|
|
|
|
|
|
(NASDAQ:OSBC) | Exhibit 99.1 | |
|
|
|
Contact: | Bradley S. Adams | For Immediate Release |
| Chief Financial Officer | July 24, 2019 |
| (630) 906-5484 |
|
Old Second Reports Second Quarter 2019 Net Income of $9.3 million,
New Commercial Lending Additions
AURORA, IL, July 24, 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 second quarter of 2019. The Company’s net income was $9.3 million, or $0.31 per diluted share, for the second quarter of 2019, compared to net income of $8.5 million, or $0.28 per diluted share, in the first quarter of 2019, and net income of $6.3 million, or $0.21 per diluted share, for the second quarter of 2018.
Old Second is also pleased to announce the expansion of its commercial lending team with the addition of three new officers during the second quarter. Louis L. Weinzelbaum joined the Bank as Group President, Senior Managing Director. Louis was most recently with MB Financial Bank where he served as Group President of the Professional Services Group. Alan H. Kohn joined the Bank as Group President, Senior Managing Director. Alan was most recently with MB Financial Bank where he served as Group President for their Healthcare Banking Group. Donald J. Clark joined the Bank as Senior Vice President, Commercial Banking. Don was most recently with MB Financial Bank where he served as Managing Director/Senior Vice President with their Commercial Banking Group. We are honored to announce these additions and we are extremely excited about the wealth of experience and knowledge they bring to our commercial team and our Chicago banking office.
Operating Results
· | Second quarter 2019 net income was $9.3 million, reflecting an increase in earnings of $809,000 from the first quarter of 2019, and an increase in earnings of $3.0 million from the second quarter of 2018. Second quarter 2019 financial results were negatively impacted by a $1.1 million mark to market loss on mortgage servicing rights (“MSRs”), of which $849,000 related solely to movements in interest rates, compared to a $819,000 loss in the first quarter of 2019, of which $642,000 related to movements in interest rates. |
· | Adjusted net income, a non-GAAP financial measure, was $9.3 million, or $0.31 per diluted share, for the second quarter of 2019, compared to adjusted net income of $8.5 million, or $0.28 per diluted share, for the first quarter of 2019, and adjusted net income of $8.7 million, or $0.29 per diluted share, for the second quarter of 2018. |
o | Second quarter 2018 adjusted net income excluded $2.5 million in costs, after tax, related to our acquisition of Greater Chicago Financial Corp. and its wholly owned subsidiary, ABC Bank, which was completed on April 20, 2018. |
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 $24.8 million for the second quarter of 2019, an increase of $718,000, or 3.0%, from $24.0 million for the first quarter of 2019, and an increase of $1.5 million, or 6.5%, from the second quarter of 2018. Net interest and dividend income in the second quarter of 2019 was favorably impacted by loan growth over the past year, as well as the December 2018 increase in interest rates. |
· | Noninterest income was $8.1 million for the second quarter of 2019, an increase of $1.7 million, or 25.6%, compared to $6.5 million for the first quarter of 2019, and a decrease of $390,000, or 4.6%, from $8.5 million for the second quarter of 2018. Total noninterest income for the second quarter of 2019 was positively impacted by net security gains recorded of $986,000, as well as growth in trust income of $253,000, compared to the first quarter of 2019, and an increase in debit card interchange income of $180,000, |
1
compared to the first quarter of 2019. The second quarter of 2019 was negatively impacted by a mark to market loss on MSRs of $1.1 million, compared to a mark to market loss on MSRs of $819,000 for the first quarter of 2019. Noninterest income for the second quarter of 2019 decreased $390,000, compared to the second quarter of 2018, with increases in the second quarter of 2019 in securities gains, net, of $674,000 and service charges on deposits of $190,000, compared to the second quarter of 2018, which were more than offset by the mark to market loss on MSRs of $1.0 million in the second quarter of 2019, compared to the second quarter of 2018. |
· | Noninterest expense was $20.1 million for the second quarter of 2019, an increase of $932,000, or 4.9%, compared to $19.2 million for the first quarter of 2019, and a decrease of $2.2 million, or 9.7%, from $22.3 million for the second quarter of 2018. The increase in noninterest expense in the second quarter of 2019, compared to the first quarter of 2019, was primarily attributable to increases in salaries, computer and data processing expense, advertising expense, debit card interchange expense, OREO valuation reserves and other expense. The decrease in noninterest expense in the second quarter of 2019, compared to the second quarter of 2018, was primarily attributable to our ABC Bank acquisition in April 2018, which resulted in higher salaries and employee benefits expense and computer and data processing expense due to the core data conversion in the second quarter of 2018. |
· | The provision for income taxes totaled $3.0 million for the second quarter of 2019, compared to $2.4 million for the first quarter of 2019 and $1.8 million for the second quarter of 2018. The linked quarter increase of $638,000 was primarily due to an increase of $1.4 million in pretax income in the second quarter of 2019, compared to the first quarter of 2019, as well as income tax credits in the first quarter of 2019 stemming from vested stock awards. The $1.3 million increase in provision for income taxes for the year over year quarter was primarily due to the $4.3 million increase in pretax income in the second quarter of 2019 compared to the second quarter of 2018. |
· | On July 16, 2019, the Company’s Board of Directors declared a cash dividend of $0.01 per share payable on August 5, 2019, to stockholders of record as of July 26, 2019. |
Capital Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 30, |
| March 31, |
| June 30, | |||
| Well-Capitalized 1 |
| 2019 |
| 2019 |
| 2018 | ||||
The Company |
|
|
|
|
|
|
|
|
|
|
|
Common equity tier 1 capital ratio | N/A |
|
| 10.26 | % |
| 9.75 | % |
| 8.49 | % |
Total risk-based capital ratio | N/A |
|
| 13.70 | % |
| 13.17 | % |
| 11.87 | % |
Tier 1 risk-based capital ratio | N/A |
|
| 12.83 | % |
| 12.30 | % |
| 10.99 | % |
Tier 1 leverage ratio | N/A |
|
| 10.85 | % |
| 10.44 | % |
| 9.37 | % |
|
|
|
|
|
|
|
|
|
|
|
|
The Bank |
|
|
|
|
|
|
|
|
|
|
|
Common equity tier 1 capital ratio | 6.50 | % |
| 13.96 | % |
| 13.60 | % |
| 12.62 | % |
Total risk-based capital ratio | 10.00 | % |
| 14.83 | % |
| 14.47 | % |
| 13.51 | % |
Tier 1 risk-based capital ratio | 8.00 | % |
| 13.96 | % |
| 13.60 | % |
| 12.62 | % |
Tier 1 leverage ratio | 5.00 | % |
| 11.96 | % |
| 11.54 | % |
| 10.75 | % |
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 $12.7 million at June 30, 2019, compared to $14.9 million at March 31, 2019, and $11.9 million at June 30, 2018. 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 0.7% at June 30, 2019, 0.8% at March 31, 2019, and 0.6% at June 30, 2018. Purchased credit impaired (“PCI”) loans acquired in our acquisition of ABC Bank totaled $10.8 million, net of purchase accounting adjustments, at June 30, 2019. We do not consider PCI loans, which showed evidence of deteriorated credit quality at acquisition, to be nonperforming assets as long as their cash flows and the timing of such cash flows continue to be estimable and probable of collection. |
2
· | OREO assets totaled $5.7 million at June 30, 2019, compared to $6.4 million at March 31, 2019, $7.2 million at December 31, 2018, and $8.9 million at June 30, 2018. Writedowns of $196,000 were recorded in the second quarter of 2019, compared to no writedowns in the first quarter of 2019, and $254,000 of valuation writedowns recorded in the second quarter of 2018. Nonperforming assets, as a percent of total loans plus OREO, was 1.0% at June 30, 2019, 1.1% at both March 31, 2019 and June 30, 2018, and 1.2% at December 31, 2018. |
· | Total loans were $1.90 billion at June 30, 2019, reflecting a slight decrease of $203,000 compared to March 31, 2019, an increase of $5.9 million compared to December 31, 2018, and an increase of $53.8 million compared to June 30, 2018, due primarily to growth in the commercial, leases, and real estate-commercial portfolios. Average loans (including loans held-for-sale) for the second quarter of 2019 were $1.90 billion, reflecting an increase of $1.8 million from the first quarter of 2019, and an increase of $88.2 million from the second quarter of 2018. Growth in the year over year period is primarily due to our acquisition of ABC Bank on April 20, 2018, which included $227.6 million of loans recorded, net of purchase accounting adjustments, which did not yet have a full quarter of average impact in the second quarter of 2018. In addition, the year over year period experienced organic growth in the commercial, leases, and real estate-commercial portfolios. |
