Exhibit 99.1
Old Second Bancorp, Inc. | | For Immediate Release |
(NASDAQ: OSBC) | | October 24, 2012 |
| | |
Contact: | J. Douglas Cheatham | | |
| Chief Financial Officer | | |
| (630) 906-5484 | | |
Old Second Bancorp, Inc. Announces Third Quarter Results
Targeted Asset Quality Management & Asset Quality Improvement
AURORA, IL, October 24, 2012 — Old Second Bancorp, Inc. (the “Company” or “Old Second”) (NASDAQ: OSBC), parent company of Old Second National Bank (the “Bank”), today announced results of operations for the third quarter of 2012. The Company reported a net income of $120,000, compared to a net loss of $1.4 million in the third quarter of 2011. The Company’s net loss available to common shareholders of $1.1 million, or $0.08 per diluted share, for the quarter compared to a net loss available to common shareholders of $2.6 million, or $0.18 per diluted share, in the third quarter of 2011.
Old Second also announced that its principle banking subsidiary, Old Second National Bank, recorded net income of $1.8 million in third quarter and a net income of $3.4 million for the first nine months of 2012.
The Company did not record a provision for loan losses for the third quarter of 2012 compared to a $3.0 million provision in the third quarter of 2011. The allowance for loan losses was 38.05% of nonperforming loans as of September 30, 2012 an increase from 35.79% as of June 30, 2012 and a decline from 42.95% a year earlier.
“Our third quarter results reflect continued payback on our diligent work to improve asset quality as we progress toward overall sustainable profitability,” said Bill Skoglund, Chairman and CEO. “As total loans decreased 2.4% in third quarter, we successfully worked with problem loan situations so that loans classified as problem loans (nonaccrual and troubled debt restructurings) dropped by 25% since December 31, 2011 (down 7.4% since June 30, 2012).”
“We continue to also be greatly encouraged as our nonperforming assets decreased to levels not seen at any quarter end since June 2009. Total nonperforming assets decreased 16.5% to $193.9 million at September 30, 2012 from $232.2 million at December 31, 2011 reflecting great work by our people, commitment to our organization from loyal customers, improved but still difficult market conditions for distressed asset dispositions and prudent property valuation writedowns in a better but still stressed overall market. We will continue to expand existing strategies and pursue new workout or remediation opportunities to reduce problem credit exposures.”
“Recognizing our need and obligation to maintain and grow capital, we are pleased to continue to exceed the Bank capital ratio objectives we established in our agreement with the Office of the Comptroller of the Currency. At September 30, 2012 the Bank’s leverage ratio was 9.66% up 31 basis points from June 30, 2012 and 91 basis points above the established 8.75% objective. The Bank’s total capital ratio was 14.06%, up 81 basis points from June 30, 2012 and 281 basis points above the 11.25% agreed objective.”
2012 Financial Highlights/Overview
Earnings
· Third quarter net income before taxes of $120,000 compared to a net loss before taxes of $1.4 million in the same quarter of 2011.
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· Third quarter net loss to common stockholders of $1.1 million compared to a net loss to common stockholders of $2.6 million in the same quarter of 2011.
· The tax-equivalent net interest margin was 3.44% during the third quarter of 2012 compared to 3.63% in the same quarter of 2011, and reflected a decrease of 21 basis points compared to the second quarter of 2012.
· Noninterest income of $31.2 million was $4.4 million higher in the first nine months of 2012 than in the same period in 2011 reflecting higher mortgage loan sales and securities gains.
· Noninterest expenses of $71.9 million were $173,000 or 0.2% higher in the first nine months of 2012 than in the same period in 2011 reflecting increased expenses in salaries and benefits, with some of the increase related to incentive based compensation and OREO while reduced expenses in many categories including, most notably FDIC insurance, legal fees and occupancy related expenses helped defray these increases.
Capital
| | September 30, 2011 | | December 31, 2011 | | September 30, 2012 | |
The Bank’s leverage capital ratio | | 9.52 | % | 9.34 | % | 9.66 | % |
The Bank’s total capital ratio | | 12.98 | % | 12.97 | % | 14.06 | % |
The Company’s leverage capital ratio | | 5.18 | % | 4.98 | % | 4.88 | % |
The Company’s total capital ratio | | 12.37 | % | 12.38 | % | 12.90 | % |
The Company’s tangible common equity to tangible assets | | 0.15 | % | (0.08 | )% | (0.25 | )% |
· Bank leverage capital ratio increased to 9.66% from 9.34% at December 31, 2011.
· Bank total capital ratio increased to 14.06% from 12.97% at December 31, 2011.
· Company leverage ratio decreased to 4.88% from 4.98% at December 31, 2011.
· Company total capital ratio increased to 12.90% from 12.38% at December 31, 2011.
· Company tangible common equity to tangible assets decreased from (0.08)% at December 31, 2011 to (0.25)% in the third quarter of 2012.
Asset Quality/Balance Sheet Overview
· Nonperforming loans declined $33.1 million or 23.8% during the first nine months of 2012 to $105.8 million as of September 30, 2012 from $138.9 million as of December 31, 2011. Our September 30, 2012 lower level of nonperforming loans as measured at quarter end was the lowest since December 31, 2008.
· There was no provision for loan loss expense for the quarter ended September 30, 2012, compared to $3.0 million in the same period in 2011 and $200,000 in the second quarter of 2012.
· Loans that were classified as performing but 30 to 89 days past due and still accruing interest decreased to $5.4 million at September 30, 2012 from $6.4 million at June 30, 2012 and $12.1 million at December 31, 2011.
· Securities available-for-sale increased $104.8 million during 2012 to $412.3 million at September 30, 2012 from $307.6 million at December 31, 2011 (all numbers rounded) with no significant impact on the current liquidity profile. At $135.1 million or 32.8% of the total portfolio, asset-backed securities are the largest component of the portfolio.
Net Interest Income
Net interest and dividend income decreased $3.5 million, from $48.9 million in the first nine months of 2011, to $45.4 million in the first nine months of 2012. Average earning assets decreased $112.3 million, or 6.1%, to $1.73 billion from the first nine months of 2011 to the first nine months of 2012, as management
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continued to emphasize asset quality and funded new loan originations continued to be limited. The $281.5 million decrease in year to date average loans and loans held-for-sale was primarily due to the ongoing lower funded demand from qualified borrowers in the Bank’s market area, charge-off activity, and movement of loan assets to OREO as well as maturities and payments on performing loans. To utilize available liquid funds, management continued to increase securities available-for-sale in the first nine months of 2012 to 21.7% of total assets up from 15.8% at the end of 2011 and 9.7% at September 30, 2011. At the same time, management reduced deposits that had previously provided funding for those assets by emphasizing relationship banking rather than single service customers. As a result, average interest bearing liabilities decreased $110.6 million, or 7.0%, from the first nine months of 2011 to the first nine months of 2012. The net interest margin (tax-equivalent basis), expressed as a percentage of average earning assets, decreased slightly from 3.57% in the first nine months of 2011 to 3.52% in the first nine months of 2012. The average tax-equivalent yield on earning assets decreased from 4.70% in the first nine months of 2011 to 4.39%, or 31 basis points in the first nine months of 2012. The 2012 first nine months of earning asset tax equivalent yield received benefit from collection of previously reversed or unrecognized interest on loans that returned to performing status during the period. The first nine months of 2012 earning asset tax equivalent yield would have been 4.27% without this benefit whereas the first nine months of 2011 would have been 4.63%. During the same period, the cost of funds on interest bearing liabilities decreased from 1.39% to 1.09%, or 30 basis points, helping to offset the decrease in yield. The decrease in average earning assets and movement to lower yielding securities with reduction in higher yielding loan volumes in 2012 were the main causes of decreased interest income.
