) |
| (0.2) |
All other |
| 8 |
| (2.4) |
|
| (11) |
| (1.7) |
|
| (42) |
| (5.0) |
Total real estate-construction |
| 8 |
| (2.4) |
|
| (60) |
| (9.2) |
|
| (51) |
| (6.0) |
Real estate-residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor |
| (28) |
| 8.5 |
|
| (16) |
| (2.4) |
|
| (3) |
| (0.4) |
Multifamily |
| (17) |
| 5.2 |
|
| 129 |
| 19.7 |
|
| (13) |
| (1.5) |
Owner occupied |
| (40) |
| 12.2 |
|
| 723 |
| 110.4 |
|
| (75) |
| (8.9) |
Revolving and junior liens |
| (367) |
| 111.5 |
|
| (109) |
| (16.6) |
|
| 112 |
| 13.3 |
Total real estate-residential |
| (452) |
| 137.4 |
|
| 727 |
| 111.1 |
|
| 21 |
| 2.5 |
Real estate-commercial, nonfarm |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner general purpose |
| - |
| - |
|
| (1) |
| (0.2) |
|
| - |
| - |
Owner special purpose |
| - |
| - |
|
| (6) |
| (0.9) |
|
| (3) |
| (0.4) |
Non-owner general purpose |
| (43) |
| 13.1 |
|
| (39) |
| (6.0) |
|
| 132 |
| 15.7 |
Non-owner special purpose |
| - |
| - |
|
| - |
| - |
|
| 636 |
| 75.8 |
Retail properties |
| 22 |
| (6.8) |
|
| 4 |
| 0.6 |
|
| - |
| - |
Total real estate-commercial, nonfarm |
| (21) |
| 6.3 |
|
| (42) |
| (6.5) |
|
| 765 |
| 91.1 |
Commercial |
| 7 |
| (2.1) |
|
| 1 |
| 0.2 |
|
| 66 |
| 7.9 |
Leases |
| 98 |
| (29.8) |
|
| - |
| - |
|
| - |
| - |
Consumer |
| 37 |
| (11.2) |
|
| 34 |
| 5.2 |
|
| 43 |
| 5.1 |
Other |
| (6) |
| 1.8 |
|
| (5) |
| (0.8) |
|
| (5) |
| (0.6) |
Net (recoveries) / charge-offs | $ | (329) |
| 100.0 |
| $ | 655 |
| 100.0 |
| $ | 839 |
| 100.0 |
1 Represents the percentage of net charge-offs attributable to each category of loans.
Gross charge-offs for the quarter ended September 30, 2017, were $241,000 compared to $1.1 million for the quarter ended June 30, 2017, and $1.2 million for the like quarter of 2016. Gross recoveries for the quarter ended September 30, 2017, were $570,000 compared to $411,000 for the quarter ended June 30, 2017, and $358,000 for the like quarter of 2016. Continued recoveries are indicative of the ongoing aggressive efforts by management to effectively manage and resolve prior charge-offs.
Deposits
Total deposits were $1.89 billion at September 30, 2017, which reflects a decrease of $21.0 million compared to June 30, 2017, and an increase of $111.7 million from total deposits of $1.78 billion at September 30, 2016. Demand deposits increased by $10.4 million for the quarter, while money markets, savings NOW and time balances decreased by $31.4 million. Total time deposits or certificates of deposit reflected a decrease of $18.0 million in the first nine months of 2017. Growth in the commercial loan portfolio has driven commercial demand deposits to a higher level in the third quarter of 2017.
Borrowings
As of September 30, 2017, the Bank had $125.0 million in FHLBC advances outstanding as compared to $75.0 million in FHLBC advances at June 30, 2017 and no FHLBC advances outstanding as of September 30, 2016.
The Company is indebted on senior notes totaling $44.0 million, net of deferred issuance costs, as of September 30, 2017. The Company is also indebted on $57.6 million, net of deferred issuance costs, of junior subordinated debentures, which are related to the trust preferred securities issued by its two statutory trust subsidiaries, Old Second Capital Trust I and Old Second Capital Trust II. The Trust II issuance converted from fixed to floating rate at three month LIBOR plus 150 basis points on June 15, 2017. Upon conversion to a floating rate, a cash flow hedge was initiated which resulted in the total interest rate paid on the debt of 4.30% for the third quarter 2017, as compared to the rate paid prior to June 15, 2017, of 6.77%.