· | Available-for-sale securities totaled $492.1 million at June 30, 2019, compared to $509.1 million at March 31, 2019, $541.2 million at December 31, 2018, and $543.6 million at June 30, 2018. Pretax net security gains of $986,000 were recorded in the second quarter of 2019, compared to $27,000 of pretax net security gains recorded in the first quarter of 2019, and $312,000 of pretax net security gains recorded in the second quarter of 2018. |
Net Interest Income
ANALYSIS OF AVERAGE BALANCES,
TAX EQUIVALENT INCOME / EXPENSE AND RATES
(Dollars in thousands - unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarters Ended | ||||||||||||||||||||||
| June 30, 2019 |
| March 31, 2019 |
| June 30, 2018 | ||||||||||||||||||
| Average |
| Income / |
| Rate |
| Average |
| Income / |
| Rate |
| Average |
| Income / |
| Rate | ||||||
| Balance |
| Expense |
| % |
| Balance |
| Expense |
| % |
| Balance |
| Expense |
| % | ||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning deposits with financial institutions | $ | 19,053 |
| $ | 111 |
| 2.34 |
| $ | 18,842 |
| $ | 114 |
| 2.45 |
| $ | 19,161 |
| $ | 97 |
| 2.03 |
Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
| 229,263 |
|
| 2,223 |
| 3.89 |
|
| 236,882 |
|
| 2,414 |
| 4.13 |
|
| 268,591 |
|
| 2,392 |
| 3.57 |
Non-taxable (TE) |
| 290,743 |
|
| 2,710 |
| 3.74 |
|
| 276,609 |
|
| 2,656 |
| 3.89 |
|
| 286,611 |
|
| 2,676 |
| 3.74 |
Total securities |
| 520,006 |
|
| 4,933 |
| 3.80 |
|
| 513,491 |
|
| 5,070 |
| 4.00 |
|
| 555,202 |
|
| 5,068 |
| 3.66 |
Dividends from FHLBC and FRBC |
| 11,317 |
|
| 156 |
| 5.53 |
|
| 11,463 |
|
| 149 |
| 5.27 |
|
| 8,619 |
|
| 111 |
| 5.17 |
Loans and loans held-for-sale 1, 2 |
| 1,897,324 |
|
| 24,958 |
| 5.28 |
|
| 1,895,512 |
|
| 24,126 |
| 5.16 |
|
| 1,809,077 |
|
| 22,552 |
| 5.00 |
Total interest earning assets |
| 2,447,700 |
|
| 30,158 |
| 4.94 |
|
| 2,439,308 |
|
| 29,459 |
| 4.90 |
|
| 2,392,059 |
|
| 27,828 |
| 4.67 |
Cash and due from banks |
| 33,618 |
|
| - |
| - |
|
| 33,749 |
|
| - |
| - |
|
| 36,720 |
|
| - |
| - |
Allowance for loan and lease losses |
| (19,435) |
|
| - |
| - |
|
| (19,235) |
|
| - |
| - |
|
| (18,494) |
|
| - |
| - |
Other noninterest bearing assets |
| 174,075 |
|
| - |
| - |
|
| 181,767 |
|
| - |
| - |
|
| 176,608 |
|
| - |
| - |
Total assets | $ | 2,635,958 |
|
|
|
|
|
| $ | 2,635,589 |
|
|
|
|
|
| $ | 2,586,893 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts | $ | 442,430 |
| $ | 373 |
| 0.34 |
| $ | 448,518 |
| $ | 379 |
| 0.34 |
| $ | 443,586 |
| $ | 238 |
| 0.22 |
Money market accounts |
| 288,698 |
|
| 262 |
| 0.36 |
|
| 299,305 |
|
| 270 |
| 0.37 |
|
| 317,775 |
|
| 193 |
| 0.24 |
Savings accounts |
| 313,822 |
|
| 124 |
| 0.16 |
|
| 307,740 |
|
| 122 |
| 0.16 |
|
| 298,240 |
|
| 70 |
| 0.09 |
Time deposits |
| 422,975 |
|
| 1,641 |
| 1.56 |
|
| 445,076 |
|
| 1,618 |
| 1.47 |
|
| 460,909 |
|
| 1,444 |
| 1.26 |
Interest bearing deposits |
| 1,467,925 |
|
| 2,400 |
| 0.66 |
|
| 1,500,639 |
|
| 2,389 |
| 0.65 |
|
| 1,520,510 |
|
| 1,945 |
| 0.51 |
Securities sold under repurchase agreements |
| 44,184 |
|
| 147 |
| 1.33 |
|
| 45,157 |
|
| 149 |
| 1.34 |
|
| 44,655 |
|
| 104 |
| 0.93 |
Other short-term borrowings |
| 93,369 |
|
| 575 |
| 2.47 |
|
| 98,328 |
|
| 607 |
| 2.50 |
|
| 58,199 |
|
| 276 |
| 1.90 |
Junior subordinated debentures |
| 57,704 |
|
| 931 |
| 6.47 |
|
| 57,692 |
|
| 927 |
| 6.52 |
|
| 57,657 |
|
| 927 |
| 6.45 |
Senior notes |
| 44,196 |
|
| 672 |
| 6.10 |
|
| 44,171 |
|
| 672 |
| 6.17 |
|
| 44,096 |
|
| 672 |
| 6.11 |
Notes payable and other borrowings |
| 13,101 |
|
| 107 |
| 3.28 |
|
| 15,273 |
|
| 116 |
| 3.08 |
|
| 19,795 |
|
| 95 |
| 1.92 |
Total interest bearing liabilities |
| 1,720,479 |
|
| 4,832 |
| 1.13 |
|
| 1,761,260 |
|
| 4,860 |
| 1.12 |
|
| 1,744,912 |
|
| 4,019 |
| 0.92 |
Noninterest bearing deposits |
| 645,580 |
|
| - |
| - |
|
| 625,423 |
|
| - |
| - |
|
| 618,765 |
|
| - |
| - |
Other liabilities |
| 19,586 |
|
| - |
| - |
|
| 13,750 |
|
| - |
| - |
|
| 15,679 |
|
| - |
| - |
Stockholders' equity |
| 250,313 |
|
| - |
| - |
|
| 235,156 |
|
| - |
| - |
|
| 207,537 |
|
| - |
| - |
Total liabilities and stockholders' equity | $ | 2,635,958 |
|
|
|
|
|
| $ | 2,635,589 |
|
|
|
|
|
| $ | 2,586,893 |
|
|
|
|
|
Net interest income (TE) 2 |
|
|
| $ | 25,326 |
|
|
|
|
|
| $ | 24,599 |
|
|
|
|
|
| $ | 23,809 |
|
|
Net interest margin (TE) 2 |
|
|
|
|
|
| 4.15 |
|
|
|
|
|
|
| 4.09 |
|
|
|
|
|
|
| 3.99 |
Interest bearing liabilities to earning assets |
| 70.29 | % |
|
|
|
|
|
| 72.20 | % |
|
|
|
|
|
| 72.95 | % |
|
|
|
|
3
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 $184,000 for the second quarter of 2019, $229,000 for the first quarter of 2019, and $233,000 for the second quarter of 2018. Nonaccrual loans are included in the above stated average balances.
2 Tax equivalent basis is calculated using a marginal tax rate of 21% in 2019 and 2018. 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 $25.3 million for the quarter ended June 30, 2019, which reflects an increase of $726,000 compared to the first quarter of 2019, and an increase of $1.5 million compared to the second quarter of 2018. The tax equivalent adjustment for the second quarter of 2019 was $572,000, compared to $563,000 for the first quarter of 2019, and $567,000 for the second quarter of 2018. Growth in interest earning assets in the second quarter of 2019, compared to the first quarter of 2019, was primarily due to non-taxable securities growth and organic loan growth, while growth in both the second and first quarters of 2019 compared to the second quarter of 2018, was primarily due to our acquisition of ABC Bank on April 20, 2018, which resulted in the addition of $227.6 million of loans recorded, net of purchase accounting adjustments. Quarterly average earning assets increased $8.4 million to $2.45 billion for the quarter ended June 30, 2019, compared to $2.44 billion for the first quarter of 2019, while the yield on average earning assets increased four basis points over the same period. Average loan growth, including loans held-for-sale, was $1.8 million for the quarter ended June 30, 2019, compared to the quarter ended March 31, 2019, while the year over year growth in the second quarter average loans, including loans held-for-sale, was $88.2 million. In addition to the ABC Bank acquisition in the second quarter of 2018, the year over year growth was also due to organic loan growth over the last twelve months, driven primarily by commercial loan and lease portfolio originations, as well as a home equity loan (“HELOC”) portfolio purchase of $20.7 million in the fourth quarter of 2018.
Tax equivalent securities income decreased $137,000 in the second quarter of 2019 compared to the first quarter of 2019, due to a reduction in yields. Tax equivalent securities income decreased by $135,000 in the second quarter of 2019, compared to the second quarter of 2018, due primarily to a reduction in average balances. Minimal security portfolio composition changes have occurred over the past year 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. This resulted in a lower security volume, but a higher yield overall in the year over year period. Our overall yield on tax equivalent securities was 3.80% for the second quarter of 2019, 4.00% for the first quarter of 2019 and 3.66% for the second quarter of 2018.
The cost of interest bearing liabilities for the second quarter of 2019 increased by one basis point from the first quarter of 2019, and increased by 21 basis points from the second quarter of 2018. Average interest bearing liabilities decreased $40.8 million in the second quarter of 2019, compared to the first quarter of 2019, primarily driven by a decrease in interest-bearing time, money market and NOW deposits. In addition, interest bearing liabilities declined as average other short-term borrowings decreased $5.0 million in the second quarter of 2019, compared to the first quarter of 2019. Total average interest bearing liabilities decreased $24.4 million in the second quarter of 2019, compared to the second quarter of 2018, due to the reduction in interest bearing deposits of $52.6 million. Growth in average demand deposits over the linked quarter period of $20.2 million and in the year over year period of $26.8 million has assisted the Company in controlling its cost of funds stemming from average interest bearing deposits, which totaled 0.66% for the second quarter of 2019, compared to 0.65% in the first quarter of 2019 and 0.51% in the second quarter of 2018.
