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(NASDAQ:OSBC) | Exhibit 99.1 | |
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Contact: | Bradley S. Adams | For Immediate Release |
| Chief Financial Officer | January 23, 2019 |
| (630) 906-5484 |
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Old Second Reports Fourth Quarter 2018 Net Income of $8.6 million
AURORA, IL, January 23, 2019 – Old Second Bancorp, Inc. (the “Company” or “Old Second”) (NASDAQ: OSBC), the parent company of Old Second National Bank (the “Bank”), today announced financial results for the fourth quarter of 2018. The Company’s net income was $8.6 million, or $0.28 per diluted share, for the fourth quarter of 2018, compared to net income of $9.6 million, or $0.32 per diluted share, in the third quarter of 2018, and net loss of $2.5 million, or $0.08 per diluted share, for the fourth quarter of 2017.
Operating Results
· | Fourth quarter 2018 net income was $8.6 million, reflecting a decrease in earnings of $1.0 million from the third quarter of 2018, and an increase in earnings of $11.1 million from the fourth quarter of 2017. Fourth quarter 2018 financial results were negatively impacted by $683,000 pretax of mortgage servicing rights valuation adjustment related solely to movements in interest rates, as well as $119,000 pretax of merger related expenses. |
· | Adjusted net income, a non-GAAP financial measure, was $8.7 million, or $0.29 per diluted share, compared to net income of $9.6 million, or $0.32 per diluted share, for the third quarter of 2018, and net income of $7.0 million, or $0.23 per diluted share, for the fourth quarter of 2017. |
o | Fourth quarter 2017 adjusted net income excluded a $9.5 million tax expense stemming from the late December 2017 enactment of the “Tax Cuts and Jobs Act,” which lowered the Federal corporate income tax rate and caused the company to record a valuation allowance with respect to its deferred tax asset. |
See the discussion entitled “Non-GAAP Presentations” below and the table on page 15 that provides a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent.
· | Net interest and dividend income was $24.3 million for the fourth quarter of 2018, an increase of $600,000, or 2.5%, from the $23.7 million recorded for the third quarter of 2018, and an increase of $5.0 million, or 25.6%, over the fourth quarter of 2017. Net interest income in the fourth quarter of 2018 was favorably impacted by the rising interest rate environment, as well as $662,000 of purchase accounting accretion, compared to $722,000 of purchase accounting accretion in the third quarter of 2018, and $213,000 in the fourth quarter of 2017. Purchase accounting accretion income realized prior to the second quarter of 2018 was due to the Company’s purchase of the Chicago branch of Talmer Bank and Trust in late 2016. Beginning in the second quarter of 2018, purchase accounting accretion income also included the impact of the ABC Bank purchase on April 20, 2018. |
· | Noninterest income was $6.5 million for the fourth quarter of 2018, compared to $7.8 million for the third quarter of 2018 and $8.2 million for the fourth quarter of 2017. The decrease in noninterest income in the fourth quarter of 2018 compared to the third quarter of 2018 was driven primarily by reductions in total residential mortgage banking revenue of $1.3 million. The decrease in noninterest income for the fourth quarter of 2018 compared to the fourth quarter of 2017 was driven primarily by reductions in total residential mortgage banking revenue of $1.4 million, as well as a $639,000 reduction in security gains, net. These reductions were partially offset by increases in service charges on deposits of $279,000 and other income of $332,000 in the fourth quarter of 2018 over the fourth quarter of 2017. |
· | Noninterest expense was $18.8 million for the fourth quarter of 2018, reflecting an increase of $66,000, or 0.4%, compared to the third quarter of 2018, and an increase of $2.6 million, or 16.0%, from the fourth quarter of 2017. The increase in noninterest expense in the fourth quarter of 2018 compared to the fourth |
1
quarter of 2017 was primarily attributable to the acquisition of ABC Bank, which increased salaries and employee benefits expense, occupancy, furniture and equipment expenses, computer and data processing expense, and amortization of core deposit intangibles. |
· | On January 15, 2019 the Company’s Board of Directors declared a cash dividend of $0.01 per share payable on February 4, 2019, to stockholders of record as of January 25, 2019. |
Capital Ratios
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| December 31, |
| September 30, |
| December 31, | |||
| Well-Capitalized 1 |
| 2018 |
| 2018 |
| 2017 | ||||
The Company |
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Common equity tier 1 capital ratio | N/A |
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| 9.29 | % |
| 9.12 | % |
| 9.25 | % |
Total risk-based capital ratio | N/A |
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| 12.63 | % |
| 12.57 | % |
| 12.93 | % |
Tier 1 risk-based capital ratio | N/A |
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| 11.78 | % |
| 11.67 | % |
| 12.03 | % |
Tier 1 leverage ratio | N/A |
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| 10.11 | % |
| 9.72 | % |
| 10.08 | % |
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The Bank |
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Common equity tier 1 capital ratio | 6.50 | % |
| 13.29 | % |
| 13.26 | % |
| 12.88 | % |
Total risk-based capital ratio | 10.00 | % |
| 14.14 | % |
| 14.16 | % |
| 13.78 | % |
Tier 1 risk-based capital ratio | 8.00 | % |
| 13.29 | % |
| 13.26 | % |
| 12.88 | % |
Tier 1 leverage ratio | 5.00 | % |
| 11.40 | % |
| 11.05 | % |
| 10.79 | % |
1 Represents ratios required to be considered well capitalized under prompt corrective action provisions. The prompt corrective action provisions are only applicable at the bank level.
· | The ratios shown above exceed levels required to be considered “well capitalized.” |
Asset Quality & Earning Assets
· | Nonperforming loans totaled $16.3 million at December 31, 2018, compared to $11.8 million at September 30, 2018, and $15.6 million at December 31, 2017. 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 were 0.9% at December 31, 2018, 0.6% at September 30, 2018, and 1.0% at December 31, 2017. Purchase credit impaired (“PCI”) loans from the Company’s acquisition of ABC Bank totaled $11.0 million, net of purchase accounting adjustments, at December 31, 2018. |
· | OREO assets totaled $7.2 million at December 31, 2018, compared to $7.0 million at September 30, 2018, and $8.4 million at December 31, 2017. Valuation writedowns totaled $96,000 for the fourth quarter of 2018, compared to $119,000 for the third quarter of 2018 and $78,000 for the fourth quarter of 2017. Nonperforming assets as a percent of total loans plus OREO, was 1.2% at December 31, 2018, 1.0% at September 30, 2018, and 1.5% at December 31, 2017. |
· | Total loans were $1.90 billion at December 31, 2018, reflecting an increase of $279.4 million compared to December 31, 2017, primarily due to the Company’s acquisition of ABC Bank, which included $227.6 million of loans recorded, net of purchase accounting adjustments. Average loans (including loans held-for-sale) for the fourth quarter of 2018 were $1.86 billion, reflecting an increase of $15.3 million from quarterly average loans for the third quarter of 2018, and an increase of $258.2 million from quarterly average loans for the fourth quarter of 2017. |
· | Available-for-sale securities totaled $541.2 million at December 31, 2018, compared to $542.3 million at September 30, 2018, and $541.4 million at December 31, 2017. No security gains or losses were recorded in the fourth quarter of 2018, compared to pretax net security gains of $13,000 in the third quarter of 2018 and pretax net security gains of $639,000 in the fourth quarter of 2017. |
2
Net Interest Income
ANALYSIS OF AVERAGE BALANCES,
TAX EQUIVALENT INTEREST AND RATES
(Dollars in thousands - unaudited)
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| Quarters Ended | ||||||||||||||||||||||
| December 31, 2018 |
| September 30, 2018 |
| December 31, 2017 | ||||||||||||||||||
| 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 earning deposits with financial institutions | $ | 19,142 |
| $ | 104 |
| 2.16 |
| $ | 17,975 |
| $ | 84 |
| 1.85 |
| $ | 13,147 |
| $ | 43 |
| 1.28 |
Securities: |
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Taxable |
| 269,236 |
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| 2,524 |
| 3.72 |
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| 268,015 |
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| 2,491 |
| 3.69 |
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| 281,096 |
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| 2,208 |
| 3.14 |
Non-taxable (TE) |
| 269,646 |
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| 2,661 |
| 3.92 |
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| 274,282 |
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| 2,612 |
| 3.78 |
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| 243,813 |
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| 2,694 |
| 4.42 |
Total securities |
| 538,882 |
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| 5,185 |
| 3.82 |
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| 542,297 |
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| 5,103 |
| 3.73 |
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| 524,909 |
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| 4,902 |
| 3.74 |
Dividends from FHLBC and FRBC |
| 10,758 |
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| 131 |
| 4.83 |
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| 8,905 |
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| 121 |
| 5.39 |
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| 8,842 |
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| 99 |
| 4.48 |
Loans and loans held-for-sale 1, 2 |
| 1,857,900 |
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| 24,182 |
| 5.16 |
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| 1,842,561 |
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| 23,421 |
| 5.04 |
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| 1,599,672 |
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| 18,585 |
| 4.55 |
Total interest earning assets |
| 2,426,682 |
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| 29,602 |
| 4.84 |
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| 2,411,738 |
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| 28,729 |
| 4.73 |
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| 2,146,570 |
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| 23,629 |
| 4.33 |
Cash and due from banks |
| 34,915 |
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| - |
| - |
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| 34,608 |
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| - |
| - |
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| 30,972 |
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| - |
| - |
Allowance for loan and lease losses |
| (19,247) |
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| - |
| - |
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| (19,696) |
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| - |
| - |
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| (17,002) |
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| - |
| - |
Other noninterest bearing assets |
| 187,355 |
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| - |
| - |
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| 191,296 |
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| - |
| - |
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| 181,484 |
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| - |
| - |
Total assets | $ | 2,629,705 |
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| $ | 2,617,946 |
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| $ | 2,342,024 |
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Liabilities and Stockholders' Equity |
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NOW accounts | $ | 429,042 |
| $ | 263 |
| 0.24 |