8
Capital
|
|
|
|
|
|
|
|
|
| September 30, |
| June 30, |
| September 30, | |||
| 2017 |
| 2017 |
| 2016 | |||
The Company's common equity tier 1 capital ratio | 8.88 | % |
| 8.55 | % |
| 10.68 | % |
(minimum 4.5% for adequately capitalized) |
|
|
|
|
|
|
|
|
The Company's tier 1 capital ratio | 11.54 | % |
| 11.06 | % |
| 13.25 | % |
(minimum 6.0% for adequately capitalized) |
|
|
|
|
|
|
|
|
The Company's total capital ratio | 12.46 | % |
| 12.14 | % |
| 15.42 | % |
(minimum 8.0% for adequately capitalized) |
|
|
|
|
|
|
|
|
The Company's tier 1 leverage ratio | 9.69 | % |
| 9.09 | % |
| 9.32 | % |
(minimum 4.0% for adequately capitalized) |
|
|
|
|
|
|
|
|
As of September 30, 2017, the Bank’s common equity tier 1 capital ratio of 12.67% and total capital ratio of 13.52% exceeded the minimum capital ratios to be deemed “well capitalized.”
Non-GAAP Presentations: Management has historically disclosed certain non-GAAP ratios to evaluate and measure the Company’s performance, including a net interest margin calculation. The net interest margin is calculated by dividing net interest income on a tax equivalent basis by average earning assets for the period. Management believes this measure provides investors with information regarding balance sheet profitability. Consistent with industry practice, management also disclosed other non-GAAP measures in the discussion above and in the following tables. The efficiency ratio is discussed in the noninterest expense presentation on page 5. The tables on page 14 provide a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent.
Forward-Looking Statements: This report may contain forward-looking statements. Forward looking statements are identifiable by the inclusion of such qualifications as expects, intends, believes, may, likely or other indications that the particular statements are not based upon facts but are rather based upon the Company’s beliefs as of the date of this release. Actual events and results may differ significantly from those described in such forward-looking statements, due to changes in the economy, interest rates or other factors and therefore the reader should not place undue reliance on such forward-looking statements. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events. For additional information concerning the Company and its business, including other factors that could materially affect the Company’s financial results or cause actual results to differ substantially from those discussed or implied in forward-looking statements contained in this release, please review our filings with the Securities and Exchange Commission.
Conference Call
The Company will host an earnings call on Thursday, October 19, 2017, at 11:00 a.m. Eastern Time (10:00 a.m. Central Time). Investors may listen to the Company’s earnings call via telephone by dialing 877-407-8035. Investors should call into the dial-in number set forth above at least 10 minutes prior to the scheduled start of the call.
A replay of the earnings call will be available until 11:59 p.m. Eastern Time (10:59 p.m. Central Time) on October 26, 2017, by dialing 877-481-4010, using Conference ID: 20352.
9
Old Second Bancorp, Inc. and Subsidiaries
(In thousands)
|
|
|
|
|
|
|
|
| (unaudited) |
|
|
| |
|
| September 30, |
| December 31, | ||
|
| 2017 |
| 2016 | ||
Assets |
|
|
|
|
|
|