For the quarter ended June 30, 2019, average other short-term borrowings, which consisted solely of FHLBC advances, totaled $93.4 million, compared to $98.3 million for the quarter ended March 31, 2019, and $58.2 million for the quarter ended June 30, 2018. Average rates paid on short-term FHLBC advances have increased from 1.90% in the second quarter of 2018 to 2.47% for the second quarter of 2019, reflecting the rising interest rate environment. The Company’s junior subordinated debt issuances and senior debt issuance reflected no material change in rates or volume from the linked quarter or year over year periods. Finally, average notes payable and other borrowings included long-term FHLBC advances acquired in our acquisition of ABC Bank of $13.1 million for the second quarter of 2019, $15.3 million for the first quarter of 2019, and $19.8 million for the second quarter of 2018.
The net interest margin (TE) increased six basis points to 4.15% for the second quarter of 2019 compared to 4.09% for the first quarter of 2019 due primarily to growth in loan yields impacted by the rising interest rate environment, which increased income from average earning assets more significantly than expenses related to average interest bearing liabilities, as well as growth in non-interest bearing deposits. The net interest margin (TE) in the second quarter of 2019 was 16 basis points higher than the second quarter of 2018, due primarily to increases in total interest earning assets, as well as the rising interest rate environment, which increased income from average earning assets more significantly than expenses on average interest bearing liabilities.
4
Noninterest Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2nd Qtr 2019 |
| ||
Noninterest Income |
| Three Months Ended |
| Percent Change From |
| |||||||||
(dollars in thousands) |
| June 30, |
| March 31, |
| June 30, |
| March 31, |
| June 30, |
| |||
|
| 2019 |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| |||
Trust income |
| $ | 1,739 |
| $ | 1,486 |
| $ | 1,645 |
| 17.0 |
| 5.7 |
|
Service charges on deposits |
|
| 1,959 |
|
| 1,862 |
|
| 1,769 |
| 5.2 |
| 10.7 |
|
Residential mortgage banking revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secondary mortgage fees |
|
| 203 |
|
| 136 |
|
| 195 |
| 49.3 |
| 4.1 |
|
Mortgage servicing rights mark to market (loss) |
|
| (1,137) |
|
| (819) |
|
| (105) |
| (38.8) |
| (982.9) |
|
Mortgage servicing income |
|
| 491 |
|
| 457 |
|
| 627 |
| 7.4 |
| (21.7) |
|
Net gain on sales of mortgage loans |
|
| 1,163 |
|
| 762 |
|
| 1,240 |
| 52.6 |
| (6.2) |
|
Total residential mortgage banking revenue |
|
| 720 |
|
| 536 |
|
| 1,957 |
| 34.3 |
| (63.2) |
|
Securities gain, net |
|
| 986 |
|
| 27 |
|
| 312 |
| N/M |
| 216.0 |
|
Increase in cash surrender value of BOLI |
|
| 320 |
|
| 458 |
|
| 351 |
| (30.1) |
| (8.8) |
|
Debit card interchange income |
|
| 1,166 |
|
| 987 |
|
| 1,132 |
| 18.1 |
| 3.0 |
|
Other income |
|
| 1,253 |
|
| 1,126 |
|
| 1,366 |
| 11.3 |
| (8.3) |
|
Total noninterest income |
| $ | 8,143 |
| $ | 6,482 |
| $ | 8,532 |
| 25.6 |
| (4.6) |
|
N/M - Not meaningful.
The $1.7 million increase in noninterest income in the second quarter of 2019, compared to the first quarter of 2019, was driven by aggregate increases of $1.8 million in trust income, service charges on deposits, total residential mortgage banking income, securities gains, net, debit card interchange income and other income which increased net income, which were partially offset by a decrease of $138,000 of income recorded related to the cash surrender value of BOLI.
The decrease in noninterest income for the year over year period of $389,000 was primarily driven by a $1.2 million reduction in total residential mortgage banking revenue stemming from rising interest rates and the resultant mark to market loss on MSRs in the second quarter of 2019. These reductions were partially offset by aggregate increases of $992,000 resulting from growth in trust income, service charges on deposits, securities gains, net and debit card interchange income. The decrease in other income for the second quarter of 2019, compared to the second quarter of 2018, was primarily attributable to a reduction in commercial interest rate swap fees of $255,000 and lease syndication fees of $39,000 partially offset by certain contract incentive fees of $80,000 recorded in the second quarter of 2019.
Noninterest Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2nd Qtr 2019 |
| ||
Noninterest Expense |
| Three Months Ended |
| Percent Change From |
| |||||||||
(dollars in thousands) |
| June 30, |
| March 31, |
| June 30, |
| March 31, |
| June 30, |
| |||
|
| 2019 |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| |||
Salaries |
| $ | 9,004 |
| $ | 8,634 |
| $ | 9,703 |
| 4.3 |
| (7.2) |
|
Officers incentive |
|
| 893 |
|
| 882 |
|
| 740 |
| 1.2 |
| 20.7 |
|
Benefits and other |
|
| 1,690 |
|
| 2,096 |
|
| 1,912 |
| (19.4) |
| (11.6) |
|
Total salaries and employee benefits |
|
| 11,587 |
|
| 11,612 |
|
| 12,355 |
| (0.2) |
| (6.2) |
|
Occupancy, furniture and equipment expense |
|
| 1,925 |
|
| 1,989 |
|
| 1,652 |
| (3.2) |
| 16.5 |
|
Computer and data processing |
|
| 1,524 |
|
| 1,332 |
|
| 2,741 |
| 14.4 |
| (44.4) |
|
FDIC insurance |
|
| 116 |
|
| 174 |
|
| 165 |
| (33.3) |
| (29.7) |
|
General bank insurance |
|
| 236 |
|
| 250 |
|
| 299 |
| (5.6) |
| (21.1) |
|
Amortization of core deposit intangible asset |
|
| 121 |
|
| 132 |
|
| 97 |
| (8.3) |
| 24.7 |
|
Advertising expense |
|
| 381 |
|
| 234 |
|
| 492 |
| 62.8 |
| (22.6) |
|
Debit card interchange expense |
|
| 233 |
|
| 147 |
|
| 301 |
| 58.5 |
| (22.6) |
|
Legal fees |
|
| 243 |
|
| 126 |
|
| 286 |
| 92.9 |
| (15.0) |
|
Other real estate owned expense, net |
|
| 248 |
|
| 50 |
|
| 429 |
| 396.0 |
| (42.2) |
|
Other expense |
|
| 3,512 |
|
| 3,148 |
|
| 3,469 |
| 11.6 |
| 1.2 |
|
Total noninterest expense |
| $ | 20,126 |
| $ | 19,194 |
| $ | 22,286 |
| 4.9 |
| (9.7) |
|
Efficiency ratio (GAAP)1 |
|
| 61.91 | % |
| 62.35 | % |
| 69.16 | % |
|
|
|
|
Adjusted efficiency ratio (non-GAAP)2 |
|
| 60.66 | % |
| 60.98 | % |
| 57.88 | % |
|
|
|
|
5
1 The efficiency ratio shown in the table above is a GAAP financial measure calculated as noninterest expense, excluding OREO expenses and amortization of core deposits, divided by the sum of net interest income and total noninterest income less net gains and losses on securities and any BOLI death benefit recorded.
2 The adjusted efficiency ratio shown in the table above is a non-GAAP financial measure calculated as noninterest 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 BOLI. See the discussion entitled “Non-GAAP Presentations” below and the table on page 16 that provides a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent.
Noninterest expense for the second quarter of 2019 increased $932,000, or 4.9%, compared to the first quarter of 2019, and decreased $2.2 million, or 9.7%, compared to the second quarter of 2018. The linked quarter increase is primarily attributable to a $192,000 increase in computer and data processing, a $147,000 increase in advertising expense, an $86,000 increase in debit card interchange expense, a $117,000 increase in legal fees, a $198,000 increase in other real estate owned expense due to valuation writedowns in the second quarter of 2019, and a $364,000 increase in other expense. Other expense increased in the second quarter of 2019, compared to the first quarter of 2019, due to external audit fees, commercial loan-related expenses, appraisal fees, and ATM operating expenses. These increases were partially offset by aggregate decreases of $133,000 in occupancy, furniture and equipment expense, FDIC insurance and amortization of core deposit intangible assets in the second quarter of 2019 compared to the first quarter of 2019.
The year over year decrease in noninterest expense is primarily attributable to our ABC Bank acquisition in the first quarter of 2018, which resulted in higher costs for the second quarter of 2018 due to conversion related expenses. Salaries and employee benefits expense, computer and data processing and advertising expense decreased an aggregate of $2.1 million due to acquisition costs incurred; in addition, other real estate owned expense, net, decreased $181,000 in the second quarter of 2019, compared to the second quarter of 2018, due to a reduction in the balance of OREO held. Partially offsetting the year over year decreases were increases to occupancy, furniture and equipment expense of $273,000 and amortization of core deposit intangibles of $24,000.