| $ | 444,790 |
| $ | 301 |
| 0.27 |
| $ | 420,073 |
| $ | 108 |
| 0.10 |
Money market accounts |
| 315,857 |
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| 292 |
| 0.37 |
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| 319,492 |
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| 250 |
| 0.31 |
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| 277,883 |
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| 95 |
| 0.14 |
Savings accounts |
| 300,845 |
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| 115 |
| 0.15 |
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| 300,519 |
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| 91 |
| 0.12 |
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| 260,852 |
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| 52 |
| 0.08 |
Time deposits |
| 461,677 |
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| 1,643 |
| 1.41 |
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| 467,933 |
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| 1,568 |
| 1.33 |
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| 383,011 |
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| 1,146 |
| 1.19 |
Interest bearing deposits |
| 1,507,421 |
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| 2,313 |
| 0.61 |
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| 1,532,734 |
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| 2,210 |
| 0.57 |
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| 1,341,819 |
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| 1,401 |
| 0.41 |
Securities sold under repurchase agreements |
| 44,628 |
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| 138 |
| 1.23 |
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| 46,850 |
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| 140 |
| 1.19 |
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| 27,664 |
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| 7 |
| 0.10 |
Other short-term borrowings |
| 83,588 |
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| 512 |
| 2.43 |
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| 55,119 |
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| 311 |
| 2.24 |
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| 84,728 |
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| 269 |
| 1.24 |
Junior subordinated debentures |
| 57,681 |
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| 933 |
| 6.42 |
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| 57,669 |
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| 930 |
| 6.40 |
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| 57,633 |
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| 929 |
| 6.45 |
Senior notes |
| 44,146 |
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| 672 |
| 6.04 |
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| 44,121 |
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| 672 |
| 6.04 |
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| 44,046 |
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| 672 |
| 6.10 |
Notes payable and other borrowings |
| 17,987 |
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| 130 |
| 2.87 |
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| 20,768 |
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| 173 |
| 3.30 |
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| - |
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| - |
| - |
Total interest bearing liabilities |
| 1,755,451 |
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| 4,698 |
| 1.06 |
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| 1,757,261 |
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| 4,436 |
| 1.00 |
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| 1,555,890 |
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| 3,278 |
| 0.84 |
Noninterest bearing deposits |
| 634,611 |
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| - |
| - |
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| 625,982 |
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| - |
| - |
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| 556,010 |
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| - |
| - |
Other liabilities |
| 17,108 |
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| - |
| - |
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| 20,142 |
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| - |
| - |
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| 26,037 |
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| - |
| - |
Stockholders' equity |
| 222,535 |
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| - |
| - |
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| 214,561 |
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| - |
| - |
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| 204,087 |
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| - |
| - |
Total liabilities and stockholders' equity | $ | 2,629,705 |
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| $ | 2,617,946 |
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| $ | 2,342,024 |
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Net interest income (TE) 2 |
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| $ | 24,904 |
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| $ | 24,293 |
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| $ | 20,351 |
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Net interest margin (TE) 2 |
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| 4.07 |
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| 4.00 |
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| 3.76 |
Interest bearing liabilities to earning assets |
| 72.34 | % |
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| 72.86 | % |
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| 72.48 | % |
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1 Interest income from loans is shown on a tax equivalent basis, which is a non-GAAP financial measure as discussed in the table on page 15, and includes fees of $508,000 for the fourth quarter of 2018, $197,000 for the third quarter of 2018, and $636,000 for the fourth quarter of 2017. Nonaccrual loans are included in the above stated average balances.
2 Tax equivalent basis is calculated using a marginal tax rate of 21% in 2018 and 35% in 2017. See the discussion entitled “Non-GAAP Presentations” below and the table on page 15 that provides a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent.
Tax equivalent net interest income was $24.9 million for the quarter ended December 31, 2018, which reflects an increase of $611,000 compared to the third quarter of 2018, and an increase of $4.6 million compared to the fourth quarter of 2017. The tax equivalent adjustment for the fourth quarter of 2018 was $564,000, compared to $553,000 for the third quarter of 2018, and $965,000 for the fourth quarter of 2017. The decline in the tax equivalent adjustment in the third and fourth quarter of 2018, compared to the fourth quarter of 2017, reflects the reduction of the federal tax rate in 2018 due to the “Tax Cuts and Jobs Act” that became effective on January 1, 2018, and lowered the Federal corporate income tax rate to 21%. Growth in interest earning assets in the third and fourth quarters of 2018 was primarily due to the Company’s acquisition of ABC Bank in April 2018, which resulted in the addition of $227.6 million of loans recorded, net of purchase accounting adjustments. Quarterly average earning assets increased $14.9 million from $2.41 billion for the quarter ended September 30, 2018, to $2.43 billion for the quarter ended December 31, 2018, while the yield on average earning assets increased 11 basis points over the same period. Average loan growth, including loans held-for-sale, was $15.3 million for the quarter ended December 31, 2018, compared to the quarter ended September 30, 2018, while the year over year growth in fourth quarter average loans, including loans held-for-sale, was $258.2 million. In addition to the ABC Bank acquisition in the second quarter of 2018, the year
3
over year growth was also due to organic loan growth over the last twelve months, driven by commercial loan portfolio originations, as well as two home equity loan (“HELOC”) portfolio purchases, which included $20.9 million and $20.7 million of HELOCs purchased in the first and fourth quarters of 2018, respectively.
Tax equivalent securities income increased $82,000 in the fourth quarter of 2018 compared to the third quarter of 2018, and increased by $283,000 in the fourth quarter of 2018 compared to the fourth quarter of 2017, in spite of the reduction in the federal income tax rates. The Company’s securities portfolio has been repositioned in the last year into higher yielding tax exempt securities, while lower yielding securities were sold or called. The securities portfolio acquired with the Company’s acquisition of ABC Bank was immediately liquidated as the holdings were not consistent with the Company’s investment strategies. This liquidation resulted in cash inflows of approximately $72.1 million. The rising interest rate environment drove a three basis point increase for taxable securities income in the fourth quarter of 2018, compared to the third quarter of 2018, and a 58 basis point increase from the fourth quarter of 2017.
The cost of interest bearing liabilities for the fourth quarter of 2018 increased by six basis points from the third quarter of 2018, and increased by 22 basis points from the fourth quarter of 2017. Average interest bearing liabilities declined $1.8 million in the fourth quarter of 2018 compared to the third quarter of 2018 primarily driven by a decrease in interest bearing deposit balances, primarily related to NOW accounts. Due to the decline in funding available from deposits, average short-term borrowings increased $28.5 million in the fourth quarter of 2018 compared to the third quarter of 2018. Total average interest bearing liabilities increased $199.6 million in the fourth quarter of 2018 compared to the fourth quarter of 2017 due to the ABC Bank acquisition, which resulted in the addition of $248.5 million of deposits and $40.0 million of borrowings, net of purchase accounting adjustments. Continued growth in average demand deposits in the year over year period of $78.6 million has assisted the Company in controlling the cost of funds stemming from average interest bearing deposits, which totaled 0.61% for the fourth quarter of 2018. In addition to the ABC acquisition, the increase in the overall cost of funds is also due to the rising rate environment.
For the quarter ended December 31, 2018, average other short-term borrowings, which are primarily FHLBC advances, increased to $83.6 million compared to $55.1 million for the quarter ended September 30, 2018, and decreased by $1.4 million compared to the quarter ended December 31, 2017. Average rates paid on short-term FHLBC advances have increased from 1.24% in the fourth quarter of 2017 to 2.43% for the fourth quarter of 2018, reflecting the rising interest rate environment. The junior subordinated debt issuances and senior debt issuance reflected no material change in rates or volumes over the three quarters presented. Finally, average notes payable and other borrowings included $18.0 million and $20.8 million of long-term FHLBC advances acquired in the Company’s purchase of ABC Bank for the fourth and third quarters of 2018, respectively.
The net interest margin (TE) increased seven basis points to 4.07% for the fourth quarter of 2018 compared to 4.00% for the third quarter of 2018 due primarily to the rising interest rate environment, which impacted income from average earning assets more significantly than expenses related to average interest bearing liabilities, as well as growth in interest earning assets. The net interest margin (TE) in the fourth quarter of 2018 was 31 basis points higher than the fourth quarter of 2017, due primarily to increases in total interest earning assets and purchase accounting accretion stemming from the Company’s acquisition of ABC Bank, as well as the rising interest rate environment, which impacted income from average earning assets more significantly than expenses on average interest bearing liabilities.