Cash and due from banks |
| $ | 32,772 |
| $ | 33,805 |
Interest bearing deposits with financial institutions |
|
| 14,730 |
|
| 13,529 |
Cash and cash equivalents |
|
| 47,502 |
|
| 47,334 |
Securities available-for-sale, at fair value |
|
| 533,484 |
|
| 531,838 |
Federal Home Loan Bank Chicago ("FHLBC") and Federal Reserve Bank Chicago ("FRBC") stock |
|
| 10,393 |
|
| 7,918 |
Loans held-for-sale |
|
| 1,641 |
|
| 4,918 |
Loans |
|
| 1,594,191 |
|
| 1,478,809 |
Less: allowance for loan losses |
|
| 16,465 |
|
| 16,158 |
Net loans |
|
| 1,577,726 |
|
| 1,462,651 |
Premises and equipment, net |
|
| 37,971 |
|
| 38,977 |
Other real estate owned |
|
| 9,024 |
|
| 11,916 |
Mortgage servicing rights, net |
|
| 6,684 |
|
| 6,489 |
Goodwill and core deposit intangible |
|
| 8,944 |
|
| 9,018 |
Bank-owned life insurance ("BOLI") |
|
| 61,403 |
|
| 60,332 |
Deferred tax assets, net |
|
| 42,394 |
|
| 53,464 |
Other assets |
|
| 23,241 |
|
| 16,333 |
Total assets |
| $ | 2,360,407 |
| $ | 2,251,188 |
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
Noninterest bearing demand |
| $ | 556,874 |
| $ | 513,688 |
Interest bearing: |
|
|
|
|
|
|
Savings, NOW, and money market |
|
| 947,969 |
|
| 950,849 |
Time |
|
| 384,272 |
|
| 402,248 |
Total deposits |
|
| 1,889,115 |
|
| 1,866,785 |
Securities sold under repurchase agreements |
|
| 26,853 |
|
| 25,715 |
Other short-term borrowings |
|
| 125,000 |
|
| 70,000 |
Junior subordinated debentures |
|
| 57,627 |
|
| 57,591 |
Senior notes |
|
| 44,033 |
|
| 43,998 |
Other liabilities |
|
| 17,016 |
|
| 11,889 |
Total liabilities |
|
| 2,159,644 |
|
| 2,075,978 |
|
|
|
|
|
|
|
Stockholders’ Equity |
|
|
|
|
|
|
Common stock |
|
| 34,626 |
|
| 34,534 |
Additional paid-in capital |
|
| 117,458 |
|
| 116,653 |
Retained earnings |
|
| 145,767 |
|
| 129,005 |
Accumulated other comprehensive loss |
|
| (632) |
|
| (8,762) |
Treasury stock |
|
| (96,456) |
|
| (96,220) |
Total stockholders’ equity |
|
| 200,763 |
|
| 175,210 |
Total liabilities and stockholders’ equity |
| $ | 2,360,407 |
| $ | 2,251,188 |
10
Old Second Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income
(In thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (unaudited) |
| (unaudited) |
| ||||||||
|
| Quarters Ended September 30, |
| Nine Months Ended September 30, | |||||||||
|
| 2017 |
| 2016 |
| 2017 |
| 2016 |
| ||||
Interest and dividend income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, including fees |
| $ | 18,208 |
| $ | 13,496 |
| $ | 52,202 |
| $ | 39,593 |
|
Loans held-for-sale |
|
| 34 |
|
| 48 |
|
| 95 |
|
| 115 |
|
Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
|
| 2,424 |
|
| 3,954 |
|
| 7,994 |
|
| 12,547 |
|
Tax exempt |
|
| 1,628 |
|
| 180 |
|
| 4,188 |
|
| 579 |
|
Dividends from FHLBC and FRBC stock |
|
| 94 |
|
| 83 |
|
| 271 |
|
| 251 |
|
Interest bearing deposits with financial institutions |
|
| 37 |
|
| 64 |
|
| 91 |
|
| 98 |
|
Total interest and dividend income |
|
| 22,425 |
|
| 17,825 |
|
| 64,841 |
|
| 53,183 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW, and money market deposits |
|
| 239 |
|
| 193 |
|
| 695 |
|
| 577 |
|
Time deposits |
|
| 1,077 |
|
| 931 |
|
| 3,081 |
|
| 2,622 |
|
Other short-term borrowings |
|
| 224 |
|
| 23 |
|
| 482 |
|
| 69 |
|
Junior subordinated debentures |
|
| 930 |
|
| 1,084 |
|
| 3,073 |
|
| 3,251 |
|
Senior notes |
|