Earning Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 30, 2019 |
| ||
Loans |
| As of |
| Percent Change From |
| |||||||||
(dollars in thousands) |
| June 30, |
| March 31, |
| June 30, |
| March 31, |
| June 30, |
| |||
|
| 2019 |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| |||
Commercial |
| $ | 337,848 |
| $ | 324,450 |
| $ | 299,536 |
| 4.1 |
| 12.8 |
|
Leases |
|
| 98,379 |
|
| 87,730 |
|
| 66,687 |
| 12.1 |
| 47.5 |
|
Real estate - commercial |
|
| 825,091 |
|
| 835,904 |
|
| 808,264 |
| (1.3) |
| 2.1 |
|
Real estate - construction |
|
| 93,079 |
|
| 94,787 |
|
| 115,486 |
| (1.8) |
| (19.4) |
|
Real estate - residential |
|
| 393,547 |
|
| 399,866 |
|
| 404,908 |
| (1.6) |
| (2.8) |
|
Home equity line of credit "HELOC" |
|
| 128,673 |
|
| 133,859 |
|
| 127,986 |
| (3.9) |
| 0.5 |
|
Other1 |
|
| 13,533 |
|
| 14,018 |
|
| 13,969 |
| (3.5) |
| (3.1) |
|
Total loans, excluding deferred loan costs and PCI |
|
| 1,890,150 |
|
| 1,890,614 |
|
| 1,836,836 |
| (0.0) |
| 2.9 |
|
Net deferred loan costs |
|
| 1,959 |
|
| 1,681 |
|
| 1,112 |
| 16.5 |
| 76.2 |
|
Total loans, excluding PCI |
|
| 1,892,109 |
|
| 1,892,295 |
|
| 1,837,948 |
| (0.0) |
| 2.9 |
|
PCI loans, net of purchase accounting adjustments |
|
| 10,834 |
|
| 10,851 |
|
| 11,214 |
| (0.2) |
| (3.4) |
|
Total loans |
| $ | 1,902,943 |
| $ | 1,903,146 |
| $ | 1,849,162 |
| (0.0) |
| 2.9 |
|
1 Other class includes consumer and overdrafts.
Total loans decreased by $203,000 for the second quarter of 2019 compared to March 31, 2019, and increased $53.8 million for the year over year period. The majority of the year over year increase is due to organic growth in commercial loans, leases, and real estate-commercial loans.
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 30, 2019 |
| ||
Securities |
| As of |
| Percent Change From |
| |||||||||
(dollars in thousands) |
| June 30, |
| March 31, |
| June 30, |
| March 31, |
| June 30, |
| |||
|
| 2019 |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| |||
Securities available-for-sale, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
| $ | 4,025 |
| $ | 3,960 |
| $ | 3,876 |
| 1.6 |
| 3.8 |
|
U.S. government agencies |
|
| 9,812 |
|
| 10,360 |
|
| 12,216 |
| (5.3) |
| (19.7) |
|
U.S. government agency mortgage-backed |
|
| 16,999 |
|
| 15,306 |
|
| 13,407 |
| 11.1 |
| 26.8 |
|
States and political subdivisions |
|
| 251,295 |
|
| 281,172 |
|
| 276,112 |
| (10.6) |
| (9.0) |
|
Corporate bonds |
|
| - |
|
| - |
|
| 700 |
| - |
| (100.0) |
|
Collateralized mortgage obligations |
|
| 64,867 |
|
| 64,330 |
|
| 61,432 |
| 0.8 |
| 5.6 |
|
Asset-backed securities |
|
| 82,725 |
|
| 70,811 |
|
| 109,263 |
| 16.8 |
| (24.3) |
|
Collateralized loan obligations |
|
| 62,357 |
|
| 63,151 |
|
| 66,638 |
| (1.3) |
| (6.4) |
|
Total securities available-for-sale |
| $ | 492,080 |
| $ | 509,090 |
| $ | 543,644 |
| (3.3) |
| (9.5) |
|
The investment portfolio was $492.1 million as of June 30, 2019, a decrease of $17.0 million from $509.1 million as of March 31, 2019, and a decrease of $51.6 million from June 30, 2018. The portfolio composition has remained relatively static over the past year, with exceptions noted in states and political subdivisions and asset-backed securities due to sales, calls or maturities in those portfolios. The largely consistent 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. Security sales recorded in the second quarter of 2019 resulted in net securities gains of $986,000, compared to $27,000 of net securities gains in the first quarter of 2019, and $312,000 of net security gains in the second quarter of 2018.
Asset Quality
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
| June 30, 2019 | ||
Nonperforming assets |
| As of |
| Percent Change From | |||||||||
(dollars in thousands) |
| June 30, |
| March 31, |
| June 30, |
| March 31, |
| June 30, | |||
|
| 2019 |
| 2019 |
| 2018 |
| 2019 |
| 2018 | |||
Nonaccrual loans |
| $ | 11,089 |
| $ | 13,383 |
| $ | 9,421 |
| (17.1) |
| 17.7 |
Performing troubled debt restructured loans accruing interest |
|
| 1,570 |
|
| 1,550 |
|
| 1,300 |
| 1.3 |
| 20.8 |
Loans past due 90 days or more and still accruing interest |
|
| - |
|
| 4 |
|
| 1,153 |
| (100.0) |
| (100.0) |
Total nonperforming loans |
|
| 12,659 |
|
| 14,937 |
|
| 11,874 |
| (15.3) |
| 6.6 |
Other real estate owned |
|
| 5,668 |
|
| 6,365 |
|
| 8,912 |
| (11.0) |
| (36.4) |
Total nonperforming assets |
| $ | 18,327 |
| $ | 21,302 |
| $ | 20,786 |
| (14.0) |
| (11.8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PCI loans, net of purchase accounting adjustments |
| $ | 10,834 |
| $ | 10,851 |
| $ | 11,214 |
| (0.2) |
| (3.4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 days past due loans |
| $ | 8,888 |
| $ | 7,544 |
| $ | 9,617 |
|
|
|
|
Nonaccrual loans to total loans |
|
| 0.6 | % |
| 0.7 | % |
| 0.5 | % |
|
|
|
Nonperforming loans to total loans |
|
| 0.7 | % |
| 0.8 | % |
| 0.6 | % |
|
|
|
Nonperforming assets to total loans plus OREO |
|
| 1.0 | % |
| 1.1 | % |
| 1.1 | % |
|
|
|
Purchased credit-impaired loans to total loans |
|
| 0.6 | % |
| 0.6 | % |
| 0.6 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease losses |
| $ | 19,372 |
| $ | 19,316 |
| $ | 19,321 |
|
|
|
|
Allowance for loan and lease losses to total loans |
|
| 1.0 | % |
| 1.0 | % |
| 1.0 | % |
|
|
|
Allowance for loan and lease losses to nonaccrual loans |
|
| 174.7 | % |
| 144.3 | % |
| 205.1 | % |
|
|
|
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. We do not consider PCI loans, which showed evidence of deteriorated credit quality at acquisition, to be nonperforming assets as long as their cash flows and the timing of such cash flows continue to be estimable and probable of collection. Nonperforming loans to total loans was 0.7% in the second quarter of 2019, 0.8% in the first quarter of 2019, and 0.6% for the second quarter of 2018. Nonperforming assets to total loans plus OREO ended at 1.0% in the second quarter of 2019 compared to 1.1% in both the first quarter of 2019 and the second quarter of 2018, reflecting stable nonperforming metrics as loan portfolio growth occurred over the last year, as well as continued OREO liquidations over the past year and write-downs recorded in 2019 and 2018. Finally, the allowance for loan and lease losses to total loans was 1.0% as of June 30, 2019, March 31, 2019, and June 30, 2018.
The following table details the accretable discount on all of our purchased loans for the quarters ended June 30, 2019, and March 31, 2019.