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| 4th Quarter 2018 |
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Noninterest Income |
| Three Months Ended |
| Percent Change From |
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(dollars in thousands) |
| December 31, |
| September 30, |
| December 31, |
| September 30, |
| December 31, |
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| 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
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Trust income |
| $ | 1,633 |
| $ | 1,644 |
| $ | 1,639 |
| (0.7) |
| (0.4) |
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Service charges on deposits |
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| 2,044 |
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| 1,923 |
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| 1,765 |
| 6.3 |
| 15.8 |
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Residential mortgage banking revenue |
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Secondary mortgage fees |
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| 140 |
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| 199 |
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| 182 |
| (29.6) |
| (23.1) |
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Mortgage servicing rights mark to market (loss) |
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| (923) |
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| (11) |
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| (46) |
| N/M |
| N/M |
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Mortgage servicing income |
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| 389 |
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| 471 |
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| 448 |
| (17.4) |
| (13.2) |
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Net gain on sales of mortgage loans |
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| 669 |
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| 965 |
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| 1,088 |
| (30.7) |
| (38.5) |
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Total residential mortgage banking revenue |
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| 275 |
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| 1,624 |
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| 1,672 |
| (83.1) |
| (83.6) |
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Securities gain, net |
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| - |
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| 13 |
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| 639 |
| (100.0) |
| (100.0) |
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Increase in cash surrender value of BOLI |
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| 38 |
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| 347 |
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| 361 |
| (89.0) |
| (89.5) |
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Debit card interchange income |
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| 1,141 |
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| 1,135 |
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| 1,069 |
| 0.5 |
| 6.7 |
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Other income |
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| 1,371 |
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| 1,128 |
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| 1,039 |
| 21.5 |
| 32.0 |
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Total noninterest income |
| $ | 6,502 |
| $ | 7,814 |
| $ | 8,184 |
| (16.8) |
| (20.6) |
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The decrease in noninterest income in the fourth quarter of 2018 compared to the third quarter of 2018 was driven primarily by a $1.3 million reduction in total residential mortgage banking revenue stemming from rising interest rates and the resultant decline of the valuation of mortgage servicing rights. In addition, the fourth quarter of 2018 included a market driven valuation decline of the cash surrender value of BOLI of $309,000 compared to the third quarter of 2018. An increase in service charges on deposits of $121,000 partially offset the noted reductions for the linked quarter comparison. The decrease in noninterest income year over year was primarily driven by a $1.4 million reduction in total resident mortgage banking revenue stemming from rising interest rates and the resultant decline of the valuation of mortgage servicing rights. In addition, the fourth quarter of 2018 included a market driven valuation decline of the cash surrender value of BOLI of $323,000 compared to same period in 2017, and a decrease of 639,000 in securities gain, net. Increases in service charges on deposits of $279,000, debit card interchange income of $72,000 and other income of $332,000 partially offset the noted reductions for the year over year comparison. The increase in other income for the fourth quarter of 2018 was primarily attributable to commercial swap fee income which increased $152,000 over the fourth quarter of 2017.
Noninterest Expense
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| 4th Quarter 2018 |
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Noninterest Expense |
| Three Months Ended |
| Percent Change From |
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(dollars in thousands) |
| December 31, |
| September 30, |
| December 31, |
| September 30, |
| December 31, |
| |||
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| 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| |||
Salaries |
| $ | 8,484 |
| $ | 8,509 |
| $ | 7,363 |
| (0.3) |
| 15.2 |
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Officers incentive |
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| 784 |
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| 820 |
|
| 204 |
| (4.4) |
| 284.3 |
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Benefits and other |
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| 1,167 |
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| 1,836 |
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| 1,346 |
| (36.4) |
| (13.3) |
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Total salaries and employee benefits |
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| 10,435 |
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| 11,165 |
|
| 8,913 |
| (6.5) |
| 17.1 |
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Occupancy, furniture and equipment expense |
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| 1,922 |
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| 1,782 |
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| 1,441 |
| 7.9 |
| 33.4 |
|
Computer and data processing |
|
| 1,413 |
|
| 1,247 |
|
| 1,104 |
| 13.3 |
| 28.0 |
|
FDIC insurance |
|
| 170 |
|
| 162 |
|
| 146 |
| 4.9 |
| 16.4 |
|
General bank insurance |
|
| 259 |
|
| 230 |
|
| 251 |
| 12.6 |
| 3.2 |
|
Amortization of core deposit intangible asset |
|
| 133 |
|
| 136 |
|
| 22 |
| (2.2) |
| 504.5 |
|
Advertising expense |
|
| 242 |
|
| 492 |
|
| 412 |
| (50.8) |
| (41.3) |
|
Debit card interchange expense |
|
| 38 |
|
| 320 |
|
| 296 |
| (88.1) |
| (87.2) |
|
Legal fees |
|
| 147 |
|
| 243 |
|
| 200 |
| (39.5) |
| (26.5) |
|
Other real estate owned expense, net |
|
| 165 |
|
| (370) |
|
| 237 |
| (144.6) |
| (30.4) |
|
Other expense |
|
| 3,853 |
|
| 3,304 |
|
| 3,169 |
| 16.6 |
| 21.6 |
|
Total noninterest expense |
| $ | 18,777 |
| $ | 18,711 |
| $ | 16,191 |
| 0.4 |
| 16.0 |
|
Efficiency ratio (GAAP) |
|
| 59.92 | % |
| 60.06 | % |
| 59.16 | % |
|
|
|
|
Adjusted efficiency ratio (non-GAAP)1 |
|
| 58.44 | % |
| 59.11 | % |
| 56.49 | % |
|
|
|
|
1 The adjusted efficiency ratio shown in the table above is a non-GAAP financial measure calculated as noninterest
5
expense, excluding OREO expenses, amortization of core deposits and acquisition related 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. See the discussion entitled “Non-GAAP Presentations” below and the table on page 15 that provides a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent.
Noninterest expense for the fourth quarter of 2018 increased $66,000, or 0.4%, compared to the third quarter of 2018 and increased $2.6 million, or 16.0%, compared to the fourth quarter of 2017. The linked quarter increase is primarily attributable to a $535,000 increase in OREO expense, net, due to gains on sales in the third quarter of 2018, and a $549,000 increase in other expense, due to an accrual on a commercial mortgage loan escrow, as well as a reclass of $331,000 related to letter of credit origination costs from the net interest margin, partially offset by a $730,000 decrease in salary and employee benefits expense. The year over year variance is primarily attributable to the ABC Bank acquisition, which resulted in increases in salaries and employee benefits expense, occupancy, furniture and equipment expenses, computer and data processing expense, and amortization of core deposit intangibles in the fourth quarter of 2018 compared to the fourth quarter of 2017. Partially offsetting the year over year increases noted was a reduction in OREO expense, net, as the OREO portfolio balances have declined over the past twelve months, and dispositions in the fourth quarter of 2018 resulted in net gains on OREO sales of $76,000 compared to net gains of $20,000 in the like 2017 quarter. In addition, other expense increased in the fourth quarter of 2018 compared to the fourth quarter of 2017 due to the accruals noted above for a commercial mortgage loan escrow, and a reclass of $331,000 related to letter of credit origination costs from the net interest margin
Earning Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2018 |
| ||
Loans |
| As of |
| Percent Change From |
| |||||||||
(dollars in thousands) |
| December 31, |
| September 30, |
| December 31, |
| September 30, |
| December 31, |
| |||
|
| 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| |||
Commercial |
| $ | 314,323 |
| $ | 306,407 |
| $ | 272,851 |
| 2.6 |
| 15.2 |
|
Leases |
|
| 78,806 |
|
| 70,661 |
|
| 68,325 |
| 11.5 |
| 15.3 |
|
Real estate - commercial |
|
| 820,941 |
|
| 804,184 |
|
| 750,991 |
| 2.1 |
| 9.3 |
|
Real estate - construction |
|
| 108,390 |
|
| 112,873 |
|
| 85,162 |
| (4.0) |
| 27.3 |
|
Real estate - residential |
|
| 407,068 |
|
| 393,598 |
|
| 313,397 |
| 3.4 |
| 29.9 |
|
Home equity line of credit "HELOC" |
|
| 140,442 |
|
| 122,022 |
|
| 112,833 |
| 15.1 |
| 24.5 |
|
Other1 |
|
| 14,439 |
|
| 12,969 |
|
| 13,383 |
| 11.3 |
| 7.9 |
|
Total loans, excluding deferred loan costs and PCI |
|
| 1,884,409 |
|
| 1,822,714 |
|
| 1,616,942 |
| 3.4 |
| 16.5 |
|
Net deferred loan costs |
|
| 1,653 |
|
| 1,348 |
|
| 680 |
| 22.6 |
| 143.1 |
|
Total loans, excluding PCI |
|
| 1,886,062 |
|
| 1,824,062 |
|
| 1,617,622 |
| 3.4 |
| 16.6 |
|
PCI loans, net of purchase accounting adjustments |
|
| 10,965 |
|
| 10,887 |
|
| - |
| 0.7 |
| N/M |
|
Total loans |
| $ | 1,897,027 |
| $ | 1,834,949 |
| $ | 1,617,622 |
| 3.4 |
| 17.3 |
|
N/M - Not meaningful.
1 Other class includes consumer and overdrafts.
Total loans increased by $62.1 million at the end of the fourth quarter of 2018 compared to September 30, 2018, and increased $279.4 million year over year. The majority of the year over year increase is due to $227.6 million of loans recorded, net of purchase accounting adjustments, from the Company’s acquisition of ABC Bank in April 2018. In addition, the Company experienced organic loan and lease growth in the year over year period, and also made purchases of HELOCs totaling $20.9 and $20.7 million in the first and fourth quarters of 2018, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2018 |
| ||
Securities |
| As of |
| Percent Change From |
| |||||||||
(dollars in thousands) |
| December 31, |
| September 30, |
| December 31, |
| September 30, |
| December 31, |
| |||
|
| 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| |||
Securities available-for-sale, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
| $ | 3,923 |
| $ | 3,854 |
| $ | 3,947 |
| 1.8 |
| (0.6) |
|
U.S. government agencies |
|
| 10,951 |
|
| 11,703 |
|
| 13,061 |
| (6.4) |
| (16.2) |
|
U.S. government agency mortgage-backed |
|
| 14,075 |
|
| 14,766 |
|
| 12,214 |
| (4.7) |
| 15.2 |
|
States and political subdivisions |
|
| 274,067 |
|
| 272,264 |
|
| 278,092 |
| 0.7 |
| (1.4) |
|
Corporate bonds |
|
| - |
|
| - |
|
| 833 |
| - |
| (100.0) |
|
Collateralized mortgage obligations |
|
| 64,429 |
|
| 64,960 |
|
| 65,939 |
| (0.8) |
| (2.3) |
|
Asset-backed securities |
|
| 109,514 |
|
| 109,173 |
|
| 112,932 |
| 0.3 |
| (3.0) |
|
Collateralized loan obligations |
|
| 64,289 |
|
| 65,618 |
|
| 54,421 |
| (2.0) |
| 18.1 |
|
Total securities available-for-sale |
| $ | 541,248 |
| $ | 542,338 |
| $ | 541,439 |
| (0.2) |
| (0.0) |
|
6
The investment portfolio was $541.2 million as of December 31, 2018, a decrease of $1.1 million from $542.3 million as of September 30, 2018, and an increase of $191,000 from December 31, 2017. The portfolio composition has remained relatively static over the most recent quarter and has experienced a modest shift from collateralized mortgage obligations to issuances of states and political subdivisions since 2017. The largely unchanged portfolio composition is due to lack of relative value among possible investment sectors and consequent opportunities to shift allocation of investments from lower return sectors to those with higher returns. The small degree of activity that did occur in the fourth quarter of 2018 resulted in no net securities gains, compared to $13,000 of net security gains in the third quarter of 2018 and $639,000 of net securities gains for the fourth quarter of 2017.