| 672 |
|
| - |
|
| 2,017 |
|
| - |
|
Subordinated debt |
|
| - |
|
| 245 |
|
| - |
|
| 727 |
|
Notes payable and other borrowings |
|
| - |
|
| 2 |
|
| - |
|
| 6 |
|
Total interest expense |
|
| 3,142 |
|
| 2,478 |
|
| 9,348 |
|
| 7,252 |
|
Net interest and dividend income |
|
| 19,283 |
|
| 15,347 |
|
| 55,493 |
|
| 45,931 |
|
Provision for loan losses |
|
| 300 |
|
| - |
|
| 1,050 |
|
| - |
|
Net interest and dividend income after provision for loan losses |
|
| 18,983 |
|
| 15,347 |
|
| 54,443 |
|
| 45,931 |
|
Noninterest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust income |
|
| 1,468 |
|
| 1,403 |
|
| 4,564 |
|
| 4,274 |
|
Service charges on deposits |
|
| 1,722 |
|
| 1,756 |
|
| 4,955 |
|
| 4,961 |
|
Secondary mortgage fees |
|
| 195 |
|
| 322 |
|
| 594 |
|
| 795 |
|
Mortgage servicing rights mark to market loss |
|
| (194) |
|
| (147) |
|
| (756) |
|
| (1,921) |
|
Mortgage servicing income |
|
| 451 |
|
| 437 |
|
| 1,330 |
|
| 1,280 |
|
Net gain on sales of mortgage loans |
|
| 1,095 |
|
| 2,177 |
|
| 3,715 |
|
| 5,031 |
|
Securities gain (loss), net |
|
| 102 |
|
| (1,959) |
|
| (165) |
|
| (2,020) |
|
Increase in cash surrender value of BOLI |
|
| 362 |
|
| 383 |
|
| 1,071 |
|
| 987 |
|
Debit card interchange income |
|
| 1,075 |
|
| 1,013 |
|
| 3,131 |
|
| 3,009 |
|
Gain (loss) on disposal and transfer of fixed assets, net |
|
| - |
|
| - |
|
| 10 |
|
| (1) |
|
Other income |
|
| 1,567 |
|
| 1,209 |
|
| 3,739 |
|
| 3,751 |
|
Total noninterest income |
|
| 7,843 |
|
| 6,594 |
|
| 22,188 |
|
| 20,146 |
|
Noninterest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
| 10,049 |
|
| 9,014 |
|
| 31,167 |
|
| 26,854 |
|
Occupancy, furniture and equipment |
|
| 1,482 |
|
| 1,500 |
|
| 4,510 |
|
| 4,427 |
|
Computer and data processing |
|
| 1,081 |
|
| 1,105 |
|
| 3,283 |
|
| 3,093 |
|
FDIC insurance |
|
| 199 |
|
| 228 |
|
| 512 |
|
| 793 |
|
General bank insurance |
|
| 246 |
|
| 269 |
|
| 780 |
|
| 839 |
|
Amortization of core deposit intangible |
|
| 24 |
|
| - |
|
| 74 |
|
| - |
|
Advertising expense |
|
| 255 |
|
| 430 |
|
| 1,093 |
|
| 1,212 |
|
Debit card interchange expense |
|
| 285 |
|
| 363 |
|
| 1,033 |
|
| 1,186 |
|
Legal fees |
|
| 162 |
|
| 242 |
|
| 450 |
|
| 594 |
|
Other real estate expense, net |
|
| 680 |
|
| 426 |
|
| 1,928 |
|
| 2,043 |
|
Other expense |
|
| 2,455 |
|
| 3,005 |
|
| 8,128 |
|
| 8,505 |
|
Total noninterest expense |
|
| 16,918 |
|
| 16,582 |
|
| 52,958 |
|
| 49,546 |
|
Income before income taxes |
|
| 9,908 |
|
| 5,359 |
|
| 23,673 |
|
| 16,531 |
|
Provision for income taxes |
|
| 1,831 |
|
| 1,860 |
|
| 6,023 |
|
| 5,865 |
|
Net income |
| $ | 8,077 |
| $ | 3,499 |
| $ | 17,650 |
| $ | 10,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
| $ | 0.27 |
| $ | 0.12 |
| $ | 0.60 |
| $ | 0.36 |
|
Diluted earnings per share |
|
| 0.27 |
|
| 0.12 |
|
| 0.59 |
|
| 0.36 |
|
|
|
|
|
|
|
|
|
|
Ending common shares outstanding |
| 29,627,086 |
| 29,554,716 |
| 29,627,086 |
| 29,554,716 |
Weighted-average basic shares outstanding |
| 29,627,086 |
| 29,554,716 |
| 29,591,811 |
| 29,524,796 |
Weighted-average diluted shares outstanding |
| 30,103,609 |
| 29,838,182 |
| 30,019,365 |
| 29,828,430 |
11
Old Second Bancorp, Inc. and Subsidiaries
Quarterly Consolidated Average Balance
(In thousands, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2016 |
| 2017 | ||||||||||||||||