7
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased Accounting Accretion |
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
| Accretable Discount- Non-PCI Loans |
| Accretable Discount- PCI Loans |
| Non-Accretable Discount- PCI Loans |
| Total | ||||
Beginning balance, April 1, 2019 |
| $ | 1,502 |
| $ | 1,085 |
| $ | 5,969 |
| $ | 8,556 |
Accretion |
|
| (286) |
|
| (108) |
|
| - |
|
| (394) |
Charge-offs |
|
| - |
|
| (48) |
|
| (467) |
|
| (515) |
Transfer |
|
| - |
|
| 2 |
|
| (2) |
|
| - |
Ending balance, June 30, 2019 |
| $ | 1,216 |
| $ | 931 |
| $ | 5,500 |
| $ | 7,647 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accretable Discount - Non-PCI Loans |
| Accretable Discount - PCI Loans |
| Non-Accretable Discount - PCI Loans |
| Total | ||||
Beginning balance, January 1, 2019 |
| $ | 1,867 |
| $ | 1,099 |
| $ | 5,969 |
| $ | 8,935 |
Accretion |
|
| (365) |
|
| (14) |
|
| - |
|
| (379) |
Ending balance, March 31, 2019 |
| $ | 1,502 |
| $ | 1,085 |
| $ | 5,969 |
| $ | 8,556 |
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows classified assets by segment for the following periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 30, 2019 |
| ||
Classified loans |
| As of |
| Percent Change From |
| |||||||||
(dollars in thousands) |
| June 30, |
| March 31, |
| June 30, |
| March 31, |
| June 30, |
| |||
|
| 2019 |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| |||
Commercial |
| $ | 7,704 |
| $ | 7,075 |
| $ | 393 |
| 8.9 |
| N/M |
|
Leases |
|
| 125 |
|
| 114 |
|
| 539 |
| 9.6 |
| (76.8) |
|
Real estate-commercial, nonfarm |
|
| 19,186 |
|
| 22,079 |
|
| 12,362 |
| (13.1) |
| 55.2 |
|
Real estate-commercial, farm |
|
| 1,210 |
|
| 1,222 |
|
| 1,248 |
| (1.0) |
| (3.0) |
|
Real estate-construction |
|
| 273 |
|
| 2,589 |
|
| 366 |
| (89.5) |
| (25.4) |
|
Real estate-residential: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor |
|
| 1,029 |
|
| 991 |
|
| 1,029 |
| 3.8 |
| - |
|
Multi-Family |
|
| 493 |
|
| 487 |
|
| 3,302 |
| 1.2 |
| (85.1) |
|
Owner occupied |
|
| 3,773 |
|
| 4,728 |
|
| 5,428 |
| (20.2) |
| (30.5) |
|
HELOC |
|
| 2,078 |
|
| 1,966 |
|
| 1,633 |
| 5.7 |
| 27.3 |
|
Other1 |
|
| 24 |
|
| 28 |
|
| 18 |
| (14.3) |
| 33.3 |
|
Total classified loans, excluding PCI |
|
| 35,895 |
|
| 41,279 |
|
| 26,318 |
| (13.0) |
| 36.4 |
|
PCI loans, net of purchase accounting adjustments |
|
| 10,834 |
|
| 10,851 |
|
| 11,214 |
| (0.2) |
| (3.4) |
|
Total classified loans |
| $ | 46,729 |
| $ | 52,130 |
| $ | 37,532 |
| (10.4) |
| 24.5 |
|
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 $46.7 million as of June 30, 2019, a decrease of $5.4 million, or 10.4%, from the prior linked quarter, and an increase of $9.2 million, or 24.5%, from the second quarter of 2018. The $10.8 million of PCI loans as of June 30, 2019, $10.9 million as of March 31, 2019, and $11.2 million as of June 30, 2018, stems from our acquisition of ABC Bank in 2018.
8
Net Charge-off Summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan Charge-offs, net of recoveries | Quarters Ended | |||||||||||||
(dollars in thousands) | June 30, |
| % of |
| March 31, |
| % of |
| June 30, |
| % of | |||
| 2019 |
| Total 2 |
| 2019 |
| Total 2 |
| 2018 |
| Total 2 | |||
Commercial | $ | 61 |
| 15.5 |
| $ | (18) |
| (12.9) |
| $ | (77) |
| (24.3) |
Leases |
| - |
| - |
|
| - |
| - |
|
| 8 |
| 2.5 |
Real estate-commercial, nonfarm |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner general purpose |
| 42 |
| 10.7 |
|
| 87 |
| 62.1 |
|
| 27 |
| 8.5 |
Owner special purpose |
| - |
| - |
|
| (3) |
| (2.1) |
|
| - |
| - |
Non-owner general purpose |
| (12) |
| (3.0) |
|
| (15) |
| (10.7) |
|
| (20) |
| (6.3) |
Non-owner special purpose |
| - |
| - |
|
| 139 |
| 99.3 |
|
| 476 |
| 150.2 |
Retail properties |
| - |
| - |
|
| - |
| - |
|
| - |
| - |
Total real estate-commercial, nonfarm |
| 30 |
| 7.7 |
|
| 208 |
| 148.6 |
|
| 483 |
| 152.4 |
Real estate-construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilder |
| - |
| - |
|
| (1) |
| (0.7) |
|
| - |
| - |
Land |
| - |
| - |
|
| - |
| - |
|
| (2) |
| (0.6) |
Commercial speculative |
| (2) |
| (0.5) |
|
| 2 |
| 1.4 |
|
| - |
| - |
All other |
| 1 |
| 0.3 |
|
| - |
| - |
|
| 2 |
| 0.6 |
Total real estate-construction |
| (1) |
| (0.2) |
|
| 1 |
| 0.7 |
|
| - |
| - |
Real estate-residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor |
| (3) |
| (0.8) |
|
| (10) |
| (7.1) |
|
| (63) |
| (19.9) |
Multi-Family |
| - |
| - |
|
| (8) |
| (5.7) |
|
| (11) |
| (3.5) |
Owner occupied |
| (11) |
| (2.8) |
|
| (14) |
| (10.0) |
|
| (26) |
| (8.2) |
Total real estate-residential |
| (14) |
| (3.6) |
|
| (32) |
| (22.8) |
|
| (100) |
| (31.6) |
HELOC |
| 267 |
| 67.8 |
|
| (46) |
| (32.9) |
|
| (26) |
| (8.2) |
Other1 |
| 51 |
| 12.8 |
|
| 27 |
| 19.3 |
|
| 29 |
| 9.2 |
Net charge-offs / (recoveries) | $ | 394 |
| 100.0 |
| $ | 140 |
| 100.0 |
| $ | 317 |
| 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 June 30, 2019, were $474,000, compared to $345,000 for the quarter ended March 31, 2019, and $699,000 for the quarter ended June 30, 2018. Gross recoveries were $80,000 for the quarter ended June 30, 2019, compared to $205,000 for the quarter ended March 31, 2019, and $382,000 for the second quarter of 2018. Continued recoveries are indicative of the ongoing aggressive efforts by management to effectively manage and resolve prior charge-offs.
Deposits
Total deposits were $2.08 billion at June 30, 2019, which reflects a decrease of $45.7 million compared to March 31, 2019, stemming from aggregate decreases in savings, NOW, money market and time deposits of $48.7 million, partially offset by an increase in demand deposits of $3.0 million. Total deposits decreased $84.1 million in the year over year period reflecting decreases in NOW, money market and time deposits of $106.2 million, partially offset by aggregate increases in demand deposits and savings accounts of $22.1 million.
Borrowings
As of June 30, 2019, we had $87.1 million outstanding in other short-term borrowings compared to $85.0 million as of March 31, 2019, and $76.6 million as of June 30, 2018.
The Company is indebted on senior notes totaling $44.2 million, net of deferred issuance costs, as of June 30, 2019. 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 $11.0 million of long-term FHLBC advances acquired with our ABC Bank acquisition, with terms ranging from June 9, 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 6. 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 15-16 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, July 25, 2019, 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 844-369-8770. 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 August 1, 2019, by dialing 877-481-4010, using Conference ID: 49597.