Asset Quality
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
| December 31, 2018 | ||
Nonperforming assets |
| As of |
| Percent Change From | |||||||||
(dollars in thousands) |
| December 31, |
| September 30, |
| December 31, |
| September 30, |
| December 31, | |||
|
| 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 | |||
Nonaccrual loans |
| $ | 13,741 |
| $ | 9,981 |
| $ | 14,388 |
| 37.7 |
| (4.5) |
Performing troubled debt restructured loans accruing interest |
|
| 1,683 |
|
| 1,719 |
|
| 988 |
| (2.1) |
| 70.3 |
Loans past due 90 days or more and still accruing interest |
|
| 917 |
|
| 79 |
|
| 248 |
| 1,060.8 |
| 269.8 |
Total nonperforming loans |
|
| 16,341 |
|
| 11,779 |
|
| 15,624 |
| 38.7 |
| 4.6 |
Other real estate owned |
|
| 7,175 |
|
| 6,964 |
|
| 8,371 |
| 3.0 |
| (14.3) |
Total nonperforming assets |
| $ | 23,516 |
| $ | 18,743 |
| $ | 23,995 |
| 25.5 |
| (2.0) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PCI loans, net of purchase accounting adjustments |
| $ | 10,965 |
| $ | 10,887 |
| $ | - |
| 0.7 |
| N/M |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 days past due loans |
| $ | 10,989 |
| $ | 16,802 |
| $ | 5,358 |
|
|
|
|
Nonaccrual loans to total loans |
|
| 0.7 | % |
| 0.5 | % |
| 0.9 | % |
|
|
|
Nonperforming loans to total loans |
|
| 0.9 | % |
| 0.6 | % |
| 1.0 | % |
|
|
|
Nonperforming assets to total loans plus OREO |
|
| 1.2 | % |
| 1.0 | % |
| 1.5 | % |
|
|
|
Purchased credit-impaired loans to total loans |
|
| 0.6 | % |
| 0.6 | % |
| - | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses |
| $ | 19,006 |
| $ | 19,328 |
| $ | 17,461 |
|
|
|
|
Allowance for loan losses to total loans |
|
| 1.0 | % |
| 1.1 | % |
| 1.1 | % |
|
|
|
Allowance for loan losses to nonaccrual loans |
|
| 138.3 | % |
| 193.7 | % |
| 121.4 | % |
|
|
|
N/M - Not meaningful.
Nonperforming loans consist of nonaccrual loans, performing troubled debt restructured loans accruing interest and loans 90 days or more past due and still accruing interest. Nonperforming loans to total loans was 0.9% in the fourth quarter of 2018, 0.6% in the third quarter of 2018, and 1.0% for the fourth quarter of 2017. Nonperforming assets to total loans plus OREO ended at 1.2% in the fourth quarter of 2018 compared to 1.0% in the third quarter of 2018, and 1.5% for the fourth quarter of 2017, reflecting stable nonperforming metrics as loan portfolio growth occurred over the last year, as well as continued OREO liquidations and write-downs recorded in 2018. Finally, the allowance for loan and lease losses to total loans was 1.0% as of December 31, 2018, which is a slight decrease from 1.1% for the third quarter 2018 and the fourth quarter of 2017.
The following table details the accretable discount on all of the Company’s purchased loans as of December 31, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accretable Discount - Non-PCI Loans |
| Accretable Discount - PCI Loans |
| Non-Accretable Discount - PCI Loans |
| Total | ||||
Beginning balance, October 1, 2018 |
| $ | 2,310 |
| $ | 1,218 |
| $ | 6,069 |
| $ | 9,597 |
Purchases |
|
| - |
|
| - |
|
| - |
|
| - |
Accretion |
|
| (443) |
|
| (119) |
|
| (100) |
|
| (662) |
Transfer1 |
|
| - |
|
| - |
|
| - |
|
| - |
Ending balance, December 31, 2018 |
| $ | 1,867 |
| $ | 1,099 |
| $ | 5,969 |
| $ | 8,935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Transfer was due to loans moved to OREO.
The allowance for loan and lease losses excludes the remaining purchase accounting credit marks recorded on the purchased loans acquired in the acquisition of ABC Bank and the Talmer branch purchase; the expected total remaining accretable discount on the purchased loans was $3.0 million as of December 31, 2018, compared to $3.5 million as of September 30, 2018, and the non-accretable discount on purchased credit impaired (PCI) loans was $6.0
7
million as of December 31, 2018, compared to $6.1 million as of September 30, 2018. There were no PCI loans prior to the second quarter of 2018 acquisition of ABC Bank.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2018 |
| ||
Classified loans |
| As of |
| Percent Change From |
| |||||||||
(dollars in thousands) |
| December 31, |
| September 30, |
| December 31, |
| September 30, |
| December 31, |
| |||
|
| 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| |||
Commercial |
| $ | 137 |
| $ | 353 |
| $ | - |
| (61.2) |
| N/M |
|
Leases |
|
| - |
|
| - |
|
| 825 |
| N/M |
| (100.0) |
|
Real estate-commercial, nonfarm |
|
| 22,661 |
|
| 21,008 |
|
| 7,262 |
| 7.9 |
| 212.0 |
|
Real estate-commercial, farm |
|
| 1,222 |
|
| 1,241 |
|
| 2,486 |
| (1.5) |
| (50.8) |
|
Real estate-construction |
|
| 2,610 |
|
| 282 |
|
| 376 |
| 825.5 |
| 594.1 |
|
Real estate-residential: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor |
|
| 1,216 |
|
| 1,103 |
|
| 448 |
| 10.2 |
| 171.4 |
|
Multifamily |
|
| 979 |
|
| 3,177 |
|
| 4,723 |
| (69.2) |
| (79.3) |
|
Owner occupied |
|
| 4,524 |
|
| 5,022 |
|
| 5,266 |
| (9.9) |
| (14.1) |
|
HELOC |
|
| 1,889 |
|
| 1,829 |
|
| 1,899 |
| 3.3 |
| (0.5) |
|
Other1 |
|
| 31 |
|
| 55 |
|
| 20 |
| (43.6) |
| 55.0 |
|
Total classified loans, excluding PCI |
|
| 35,269 |
|
| 34,070 |
|
| 23,305 |
| 3.5 |
| 51.3 |
|
PCI loans, net of purchase accounting adjustments |
|
| 10,965 |
|
| 10,887 |
|
| - |
| 0.7 |
| N/M |
|
Total classified loans |
| $ | 46,234 |
| $ | 44,957 |
| $ | 23,305 |
| 2.8 |
| 98.4 |
|
N/M - Not meaningful.
1 Other class includes consumer and overdrafts.
Classified loans include nonaccrual, performing troubled debt restructurings, PCI loans, and all other loans considered substandard, as shown above. Classified loans totaled $46.2 million as of December 31, 2018, an increase of $1.3 million, or 2.8%, from the prior quarter, and an increase of $22.9 million, or 98.4%, from the like quarter of 2017. The $11.0 million of PCI loans as of December 31, 2018, stems from the Company’s acquisition of ABC Bank.
8
Net Charge-off Summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan Charge-offs, net of recoveries | Quarters Ended | |||||||||||||
(dollars in thousands) | December 31, |
| % of |
| September 30, |
| % of |
| December 31, |
| % of | |||
| 2018 |
| Total 2 |
| 2018 |
| Total 2 |
| 2017 |
| Total 2 | |||
Commercial | $ | (13) |
| (1.6) |
| $ | (25) |
| 357.1 |
| $ | (12) |
| 4.9 |
Leases |
| - |
| - |
|
| - |
| - |
|
| - |
| - |
Consumer |
| - |
| - |
|
| - |
| - |
|
| 47 |
| (19.1) |
Real estate-commercial, nonfarm |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner general purpose |