Net interest income decreased $1.3 million from $15.9 million in the third quarter of 2011 to $14.6 million in the third quarter of 2012. The decrease in average earning assets on a quarterly comparative basis was $48.7 million, or 2.8%, from September 30, 2011 to September 30, 2012 due in part to continued low demand from qualified borrowers as well as OREO activity in the quarter. Average interest bearing liabilities decreased $66.2 million, or 4.4%, during the same period. The net interest margin (tax-equivalent basis), expressed as a percentage of average earning assets, decreased from 3.63% in the third quarter of 2011 to 3.44% in the third quarter of 2012. The average tax-equivalent yield on earning assets decreased from 4.73% in the third quarter of 2011 to 4.24% in the third quarter of 2012, or 49 basis points. The 2012 third quarter earning asset tax equivalent yield received benefit from collection of previously reversed or unrecognized interest on loans that returned to performing status during the period. The third quarter 2012 earning asset tax equivalent yield would have been 4.10% without this benefit whereas the third quarter of 2011 would have been 4.65%. The cost of interest-bearing liabilities also decreased from 1.35% to 1.02%, or 33 basis points, in the same period. Consistent with the year to date margin trend, the decreased overall average earning assets and the movement to lower yielding securities combined with the repricing of interest bearing assets and liabilities in a lower interest rate environment decreased interest income to a greater degree than it decreased interest expense.
Asset Quality
In the first nine months of 2012, the Company recorded a $6.3 million provision for loan losses, which did not include any provision in the third quarter. In the first nine months of 2011, the provision for loan losses was $7.5 million, which included $3.0 million in the third quarter. Provisions for loan losses are made to provide for probable and estimable losses inherent in the loan portfolio. Nonperforming loans decreased to $105.8 million at September 30, 2012 from $138.9 million at December 31, 2011, and $139.3 million at September 30, 2011. Charge-offs, net of recoveries, totaled $18.0 million and $24.0 million in the first nine months of 2012 and 2011, respectively. Net charge-offs totaled $29,000 in the third quarter of 2012 and $9.2 million in the third quarter of 2011. The distribution of the Company’s gross charge-off activity for the periods indicated is detailed in the first table below and the distribution of the Company’s remaining nonperforming loans and related specific allocations at September 30, 2012 are included in the following tables.
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Loan Charge-offs, Gross | | Three Months Ended
September 30, | | Year to Date
September 30, | |
(in thousands) | | 2012 | | 2011 | | 2012 | | 2011 | |
Real estate-construction | | | | | | | | | |
Homebuilder | | $ | 44 | | $ | 1,391 | | $ | 1,138 | | $ | 3,045 | |
Land | | — | | 75 | | 20 | | 3,089 | |
Commercial speculative | | 816 | | 449 | | 2,781 | | 937 | |
All other | | 49 | | 114 | | 312 | | 157 | |
Total real estate-construction | | 909 | | 2,029 | | 4,251 | | 7,228 | |
Real estate-residential | | | | | | | | | |
Investor | | 250 | | 1,662 | | 3,341 | | 2,748 | |
Owner occupied | | 446 | | 1,684 | | 1,664 | | 3,738 | |
Revolving and junior liens | | 534 | | 536 | | 1,411 | | 780 | |
Total real estate-residential | | 1,230 | | 3,882 | | 6,416 | | 7,266 | |
Real estate-commercial, nonfarm | | | | | | | | | |
Owner general purpose | | 7 | | 188 | | 1,199 | | 3,424 | |
Owner special purpose | | 90 | | 658 | | 2,564 | | 2,290 | |
Non-owner general purpose | | 121 | | 1,843 | | 4,624 | | 4,786 | |
Non-owner special purpose | | — | | 809 | | 124 | | 1,671 | |
Retail properties | | 137 | | 1,177 | | 4,183 | | 3,581 | |
Total real estate-commercial, nonfarm | | 355 | | 4,675 | | 12,694 | | 15,752 | |
Real estate-commercial, farm | | — | | — | | — | | — | |
Commercial | | 2 | | 143 | | 110 | | 298 | |
Other | | 186 | | 169 | | 463 | | 433 | |
| | $ | 2,682 | | $ | 10,898 | | $ | 23,934 | | $ | 30,977 | |
The distribution of the Company’s nonperforming loans as of September 30, 2012, is included in the chart below (in thousands):
Nonperforming loans
as of September 30, 2012
| | Nonaccrual
Total (1) | | 90 Days or
More Past
Due
(Accruing) | | Restructured
Loans
(Accruing) | | Total Non
performing
Loans | | % Non
Performing
Loans | | Specific
Allocation | |
Real estate-construction | | $ | 13,662 | | $ | 47 | | $ | 2,326 | | $ | 16,035 | | 15.2 | % | $ | 1,408 | |
Real estate-residential: | | | | | | | | | | | | | |
Investor | | 12,838 | | 169 | | — | | 13,007 | | 12.3 | % | 875 | |
Owner occupied | | 9,368 | | 100 | | 5,407 | | 14,875 | | 14.1 | % | 811 | |
Revolving and junior liens | | 3,245 | | — | | 61 | | 3,306 | | 3.1 | % | 864 | |
Real estate-commercial, nonfarm | | 50,662 | | 1,256 | | 3,724 | | 55,642 | | 52.6 | % | 2,996 | |
Real estate-commercial, farm | | 1,790 | | — | | — | | 1,790 | | 1.7 | % | 117 | |
Commercial | | 1,157 | | — | | — | | 1,157 | | 1.0 | % | 514 | |
| | $ | 92,722 | | $ | 1,572 | | $ | 11,518 | | $ | 105,812 | | 100.0 | % | $ | 7,585 | |
(1) | Nonaccrual loans included a total of $11.3 million in restructured loans. Component balances are $1.7 million in real estate construction, $5.6 million in real estate-commercial nonfarm, $1.3 million is in real estate - residential investor, $2.7 million is in real estate - owner occupied and $17,000 in Commercial. |
Classified loans (under a definition closely reflecting our regulator’s definition — substandard loans and TDR accruing) have decreased $122.2 million or 46.8% from a year ago and $99.3 million or 41.7% from December 31, 2011. Classified loans are summarized in the table below:
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| | Classified Loans | |
| | 9/30/2012 | | 12/31/2011 | | 9/30/2011 | |
Commercial | | $ | 1,748 | | $ | 2,380 | | $ | 8,762 | |
Real estate - commercial | | 75,510 | | 134,015 | | 145,904 | |
Real estate - construction | | 22,387 | | 40,476 | | 47,089 | |
Real estate - residential | | 39,143 | | 61,234 | | 59,235 | |
Consumer | | 5 | | 13 | | 15 | |
| | $ | 138,793 | | $ | 238,118 | | $ | 261,005 | |
Commercial Real Estate
Commercial Real Estate Nonfarm (“CRE”) remained the largest component of nonperforming loans at $55.6 million, or 52.6% of total nonperforming loans. The dollar volume of nonperforming CRE loans is down from $64.0 million at December 31, 2011 and $65.7 million at September 30, 2011. These decreases resulted from loans moving to OREO during these periods, loans paying off and loans upgraded as a result of improved performance. The class components of the CRE segment at September 30, 2012, were as follows (dollars in thousands):
CRE | | Nonaccrual
Total | | 90 Days or
More Past
Due
(Accruing) | | Restructured
Loans
(Accruing) | | Total Non
performing
Loans | | % Non
performing
CRE Loans | | Specific
Allocation | |
Owner occupied general purpose | | $ | 5,901 | | $ | — | | $ | — | | $ | 5,901 | | 10.6 | % | $ | 337 | |
Owner occupied special purpose | | 12,889 | | — | | — | | 12,889 | | 23.2 | % | 896 | |
Non-owner occupied general purpose | | 19,664 | | 1,256 | | 3,724 | | 24,644 | | 44.3 | % | 350 | |
Non-owner occupied special purpose | | 487 | | — | | — | | 487 | | 0.9 | % | — | |
Retail properties | | 11,721 | | — | | — | | 11,721 | | 21.0 | % | 1,413 | |
| | $ | 50,662 | | $ | 1,256 | | $ | 3,724 | | $ | 55,642 | | 100.0 | % | $ | 2,996 | |
Non-owner occupied, general purpose loans include credits that are collateralized by office, warehouse, and industrial properties and represented 24.7% of total CRE loans, and 44.3% of nonperforming CRE loans at the end of the third quarter of 2012. Third quarter 2012 charge-offs in this category were $121,000, with most of the charge-offs coming from fully allocated credits, and management estimated that $350,000 of specific allocation was sufficient coverage for the remaining loss exposure at September 30, 2012.