10
Old Second Bancorp, Inc. and Subsidiaries
(In thousands)
|
|
|
|
|
|
|
|
| (unaudited) |
|
|
| |
|
| June 30, |
| December 31, | ||
|
| 2019 |
| 2018 | ||
Assets |
|
|
|
|
|
|
Cash and due from banks |
| $ | 38,036 |
| $ | 38,599 |
Interest earning deposits with financial institutions |
|
| 20,181 |
|
| 16,636 |
Cash and cash equivalents |
|
| 58,217 |
|
| 55,235 |
Securities available-for-sale, at fair value |
|
| 492,080 |
|
| 541,248 |
Federal Home Loan Bank Chicago ("FHLBC") and Federal Reserve Bank Chicago ("FRBC") stock |
|
| 10,608 |
|
| 13,433 |
Loans held-for-sale |
|
| 5,142 |
|
| 2,984 |
Loans |
|
| 1,902,943 |
|
| 1,897,027 |
Less: allowance for loan and lease losses |
|
| 19,372 |
|
| 19,006 |
Net loans |
|
| 1,883,571 |
|
| 1,878,021 |
Premises and equipment, net |
|
| 42,551 |
|
| 42,439 |
Other real estate owned |
|
| 5,668 |
|
| 7,175 |
Mortgage servicing rights, net |
|
| 5,818 |
|
| 7,357 |
Goodwill and core deposit intangible |
|
| 21,561 |
|
| 21,814 |
Bank-owned life insurance ("BOLI") |
|
| 62,322 |
|
| 61,544 |
Deferred tax assets, net |
|
| 14,277 |
|
| 21,280 |
Other assets |
|
| 21,791 |
|
| 23,473 |
Total assets |
| $ | 2,623,606 |
| $ | 2,676,003 |
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
Noninterest bearing demand |
| $ | 632,900 |
| $ | 618,830 |
Interest bearing: |
|
|
|
|
|
|
Savings, NOW, and money market |
|
| 1,023,621 |
|
| 1,040,668 |
Time |
|
| 421,253 |
|
| 457,175 |
Total deposits |
|
| 2,077,774 |
|
| 2,116,673 |
Securities sold under repurchase agreements |
|
| 54,166 |
|
| 46,632 |
Other short-term borrowings |
|
| 87,125 |
|
| 149,500 |
Junior subordinated debentures |
|
| 57,710 |
|
| 57,686 |
Senior notes |
|
| 44,208 |
|
| 44,158 |
Notes payable and other borrowings |
|
| 11,035 |
|
| 15,379 |
Other liabilities |
|
| 34,324 |
|
| 16,894 |
Total liabilities |
|
| 2,366,342 |
|
| 2,446,922 |
|
|
|
|
|
|
|
Stockholders’ Equity |
|
|
|
|
|
|
Common stock |
|
| 34,825 |
|
| 34,720 |
Additional paid-in capital |
|
| 119,762 |
|
| 119,081 |
Retained earnings |
|
| 192,612 |
|
| 175,463 |
Accumulated other comprehensive income (loss) |
|
| 6,112 |
|
| (4,079) |
Treasury stock |
|
| (96,047) |
|
| (96,104) |
Total stockholders’ equity |
|
| 257,264 |
|
| 229,081 |
Total liabilities and stockholders’ equity |
| $ | 2,623,606 |
| $ | 2,676,003 |
11
Old Second Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income
(In thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (unaudited) |
| (unaudited) |
| |||||||
|
| Three Months Ended June 30, |
| Six Months Ended June 30, | |||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Interest and dividend income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, including fees |
| $ | 24,924 |
| $ | 22,512 |
| $ | 49,023 |
| $ | 41,248 |
|
Loans held-for-sale |
|
| 31 |
|
| 35 |
|
| 53 |
|
| 55 |
|
Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
|
| 2,223 |
|
| 2,392 |
|
| 4,637 |
|
| 4,562 |
|
Tax exempt |
|
| 2,141 |
|
| 2,114 |
|
| 4,239 |
|
| 4,175 |
|
Dividends from FHLBC and FRBC stock |
|
| 156 |
|
| 111 |
|
| 305 |
|
| 217 |
|
Interest bearing deposits with financial institutions |
|
| 111 |
|
| 97 |
|
| 225 |
|
| 146 |
|
Total interest and dividend income |
|
| 29,586 |
|
| 27,261 |
|
| 58,482 |
|
| 50,403 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW, and money market deposits |
|
| 759 |
|
| 501 |
|
| 1,530 |
|
| 845 |
|
Time deposits |
|
| 1,641 |
|
| 1,444 |
|
| 3,259 |
|
| 2,619 |
|
Securities sold under repurchase agreements |
|
| 147 |
|
| 104 |
|
| 296 |
|
| 183 |
|
Other short-term borrowings |
|
| 575 |
|
| 276 |
|
| 1,182 |
|
| 605 |
|
Junior subordinated debentures |
|
| 931 |
|
| 927 |
|
| 1,858 |
|
| 1,854 |
|
Senior notes |
|
| 672 |
|
| 672 |
|
| 1,344 |
|
| 1,344 |
|
Notes payable and other borrowings |
|
| 107 |
|
| 95 |
|
| 223 |
|
| 95 |
|
Total interest expense |
|
| 4,832 |
|
| 4,019 |
|
| 9,692 |
|
| 7,545 |
|
Net interest and dividend income |
|
| 24,754 |
|
| 23,242 |
|
| 48,790 |
|
| 42,858 |
|
Provision for loan and lease losses |
|
| 450 |
|
| 1,450 |
|
| 900 |
|
| 728 |
|
Net interest and dividend income after provision for loan and lease losses |
|
| 24,304 |
|
| 21,792 |
|
| 47,890 |
|
| 42,130 |
|
Noninterest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust income |
|
| 1,739 |
|
| 1,645 |
|
| 3,225 |
|
| 3,140 |
|
Service charges on deposits |
|
| 1,959 |
|
| 1,769 |
|
| 3,821 |
|
| 3,361 |
|
Secondary mortgage fees |
|
| 203 |
|
| 195 |
|
| 339 |
|
| 357 |
|
Mortgage servicing rights mark to market (loss) gain |
|
| (1,137) |
|
| (105) |
|
| (1,956) |
|
| 200 |
|
Mortgage servicing income |
|
| 491 |
|
| 627 |
|
| 948 |
|
| 1,079 |
|
Net gain on sales of mortgage loans |
|
| 1,163 |
|
| 1,240 |
|
| 1,925 |
|
| 2,157 |
|
Securities gains, net |
|
| 986 |
|
| 312 |
|
| 1,013 |
|
| 347 |
|
Increase in cash surrender value of BOLI |
|
| 320 |
|
| 351 |
|
| 778 |
|
| 599 |
|
Death benefit realized on BOLI |
|
| - |
|
| - |
|
| - |
|
| 1,026 |
|
Debit card interchange income |
|
| 1,166 |
|
| 1,132 |
|
| 2,153 |
|
| 2,144 |
|
Other income |
|
| 1,253 |
|
| 1,366 |
|
| 2,379 |
|
| 2,627 |
|
Total noninterest income |
|
| 8,143 |
|
| 8,532 |
|
| 14,625 |
|
| 17,037 |
|
Noninterest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
| 11,587 |
|
| 12,355 |
|
| 23,199 |
|
| 22,562 |
|
Occupancy, furniture and equipment |
|
| 1,925 |
|
| 1,652 |
|
| 3,914 |
|
| 3,210 |
|
Computer and data processing |
|
| 1,524 |
|
| 2,741 |
|
| 2,856 |
|
| 4,085 |
|
FDIC insurance |
|
| 116 |
|
| 165 |
|
| 290 |
|
| 321 |
|
General bank insurance |
|
| 236 |
|
| 299 |
|
| 486 |
|
| 550 |
|
Amortization of core deposit intangible |
|
| 121 |
|
| 97 |
|
| 253 |
|
| 118 |
|
Advertising expense |
|
| 381 |
|
| 492 |
|
| 615 |
|
| 833 |
|
Debit card interchange expense |
|
| 233 |
|
| 301 |
|
| 380 |
|
| 582 |
|
Legal fees |
|
| 243 |
|
| 286 |
|
| 369 |
|
| 445 |
|
Other real estate expense, net |
|
| 248 |
|
| 429 |
|
| 298 |
|
| 602 |
|
Other expense | �� |
| 3,512 |
|
| 3,469 |
|
| 6,660 |
|
| 6,332 |
|
Total noninterest expense |
|
| 20,126 |
|
| 22,286 |
|
| 39,320 |
|
| 39,640 |
|
Income before income taxes |
|
| 12,321 |
|
| 8,038 |
|
| 23,195 |
|
| 19,527 |
|
Provision for income taxes |
|
| 3,043 |
|
| 1,777 |
|
| 5,449 |
|
| 3,777 |
|
Net income |
| $ | 9,278 |
| $ | 6,261 |
| $ | 17,746 |
| $ | 15,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
| $ | 0.31 |
| $ | 0.21 |
| $ | 0.59 |
| $ | 0.53 |
|
Diluted earnings per share |
|
| 0.31 |
|
| 0.21 |
|
| 0.58 |
|
| 0.52 |
|
Dividends declared per share |
|
| 0.01 |
|
| 0.01 |
|
| 0.02 |
|
| 0.02 |
|
|
|
|
|
|
|
|
|
|
Ending common shares outstanding |
| 29,896,529 |
| 29,747,078 |
| 29,896,529 |
| 29,747,078 |
Weighted-average basic shares outstanding |
| 29,896,231 |
| 29,747,078 |
| 29,871,081 |
| 29,703,508 |
Weighted-average diluted shares outstanding |
| 30,389,892 |
| 30,337,282 |
| 30,366,889 |
| 30,253,440 |
12
Old Second Bancorp, Inc. and Subsidiaries