Assets |
| 1st Qtr |
| 2nd Qtr |
| 3rd Qtr |
| 4th Qtr |
| 1st Qtr |
| 2nd Qtr |
| 3rd Qtr | |||||||
Cash and due from banks |
| $ | 27,813 |
| $ | 28,597 |
| $ | 41,344 |
| $ | 28,928 |
| $ | 33,585 |
| $ | 39,425 |
| $ | 31,028 |
Interest bearing deposits with financial institutions |
|
| 15,513 |
|
| 12,048 |
|
| 50,054 |
|
| 54,865 |
|
| 12,121 |
|
| 11,938 |
|
| 11,685 |
Cash and cash equivalents |
|
| 43,326 |
|
| 40,645 |
|
| 91,398 |
|
| 83,793 |
|
| 45,706 |
|
| 51,363 |
|
| 42,713 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available-for-sale, at fair value |
|
| 486,924 |
|
| 684,179 |
|
| 659,890 |
|
| 533,233 |
|
| 563,897 |
|
| 586,686 |
|
| 548,432 |
Securities held-to-maturity, at amortized cost |
|
| 246,772 |
|
| 80,899 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
FHLBC and FRBC stock |
|
| 8,518 |
|
| 7,431 |
|
| 7,918 |
|
| 7,911 |
|
| 7,614 |
|
| 7,699 |
|
| 8,339 |
Loans held-for-sale |
|
| 2,912 |
|
| 4,238 |
|
| 5,295 |
|
| 4,050 |
|
| 2,670 |
|
| 3,616 |
|
| 3,244 |
Loans |
|
| 1,138,985 |
|
| 1,145,892 |
|
| 1,186,279 |
|
| 1,386,487 |
|
| 1,484,556 |
|
| 1,505,572 |
|
| 1,550,229 |
Less: allowance for loan losses |
|
| 16,257 |
|
| 16,415 |
|
| 15,767 |
|
| 15,388 |
|
| 16,292 |
|
| 15,779 |
|
| 16,478 |
Net loans |
|
| 1,122,728 |
|
| 1,129,477 |
|
| 1,170,512 |
|
| 1,371,099 |
|
| 1,468,264 |
|
| 1,489,793 |
|
| 1,533,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premises and equipment, net |
|
| 39,416 |
|
| 39,143 |
|
| 39,191 |
|
| 39,129 |
|
| 38,917 |
|
| 38,395 |
|
| 38,098 |
Other real estate owned |
|
| 18,760 |
|
| 16,906 |
|
| 14,888 |
|
| 14,008 |
|
| 13,464 |
|
| 12,596 |
|
| 10,688 |
Mortgage servicing rights, net |
|
| 5,347 |
|
| 5,151 |
|
| 4,822 |
|
| 5,618 |
|
| 6,543 |
|
| 6,464 |
|
| 6,464 |
Goodwill and core deposit intangible |
|
| - |
|
| - |
|
| - |
|
| 3,195 |
|
| 9,005 |
|
| 8,981 |
|
| 8,956 |
Bank-owned life insurance ("BOLI") |
|
| 59,178 |
|
| 59,459 |
|
| 59,787 |
|
| 60,153 |
|
| 60,446 |
|
| 60,806 |
|
| 61,165 |
Deferred tax assets, net |
|
| 65,210 |
|
| 61,768 |
|
| 57,692 |
|
| 55,902 |
|
| 52,747 |
|
| 48,459 |
|
| 45,635 |
Other assets |
|
| 9,346 |
|
| 10,469 |
|
| 13,833 |
|
| 19,067 |
|
| 11,714 |
|
| 14,227 |
|
| 14,900 |
Total other assets |
|
| 197,257 |
|
| 192,896 |
|
| 190,213 |
|
| 197,072 |
|
| 192,836 |
|
| 189,928 |
|
| 185,906 |
Total assets |
| $ | 2,108,437 |
| $ | 2,139,765 |
| $ | 2,125,226 |
| $ | 2,197,158 |
| $ | 2,280,987 |
| $ | 2,329,085 |
| $ | 2,322,385 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest bearing demand |
| $ | 450,150 |
| $ | 472,450 |
| $ | 472,599 |
| $ | 510,161 |
| $ | 525,454 |
| $ | 557,265 |
| $ | 551,768 |
Interest bearing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW, and money market |
|
| 915,924 |
|
| 920,389 |
|
| 907,531 |
|
| 933,222 |
|
| 969,609 |
|
| 977,796 |
|
| 958,926 |
Time |
|
| 407,743 |
|
| 402,912 |
|
| 401,999 |
|
| 404,507 |
|
| 394,388 |
|
| 392,779 |
|
| 389,037 |
Total deposits |
|
| 1,773,817 |
|
| 1,795,751 |
|
| 1,782,129 |
|
| 1,847,890 |
|
| 1,889,451 |
|
| 1,927,840 |
|
| 1,899,731 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold under repurchase agreements |
|
| 35,776 |
|
| 37,433 |
|
| 31,892 |
|
| 31,019 |
|
| 29,805 |
|
| 35,652 |
|
| 32,800 |
Other short-term borrowings |
|
| 27,802 |
|
| 28,187 |
|