The owner occupied special purpose category had loans totaling $167.1 million, representing 28.2% of all CRE loans. With $12.9 million of these loans nonperforming at September 30, 2012, these loans accounted for 23.2% of total nonperforming CRE. Special purpose owner occupied credits include loans collateralized by property types such as car washes, golf courses, restaurants, and medical office buildings. Charge-offs in the third quarter of 2012 totaled $90,000 in this loan category and management estimated that the specific allocation of $896,000 was sufficient coverage for the remaining loss exposure at September 30, 2012.
Portfolio loans secured by retail property, primarily retail strip malls, continue to experience financial stress as vacancies and lower rents needed to secure tenants hampered successful retail mall performance. This class accounted for 8.5% of all CRE loans and 21.0% of all nonperforming CRE loans at September 30, 2012. Third quarter 2012 charge-offs in the retail segment totaled $137,000. However, there can be no guarantee that actual losses in this category, and all other categories discussed in this section, will not exceed the amount specifically reserved for the category.
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As of September 30, 2012, owner occupied general purpose loans comprised 22.0% of CRE, and 10.6% of nonperforming CRE loans. Charge-offs totaled $7,000 in the third quarter of 2012, and management estimated that specific allocations of $337,000 were sufficient coverage for the remaining loss exposure at September 30, 2012.
Non-owner occupied special purpose loans represented 16.6% of the CRE portfolio, and 0.9% of nonperforming CRE loans at the end of the third quarter of 2012. In the third quarter there were no charge-offs recorded and no specific allocation. Management has reviewed all nonperforming loans and concluded no additional inherent losses are apparent which would require a specific reserve at September 30, 2012.
In addition to the specific allocations detailed above, management estimates include a higher risk commercial real estate pool loss factor for certain CRE loans. These loans typically have a deficiency in cash flow coverage from the property securing the credit, but other supporting factors such as liquidity, guarantor capacity, sufficient global cash flow coverage or cooperation from the borrower is evident to support the credit. These deficiencies in cash flow coverage are typically attributable to vacancy that is expected to be temporary or reduced operating income from the owner-occupant due to continued economic stress in our market areas. The pool also includes cases where the property securing the credit has adequate cash flow coverage, but the borrower has other economic stress indicators to warrant heightened risk treatment. Due to a 71.1% decline in the balance of loans in this pool, management estimated a reduction of reserves of $5.4 million in the first nine months of 2012 compared to December 31, 2011.
Construction and Development
At September 30, 2012, nonperforming construction and development (“C & D”) loans totaled $16.0 million, or 15.2% of total nonperforming loans. This is a decrease of $17.8 million from $33.8 million at December 31, 2011, and a decrease of $23.9 million from $39.9 million at September 30, 2011. Of the $48.6 million of total C & D loans in the portfolio, 33.0% were nonperforming as of September 30, 2012, as compared to 47.3% at December 31, 2011, and 51.2% at September 30, 2011. Total C & D charge-offs for the third quarter of 2012 were $909,000, as compared to $2.0 million in the third quarter 2011. Following all charge-off activity, management estimated that specific allocations of $1.4 million were sufficient coverage for the remaining loss exposure in this segment at September 30, 2012. The majority of the Bank’s C & D loans are located in suburban Chicago markets, predominantly in the far western and southwestern suburbs. The Bank’s loan exposure to credits secured by homebuilder inventory is down 51.6% from a year ago.
Management closely monitors the performing loans that have been rated as “special mention” or “substandard” but that are still accruing interest. While some additional adverse migration is still possible, management believes that the remaining performing C & D borrowers have demonstrated sufficient operating strength through an extended period of weak construction to avoid classification as an impaired credit at September 30, 2012. As a result, management believes future losses in the construction segment will generally continue to trend downward. In addition to reviewing the operating performance of the borrowers when reviewing allowance estimates, management also continues to update underlying collateral valuation estimates to reflect the aggregate estimated credit exposure.
Residential Real Estate
Nonperforming 1-4 family owner occupied residential mortgages to consumers totaled $14.9 million, or 14.1% of the nonperforming loan total as of September 30, 2012. This segment totaled $20.3 million in nonperforming loans at December 31, 2011, compared to $18.6 million at September 30, 2011. While Kendall, Kane, and Will counties experienced high rates of foreclosure in both 2012 and 2011, the Bank has recently experienced relatively stable or somewhat improved nonperforming totals. The majority of all residential mortgage loans originated today are sold on the secondary market. Of the nonperforming loans in this category, $5.4 million, or 36.3%, are to homeowners enrolled in the Bank’s foreclosure avoidance program and were classified as restructured at September 30, 2012. The typical concessions granted in these cases were small and temporary rate reductions and a reduced monthly payment with the expectation that
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these borrowers resume normal performance on their obligations when their earnings situation improves. The usual profile of these borrowers includes a decrease in household income resulting from a change or loss of employment. The remaining nonperforming loans in the 1-4 family residential category are in nonaccrual status and most cases are in various stages of foreclosure. Management believes that deterioration in the segment relates primarily to the high rate of unemployment in our market areas offset by some reductions from loans moved to OREO or upgraded as borrowers regain employment. In addition, a significant portion of these nonperforming loans were supported by private mortgage insurance, and, at September 30, 2012, management estimated that a specific allocation of $811,000 was adequate loss coverage following the $446,000 of charge-offs that occurred during the quarter and allowing for problems in collecting on private mortgage insurance. At September 30, 2012, there were loans of $100,000 that were greater than 90 days past due and were still accruing interest in this portfolio segment. Additionally, at September 30, 2012, loans 30 to 89 days past due and still accruing totaled $449,000 which was an improvement from $4.0 million at December 31, 2011, and from $1.1 million at September 30, 2011.
Nonperforming residential investor loans at September 30, 2012 consisted of multi-family ($8.5 million) and 1-4 family properties ($4.5 million) for a total of $13.0 million, or 12.3% of the nonperforming loans total. September 30, 2012 was a decrease from $15.3 million at December 31, 2011 but an increase from $9.8 million at September 30, 2011. Following the third quarter charge-off of $250,000, management estimated that a total specific allocation of $875,000 would provide sufficient loss reserves at September 30, 2012, for the remaining risk in this category. The multi-family and rental market segment is showing improved credit metrics as higher occupancy rates have driven stronger net operating income.
Other
The remaining nonperforming credits included $1.1 million in commercial loans, $3.3 million in consumer home equity and second mortgage loans and $1.8 million in farmland and agricultural loans. These loan categories have shown stable credit characteristics and losses have been minimal during this economic cycle. At September 30, 2012, management estimated that a total specific allocation of $514,000 on the commercial portfolio, $117,000 in farmland and agricultural loans would be sufficient loss coverage for the remaining risk in those nonperforming credits, and $864,000 was sufficient loss coverage for the consumer home equity and second mortgage loan segment. These estimated amounts were following charge-offs in the third quarter of 2012 of $2,000 in commercial loans, and $534,000 in consumer home equity loans.