Quarterly Consolidated Average Balance
(In thousands, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2018 |
| 2019 | |||||||||||||
Assets |
| 1st Qtr |
| 2nd Qtr |
| 3rd Qtr |
| 4th Qtr |
| 1st Qtr |
| 2nd Qtr | ||||||
Cash and due from banks |
| $ | 29,776 |
| $ | 36,720 |
| $ | 34,608 |
| $ | 34,915 |
| $ | 33,749 |
| $ | 33,618 |
Interest earning deposits with financial institutions |
|
| 13,819 |
|
| 19,161 |
|
| 17,975 |
|
| 19,142 |
|
| 18,842 |
|
| 19,053 |
Cash and cash equivalents |
|
| 43,595 |
|
| 55,881 |
|
| 52,583 |
|
| 54,057 |
|
| 52,591 |
|
| 52,671 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available-for-sale, at fair value |
|
| 549,161 |
|
| 555,202 |
|
| 542,297 |
|
| 538,882 |
|
| 513,491 |
|
| 520,006 |
FHLBC and FRBC stock |
|
| 8,920 |
|
| 8,619 |
|
| 8,905 |
|
| 10,758 |
|
| 11,463 |
|
| 11,317 |
Loans held-for-sale |
|
| 2,353 |
|
| 2,868 |
|
| 3,220 |
|
| 2,617 |
|
| 1,853 |
|
| 2,870 |
Loans |
|
| 1,600,594 |
|
| 1,806,209 |
|
| 1,839,341 |
|
| 1,855,283 |
|
| 1,893,659 |
|
| 1,894,454 |
Less: allowance for loan and lease losses |
|
| 18,263 |
|
| 18,494 |
|
| 19,696 |
|
| 19,247 |
|
| 19,235 |
|
| 19,435 |
Net loans |
|
| 1,582,331 |
|
| 1,787,715 |
|
| 1,819,645 |
|
| 1,836,036 |
|
| 1,874,424 |
|
| 1,875,019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premises and equipment, net |
|
| 37,472 |
|
| 41,796 |
|
| 42,651 |
|
| 42,731 |
|
| 42,270 |
|
| 42,271 |
Other real estate owned |
|
| 7,884 |
|
| 7,951 |
|
| 7,801 |
|
| 7,159 |
|
| 6,779 |
|
| 6,012 |
Mortgage servicing rights, net |
|
| 7,347 |
|
| 7,697 |
|
| 7,915 |
|
| 8,130 |
|
| 7,334 |
|
| 6,551 |
Goodwill and core deposit intangible |
|
| 8,911 |
|
| 9,035 |
|
| 21,990 |
|
| 21,879 |
|
| 21,747 |
|
| 21,618 |
Bank-owned life insurance ("BOLI") |
|
| 61,273 |
|
| 60,920 |
|
| 61,283 |
|
| 61,616 |
|
| 61,661 |
|
| 62,124 |
Deferred tax assets, net |
|
| 26,739 |
|
| 26,825 |
|
| 27,680 |
|
| 25,531 |
|
| 20,878 |
|
| 16,458 |
Other assets |
|
| 16,881 |
|
| 22,384 |
|
| 21,976 |
|
| 20,309 |
|
| 21,098 |
|
| 19,041 |
Total other assets |
|
| 166,507 |
|
| 176,608 |
|
| 191,296 |
|
| 187,355 |
|
| 181,767 |
|
| 174,075 |
Total assets |
| $ | 2,352,867 |
| $ | 2,586,893 |
| $ | 2,617,946 |
| $ | 2,629,705 |
| $ | 2,635,589 |
| $ | 2,635,958 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest bearing demand |
| $ | 554,624 |
| $ | 618,765 |
| $ | 625,982 |
| $ | 634,611 |
| $ | 625,423 |
| $ | 645,580 |
Interest bearing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW, and money market |
|
| 970,998 |
|
| 1,059,601 |
|
| 1,064,801 |
|
| 1,045,744 |
|
| 1,055,563 |
|
| 1,044,950 |
Time |
|
| 382,422 |
|
| 460,909 |
|
| 467,933 |
|
| 461,677 |
|
| 445,076 |
|
| 422,975 |
Total deposits |
|
| 1,908,044 |
|
| 2,139,275 |
|
| 2,158,716 |
|
| 2,142,032 |
|
| 2,126,062 |
|
| 2,113,505 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold under repurchase agreements |
|
| 40,275 |
|
| 44,655 |
|
| 46,850 |
|
| 44,628 |
|
| 45,157 |
|
| 44,184 |
Other short-term borrowings |
|
| 87,444 |
|
| 58,199 |
|
| 55,119 |
|
| 83,588 |
|
| 98,328 |
|
| 93,369 |
Junior subordinated debentures |
|
| 57,645 |
|
| 57,657 |
|
| 57,669 |
|
| 57,681 |
|
| 57,692 |
|
| 57,704 |
Senior Notes |
|
| 44,071 |
|
| 44,096 |
|
| 44,121 |
|
| 44,146 |
|
| 44,171 |
|
| 44,196 |
Notes payable and other borrowings |
|
| - |
|
| 19,795 |
|
| 20,768 |
|
| 17,987 |
|
| 15,273 |
|
| 13,101 |
Other liabilities |
|
| 13,969 |
|
| 15,679 |
|
| 20,142 |
|
| 17,108 |
|
| 13,750 |
|
| 19,586 |
Total liabilities |
|
| 2,151,448 |
|
| 2,379,356 |
|
| 2,403,385 |
|
| 2,407,170 |
|
| 2,400,433 |
|
| 2,385,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
| 34,647 |
|
| 34,717 |
|
| 34,717 |
|
| 34,717 |
|
| 34,775 |
|
| 34,825 |
Additional paid-in capital |
|
| 117,734 |
|
| 117,793 |
|
| 118,366 |
|
| 118,800 |
|
| 119,051 |
|
| 119,381 |
Retained earnings |
|
| 147,309 |
|
| 155,553 |
|
| 162,486 |
|
| 172,363 |
|
| 180,398 |
|
| 188,453 |
Accumulated other comprehensive loss |
|
| (1,871) |
|
| (4,232) |
|
| (4,714) |
|
| (7,204) |
|
| (3,102) |
|
| 3,705 |
Treasury stock |
|
| (96,400) |
|
| (96,294) |
|
| (96,294) |
|
| (96,141) |
|
| (95,966) |
|
| (96,051) |
Total stockholders' equity |
|
| 201,419 |
|
| 207,537 |
|
| 214,561 |
|
| 222,535 |
|
| 235,156 |
|
| 250,313 |
Total liabilities and stockholders' equity |
| $ | 2,352,867 |
| $ | 2,586,893 |
| $ | 2,617,946 |
| $ | 2,629,705 |
| $ | 2,635,589 |
| $ | 2,635,958 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Earning Assets |
| $ | 2,174,847 |
| $ | 2,392,059 |
| $ | 2,411,738 |
| $ | 2,426,682 |
| $ | 2,439,308 |
| $ | 2,447,700 |
Total Interest Bearing Liabilities |
|
| 1,582,855 |
|
| 1,744,912 |
|
| 1,757,261 |
|
| 1,755,451 |
|
| 1,761,260 |
|
| 1,720,479 |
13
Old Second Bancorp, Inc. and Subsidiaries
Quarterly Consolidated Statements of Income
(In thousands, except per share data, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2018 |
| 2019 |
| ||||||||||||||
|
| 1st Qtr |
| 2nd Qtr |
| 3rd Qtr |
| 4th Qtr |
| 1st Qtr |
| 2nd Qtr |
| ||||||
Interest and Dividend Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, including fees |
| $ | 18,732 |
| $ | 22,512 |
| $ | 23,377 |
| $ | 24,144 |
| $ | 24,099 |
| $ | 24,924 |
|
Loans held-for-sale |
|
| 24 |
|
| 35 |
|
| 39 |
|
| 33 |
|
| 22 |
|
| 31 |
|
Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
|
| 2,170 |
|
| 2,392 |
|
| 2,491 |
|
| 2,524 |
|
| 2,414 |
|
| 2,223 |
|
Tax exempt |
|
| 2,061 |
|
| 2,114 |
|
| 2,064 |
|
| 2,102 |
|
| 2,098 |
|
| 2,141 |
|
Dividends from FHLB and FRBC stock |
|
| 106 |
|
| 111 |
|
| 121 |
|
| 131 |
|
| 149 |
|
| 156 |
|
Interest bearing deposits with financial institutions |
|
| 49 |
|
| 97 |
|
| 84 |
|
| 104 |
|
| 114 |
|
| 111 |
|
Total interest and dividend income |
|
| 23,142 |
|
| 27,261 |
|
| 28,176 |
|
| 29,038 |
|
| 28,896 |
|
| 29,586 |
|
Interest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW, and money market deposits |
|
| 344 |
|
| 501 |
|
| 642 |
|
| 670 |
|
| 771 |
|
| 759 |
|
Time deposits |
|
| 1,175 |
|
| 1,444 |
|
| 1,568 |
|
| 1,643 |
|
| 1,618 |
|
| 1,641 |
|
Securities sold under repurchase agreements |
|
| 79 |
|
| 104 |
|
| 140 |
|
| 138 |
|
| 149 |
|
| 147 |
|
Other short-term borrowings |
|
| 329 |
|
| 276 |
|
| 311 |
|
| 512 |
|
| 607 |
|
| 575 |
|
Junior subordinated debentures |
|
| 927 |
|
| 927 |
|
| 930 |
|
| 933 |
|
| 927 |
|
| 931 |
|
Senior notes |
|
| 672 |
|
| 672 |
|
| 672 |
|
| 672 |
|
| 672 |
|
| 672 |
|
Notes payable and other borrowings |
|
| - |
|
| 95 |
|
| 173 |
|
| 130 |
|
| 116 |
|
| 107 |
|
Total interest expense |
|
| 3,526 |
|
| 4,019 |
|
| 4,436 |
|
| 4,698 |
|
| 4,860 |
|
| 4,832 |
|
Net interest and dividend income |
|
| 19,616 |
|
| 23,242 |
|
| 23,740 |
|
| 24,340 |
|
| 24,036 |
|
| 24,754 |
|
(Release) provision for loan and lease losses |
|
| (722) |
|
| 1,450 |
|
| - |
|
| 500 |
|
| 450 |
|
| 450 |
|
Net interest and dividend income after (release) provision for loan and lease losses |