| 22,174 |
|
| 27,940 |
|
| 56,111 |
|
| 58,572 |
|
| 72,065 |
Junior subordinated debentures |
|
| 57,549 |
|
| 57,561 |
|
| 57,573 |
|
| 57,585 |
|
| 57,597 |
|
| 57,609 |
|
| 57,621 |
Senior Notes |
|
| - |
|
| - |
|
| - |
|
| 8,155 |
|
| 43,978 |
|
| 43,995 |
|
| 44,021 |
Subordinated debt |
|
| 45,000 |
|
| 45,000 |
|
| 45,000 |
|
| 36,685 |
|
| - |
|
| - |
|
| - |
Notes payable and other borrowings |
|
| 500 |
|
| 500 |
|
| 500 |
|
| 408 |
|
| - |
|
| - |
|
| - |
Other liabilities |
|
| 11,033 |
|
| 12,511 |
|
| 15,539 |
|
| 12,609 |
|
| 25,061 |
|
| 18,047 |
|
| 19,395 |
Total liabilities |
|
| 1,951,477 |
|
| 1,976,943 |
|
| 1,954,807 |
|
| 2,022,291 |
|
| 2,102,003 |
|
| 2,141,715 |
|
| 2,125,633 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
| 34,427 |
|
| 34,505 |
|
| 34,533 |
|
| 34,533 |
|
| 34,451 |
|
| 34,577 |
|
| 34,626 |
Additional paid-in capital |
|
| 115,945 |
|
| 116,065 |
|
| 116,365 |
|
| 116,537 |
|
| 116,747 |
|
| 117,077 |
|
| 117,340 |
Retained earnings |
|
| 116,231 |
|
| 119,640 |
|
| 123,771 |
|
| 128,017 |
|
| 131,631 |
|
| 136,384 |
|
| 142,657 |
Accumulated other comprehensive loss |
|
| (13,677) |
|
| (11,241) |
|
| (8,030) |
|
| (8,000) |
|
| (7,692) |
|
| (4,310) |
|
| (1,415) |
Treasury stock |
|
| (95,966) |
|
| (96,147) |
|
| (96,220) |
|
| (96,220) |
|
| (96,243) |
|
| (96,358) |
|
| (96,456) |
Total stockholders' equity |
|
| 156,960 |
|
| 162,822 |
|
| 170,419 |
|
| 174,867 |
|
| 178,894 |
|
| 187,370 |
|
| 196,752 |
Total liabilities and stockholders' equity |
| $ | 2,108,437 |
| $ | 2,139,765 |
| $ | 2,125,226 |
| $ | 2,197,158 |
| $ | 2,280,897 |
| $ | 2,329,085 |
| $ | 2,322,385 |
12
Old Second Bancorp, Inc. and Subsidiaries
Quarterly Consolidated Statements of Income
(In thousands, except share data, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2016 |
| 2017 |
| |||||||||||||||||
|
| 1st Qtr |
| 2nd Qtr |
| 3rd Qtr |
| 4th Qtr |
| 1st Qtr |
| 2nd Qtr |
| 3rd Qtr |
| |||||||
Interest and Dividend Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, including fees |
| $ | 13,058 |
| $ | 13,039 |
| $ | 13,496 |
| $ | 16,426 |
| $ | 16,609 |
| $ | 17,385 |
| $ | 18,208 |
|
Loans held-for-sale |
|
| 28 |
|
| 39 |
|
| 48 |
|
| 36 |
|
| 24 |
|
| 37 |
|
| 34 |
|
Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
|
| 4,211 |
|
| 4,382 |
|
| 3,954 |
|
| 3,318 |
|
| 2,963 |
|
| 2,607 |
|
| 2,424 |
|
Tax exempt |
|
| 179 |
|
| 220 |
|
| 180 |
|
| 263 |
|
| 912 |
|
| 1,648 |
|
| 1,628 |
|
Dividends from FHLB and FRBC stock |
|
| 84 |
|
| 84 |
|
| 83 |
|
| 82 |
|
| 85 |
|
| 92 |
|
| 94 |
|
Interest bearing deposits with financial institutions |
|
| 19 |
|
| 15 |
|
| 64 |
|
| 71 |
|
| 23 |
|
| 31 |
|
| 37 |
|
Total interest and dividend income |
|
| 17,579 |
|
| 17,779 |
|
| 17,825 |
|
| 20,196 |
|
| 20,616 |
|
| 21,800 |
|
| 22,425 |
|
Interest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW, and money market deposits |
|
| 191 |
|
| 193 |
|
| 193 |
|
| 212 |
|
| 223 |
|
| 233 |
|
| 239 |
|
Time deposits |
|
| 822 |
|
| 869 |
|
| 931 |
|
| 1,018 |
|
| 979 |
|
| 1,025 |
|
| 1,077 |
|
Other short-term borrowings |
|
| 20 |
|
| 26 |
|
| 23 |
|
| 37 |
|
| 108 |
|
| 150 |
|
| 224 |
|
Junior subordinated debentures |
|
| 1,084 |
|
| 1,083 |
|
| 1,084 |
|
| 1,083 |
|
| 1,084 |
|
| 1,059 |
|
| 930 |
|
Senior notes |
|
| - |
|
| - |
|
| - |
|
| 112 |
|
| 673 |