Other Troubled Loans
Loans that were classified as performing but 30 to 89 days past due and still accruing interest decreased to $5.4 million at September 30, 2012, from $12.1 million at December 31, 2011, and $10.0 million at September 30, 2011. At September 30, 2012, loans 30 to 89 days past due consisted of $449,000 in 1-4 family owner occupied mortgages, $1.8 million in commercial real estate credits, $974,000 in residential investor credits, $572,000 in construction and development, $268,000 in commercial loans, $25,000 in consumer loans and $1.4 million in home equity loans. Troubled debt restructurings (“TDR”) in accrual status total $11.5 million, which was a slight decrease from $11.8 million in TDRs from December 31, 2011 and a decrease from $13.6 million from September 30, 2011. Accruing TDRs included $5.4 million in 1-4 family owner occupied mortgages in the foreclosure avoidance program discussed previously, $2.3 million in restructured residential lot inventory loans to builders, $61,000 in revolving and junior liens mortgages, and $3.7 million in non-owner occupied general purpose commercial real estate.
Nonaccrual TDR loans totaled $11.3 million as of September 30, 2012. These credits, which have not demonstrated a sustained period of financial performance, are primarily due to bankruptcy or continued deterioration in the borrowers’ financial situation. Management is pursuing liquidation strategies for many of these loans. Management estimated that specific allocation estimates of $369,000 at September 30, 2012, were sufficient coverage for the remaining loss exposure in this category.
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Allowance for Loan and Lease Loss Reserve
The coverage ratio of the allowance for loan losses to nonperforming loans was 38.1% as of September 30, 2012, which reflects a modest increase from 37.4% as of December 31, 2011. A decrease of $33.1 million, or 23.8%, in nonperforming loans in the nine months along with reductions in both specific reserves and management factor reserves drove the overall coverage ratio change. Management updated the estimated specific allocations in the third quarter after receiving more recent appraisal collateral valuations or information on cash flow trends related to the impaired credits. The estimated general allocations decreased by $6.3 million from December 31, 2011, as the overall loan balances subject to general factors decreased at September 30, 2012. Management determined the estimated amount to provide in the allowance for loan losses based upon a number of factors, including loan growth or contraction, the quality and composition of the loan portfolio and loan loss experience. The latter item was also weighted more heavily based upon recent loss experience. The C & D portfolio has had diminished adverse migration and the remaining credits are exhibiting more stable credit characteristics. Management estimates adequate reserves have been established for the remaining risk of loss in the C & D portfolio.
Management regularly reviews the performance of the higher risk pool within commercial real estate loans, and adjusts the population and the related loss factors taking into account adverse market trends including collateral valuation as well as its assessments of the credits in that pool. Those assessments capture management’s estimate of the potential for adverse migration to an impaired status as well as its estimation of what the potential valuation impact from that migration would be if it were to occur. The amount of assets subject to this pool factor decreased by 71.1% at September 30, 2012 as compared to December 31, 2011. Also, compared to December 31, 2011, management decreased the loss factor assigned to this pool by 0.04% based on risk characteristics of the remaining credits. Management has also observed that many stresses in those credits were generally attributable to cyclical economic events that were showing some signs of stabilization. Those signs included a reduction in loan migration to watch status, as well as a decrease in 30 to 89 day past due loans and some stabilization in values of certain properties.
The above changes in estimates were made by management to be consistent with observable trends within loan portfolio segments and in conjunction with market conditions and credit review administration activities. Several environmental factors are also evaluated on an ongoing basis and are included in the assessment of the adequacy of the allowance for loan losses. When measured as a percentage of loans outstanding, the total allowance for loan losses decreased from 4.2% of total loans as of September 30, 2011, to 3.3% of total loans at September 30, 2012. In management’s judgment, an adequate allowance for estimated losses has been established for inherent losses at September 30, 2012; however, there can be no assurance that actual losses will not exceed the estimated amounts in the future.
Other Real Estate Owned
Other real estate owned (“OREO”) net of valuation reserve totaled $88.1 million at September 30, 2012 or a decrease of $5.2 million from December 31, 2011. Disposition activity and valuation write downs in the third quarter exceeded additions to OREO assets, leading to an overall decrease of $1.6 million from OREO assets of $89.7 million at June 30, 2012. In the third quarter of 2012, management successfully converted collateral securing problem loans to properties ready for disposition, spent as needed on development improvements, transacted asset dispositions and recorded valuation adjustments as shown below in thousands. As a result, holdings in the categories of vacant land suitable for farming, lots suitable for development and commercial property declined in the quarter while single family residences and multi-family properties increased during the quarter. Overall, a net gain on sale of $20,000 was realized in third quarter 2012.
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| | Three Months Ended
September 30, | | Year to Date
September 30, | |
| | 2012 | | 2011 | | 2012 | | 2011 | |
Beginning balance | | $ | 89,671 | | $ | 82,611 | | $ | 93,290 | | $ | 75,613 | |
Property additions | | 7,594 | | 29,842 | | 26,944 | | 60,355 | |
Development improvements | | 131 | | 394 | | 646 | | 2,561 | |
Less: | | | | | | | | | |
Property disposals | | 4,829 | | 9,574 | | 20,517 | | 28,754 | |
Period valuation adjustments | | 4,474 | | 2,719 | | 12,270 | | 9,221 | |
Other real estate owned | | $ | 88,093 | | $ | 100,554 | | $ | 88,093 | | $ | 100,554 | |
The OREO valuation reserve increased to $29.3 million, which is 24.9% of gross OREO at September 30, 2012. The valuation reserve represented 17.8% of gross OREO at September 30, 2011. In management’s judgment, an adequate property valuation allowance has been established; however, there can be no assurance that actual valuation losses will not exceed the estimated amounts in the future.
Noninterest Income
Noninterest income increased $1.8 million, or 21.6%, to $10.3 million during the third quarter of 2012 compared to $8.5 million during the same period in 2011. For the first nine months of 2012, noninterest income increased by $4.4 million, or 16.2%, to $31.2 million compared to $26.8 million for the same period in 2011. Trust income decreased by $168,000, or 10.1%, and by $553,000, or 10.7%, for the third quarter and first nine months of 2012, respectively. The Company’s reduction in trust revenues, for both the quarter and nine month year over year periods, was largely caused by three key client departures and lower levels of new business development. Service charge income from deposit accounts decreased for both the quarter and first nine months of 2012, primarily due to decreases in volume of overdraft fees and commercial checking service charges. Total mortgage banking income in the third quarter of 2012, including net gain on sales of mortgage loans, secondary market fees, and servicing income, was $2.7 million, an increase of $1.4 million from the third quarter of 2011. Mortgage banking income for the first nine months of the year also increased by $3.9 million, or 93.9%, from the 2011 level, reflecting continued strong demand for mortgage loans through the first nine months of 2012 as interest rates remained at historically low levels.
Realized gains on securities totaled $513,000 in the third quarter and $1.3 million in the first nine months of 2012 as the securities portfolio was revised to reduce levels of mortgage backed securities with inherent prepayment risk. Sales of asset-backed securities backed by student loans substantively guaranteed by the U. S. Department of Education were also conducted in the third quarter to reduce concentration level. Gains in 2012 compared to losses of $63,000 in the third quarter of 2011 and gains of $588,000 in the first nine months of 2011. Bank owned life insurance (“BOLI”) income increased $192,000, or 82.4% and $116,000, or 10.3% in the third quarter and first nine months of 2012, respectively, over the same periods in 2011. Debit card interchange income increased for both the third quarter and first nine months of 2012 as the volume of consumer card activity continued to increase when compared to 2011. Lease revenue received from OREO properties, which partially offsets OREO expenses included in noninterest expense, decreased $220,000 in the third quarter of this year when compared to 2011 third quarter but increased $393,000 in the first nine months of 2012 compared to the same period in 2011. Net gains on disposition of OREO properties decreased by $277,000, to $20,000 in the third quarter of 2012, and by $535,000, to $398,000 in the first nine months of 2012 as property sales slowed in a still stressed market and price realized upon sale in that market closely approximated our fair value carrying cost. Other noninterest income increased $455,000, or 40.0%, for the third quarter and by $213,000, or 5.3%, for the first nine months of 2012 largely due to sale of a lightly used bank premises property in the third quarter.