|
| 20,338 |
|
| 21,792 |
|
| 23,740 |
|
| 23,840 |
|
| 23,586 |
|
| 24,304 |
|
Noninterest Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust income |
|
| 1,495 |
|
| 1,645 |
|
| 1,644 |
|
| 1,633 |
|
| 1,486 |
|
| 1,739 |
|
Service charges on deposits |
|
| 1,592 |
|
| 1,769 |
|
| 1,923 |
|
| 2,044 |
|
| 1,862 |
|
| 1,959 |
|
Secondary mortgage fees |
|
| 162 |
|
| 195 |
|
| 199 |
|
| 140 |
|
| 136 |
|
| 203 |
|
Mortgage servicing rights mark to market gain (loss) |
|
| 305 |
|
| (105) |
|
| (11) |
|
| (923) |
|
| (819) |
|
| (1,137) |
|
Mortgage servicing income |
|
| 452 |
|
| 627 |
|
| 471 |
|
| 389 |
|
| 457 |
|
| 491 |
|
Net gain on sales of mortgage loans |
|
| 917 |
|
| 1,240 |
|
| 965 |
|
| 669 |
|
| 762 |
|
| 1,163 |
|
Securities gains, net |
|
| 35 |
|
| 312 |
|
| 13 |
|
| - |
|
| 27 |
|
| 986 |
|
Increase in cash surrender value of BOLI |
|
| 248 |
|
| 351 |
|
| 347 |
|
| 38 |
|
| 458 |
|
| 320 |
|
Death benefit realized on BOLI |
|
| 1,026 |
|
| - |
|
| - |
|
| - |
|
| - |
|
|
|
|
Debit card interchange income |
|
| 1,012 |
|
| 1,132 |
|
| 1,135 |
|
| 1,141 |
|
| 987 |
|
| 1,166 |
|
Other income |
|
| 1,261 |
|
| 1,366 |
|
| 1,128 |
|
| 1,371 |
|
| 1,126 |
|
| 1,253 |
|
Total noninterest income |
|
| 8,505 |
|
| 8,532 |
|
| 7,814 |
|
| 6,502 |
|
| 6,482 |
|
| 8,143 |
|
Noninterest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
| 10,207 |
|
| 12,355 |
|
| 11,165 |
|
| 10,435 |
|
| 11,612 |
|
| 11,587 |
|
Occupancy, furniture and equipment |
|
| 1,558 |
|
| 1,652 |
|
| 1,782 |
|
| 1,922 |
|
| 1,989 |
|
| 1,925 |
|
Computer and data processing |
|
| 1,344 |
|
| 2,741 |
|
| 1,247 |
|
| 1,413 |
|
| 1,332 |
|
| 1,524 |
|
FDIC insurance |
|
| 156 |
|
| 165 |
|
| 162 |
|
| 170 |
|
| 174 |
|
| 116 |
|
General bank insurance |
|
| 251 |
|
| 299 |
|
| 230 |
|
| 259 |
|
| 250 |
|
| 236 |
|
Amortization of core deposit intangible |
|
| 21 |
|
| 97 |
|
| 136 |
|
| 133 |
|
| 132 |
|
| 121 |
|
Advertising expense |
|
| 341 |
|
| 492 |
|
| 492 |
|
| 242 |
|
| 234 |
|
| 381 |
|
Debit card interchange expense |
|
| 281 |
|
| 301 |
|
| 320 |
|
| 38 |
|
| 147 |
|
| 233 |
|
Legal fees |
|
| 159 |
|
| 286 |
|
| 243 |
|
| 147 |
|
| 126 |
|
| 243 |
|
Other real estate expense, net |
|
| 173 |
|
| 429 |
|
| (370) |
|
| 165 |
|
| 50 |
|
| 248 |
|
Other expense |
|
| 2,863 |
|
| 3,469 |
|
| 3,304 |
|
| 3,853 |
|
| 3,148 |
|
| 3,512 |
|
Total noninterest expense |
|
| 17,354 |
|
| 22,286 |
|
| 18,711 |
|
| 18,777 |
|
| 19,194 |
|
| 20,126 |
|
Income before income taxes |
|
| 11,489 |
|
| 8,038 |
|
| 12,843 |
|
| 11,565 |
|
| 10,874 |
|
| 12,321 |
|
Provision for income taxes |
|
| 2,000 |
|
| 1,777 |
|
| 3,201 |
|
| 2,945 |
|
| 2,406 |
|
| 3,043 |
|
Net income |
| $ | 9,489 |
| $ | 6,261 |
| $ | 9,642 |
| $ | 8,620 |
| $ | 8,468 |
| $ | 9,278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share |
| $ | 0.32 |
| $ | 0.21 |
| $ | 0.32 |
| $ | 0.29 |
| $ | 0.28 |
| $ | 0.31 |
|
Diluted earnings (loss) per share |
|
| 0.31 |
|
| 0.21 |
|
| 0.32 |
|
| 0.28 |
|
| 0.28 |
|
| 0.31 |
|
Dividends paid per share |
|
| 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 | ||||||||||||||||
|
| June 30, 2019 |
| March 31, 2019 |
| June 30, 2018 | ||||||||||||
|
| Amount |
| Per share |
| Amount |
| Per Share |
| Amount |
| Per Share | ||||||
Adjusted Net Income and adjusted diluted earnings per share (EPS), including certain items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (GAAP) |
| $ | 9,278 |
| $ | 0.31 |
| $ | 8,468 |
| $ | 0.28 |
| $ | 6,261 |
| $ | 0.21 |
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition related costs, net, after tax |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 2,468 |
|
| 0.08 |
Adjusted net income, including certain items |
| $ | 9,278 |
| $ | 0.31 |
| $ | 8,468 |
| $ | 0.28 |
| $ | 8,729 |
| $ | 0.29 |
|
|
|
|
|
|
|
|
|
|
|
|
| Quarters Ended |
| |||||||
|
| June 30, |
| March 31, |
| June 30, |
| |||
|
| 2019 |
| 2019 |
| 2018 |
| |||
Net Interest Margin |
|
|
|
|
|
|
|
|
|
|
Interest income (GAAP) |
| $ | 29,586 |
| $ | 28,896 |
| $ | 27,261 |
|
Taxable-equivalent adjustment: |
|
|
|
|
|
|
|
|
|
|
Loans |
|
| 3 |
|
| 5 |
|
| 5 |
|
Securities |
|
| 569 |
|
| 558 |
|
| 562 |
|
Interest income (TE) |
|
| 30,158 |
|
| 29,459 |
|
| 27,828 |
|
Interest expense (GAAP) |
|
| 4,832 |
|
| 4,860 |
|
| 4,019 |
|
Net interest income (TE) |
| $ | 25,326 |
| $ | 24,599 |
| $ | 23,809 |
|
Net interest income (GAAP) |
| $ | 24,754 |
| $ | 24,036 |
| $ | 23,242 |
|
Average interest earning assets |
| $ | 2,447,700 |
| $ | 2,439,308 |
| $ | 2,392,059 |
|
Net interest margin (GAAP) |
|
| 4.06 | % |
| 4.00 | % |
| 3.90 | % |
Net interest margin (TE) |
|
| 4.15 | % |
| 4.09 | % |
| 3.99 | % |
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP |
| Non-GAAP |
| ||||||||||||||
|
|
| Three Months Ended |
|
| Three Months Ended |
| ||||||||||||
|
| June 30, |
| March 31, |
| June 30, |
| June 30, |
| March 31, |
| June 30, |
| ||||||
|
| 2019 |
| 2019 |
| 2018 |
| 2019 |
| 2019 |
| 2018 |
| ||||||
Efficiency Ratio / Adjusted Efficiency Ratio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest expense |
| $ | 20,126 |
| $ | 19,194 |
| $ | 22,286 |
| $ | 20,126 |
| $ | 19,194 |
| $ | 22,286 |
|
Less amortization of core deposit |
|
| 121 |
|
| 132 |
|
| 97 |
|
| 121 |
|
| 132 |
|
| 97 |
|
Less other real estate expense, net |
|
| 248 |
|
| 50 |
|
| 429 |
|
| 248 |
|
| 50 |
|
| 429 |
|
Less acquisition related costs |
|
| N/A |
|
| N/A |
|
| N/A |
|
| - |
|
| - |
|
| 3,168 |
|
Noninterest expense less adjustments |
| $ | 19,757 |
| $ | 19,012 |
| $ | 21,760 |
| $ | 19,757 |
| $ | 19,012 |
| $ | 18,592 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
| $ | 24,754 |
| $ | 24,036 |
| $ | 23,242 |
| $ | 24,754 |
| $ | 24,036 |
| $ | 23,242 |
|
Taxable-equivalent adjustment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
| N/A |
|
| N/A |
|
| N/A |
|
| 3 |
|
| 5 |
|
| 5 |
|
Securities |
|
| N/A |
|
| N/A |
|
| N/A |
|
| 569 |
|
| 558 |
|
| 562 |
|
Net interest income including adjustments |
|
| 24,754 |
|
| 24,036 |
|
| 23,242 |
|
| 25,326 |
|
| 24,599 |
|
| 23,809 |
|
Noninterest income |
|
| 8,143 |
|
| 6,482 |
|
| 8,532 |
|
| 8,143 |
|
| 6,482 |
|
| 8,532 |
|
Less securities gain, net |
|
| 986 |
|
| 27 |
|
| 312 |
|
| 986 |
|
| 27 |
|
| 312 |
|
Taxable-equivalent adjustment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash surrender value of BOLI |
|
| N/A |
|
| N/A |
|
| N/A |
|
| 85 |
|
| 122 |
|
| 93 |
|
Noninterest income (less) / including adjustments |
|
| 7,157 |
|
| 6,455 |
|
| 8,220 |
|
| 7,242 |
|
| 6,577 |
|
| 8,313 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income including adjustments plus noninterest income (less) / including adjustments |
| $ | 31,911 |
| $ | 30,491 |
| $ | 31,462 |
| $ | 32,568 |
| $ | 31,176 |
| $ | 32,122 |
|
Efficiency ratio / Adjusted efficiency ratio |
|
| 61.91 | % |
| 62.35 | % |
| 69.16 | % |
| 60.66 | % |
| 60.98 | % |
| 57.88 | % |
16