|
| 672 |
|
| 672 |
|
Subordinated debt |
|
| 239 |
|
| 243 |
|
| 245 |
|
| 222 |
|
| - |
|
| - |
|
| - |
|
Notes payable and other borrowings |
|
| 2 |
|
| 2 |
|
| 2 |
|
| 2 |
|
| - |
|
| - |
|
| - |
|
Total interest expense |
|
| 2,358 |
|
| 2,416 |
|
| 2,478 |
|
| 2,686 |
|
| 3,067 |
|
| 3,139 |
|
| 3,142 |
|
Net interest and dividend income |
|
| 15,221 |
|
| 15,363 |
|
| 15,347 |
|
| 17,510 |
|
| 17,549 |
|
| 18,661 |
|
| 19,283 |
|
Provision for loan losses |
|
| - |
|
| - |
|
| - |
|
| 750 |
|
| - |
|
| 750 |
|
| 300 |
|
Net interest and dividend income after reserve for loan losses |
|
| 15,221 |
|
| 15,363 |
|
| 15,347 |
|
| 16,760 |
|
| 17,549 |
|
| 17,911 |
|
| 18,983 |
|
Noninterest Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust income |
|
| 1,369 |
|
| 1,502 |
|
| 1,403 |
|
| 1,396 |
|
| 1,458 |
|
| 1,638 |
|
| 1,468 |
|
Service charges on deposits |
|
| 1,559 |
|
| 1,646 |
|
| 1,756 |
|
| 1,723 |
|
| 1,618 |
|
| 1,615 |
|
| 1,722 |
|
Secondary mortgage fees |
|
| 193 |
|
| 280 |
|
| 322 |
|
| 243 |
|
| 176 |
|
| 223 |
|
| 195 |
|
Mortgage servicing rights mark to market (loss) gain |
|
| (1,041) |
|
| (733) |
|
| (147) |
|
| 1,002 |
|
| (133) |
|
| (429) |
|
| (194) |
|
Mortgage servicing income |
|
| 421 |
|
| 422 |
|
| 437 |
|
| 444 |
|
| 435 |
|
| 444 |
|
| 451 |
|
Net gain on sales of mortgage loans |
|
| 1,212 |
|
| 1,642 |
|
| 2,177 |
|
| 1,312 |
|
| 1,147 |
|
| 1,473 |
|
| 1,095 |
|
Securities (loss) gain, net |
|
| (61) |
|
| - |
|
| (1,959) |
|
| (193) |
|
| (136) |
|
| (131) |
|
| 102 |
|
Increase in cash surrender value of BOLI |
|
| 285 |
|
| 319 |
|
| 383 |
|
| 296 |
|
| 359 |
|
| 350 |
|
| 362 |
|
Debit card interchange income |
|
| 947 |
|
| 1,049 |
|
| 1,013 |
|
| 1,018 |
|
| 975 |
|
| 1,081 |
|
| 1,075 |
|
(Loss) gain on disposal and transfer of fixed assets |
|
| (1) |
|
| - |
|
| - |
|
| - |
|
| (2) |
|
| 12 |
|
| - |
|
Other income |
|
| 1,392 |
|
| 1,150 |
|
| 1,209 |
|
| 1,187 |
|
| 1,131 |
|
| 1,041 |
|
| 1,567 |
|
Total noninterest income |
|
| 6,275 |
|
| 7,277 |
|
| 6,594 |
|
| 8,428 |
|
| 7,028 |
|
| 7,317 |
|
| 7,843 |
|
Noninterest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
| 9,026 |
|
| 8,814 |
|
| 9,014 |
|
| 9,380 |
|
| 10,573 |
|
| 10,545 |
|
| 10,049 |
|
Occupancy, furniture and equipment |
|
| 1,581 |
|
| 1,346 |
|
| 1,500 |
|
| 1,636 |
|
| 1,566 |
|
| 1,462 |
|
| 1,482 |
|
Computer and data processing |
|
| 925 |
|
| 1,063 |
|
| 1,105 |
|
| 1,256 |
|
| 1,090 |
|
| 1,112 |
|
| 1,081 |
|
FDIC insurance |
|
| 203 |
|
| 362 |
|
| 228 |
|
| 72 |
|
| 148 |
|
| 165 |
|
| 199 |
|
General bank insurance |
|
| 298 |
|
| 272 |
|
| 269 |
|
| 270 |
|
| 270 |
|
| 264 |
|
| 246 |
|
Amortization of core deposit intangible |
|
| - |
|
| - |
|
| - |
|
| 16 |
|
| 25 |
|
| 25 |
|
| 24 |
|
Advertising expense |
|
| 347 |
|
| 435 |
|
| 430 |
|
| 421 |
|
| 386 |
|
| 452 |
|
| 255 |
|
Debit card interchange expense |
|
| 203 |
|
| 620 |
|
| 363 |
|
| 269 |
|
| 349 |
|
| 399 |
|
| 285 |
|
Legal fees |
|
| 161 |
|
| 191 |
|
| 242 |
|
| 206 |
|
| 104 |
|
| 184 |
|
| 162 |
|
Other real estate expense, net |
|
| 738 |
|
| 879 |
|
| 426 |
|
| 700 |
|
| 709 |
|
| 539 |
|
| 680 |
|
Other expense |
|
| 2,782 |
|
| 2,718 |
|
| 3,005 |
|
| 2,989 |
|
| 2,834 |
|
| 2,839 |
|
| 2,455 |
|
Total noninterest expense |
|
| 16,264 |
|
| 16,700 |
|
| 16,582 |
|
| 17,215 |
|
| 18,054 |