9
Noninterest Expense
Noninterest expense was $24.9 million during the third quarter of 2012, an increase of $2.0 million, from $22.8 million in the third quarter of 2011. Noninterest expense totaled $71.9 million during the first nine months of 2012, an increase of $173,000, or 0.2%, from $71.8 million in the first nine months of 2011. The increase in salaries and benefits expense was $978,000, or 12.2%, and $1.3 million, or 5.3%, when comparing the third quarter and first nine months of 2012, respectively, to the same periods in 2011. The increase in salaries and benefits expense resulted primarily from an increase in salary expense as we hired loan officers and accrued incentive compensation. The number of full time equivalent employees was 479 at the third quarter of 2012 and 2011.
Federal Deposit Insurance Corporation (“FDIC”) costs decreased $3,000, or 0.3%, and $826,000, or 21.3%, for the third quarter and first nine months of 2012, respectively, as compared to the prior year. The methodology for the assessment calculation changed effective with the third quarter of 2011. The revised assessment approach applies to an adjusted average asset base rather than insured deposits, which contributed to the lower Bank assessment. In addition, the reduction in assets inherent in management’s balance sheet strategy has also resulted in lower FDIC premiums.
General bank insurance increased $6,000 and $42,000 for the third quarter and first nine months of 2012 when compared to the same periods in 2011 reflecting this year’s insurance renewal programs. Advertising expense increased by $89,000, or 28.6%, and $251,000, or 34.3%, in the third quarter and first nine months of 2012, respectively, when compared to the same periods in 2011. Legal fees decreased $164,000 and $692,000 in a quarterly and year to date comparison as a result of a management program to control rates charged by law firms providing services and were primarily related to loan workouts.
OREO expense increased $1.2 million in the third quarter and $1.4 million in the first nine months of 2012 compared to the same periods in 2011. The increase for both the quarterly and year to date periods was primarily due to increases in valuation expense of $1.8 million and $2.9 million, respectively. This increase was partially offset by decreased expenses incurred in administering OREO property taxes and insurance, which had decreases of $671,000 and $2.0 million for the third quarter and first nine months of 2012, respectively, due to some relief in property tax levies. Other noninterest expense increased $165,000, or 5.5%, from $3.0 million in the third quarter of 2011 to $3.2 million in the same period of 2012. Other expense decreased $390,000, or 4.1%, from $9.6 million in the first nine months of 2011 to $9.2 million in the same period of 2012.
Assets
Total assets decreased $38.0 million, or 2.0%, from December 31, 2011, to close at $1.90 billion as of September 30, 2012. Loans decreased for the first nine months of 2012 by $160.7 million, or 11.7% to $1.21 billion as of September 30, 2012, as management continued to emphasize balance sheet stabilization and credit quality as demand from qualified borrowers remained slow. At the same time, loan charge-off activity reduced balances and collateral that previously secured loans moved to OREO. OREO assets decreased $5.2 million, or 5.6%, for the nine months ended September 30, 2012, compared to December 31, 2011 as sale activity and valuation writedowns exceeded new properties added. Available-for-sale securities increased by $104.8 million or 34.1% for the nine months ended September 30, 2012, reflecting continued movement by management to emphasize securities investments in the absence of qualified loan demand. Management continued to increase available-for-sale securities in the third quarter with the past practice of utilizing available liquid funds. For the nine months ended September 30, 2012, large dollar purchases were made in collateralized mortgage backed securities and asset-backed (many backed by student loan assets) securities totaling 115.5 million, and $147.1 million, respectively. At the same time, net cash equivalents increased despite general balance sheet stabilization. The largest changes by loan type included decreases in commercial real estate, real estate construction, and residential real estate loans of $82.8 million, $22.8 million and $40.4 million, or 11.8%, 32.0%, and 8.5%, respectively.
10
Deposits
Total deposits decreased $43.8 million, or 2.5%, during the nine months ended September 30, 2012, to close at $1.70 billion. The deposit segments that increased in this period were noninterest bearing demand, savings, and money markets, which increased by $19.1 million, $14.6 million and $33.1 million, or 5.3%, 7.4% and 11.5%, respectively. At the same time, NOW accounts decreased by $10.7 million, or 3.9%. Time deposits decreased $99.9 million or 16.2% due to management’s pricing strategy discouraging customers with a single service relationship at the Bank. Market interest rates decreased generally and the average cost of interest bearing deposits decreased from 1.13% in the first nine months of 2011, to 0.76%, or 37 basis points, in the same period of 2012. Similarly, the average total cost of interest bearing liabilities decreased 30 basis points from 1.39% in the first nine months of 2011 to 1.09% in the first nine months of 2012.
Borrowings
One of the Company’s most significant borrowing relationships continued to be the $45.5 million credit facility with Bank of America. That credit facility began in January 2008 and was originally composed of a $30.5 million Senior Debt facility and $500,000 in term debt (collectively the “Senior Debt”), as well as $45.0 million of subordinated debt (the “Subordinated Debt”). The Subordinated Debt and the term debt portion of the senior debt facility mature on March 31, 2018. The interest rate on the Senior Debt facility resets quarterly, and is based on, at the Company’s option, either the lender’s prime rate or three-month LIBOR plus 90 basis points. The interest rate on the Subordinated Debt resets quarterly, and is equal to three-month LIBOR plus 150 basis points. The Company had no principal outstanding balance on the senior line of credit when it matured, but did have $500,000 in principal outstanding in term debt and $45.0 million in principal outstanding in Subordinated Debt at the end of both December 31, 2011 and September 30, 2012. The term debt is secured by all of the outstanding capital stock of the Bank. The Company has made all required interest payments on the outstanding principal amounts on a timely basis.
The credit facility agreement contains usual and customary provisions regarding acceleration of the Senior Debt upon the occurrence of an event of default by the Company under the agreement, as described therein. The agreement also contains certain customary representations and warranties and financial and negative covenants. At September 30, 2012, the Company continued to be out of compliance with two of the financial covenants contained within the credit agreement. The agreement provides that upon an event of default as the result of the Company’s failure to comply with a financial covenant relating to the Senior Debt the lender may (i) terminate all commitments to extend further credit, (ii) increase the interest rate on the revolving line of the term debt by 200 basis points, (iii) declare the Senior Debt immediately due and payable and (iv) exercise all of its rights and remedies at law, in equity and/or pursuant to any or all collateral documents, including foreclosing on the collateral. The total outstanding principal amount of the Senior Debt is the $500,000 in term debt. Because the Subordinated Debt is treated as Tier 2 capital for regulatory capital purposes, the Agreement does not provide the lender with any rights of acceleration or other remedies with regard to the Subordinated Debt upon an event of default caused by the Company’s failure to comply with a financial covenant. In November 2009, the lender provided notice to the Company that it was invoking the default rate. This action by the lender resulted in nominal additional interest expense as it only applies to the $500,000 of outstanding senior term debt.
The Company increased its securities sold under repurchase agreements $837,000 from December 31, 2011. These balances increased in response to a modest level of customer requests for pledged security on new deposits.
Capital
As of September 30, 2012, total stockholders’ equity was $70.7 million, which was a decrease of $3.3 million, or 4.4%, from $74.0 million as of December 31, 2011. This decrease was primarily attributable to the net loss from operations in the first quarter of 2012. As of September 30, 2012, the Company’s regulatory
11
ratios of total capital to risk weighted assets, Tier 1 capital to risk weighted assets and increased to 12.90%, and 6.45%, while the Tier 1 leverage decreased to 4.88%, compared to 12.38%, 6.21%, and 4.98%, respectively, at December 31, 2011. The Company, on a consolidated basis, exceeded the minimum ratios to be deemed “adequately capitalized” under regulatory defined capital ratios at September 30, 2012. The same capital ratios at the Bank were 14.06%, 12.79%, and 9.66%, respectively, at September 30, 2012, compared to 12.97%, 11.70%, and 9.34%, at December 31, 2011. The Bank’s ratios exceeded the heightened capital ratios agreed to in the Consent Order entered into with the Office of the Comptroller of Currency in May 2011.