| 14 |
| 1.7 |
|
| (6) |
| 85.7 |
|
| - |
| - |
Owner special purpose |
| - |
| - |
|
| 192 |
| (2,742.9) |
|
| - |
| - |
Non-owner general purpose |
| 903 |
| 109.9 |
|
| (22) |
| 314.3 |
|
| (37) |
| 15.0 |
Non-owner special purpose |
| - |
| - |
|
| - |
| - |
|
| - |
| - |
Retail properties |
| - |
| - |
|
| - |
| - |
|
| 9 |
| (3.7) |
Total real estate-commercial, nonfarm |
| 917 |
| 111.6 |
|
| 164 |
| (2,342.9) |
|
| (28) |
| 11.3 |
Real estate-construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilder |
| - |
| - |
|
| - |
| - |
|
| (93) |
| 37.8 |
Land |
| - |
| - |
|
| (23) |
| 328.6 |
|
| (1) |
| 0.4 |
Commercial speculative |
| - |
| - |
|
| - |
| - |
|
| - |
| - |
All other |
| - |
| - |
|
| (9) |
| 128.6 |
|
| (194) |
| 78.9 |
Total real estate-construction |
| - |
| - |
|
| (32) |
| 457.2 |
|
| (288) |
| 117.1 |
Real estate-residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor |
| (11) |
| (1.3) |
|
| (18) |
| 257.1 |
|
| 64 |
| (26.0) |
Multifamily |
| (15) |
| (1.8) |
|
| (11) |
| 157.1 |
|
| (13) |
| 5.3 |
Owner occupied |
| (11) |
| (1.3) |
|
| (54) |
| 771.4 |
|
| 18 |
| (7.3) |
Revolving and junior liens |
|
|
| - |
|
|
|
| - |
|
| (30) |
| 12.2 |
Total real estate-residential |
| (37) |
| (4.4) |
|
| (83) |
| 1,185.6 |
|
| 39 |
| (15.8) |
HELOC |
| (81) |
| (9.9) |
|
| (90) |
| 1,285.7 |
|
| - |
| - |
Real estate-commercial, farm |
| - |
| - |
|
| - |
| - |
|
| - |
| - |
Other1 |
| 36 |
| 4.3 |
|
| 59 |
| (842.7) |
|
| (4) |
| 1.6 |
Net charge-offs / (recoveries) | $ | 822 |
| 100.0 |
| $ | (7) |
| 100.0 |
| $ | (246) |
| 100.0 |
1 Other class includes consumer and overdrafts.
2 Represents the percentage of net charge-offs attributable to each category of loans.
Gross charge-offs for the quarter ended December 31, 2018, were $1.1 million compared to $372,000 for the quarter ended September 30, 2018, and $308,000 for the quarter ended December 31, 2017. Gross recoveries were $229,000 for the quarter ended December 31, 2018, compared to $379,000 for the quarter ended September 30, 2018, and $554,000 for the like quarter of 2017. Continued recoveries are indicative of the ongoing aggressive efforts by management to effectively manage and resolve prior charge-offs.
Deposits
Total deposits were $2.12 billion at December 31, 2018, which reflects a decrease of $15.7 million compared to September 30, 2018, stemming from reductions in savings, NOW, and money market accounts of $5.2 million, and time deposits of $7.7 million. Growth in all deposit categories for December 31, 2018, compared to December 31, 2017, was driven by the Company’s acquisition of ABC Bank, which resulted in additional deposits recorded in the second quarter of 2018 of $248.5 million.
Borrowings
As of December 31, 2018, the Bank had $149.5 million outstanding in other short-term borrowings, which were primarily FHLBC advances, compared to $81.9 million in other short-term borrowings outstanding as of September 30, 2018, and $115.0 million of short-term FHLBC advances outstanding as of December 31, 2017.
The Company is indebted on senior notes totaling $44.2 million, net of deferred issuance costs, as of December 31, 2018. The Company is also indebted on $57.7 million of junior subordinated debentures, net of deferred issuance costs, 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. Notes payable and other borrowings is comprised of $15.4 million of long-term FHLBC advances acquired with the ABC Bank acquisition, with terms ranging from March 30, 2020 to February 2, 2026.
9
Non-GAAP Presentations: Management has disclosed in this earnings release certain non-GAAP financial measures to evaluate and measure the Company’s performance, including adjusted net income, adjusted earnings per share, the presentation of net interest income and net interest margin on a fully taxable equivalent basis, and efficiency ratio calculations. Management believes the adjusted earnings per share data is more informative for the user if the per share impact of certain activity is excluded for quarterly comparative purposes. 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 has disclosed the efficiency ratio including and excluding certain items, which is discussed in the noninterest expense presentation on page 5. These non-GAAP financial measures should not be considered as a substitute for GAAP financial measures, and we strongly encourage investors to review the GAAP financial measures included in this earnings release and not to place undue reliance upon any single financial measure. In addition, because non-GAAP financial measures are not standardized, it may not be possible to compare the non-GAAP financial measures presented in this earnings release with other companies’ non-GAAP financial measures having the same or similar names. The tables on page 15 provide a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent.
Forward-Looking Statements: This earnings release contains forward-looking statements. Forward looking statements can be identified by words such as “anticipated,” “expects,” “intends,” “believes,” “may,” “likely,” “will” or other that indicate future periods. Such forward-looking statements are subject to risks, uncertainties, and other factors, including a downturn in the economy, particularly in the Company’s markets, volatile credit and financial markets both domestic and foreign, potential deterioration in real estate values, regulatory changes and excessive loan losses, as well as additional risks and uncertainties contained in the “Risk Factors” and forward-looking statements disclosure contained in the Company’s most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, any or all of which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. The inclusion of this forward-looking information should not be construed as a representation by the Company or any person that future events, plans, or expectations contemplated by the Company will be achieved. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Conference Call
The Company will host an earnings call on Thursday, January 24, 2018, 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 11:00 a.m. Eastern Time (10:00 a.m. Central Time) on January 31, 2019, by dialing 877-481-4010, using Conference ID: 41677.
10
Old Second Bancorp, Inc. and Subsidiaries
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| December 31, |
| December 31, | ||
|
| 2018 |
| 2017 | ||
Assets |
|
|
|
|
|
|
Cash and due from banks |
| $ | 38,599 |
| $ | 37,444 |
Interest earning deposits with financial institutions |
|
| 16,636 |
|
| 18,389 |
Cash and cash equivalents |
|
| 55,235 |
|
| 55,833 |
Securities available-for-sale, at fair value |
|
| 541,248 |
|
| 541,439 |
Federal Home Loan Bank Chicago ("FHLBC") and Federal Reserve Bank Chicago ("FRBC") stock |
|
| 13,433 |
|
| 10,168 |
Loans held-for-sale |
|
| 2,984 |
|
| 4,067 |
Loans |
|
| 1,897,027 |
|
| 1,617,622 |
Less: allowance for loan and lease losses |
|
| 19,006 |
|
| 17,461 |
Net loans |
|
| 1,878,021 |
|
| 1,600,161 |
Premises and equipment, net |
|
| 42,439 |
|
| 37,628 |
Other real estate owned |
|
| 7,175 |
|
| 8,371 |
Mortgage servicing rights, net |
|
| 7,357 |
|
| 6,944 |
Goodwill and core deposit intangible |
|
| 21,814 |
|
| 8,922 |
Bank-owned life insurance ("BOLI") |
|
| 61,544 |
|
| 61,764 |
Deferred tax assets, net |
|
| 21,280 |
|
| 25,356 |
Other assets |
|