|
| 17,986 |
|
| 16,918 |
|
Income before income taxes |
|
| 5,232 |
|
| 5,940 |
|
| 5,359 |
|
| 7,973 |
|
| 6,523 |
|
| 7,242 |
|
| 9,908 |
|
Provision for income taxes |
|
| 1,910 |
|
| 2,095 |
|
| 1,860 |
|
| 2,955 |
|
| 2,096 |
|
| 2,096 |
|
| 1,831 |
|
Net income |
| $ | 3,322 |
| $ | 3,845 |
| $ | 3,499 |
| $ | 5,018 |
| $ | 4,427 |
| $ | 5,146 |
| $ | 8077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
| $ | 0.11 |
| $ | 0.13 |
| $ | 0.12 |
| $ | 0.17 |
| $ | 0.15 |
| $ | 0.17 |
| $ | 0.27 |
|
Diluted earnings per share |
|
| 0.11 |
|
| 0.13 |
|
| 0.12 |
|
| 0.17 |
|
| 0.15 |
|
| 0.17 |
|
| 0.27 |
|
13
The table below provides a reconciliation of each non-GAAP tax equivalent measure to the most comparable GAAP measure for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarters Ended |
|
| Nine Months Ended |
| |||||||||||
|
| September 30, |
| June 30, |
| September 30, |
|
| September 30, |
| |||||||
|
| 2017 |
| 2017 |
| 2016 |
|
| 2017 |
| 2016 |
| |||||
Net Interest Margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (GAAP) |
| $ | 22,425 |
| $ | 21,800 |
| $ | 17,825 |
|
| $ | 64,841 |
| $ | 53,183 |
|
Taxable-equivalent adjustment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
| 23 |
|
| 23 |
|
| 23 |
|
|
| 68 |
|
| 70 |
|
Securities |
|
| 876 |
|
| 888 |
|
| 97 |
|
|
| 2,255 |
|
| 312 |
|
Interest income (TE) |
|
| 23,324 |
|
| 22,711 |
|
| 17,945 |
|
|
| 67,164 |
|
| 53,565 |
|
Interest expense (GAAP) |
|
| 3,142 |
|
| 3,139 |
|
| 2,478 |
|
|
| 9,348 |
|
| 7,252 |
|
Net interest income (TE) |
| $ | 20,182 |
| $ | 19,572 |
| $ | 15,467 |
|
| $ | 57,816 |
| $ | 46,313 |
|
Net interest income (GAAP) |
| $ | 19,283 |
| $ | 18,661 |
| $ | 15,347 |
|
| $ | 55,493 |
| $ | 45,931 |
|
Average interest earning assets |
| $ | 2,121,929 |
| $ | 2,115,511 |
| $ | 1,909,436 |
|
| $ | 2,102,952 |
| $ | 1,914,564 |
|
Net interest margin (GAAP) |
|
| 3.61 | % |
| 3.54 | % |
| 3.20 | % |
|
| 3.53 | % |
| 3.20 | % |
Net interest margin (TE) |
|
| 3.77 | % |
| 3.71 | % |
| 3.22 | % |
|
| 3.68 | % |
| 3.23 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarters Ended |
| ||||||
|
| September 30, |
| June 30, |
| September 30, |
| |||
|
| 2017 |
| 2017 |
| 2016 |
| |||
Efficiency Ratio |
|
|
|
|
|
|
|
|
|
|
Noninterest expense |
| $ | 16,918 |
| $ | 17,986 |
| $ | 16,582 |
|
Less amortization of core deposit |
|
| 24 |
|
| 25 |
|
| - |
|
Less other real estate expense, net |
|
| 680 |
|
| 539 |
|
| 426 |
|
Less acquisition costs |
|
| - |
|
| - |
|
| 115 |
|
Adjusted noninterest expense |
|
| 16,214 |
|
| 17,422 |
|
| 16,041 |
|
Net interest income (GAAP) |
|
| 19,283 |
|
| 18,661 |
|
| 15,347 |
|
Taxable-equivalent adjustment: |
|
|
|
|
|
|
|
|
|
|
Loans |
|
| 23 |
|
| 23 |
|
| 23 |
|
Securities |
|
| 876 |
|
| 888 |
|
| 97 |
|
Net interest income (TE) |
|
| 20,182 |
|
| 19,572 |
|
| 15,467 |
|
Noninterest income |
|
| 7,843 |
|
| 7,317 |
|
| 6,594 |
|
Taxable-equivalent adjustment: |
|
|
|
|
|
|
|
|
|
|
Increase in cash surrender value of BOLI (TE) |
|
| 195 |
|
| 188 |
|
| 206 |
|
Noninterest income (TE) |
|
| 8,038 |
|
| 7,505 |
|
| 6,800 |
|
Less securities gain (loss), net |
|
| 102 |
|
| (131) |
|
| (1,959) |
|
Adjusted noninterest income, plus net interest income (TE) |
| $ | 28,118 |
| $ | 27,208 |
| $ | 24,226 |
|
Efficiency ratio |
|
| 57.66 | % |
| 64.03 | % |
| 66.21 | % |
14