In July 2011, the Company also entered into a written agreement (the “Written Agreement”) with the Federal Reserve Bank of Chicago (the “Reserve Bank”) designed to maintain the financial soundness of the Company. Key provisions of the Written Agreement include restrictions on the Company’s payment of dividends on its capital stock, restrictions on its taking of dividends or other payments from the Bank that reduce the Bank’s capital, restrictions on subordinated debenture and trust preferred security distributions, restrictions on incurring additional debt or repurchasing stock, capital planning provisions, requirements to submit cash flow projections to the Reserve Bank, requirements to comply with certain notice provisions pertaining to changes in directors or senior management, requirements to comply with regulatory restrictions on indemnification and severance payments, and requirements to submit certain reports to the Reserve Bank. The Written Agreement also calls for the Company to serve as a source of strength for the Bank, including ensuring that the Bank complies with the OCC Consent Order of May 2011.
In addition to the above regulatory ratios, the Company’s non-GAAP tangible common equity to tangible assets and the Tier 1 common equity to risk weighted assets decreased to (0.25)% and (0.17)%, respectively, at September 30, 2012, compared to (0.08)% and (0.05)%, respectively, at December 31, 2011.
As previously announced in the third quarter of 2010, the Company elected to defer regularly scheduled interest payments on $58.4 million of junior subordinated debentures related to the trust preferred securities issued by its two statutory trust subsidiaries, Old Second Capital Trust I and Old Second Capital Trust II (the “Trust Preferred Securities”). Because of the deferral on the subordinated debentures, the trusts will defer regularly scheduled dividends on their trust preferred securities. The total accumulated interest on the Trust Preferred Securities including compounded interest from July 1, 2010 on the deferred payments totaled $10.5 million at September 30, 2012.
The Company has also suspended quarterly cash dividends on its outstanding Fixed Rate Cumulative Perpetual Preferred Stock, Series B, issued to the U.S. Department of the Treasury (the “TARP Preferred Stock”) in connection with the Company’s participation in the TARP Capital Purchase Program as well as suspending dividends on its outstanding common stock. The dividend payments have been deferred since November 15, 2010, and while in deferral these dividends are compounded quarterly. The accumulated TARP Preferred Stock dividends totaled $8.1 million at September 30, 2012.
Under the terms of the junior subordinated debentures, the Company is allowed to defer payments of interest for 20 quarterly periods on the Trust Preferred Securities without default or penalty, but such amounts will continue to accrue. Also during the deferral period, the Company generally may not pay cash dividends on or repurchase its common stock or preferred stock, including the TARP Preferred Stock. Under the terms of the TARP Preferred Stock, the Company is required to pay dividends on a quarterly basis at a rate of 5% per year for the first five years, after which the dividend rate automatically increases to 9%. Dividend payments on the TARP Preferred Stock may be deferred without default, but the dividend is cumulative and therefore will continue to accrue and, if the Company fails to pay dividends for an aggregate of six quarters, whether or not consecutive, the holder will have the right to appoint representatives to the Company’s board of directors. In January 2012, the U.S. Treasury appointed an observer to the Company’s board of directors. The observer concluded responsibilities under the appointment with the October 2012 Board meeting. We expect a new director appointed by the U.S. Treasury to join the board after approval is formally received from our other regulatory agencies.
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The terms of the TARP Preferred Stock also prevent the Company from paying cash dividends on or repurchasing its common stock while TARP Preferred Stock dividends are in arrears. Pursuant to the terms of our regulatory agreements, the Company must seek regulatory approval prior to resuming payments on its Subordinated Debt and TARP Preferred Stock.
Non-GAAP Presentations: Management has traditionally disclosed certain non-GAAP ratios to evaluate and measure the Company’s performance, including a net interest margin calculation. The net interest margin is calculated by dividing net interest income on a tax equivalent basis by average earning assets for the period. Management believes this measure provides investors with information regarding balance sheet profitability. Management also presents an efficiency ratio that is non-GAAP. The efficiency ratio is calculated by dividing adjusted noninterest expense by the sum of net interest income on a tax equivalent basis and adjusted noninterest income. Management believes this measure provides investors with information regarding the Company’s operating efficiency and how management evaluates performance internally. Consistent with industry practice, management also disclosed the tangible common equity to tangible assets and the Tier 1 common equity to risk weighted assets in the discussion immediately above and in the following tables. The tables provide a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent.
Forward Looking Statements: This report may contain forward-looking statements. Forward looking statements are identifiable by the inclusion of such qualifications as expects, intends, believes, may, likely or other indications that the particular statements are not based upon facts but are rather based upon the Company’s beliefs as of the date of this release. Actual events and results may differ significantly from those described in such forward-looking statements, due to changes in the economy, regulatory requirements, including rules jointly proposed by the federal bank agencies to implement Basel III, interest rates, or other factors. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events. For additional information concerning the Company and its business, including other factors that could materially affect the Company’s financial results, please review our filings with the Securities and Exchange Commission.
13
Financial Highlights (unaudited)
In thousands, except share data
| | As of and for the | | As of and for the | |
| | Three Months Ended | | Nine Months Ended | |
| | September 30, | | September 30, | |
| | 2012 | | 2011 | | 2012 | | 2011 | |
Summary Statements of Operations: | | | | | | | | | |
Net interest and dividend income | | $ | 14,635 | | $ | 15,922 | | $ | 45,429 | | $ | 48,933 | |
Provision for loan losses | | — | | 3,000 | | 6,284 | | 7,500 | |
Noninterest income | | 10,348 | | 8,508 | | 31,208 | | 26,846 | |
Noninterest expense | | 24,863 | | 22,820 | | 71,949 | | 71,776 | |