| 23,473 |
|
| 22,776 |
Total assets |
| $ | 2,676,003 |
| $ | 2,383,429 |
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
Noninterest bearing demand |
| $ | 618,830 |
| $ | 572,404 |
Interest bearing: |
|
|
|
|
|
|
Savings, NOW, and money market |
|
| 1,040,668 |
|
| 967,750 |
Time |
|
| 457,175 |
|
| 382,771 |
Total deposits |
|
| 2,116,673 |
|
| 1,922,925 |
Securities sold under repurchase agreements |
|
| 46,632 |
|
| 29,918 |
Other short-term borrowings |
|
| 149,500 |
|
| 115,000 |
Junior subordinated debentures |
|
| 57,686 |
|
| 57,639 |
Senior notes |
|
| 44,158 |
|
| 44,058 |
Notes payable and other borrowings |
|
| 15,379 |
|
| - |
Other liabilities |
|
| 16,894 |
|
| 13,539 |
Total liabilities |
|
| 2,446,922 |
|
| 2,183,079 |
|
|
|
|
|
|
|
Stockholders’ Equity |
|
|
|
|
|
|
Common stock |
|
| 34,720 |
|
| 34,626 |
Additional paid-in capital |
|
| 119,081 |
|
| 117,742 |
Retained earnings |
|
| 175,463 |
|
| 142,959 |
Accumulated other comprehensive (loss) income |
|
| (4,079) |
|
| 1,479 |
Treasury stock |
|
| (96,104) |
|
| (96,456) |
Total stockholders’ equity |
|
| 229,081 |
|
| 200,350 |
Total liabilities and stockholders’ equity |
| $ | 2,676,003 |
| $ | 2,383,429 |
11
Old Second Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income
(In thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Three Months Ended December 31, |
| Years Ended December 31, |
| ||||||||
|
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| ||||
Interest and dividend income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, including fees |
| $ | 24,144 |
| $ | 18,535 |
| $ | 88,769 |
| $ | 70,737 |
|
Loans held-for-sale |
|
| 33 |
|
| 28 |
|
| 127 |
|
| 123 |
|
Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
|
| 2,524 |
|
| 2,208 |
|
| 9,577 |
|
| 10,202 |
|
Tax exempt |
|
| 2,102 |
|
| 1,751 |
|
| 8,341 |
|
| 5,939 |
|
Dividends from FHLBC and FRBC stock |
|
| 131 |
|
| 99 |
|
| 469 |
|
| 370 |
|
Interest bearing deposits with financial institutions |
|
| 104 |
|
| 43 |
|
| 334 |
|
| 134 |
|
Total interest and dividend income |
|
| 29,038 |
|
| 22,664 |
|
| 107,617 |
|
| 87,505 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW, and money market deposits |
|
| 670 |
|
| 255 |
|
| 2,156 |
|
| 950 |
|
Time deposits |
|
| 1,643 |
|
| 1,146 |
|
| 5,829 |
|
| 4,227 |
|
Securities sold under repurchase agreements |
|
| 138 |
|
| 7 |
|
| 462 |
|
| 17 |
|
Other short-term borrowings |
|
| 512 |
|
| 269 |
|
| 1,429 |
|
| 741 |
|
Junior subordinated debentures |
|
| 933 |
|
| 929 |
|
| 3,716 |
|
| 4,002 |
|
Senior notes |
|
| 672 |
|
| 672 |
|
| 2,688 |
|
| 2,689 |
|
Notes payable and other borrowings |
|
| 130 |
|
| - |
|
| 398 |
|
| - |
|
Total interest expense |
|
| 4,698 |
|
| 3,278 |
|
| 16,678 |
|
| 12,626 |
|
Net interest and dividend income |
|
| 24,340 |
|
| 19,386 |
|
| 90,939 |
|
| 74,879 |
|
Provision for loan and lease losses |
|
| 500 |
|
| 750 |
|
| 1,228 |
|
| 1,800 |
|
Net interest and dividend income after provision for loan and lease losses |
|
| 23,840 |
|
| 18,636 |
|
| 89,711 |
|
| 73,079 |
|
Noninterest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust income |
|
| 1,633 |
|
| 1,639 |
|
| 6,417 |
|
| 6,203 |
|
Service charges on deposits |
|
| 2,044 |
|
| 1,765 |
|
| 7,328 |
|
| 6,720 |
|
Secondary mortgage fees |
|
| 140 |
|
| 182 |
|
| 696 |
|
| 776 |
|
Mortgage servicing rights mark to market (loss) |
|
| (923) |
|
| (46) |
|
| (734) |
|
| (802) |
|
Mortgage servicing income |
|
| 389 |
|
| 448 |
|
| 1,939 |
|
| 1,778 |
|
Net gain on sales of mortgage loans |
|
| 669 |
|
| 1,088 |
|
| 3,791 |
|
| 4,803 |
|
Securities gains, net |
|
| - |
|
| 639 |
|
| 360 |
|
| 474 |
|
Increase in cash surrender value of BOLI |
|
| 38 |
|
| 361 |
|
| 984 |
|
| 1,432 |
|
Death benefit realized on bank-owned life insurance |
|
| - |
|
| - |
|
| 1,026 |
|
| - |
|
Debit card interchange income |
|
| 1,141 |
|
| 1,069 |
|
| 4,420 |
|
| 4,200 |
|
Gain on disposal and transfer of fixed assets, net |
|
| - |
|
| - |
|
| - |
|
| 10 |
|
Other income |
|
| 1,371 |
|
| 1,039 |
|
| 5,126 |
|
| 4,778 |
|
Total noninterest income |
|
| 6,502 |
|
| 8,184 |
|
| 31,353 |
|
| 30,372 |
|
Noninterest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
| 10,435 |
|
| 8,913 |
|
| 44,161 |
|
| 40,080 |
|
Occupancy, furniture and equipment |
|
| 1,922 |
|
| 1,441 |
|
| 6,915 |
|
| 5,951 |
|
Computer and data processing |
|
| 1,413 |
|
| 1,104 |
|
| 6,745 |
|
| 4,387 |
|
FDIC insurance |
|
| 170 |
|
| 146 |
|
| 653 |
|
| 658 |
|
General bank insurance |
|
| 259 |
|
| 251 |
|
| 1,040 |
|
| 1,031 |
|
Amortization of core deposit intangible |
|
| 133 |
|
| 22 |
|
| 387 |
|
| 96 |
|
Advertising expense |
|
| 242 |
|
| 412 |
|
| 1,567 |
|
| 1,505 |
|
Debit card interchange expense |
|
| 38 |
|
| 296 |
|
| 940 |
|
| 1,329 |
|
Legal fees |
|
| 147 |
|
| 200 |
|
| 835 |
|
| 650 |
|
Other real estate expense, net |
|
| 165 |
|
| 237 |
|
| 396 |
|
| 2,165 |
|
Other expense |
|
| 3,853 |
|
| 3,169 |
|
| 13,489 |
|
| 11,297 |
|
Total noninterest expense |
|
| 18,777 |
|
| 16,191 |
|
| 77,128 |
|
| 69,149 |
|
Income before income taxes |
|
| 11,565 |
|
| 10,629 |
|
| 43,936 |
|
| 34,302 |
|
Provision for income taxes |
|
| 2,945 |
|
| 13,141 |
|
| 9,924 |
|
| 19,164 |
|
Net income (loss) available to common stockholders |
| $ | 8,620 |
| $ | (2,512) |
| $ | 34,012 |
| $ | 15,138 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share |
| $ | 0.29 |
| $ | (0.08) |
| $ | 1.14 |
| $ | 0.51 |
|
Diluted earnings (loss) per share |
|
| 0.28 |
|
| (0.08) |
|
| 1.12 |
|
| 0.50 |
|
Dividends declared per share |
|
| 0.01 |
|
| 0.01 |
|
| 0.04 |
|
| 0.04 |
|
|
|
|
|
|
|
|
|
|
Ending common shares outstanding |
| 29,763,078 |
| 29,627,086 |
| 29,763,078 |
| 29,627,086 |
Weighted-average basic shares outstanding |
| 29,758,328 |
| 29,627,086 |
| 29,728,308 |
| 29,600,702 |
Weighted-average diluted shares outstanding |
| 30,343,296 |
| 30,094,960 |
| 30,308,935 |
| 30,038,417 |
12
Old Second Bancorp, Inc. and Subsidiaries
Quarterly Consolidated Average Balance
(In thousands, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2017 |
| 2018 | |||||||||||||||||||
Assets |
| 1st Qtr |
| 2nd Qtr |
| 3rd Qtr |
| 4th Qtr |
| 1st Qtr |
| 2nd Qtr |
| 3rd Qtr |
| 4th Qtr | ||||||||
Cash and due from banks |
| $ | 33,585 |
| $ | 39,425 |
| $ | 31,028 |
| $ | 30,972 |
| $ | 29,776 |
| $ | 36,720 |
| $ | 34,608 |
| $ | 34,915 |
Interest earning deposits with financial institutions |
|
| 12,121 |
|
| 11,938 |
|
| 11,685 |
|
| 13,147 |
|
| 13,819 |
|
| 19,161 |
|
| 17,975 |
|
| 19,142 |
Cash and cash equivalents |
|
| 45,706 |
|
| 51,363 |
|
| 42,713 |
|
| 44,119 |
|
| 43,595 |
|
| 55,881 |
|
| 52,583 |
|
| 54,057 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available-for-sale, at fair value |
|
| 563,897 |
|
| 586,686 |
|
| 548,432 |
|
| 524,909 |
|
| 549,161 |
|
| 555,202 |
|
| 542,297 |
|
| 538,882 |
FHLBC and FRBC stock |
|
| 7,614 |
|
| 7,699 |
|
| 8,339 |
|
| 8,842 |
|
| 8,920 |
|
| 8,619 |
|
| 8,905 |
|
| 10,758 |
Loans held-for-sale |
|
| 2,670 |
|
| 3,616 |
|
| 3,244 |
|
| 2,744 |
|
| 2,353 |
|
| 2,868 |
|
| 3,220 |
|
| 2,617 |
Loans |
|
| 1,484,556 |
|
| 1,505,572 |
|
| 1,550,229 |
|
| 1,596,928 |
|
| 1,600,594 |
|
| 1,806,209 |
|
| 1,839,341 |
|
| 1,855,283 |
Less: allowance for loan and lease losses |
|
| 16,292 |
|
| 15,779 |
|
| 16,478 |
|
| 17,002 |
|
| 18,263 |
|
| 18,494 |
|
| 19,696 |
|
| 19,247 |
Net loans |
|
| 1,468,264 |
|
| 1,489,793 |
|
| 1,533,751 |
|
| 1,579,926 |
|
| 1,582,331 |
|
| 1,787,715 |
|
| 1,819,645 |
|
| 1,836,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premises and equipment, net |
|
| 38,917 |
|
| 38,395 |
|
| 38,098 |
|
| 37,825 |
|
| 37,472 |
|
| 41,796 |
|
| 42,651 |
|
| 42,731 |
Other real estate owned |
|
| 13,464 |
|
| 12,596 |
|
| 10,688 |
|
| 8,601 |
|
| 7,884 |
|
| 7,951 |
|
| 7,801 |
|
| 7,159 |
Mortgage servicing rights, net |
|
| 6,543 |
|
| 6,464 |
|
| 6,464 |
|
| 6,821 |
|
| 7,347 |
|
| 7,697 |
|
| 7,915 |
|
| 8,130 |
Goodwill and core deposit intangible |
|
| 9,005 |
|
| 8,981 |
|
| 8,956 |
|
| 8,932 |
|
| 8,911 |
|
| 9,035 |
|
| 21,990 |
|
| 21,879 |
Bank-owned life insurance ("BOLI") |
|
| 60,446 |
|
| 60,806 |
|
| 61,165 |
|
| 61,527 |
|
| 61,273 |
|
| 60,920 |
|
| 61,283 |
|
| 61,616 |
Deferred tax assets, net |
|
| 52,747 |
|
| 48,459 |
|
| 45,635 |
|
| 41,335 |
|
| 26,739 |
|
| 26,825 |
|
| 27,680 |
|
| 25,531 |
Other assets |
|
| 11,714 |
|
| 14,227 |
|
| 14,900 |
|
| 16,443 |
|
| 16,881 |
|
| 22,384 |
|
| 21,976 |
|
| 20,309 |
Total other assets |
|
| 192,836 |
|
| 189,928 |
|
| 185,906 |
|
| 181,484 |
|
| 166,507 |
|
| 176,608 |
|
| 191,296 |
|
| 187,355 |
Total assets |
| $ | 2,280,987 |
| $ | 2,329,085 |
| $ | 2,322,385 |
| $ | 2,342,024 |
| $ | 2,352,867 |
| $ | 2,586,893 |
| $ | 2,617,946 |
| $ | 2,629,705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest bearing demand |
| $ | 525,454 |
| $ | 557,265 |
| $ | 551,768 |
| $ | 556,010 |
| $ | 554,624 |
| $ | 618,765 |
| $ | 625,982 |
| $ | 634,611 |
Interest bearing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW, and money market |
|
| 969,609 |
|
| 977,796 |
|
| 958,926 |
|
| 958,808 |
|
| 970,998 |
|
| 1,059,601 |
|
| 1,064,801 |
|
| 1,045,744 |
Time |
|
| 394,388 |
|
| 392,779 |
|
| 389,037 |
|
| 383,011 |
|
| 382,422 |
|
| 460,909 |
|
| 467,933 |
|
| 461,677 |
Total deposits |
|
| 1,889,451 |
|
| 1,927,840 |
|
| 1,899,731 |
|
| 1,897,829 |
|
| 1,908,044 |
|
| 2,139,275 |
|
| 2,158,716 |
|
| 2,142,032 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold under repurchase agreements |
|
| 29,805 |
|
| 35,652 |
|
| 32,800 |
|
| 27,664 |
|
| 40,275 |
|
| 44,655 |
|
| 46,850 |
|
| 44,628 |
Other short-term borrowings |
|
| 56,111 |
|
| 58,572 |
|
| 72,065 |
|
| 84,728 |
|
| 87,444 |
|
| 58,199 |
|
| 55,119 |
|
| 83,588 |
Junior subordinated debentures |
|
| 57,597 |
|
| 57,609 |
|
| 57,621 |
|
| 57,633 |
|
| 57,645 |
|
| 57,657 |
|
| 57,669 |
|
| 57,681 |
Senior Notes |
|
| 43,978 |
|
| 43,995 |
|
| 44,021 |
|
| 44,046 |
|
| 44,071 |
|
| 44,096 |
|
| 44,121 |
|
| 44,146 |
Notes payable and other borrowings |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 19,795 |
|
| 20,768 |
|
| 17,987 |
Other liabilities |
|
| 25,061 |
|
| 18,047 |
|
| 19,395 |
|
| 26,037 |
|
| 13,969 |
|
| 15,679 |
|
| 20,142 |
|
| 17,108 |
Total liabilities |
|
| 2,102,003 |
|
| 2,141,715 |
|
| 2,125,633 |
|
| 2,137,937 |
|
| 2,151,448 |
|
| 2,379,356 |
|
| 2,403,385 |
|
| 2,407,170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
| 34,451 |
|
| 34,577 |
|
| 34,626 |
|
| 34,626 |
|
| 34,647 |
|
| 34,717 |
|
| 34,717 |
|
| 34,717 |
Additional paid-in capital |
|
| 116,747 |
|
| 117,077 |
|
| 117,340 |
|
| 117,607 |
|
| 117,734 |
|
| 117,793 |
|
| 118,366 |
|
| 118,800 |
Retained earnings |
|
| 131,631 |
|
| 136,384 |
|
| 142,657 |
|
| 148,863 |
|
| 147,309 |
|
| 155,553 |
|
| 162,486 |
|
| 172,363 |
Accumulated other comprehensive loss |
|
| (7,692) |
|
| (4,310) |
|
| (1,415) |
|
| (553) |
|
| (1,871) |
|
| (4,232) |
|
| (4,714) |
|
| (7,204) |
Treasury stock |
|
| (96,243) |
|
| (96,358) |
|
| (96,456) |
|
| (96,456) |
|
| (96,400) |
|
| (96,294) |
|
| (96,294) |
|
| (96,141) |
Total stockholders' equity |
|
| 178,894 |
|
| 187,370 |
|
| 196,752 |
|
| 204,087 |
|
| 201,419 |
|
| 207,537 |
|
| 214,561 |
|
| 222,535 |
Total liabilities and stockholders' equity |
| $ | 2,280,897 |
| $ | 2,329,085 |
| $ | 2,322,385 |
| $ | 2,342,024 |
| $ | 2,352,867 |
| $ | 2,586,893 |
| $ | 2,617,946 |
| $ | 2,629,705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Earning Assets |
| $ | 2,070,858 |
| $ | 2,115,511 |
| $ | 2,121,929 |
| $ | 2,146,570 |
| $ | 2,174,847 |
| $ | 2,392,059 |
| $ | 2,411,738 |
| $ | 2,426,682 |
Total Interest Bearing Liabilities |
|
| 1,551,488 |
|
| 1,566,403 |
|
| 1,554,470 |
|
| 1,555,890 |
|
| 1,582,855 |
|
| 1,744,912 |
|
| 1,757,261 |
|
| 1,755,451 |
13
Old Second Bancorp, Inc. and Subsidiaries
Quarterly Consolidated Statements of Income
(In thousands, except per share data, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2017 |
| 2018 | ||||||||||||||||||||
|
| 1st Qtr |
| 2nd Qtr |
| 3rd Qtr |
| 4th Qtr |
| 1st Qtr |
| 2nd Qtr |
| 3rd Qtr |
| 4th Qtr | ||||||||
Interest and Dividend Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, including fees |
| $ | 16,609 |
| $ | 17,385 |
| $ | 18,208 |
| $ | 18,535 |
| $ | 18,732 |
| $ | 22,512 |
| $ | 23,377 |
| $ | 24,144 |
Loans held-for-sale |
|
| 24 |
|
| 37 |
|
| 34 |
|
| 28 |
|
| 24 |
|
| 35 |
|
| 39 |
|
| 33 |
Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
|
| 2,963 |
|
| 2,607 |
|
| 2,424 |
|
| 2,208 |
|
| 2,170 |
|
| 2,392 |
|
| 2,491 |
|
| 2,524 |
Tax exempt |
|
| 912 |
|
| 1,648 |
|
| 1,628 |
|
| 1,751 |
|
| 2,061 |
|
| 2,114 |
|
| 2,064 |
|
| 2,102 |
Dividends from FHLB and FRBC stock |
|
| 85 |
|
| 92 |
|
| 94 |
|
| 99 |
|
| 106 |
|
| 111 |
|
| 121 |
|
| 131 |
Interest bearing deposits with financial institutions |
|
| 23 |
|
| 31 |
|
| 37 |
|
| 43 |
|
| 49 |
|
| 97 |
|
| 84 |
|
| 104 |
Total interest and dividend income |
|
| 20,616 |
|
| 21,800 |
|
| 22,425 |
|
| 22,664 |
|
| 23,142 |
|
| 27,261 |
|
| 28,176 |
|
| 29,038 |
Interest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW, and money market deposits |
|
| 223 |
|
| 233 |
|
| 239 |
|
| 255 |
|
| 344 |
|
| 501 |
|
| 642 |
|
| 670 |
Time deposits |
|
| 979 |
|
| 1,025 |
|
| 1,077 |
|
| 1,146 |
|
| 1,175 |
|
| 1,444 |
|
| 1,568 |
|
| 1,643 |
Securities sold under repurchase agreements |
|
| 2 |
|
| 4 |
|
| 4 |
|
| 7 |
|
| 79 |
|
| 104 |
|
| 140 |
|
| 138 |
Other short-term borrowings |
|
| 106 |
|
| 146 |
|
| 220 |
|
| 269 |
|
| 329 |
|
| 276 |
|
| 311 |
|
| 512 |
Junior subordinated debentures |
|
| 1,084 |
|
| 1,059 |
|
| 930 |
|
| 929 |
|
| 927 |
|
| 927 |
|
| 930 |
|
| 933 |
Senior notes |
|
| 673 |
|
| 672 |
|
| 672 |
|
| 672 |
|
| 672 |
|
| 672 |
|
| 672 |
|
| 672 |
Notes payable and other borrowings |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 95 |
|
| 173 |
|
| 130 |
Total interest expense |
|
| 3,067 |
|
| 3,139 |
|
| 3,142 |
|
| 3,278 |
|
| 3,526 |
|
| 4,019 |
|
| 4,436 |
|
| 4,698 |
Net interest and dividend income |
|
| 17,549 |
|
| 18,661 |
|
| 19,283 |
|
| 19,386 |
|
| 19,616 |
|
| 23,242 |
|
| 23,740 |
|
| 24,340 |
Provision (release) for loan and lease losses |
|
| - |
|
| 750 |
|
| 300 |
|
| 750 |
|
| (722) |
|
| 1,450 |
|
| - |
|
| 500 |
Net interest and dividend income after provision (release) for loan and lease losses |
|
| 17,549 |
|
| 17,911 |
|
| 18,983 |
|
| 18,636 |
|
| 20,338 |
|
| 21,792 |
|
| 23,740 |
|
| 23,840 |
Noninterest Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust income |
|
| 1,458 |
|
| 1,638 |
|
| 1,468 |
|
| 1,639 |
|
| 1,495 |
|
| 1,645 |
|
| 1,644 |
|
| 1,633 |
Service charges on deposits |
|
| 1,618 |
|
| 1,615 |
|
| 1,722 |
|
| 1,765 |
|
| 1,592 |