Provision for income taxes | | — | | — | | — | | — | |
Net income (loss) | | 120 | | (1,390 | ) | (1,596 | ) | (3,497 | ) |
Net loss available to common stockholders | | (1,135 | ) | (2,580 | ) | (5,312 | ) | (7,021 | ) |
| | | | | | | | | |
Key Ratios (annualized): | | | | | | | | | |
Return on average assets | | 0.02 | % | (0.28 | )% | (0.11 | )% | (0.23 | )% |
Return to common stockholders on average assets | | (0.23 | )% | (0.52 | )% | (0.36 | )% | (0.46 | )% |
Return on average equity | | 0.69 | % | (6.84 | )% | (2.96 | )% | (5.81 | )% |
Return on average common equity | | 239.29 | % | (100.92 | )% | (900.46 | )% | (91.98 | )% |
Net interest margin (non-GAAP tax equivalent)(1) | | 3.44 | % | 3.63 | % | 3.52 | % | 3.57 | % |
Efficiency ratio (non-GAAP tax equivalent)(1) | | 73.01 | % | 70.79 | % | 70.76 | % | 73.06 | % |
Tangible common equity to tangible assets(2) | | (0.25 | )% | 0.15 | % | (0.25 | )% | 0.15 | % |
Tier 1 common equity to risk weighted assets(2) | | (0.17 | )% | 0.22 | % | (0.17 | )% | 0.22 | % |
Company total capital to risk weighted assets (3) | | 12.90 | % | 12.37 | % | 12.90 | % | 12.37 | % |
Company tier 1 capital to risk weighted assets (3) | | 6.45 | % | 6.39 | % | 6.45 | % | 6.39 | % |
Company tier 1 capital to average assets | | 4.88 | % | 5.18 | % | 4.88 | % | 5.18 | % |
Bank total capital to risk weighted assets (3) | | 14.06 | % | 12.98 | % | 14.06 | % | 12.98 | % |
Bank tier 1 capital to risk weighted assets (3) | | 12.79 | % | 11.70 | % | 12.79 | % | 11.70 | % |
Bank tier 1 capital to average assets | | 9.66 | % | 9.52 | % | 9.66 | % | 9.52 | % |
| | | | | | | | | |
Per Share Data: | | | | | | | | | |
Basic loss per share | | $ | (0.08 | ) | $ | (0.18 | ) | $ | (0.37 | ) | $ | (0.49 | ) |
Diluted loss per share | | $ | (0.08 | ) | $ | (0.18 | ) | $ | (0.37 | ) | $ | (0.49 | ) |
Dividends declared per share | | $ | 0.00 | | $ | 0.00 | | $ | 0.00 | | $ | 0.00 | |
Common book value per share | | $ | (0.06 | ) | $ | 0.55 | | $ | (0.06 | ) | $ | 0.55 | |
Tangible common book value per share | | $ | (0.33 | ) | $ | 0.20 | | $ | (0.33 | ) | $ | 0.20 | |
Ending number of shares outstanding | | 14,084,328 | | 14,034,991 | | 14,084,328 | | 14,034,991 | |
Average number of shares outstanding | | 14,084,328 | | 14,034,991 | | 14,070,783 | | 14,004,599 | |
Diluted average shares outstanding | | 14,210,928 | | 14,217,216 | | 14,206,017 | | 14,225,022 | |
| | | | | | | | | |
End of Period Balances: | | | | | | | | | |
Loans | | $ | 1,208,289 | | $ | 1,423,957 | | $ | 1,208,289 | | $ | 1,423,957 | |
Deposits | | 1,696,934 | | 1,728,034 | | 1,696,934 | | 1,728,034 | |
Stockholders’ equity | | 70,741 | | 78,278 | | 70,741 | | 78,278 | |
Total earning assets | | 1,671,523 | | 1,714,809 | | 1,671,523 | | 1,714,809 | |
Total assets | | 1,903,400 | | 1,940,704 | | 1,903,400 | | 1,940,704 | |
| | | | | | | | | |
Average Balances: | | | | | | | | | |
Loans | | $ | 1,222,829 | | $ | 1,483,109 | | $ | 1,286,462 | | $ | 1,569,422 | |
Deposits | | 1,713,137 | | 1,746,854 | | 1,737,247 | | 1,832,242 | |
Stockholders’ equity | | 69,600 | | 80,649 | | 72,026 | | 80,479 | |
Total earning assets | | 1,702,675 | | 1,751,347 | | 1,730,932 | | 1,843,264 | |
Total assets | | 1,922,561 | | 1,959,914 | | 1,947,917 | | 2,043,061 | |
(1) Tabular disclosures of the tax equivalent calculation including the net interest margin and efficiency ratio for the quarters ending September 30, 2012, and 2011, respectively, are presented on page 20.
(2) The information to reconcile GAAP measures and the ratios of Tier 1 capital, total capital, tangible common equity or Tier 1 common equity, as applicable, to average total assets, risk-weighted assets or tangible assets, as applicable, are presented on page 21.
(3) The Company and the Bank are subject to regulatory capital requirements administered by federal banking agencies. Those agencies define the basis for these calculations including the prescribed methodology for the calculation of the amount of risk-weighted assets.
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Financial Highlights, continued
In thousands, except share data
| | | | | | | | | | | | | |
| | (unaudited) | | (unaudited) | |
| | Three Months Ended | | Nine Months Ended | |
| | September 30, | | September 30, | |
| | 2012 | | 2011 | | 2012 | | 2011 | |
Asset Quality | | | | | | | | | |
Charge-offs | | $ | 2,682 | | $ | 10,898 | | $ | 23,934 | | $ | 30,977 | |
Recoveries | | 2,653 | | 1,732 | | 5,910 | | 7,021 | |
Net charge-offs | | $ | 29 | | $ | 9,166 | | $ | 18,024 | | $ | 23,956 | |
Provision for loan losses | | — | | 3,000 | | 6,284 | | 7,500 | |
Allowance for loan losses to loans | | 3.33 | % | 4.20 | % | 3.33 | % | 4.20 | % |
| | (unaudited) | | (audited) | | | | |
| | As of | | As of | | | | |
| | September 30, | | December 31, | | | | |
| | 2012 | | 2011 | | 2011 | | | | |
Nonaccrual loans(1) | | $ | 92,722 | | $ | 122,111 | | $ | 126,786 | | | | |
Restructured loans | | 11,518 | | 13,596 | | 11,839 | | | | |
Loans past due 90 days | | 1,572 | | 3,634 | | 318 | | | | |
Nonperforming loans | | 105,812 | | 139,341 | | 138,943 | | | | |
Other real estate owned | | 88,093 | | 100,554 | | 93,290 | | | | |
Nonperforming assets | | $ | 193,905 | | $ | 239,895 | | $ | 232,233 | | | | |
(1) Includes $11.3 million,$15.8 million and $16.2 million in nonaccrual restructured loans at September 30, 2012, September 30, 2011, and December 31, 2011, respectively.
| | (unaudited) | | (audited) | | | | |
| | As of | | As of | | | | |
| | September 30, | | December 31, | | | | |
Major Classifications of Loans | | 2012 | | 2011 | | 2011 | | | | |
Commercial | | $ | 81,438 | | $ | 107,589 | | $ | 98,099 | | | | |
Real estate - commercial | | 621,715 | | 730,554 | | 704,492 | | | | |
Real estate - construction | | 48,606 | | 77,958 | | 71,436 | | | | |
Real estate - residential | | 436,837 | | 489,985 | | 477,200 | | | | |
Installment | | 3,167 | | 4,187 | | 3,789 | | | | |
Overdraft | | 613 | | 409 | | 457 | | | | |
Lease financing receivables | | 3,229 | | 2,223 | | 2,087 | | | | |
Other | | 12,677 | | 11,242 | | 11,498 | | | | |
| | 1,208,282 | | 1,424,147 | | 1,369,058 | | | | |
Net deferred loan costs (fees) | | 7 | | (190 | ) | (73 | ) | | | |
| | $ | 1,208,289 | | $ | 1,423,957 | | $ | 1,368,985 | | | | |
| | (unaudited) | | (audited) | | | | |
| | As of | | As of | | | | |
| | September 30, | | December 31, | | | | |
Major Classifications of Deposits | | 2012 | | 2011 | | 2011 | | | | |
Noninterest bearing | | $ | 381,111 | | $ | 347,154 | | $ | 361,963 | | | | |
Savings | | 211,452 | | 191,721 | | 196,870 | | | | |
NOW accounts | | 265,215 | | 258,216 | | 275,957 | | | | |
Money market accounts | | 321,614 | | 287,228 | | 288,508 | | | | |
Certificates of deposits of less than $100,000 | | 323,464 | | 408,236 | | 390,530 | | | | |
Certificates of deposits of $100,000 or more | | 194,078 | | 235,479 | | 226,953 | | | | |
| | $ | 1,696,934 | | $ | 1,728,034 | | $ | 1,740,781 | | | | |
15
Old Second Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands)