|
| 1,769 |
|
| 1,923 |
|
| 2,044 |
Secondary mortgage fees |
|
| 176 |
|
| 223 |
|
| 195 |
|
| 182 |
|
| 162 |
|
| 195 |
|
| 199 |
|
| 140 |
Mortgage servicing rights mark to market (loss) gain |
|
| (133) |
|
| (429) |
|
| (194) |
|
| (46) |
|
| 305 |
|
| (105) |
|
| (11) |
|
| (923) |
Mortgage servicing income |
|
| 435 |
|
| 444 |
|
| 451 |
|
| 448 |
|
| 452 |
|
| 627 |
|
| 471 |
|
| 389 |
Net gain on sales of mortgage loans |
|
| 1,147 |
|
| 1,473 |
|
| 1,095 |
|
| 1,088 |
|
| 917 |
|
| 1,240 |
|
| 965 |
|
| 669 |
Securities (loss) gain, net |
|
| (136) |
|
| (131) |
|
| 102 |
|
| 639 |
|
| 35 |
|
| 312 |
|
| 13 |
|
| - |
Increase in cash surrender value of BOLI |
|
| 359 |
|
| 350 |
|
| 362 |
|
| 361 |
|
| 248 |
|
| 351 |
|
| 347 |
|
| 38 |
Death benefit realized on bank-owned life insurance |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 1,026 |
|
| - |
|
| - |
|
| - |
Debit card interchange income |
|
| 975 |
|
| 1,081 |
|
| 1,075 |
|
| 1,069 |
|
| 1,012 |
|
| 1,132 |
|
| 1,135 |
|
| 1,141 |
(Loss) gain on disposal and transfer of fixed assets |
|
| (2) |
|
| 12 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
Other income |
|
| 1,131 |
|
| 1,041 |
|
| 1,567 |
|
| 1,039 |
|
| 1,261 |
|
| 1,366 |
|
| 1,128 |
|
| 1,371 |
Total noninterest income |
|
| 7,028 |
|
| 7,317 |
|
| 7,843 |
|
| 8,184 |
|
| 8,505 |
|
| 8,532 |
|
| 7,814 |
|
| 6,502 |
Noninterest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
| 10,573 |
|
| 10,545 |
|
| 10,049 |
|
| 8,913 |
|
| 10,207 |
|
| 12,355 |
|
| 11,165 |
|
| 10,435 |
Occupancy, furniture and equipment |
|
| 1,566 |
|
| 1,462 |
|
| 1,482 |
|
| 1,441 |
|
| 1,558 |
|
| 1,652 |
|
| 1,782 |
|
| 1,922 |
Computer and data processing |
|
| 1,090 |
|
| 1,112 |
|
| 1,081 |
|
| 1,104 |
|
| 1,344 |
|
| 2,741 |
|
| 1,247 |
|
| 1,413 |
FDIC insurance |
|
| 148 |
|
| 165 |
|
| 199 |
|
| 146 |
|
| 156 |
|
| 165 |
|
| 162 |
|
| 170 |
General bank insurance |
|
| 270 |
|
| 264 |
|
| 246 |
|
| 251 |
|
| 251 |
|
| 299 |
|
| 230 |
|
| 259 |
Amortization of core deposit intangible |
|
| 25 |
|
| 25 |
|
| 24 |
|
| 22 |
|
| 21 |
|
| 97 |
|
| 136 |
|
| 133 |
Advertising expense |
|
| 386 |
|
| 452 |
|
| 255 |
|
| 412 |
|
| 341 |
|
| 492 |
|
| 492 |
|
| 242 |
Debit card interchange expense |
|
| 349 |
|
| 399 |
|
| 285 |
|
| 296 |
|
| 281 |
|
| 301 |
|
| 320 |
|
| 38 |
Legal fees |
|
| 104 |
|
| 184 |
|
| 162 |
|
| 200 |
|
| 159 |
|
| 286 |
|
| 243 |
|
| 147 |
Other real estate expense, net |
|
| 709 |
|
| 539 |
|
| 680 |
|
| 237 |
|
| 173 |
|
| 429 |
|
| (370) |
|
| 165 |
Other expense |
|
| 2,834 |
|
| 2,839 |
|
| 2,455 |
|
| 3,169 |
|
| 2,863 |
|
| 3,469 |
|
| 3,304 |
|
| 3,853 |
Total noninterest expense |
|
| 18,054 |
|
| 17,986 |
|
| 16,918 |
|
| 16,191 |
|
| 17,354 |
|
| 22,286 |
|
| 18,711 |
|
| 18,777 |
Income before income taxes |
|
| 6,523 |
|
| 7,242 |
|
| 9,908 |
|
| 10,629 |
|
| 11,489 |
|
| 8,038 |
|
| 12,843 |
|
| 11,565 |
Provision for income taxes |
|
| 2,096 |
|
| 2,096 |
|
| 1,831 |
|
| 13,141 |
|
| 2,000 |
|
| 1,777 |
|
| 3,201 |
|
| 2,945 |
Net income (loss) |
| $ | 4,427 |
| $ | 5,146 |
| $ | 8,077 |
| $ | (2,512) |
| $ | 9,489 |
| $ | 6,261 |
| $ | 9,642 |
| $ | 8,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share |
| $ | 0.15 |
| $ | 0.17 |
| $ | 0.27 |
| $ | (0.08) |
| $ | 0.32 |
| $ | 0.21 |
| $ | 0.32 |
| $ | 0.29 |
Diluted earnings (loss) per share |
|
| 0.15 |
|
| 0.17 |
|
| 0.27 |
|
| (0.08) |
|
| 0.31 |
|
| 0.21 |
|
| 0.32 |
|
| 0.28 |
Dividends paid per share |
|
| 0.01 |
|
| 0.01 |
|
| 0.01 |
|
| 0.01 |
|
| 0.01 |
|
| 0.01 |
|
| 0.01 |
|
| 0.01 |
14
Reconciliation of Non-GAAP Financial Measures
The tables below provide a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure for the periods indicated. Dollar amounts below in thousands, except per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarters Ended | ||||||||||||||||
|
| December 31, 2018 |
| September 30, 2018 |
| December 31, 2017 | ||||||||||||
|
| Amount |
| Per share |
| Amount |
| Per Share |
| Amount |
| Per Share | ||||||
Adjusted Net Income and adjusted diluted earnings per share (EPS), excluding certain items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (GAAP) |
| $ | 8,620 |
| $ | 0.28 |
| $ | 9,642 |
| $ | 0.32 |
| $ | (2,512) |
| $ | (0.08) |
(Less) / Add: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition related costs, net, after tax |
|
| 89 |
|
| 0.01 |
|
| (61) |
|
| (0.00) |
|
| - |
|
| - |
Impact of federal tax reform |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 9,475 |
|
| 0.31 |
Adjusted net income, excluding certain items |
| $ | 8,709 |
| $ | 0.29 |
| $ | 9,581 |
| $ | 0.32 |
| $ | 6,963 |
| $ | 0.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarters Ended |
|
| Year Ended |
| |||||||||||
|
| December 31, |
| September 30, |
| December 31, |
|
| December 31, |
| |||||||
|
| 2018 |
| 2018 |
| 2017 |
|
| 2018 |
| 2017 |
| |||||
Net Interest Margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (GAAP) |
| $ | 29,038 |
| $ | 28,176 |
| $ | 22,664 |
|
| $ | 107,617 |
| $ | 87,505 |
|
Taxable-equivalent adjustment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
| 5 |
|
| 5 |
|
| 22 |
|
|
| 26 |
|
| 90 |
|
Securities |
|
| 559 |
|
| 548 |
|
| 943 |
|
|
| 2,217 |
|
| 3,198 |
|
Interest income (TE) |
|
| 29,602 |
|
| 28,729 |
|
| 23,629 |
|
|
| 109,860 |
|
| 90,793 |
|
Interest expense (GAAP) |
|
| 4,698 |
|
| 4,436 |
|
| 3,278 |
|
|
| 16,678 |
|
| 12,626 |
|
Net interest income (TE) |
| $ | 24,904 |
| $ | 24,293 |
| $ | 20,351 |
|
| $ | 93,182 |
| $ | 78,167 |
|
Net interest income (GAAP) |
| $ | 24,340 |
| $ | 23,740 |
| $ | 19,386 |
|
| $ | 90,939 |
| $ | 74,879 |
|
Average interest earning assets |
| $ | 2,426,682 |
| $ | 2,411,738 |
| $ | 2,146,570 |
|
| $ | 2,352,187 |
| $ | 2,113,947 |
|
Net interest margin (GAAP) |
|
| 3.98 | % |
| 3.91 | % |
| 3.58 | % |
|
| 3.87 | % |
| 3.54 | % |
Net interest margin (TE) |
|
| 4.07 | % |
| 4.00 | % |
| 3.76 | % |
|
| 3.96 | % |
| 3.70 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| ||||||
|
| December 31, |
| September 30, |
| December 31, |
| |||
|
| 2018 |
| 2018 |
| 2017 |
| |||
Efficiency Ratio |
|
|
|
|
|
|
|
|
|
|
Noninterest expense |
| $ | 18,777 |
| $ | 18,711 |
| $ | 16,191 |
|
Less amortization of core deposit |
|
| 133 |
|
| 136 |
|
| 22 |
|
Less other real estate expense, net |
|
| 165 |
|
| (370) |
|
| 237 |
|
Less acquisition related costs |
|
| 119 |
|
| (82) |
|
| 65 |
|
Adjusted noninterest expense |
| $ | 18,360 |
| $ | 19,027 |
| $ | 15,867 |
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (GAAP) |
| $ | 24,340 |
| $ | 23,740 |
| $ | 19,386 |
|
Taxable-equivalent adjustment: |
|
|
|
|
|
|
|
|
|
|
Loans |
|
| 5 |
|
| 5 |
|
| 22 |
|
Securities |
|
| 559 |
|
| 548 |
|
| 943 |
|
Net interest income (TE) |
|
| 24,904 |
|
| 24,293 |
|
| 20,351 |
|
Noninterest income |
|
| 6,502 |
|
| 7,814 |
|
| 8,184 |
|
Taxable-equivalent adjustment: |
|
|
|
|
|
|
|
|
|
|
Increase in cash surrender value of BOLI (TE) |
|
| 10 |
|
| 92 |
|
| 194 |
|
Noninterest income (TE) |
|
| 6,512 |
|
| 7,906 |
|
| 8,378 |
|
Less securities gain (loss), net |
|
| - |
|
| 13 |
|
| 639 |
|
Adjusted noninterest income, plus net interest income (TE) |
| $ | 31,416 |
| $ | 32,186 |
| $ | 28,090 |
|
Efficiency ratio (GAAP) |
|
| 59.92 | % |
| 60.06 | % |
| 59.16 | % |
Adjusted efficiency ratio (non-GAAP) |
|
| 58.44 | % |
| 59.11 | % |
| 56.49 | % |
15