| | (unaudited) | | (audited) | |
| | September 30, | | December 31, | |
| | 2012 | | 2011 | |
Assets | | | | | |
Cash and due from banks | | $ | 38,185 | | $ | 2,692 | |
Interest bearing deposits with financial institutions | | 34,056 | | 48,257 | |
Cash and cash equivalents | | 72,241 | | 50,949 | |
Securities available-for-sale | | 412,346 | | 307,564 | |
Federal Home Loan Bank and Federal Reserve Bank stock | | 11,800 | | 14,050 | |
Loans held-for-sale | | 5,032 | | 12,806 | |
Loans | | 1,208,289 | | 1,368,985 | |
Less: allowance for loan losses | | 40,257 | | 51,997 | |
Net loans | | 1,168,032 | | 1,316,988 | |
Premises and equipment, net | | 48,509 | | 50,477 | |
Other real estate owned, net | | 88,093 | | 93,290 | |
Mortgage servicing rights, net | | 3,603 | | 3,487 | |
Core deposit and other intangible asset, net | | 3,813 | | 4,678 | |
Bank-owned life insurance (BOLI) | | 53,841 | | 52,595 | |
Other assets | | 36,090 | | 34,534 | |
Total assets | | $ | 1,903,400 | | $ | 1,941,418 | |
| | | | | |
Liabilities | | | | | |
Deposits: | | | | | |
Noninterest bearing demand | | $ | 381,111 | | $ | 361,963 | |
Interest bearing: | | | | | |
Savings, NOW, and money market | | 798,281 | | 761,335 | |
Time | | 517,542 | | 617,483 | |
Total deposits | | 1,696,934 | | 1,740,781 | |
Securities sold under repurchase agreements | | 1,738 | | 901 | |
Junior subordinated debentures | | 58,378 | | 58,378 | |
Subordinated debt | | 45,000 | | 45,000 | |
Notes payable and other borrowings | | 500 | | 500 | |
Other liabilities | | 30,109 | | 21,856 | |
Total liabilities | | 1,832,659 | | 1,867,416 | |
| | | | | |
Stockholders’ Equity | | | | | |
Preferred stock | | 71,611 | | 70,863 | |
Common stock | | 18,729 | | 18,628 | |
Additional paid-in capital | | 66,118 | | 65,999 | |
Retained earnings | | 11,795 | | 17,107 | |
Accumulated other comprehensive loss | | (2,556 | ) | (3,702 | ) |
Treasury stock | | (94,956 | ) | (94,893 | ) |
Total stockholders’ equity | | 70,741 | | 74,002 | |
Total liabilities and stockholders’ equity | | $ | 1,903,400 | | $ | 1,941,418 | |
16
Old Second Bancorp, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except share data)
| | | | | | | | | | | | | |
| | (unaudited) | | (unaudited) | |
| | Three Months Ended | | Year to Date | |
| | September 30, | | September 30, | |
| | 2012 | | 2011 | | 2012 | | 2011 | |
Interest and Dividend Income | | | | | | | | | |
Loans, including fees | | $ | 16,193 | | $ | 19,800 | | $ | 51,476 | | $ | 61,765 | |
Loans held-for-sale | | 68 | | 72 | | 201 | | 198 | |
Securities, taxable | | 1,868 | | 928 | | 5,222 | | 2,691 | |
Securities, tax exempt | | 98 | | 114 | | 303 | | 383 | |
Dividends from Federal Reserve Bank and Federal Home Loan Bank stock | | 77 | | 73 | | 228 | | 216 | |
Federal funds sold | | — | | — | | — | | 1 | |
Interest bearing deposits with financial institutions | | 29 | | 58 | | 89 | | 197 | |
Total interest and dividend income | | 18,333 | | 21,045 | | 57,519 | | 65,451 | |
Interest Expense | | | | | | | | | |
Savings, NOW, and money market deposits | | 253 | | 327 | | 807 | | 1,275 | |
Time deposits | | 1,973 | | 3,436 | | 6,920 | | 11,220 | |
Securities sold under repurchase agreements | | 1 | | — | | 2 | | — | |
Other short-term borrowings | | — | | — | | 4 | | — | |
Junior subordinated debentures | | 1,243 | | 1,155 | | 3,660 | | 3,401 | |
Subordinated debt | | 223 | | 201 | | 684 | | 610 | |
Notes payable and other borrowings | | 5 | | 4 | | 13 | | 12 | |
Total interest expense | | 3,698 | | 5,123 | | 12,090 | | 16,518 | |
Net interest and dividend income | | 14,635 | | 15,922 | | 45,429 | | 48,933 | |
Provision for loan losses | | — | | 3,000 | | 6,284 | | 7,500 | |
Net interest and dividend income after provision for loan losses | | 14,635 | | 12,922 | | 39,145 | | 41,433 | |
Noninterest Income | | | | | | | | | |
Trust income | | 1,489 | | 1,657 | | 4,603 | | 5,156 | |
Service charges on deposits | | 1,982 | | 2,157 | | 5,706 | | 6,021 | |
Secondary mortgage fees | | 350 | | 269 | | 957 | | 732 | |
Mortgage servicing loss, net of changes in fair value | | (155 | ) | (328 | ) | (365 | ) | (221 | ) |
Net gain on sales of mortgage loans | | 2,504 | | 1,314 | | 7,509 | | 3,667 | |
Securities gains, net | | 513 | | (63 | ) | 1,306 | | 588 | |
Increase in cash surrender value of bank-owned life insurance | | 425 | | 233 | | 1,246 | | 1,130 | |
Debit card interchange income | | 788 | | 775 | | 2,661 | | 2,259 | |
Lease revenue from other real estate owned | | 840 | | 1,060 | | 2,930 | | 2,537 | |
Net gain on sales of other real estate owned | | 20 | | 297 | | 398 | | 933 | |
Other income | | 1,592 | | 1,137 | | 4,257 | | 4,044 | |
Total noninterest income | | 10,348 | | 8,508 | | 31,208 | | 26,846 | |
Noninterest Expense | | | | | | | | | |
Salaries and employee benefits | | 8,963 | | 7,985 | | 26,835 | | 25,494 | |
Occupancy expense, net | | 1,242 | | 1,273 | | 3,684 | | 3,928 | |
Furniture and equipment expense | | 1,078 | | 1,405 | | 3,416 | | 4,340 | |
FDIC insurance | | 1,029 | | 1,032 | | 3,058 | | 3,884 | |
General bank insurance | | 851 | | 845 | | 2,538 | | 2,496 | |
Amortization of core deposit and other intangible asset | | 420 | | 276 | | 865 | | 711 | |
Advertising expense | | 400 | | 311 | | 982 | | 731 | |
Debit card interchange expense | | 388 | | 394 | | 1,183 | | 1,091 | |
Legal fees | | 760 | | 924 | | 2,215 | | 2,907 | |
Other real estate expense | | 6,545 | | 5,353 | | 17,987 | | 16,618 | |
Other expense | | 3,187 | | 3,022 | | 9,186 | | 9,576 | |
Total noninterest expense | | 24,863 | | 22,820 | | 71,949 | | 71,776 | |
Income (loss) before income taxes | | 120 | | (1,390 | ) | (1,596 | ) | (3,497 | ) |
Income taxes | | — | | — | | — | | — | |
Net Income (loss) | | 120 | | (1,390 | ) | $ | (1,596 | ) | $ | (3,497 | ) |
Preferred stock dividends and accretion | | 1,255 | | 1,190 | | 3,716 | | 3,524 | |
Net loss available to common stockholders | | $ | (1,135 | ) | $ | (2,580 | ) | $ | (5,312 | ) | $ | (7,021 | ) |
| | | | | | | | | |
Basic loss per share | | $ | (0.08 | ) | $ | (0.18 | ) | $ | (0.37 | ) | $ | (0.49 | ) |
Diluted loss per share | | (0.08 | ) | (0.18 | ) | (0.37 | ) | (0.49 | ) |
Dividends declared per share | | — | | — | | — | | — | |
17
ANALYSIS OF AVERAGE BALANCES,
TAX EQUIVALENT INTEREST AND RATES
Three Months ended September 30, 2012, and 2011
(Dollar amounts in thousands - unaudited)
| | 2012 | | 2011 | |
| | Average | | | | | | Average | | | | | |
| | Balance | | Interest | | Rate | | Balance | | Interest | | Rate | |
Assets | | | | | | | | | | | | | |
Interest bearing deposits | | $ | 46,138 | | $ | 29 | | 0.25 | % | $ | 91,178 | | $ | 58 | | 0.25 | % |
Securities: | | | | | | | | | | | | | |
Taxable | | 404,855 | | 1,868 | | 1.85 | | 144,581 | | 928 | | 2.57 | |
Non-taxable (tax equivalent) | | 9,518 | | 151 | | 6.35 | | 12,172 | | 176 | | 5.78 | |
Total securities | | 414,373 | | 2,019 | | 1.95 | | 156,753 | | 1,104 | | 2.82 | |
Dividends from FRB and FHLB stock | | 11,984 | | 77 | | 2.57 | | 14,050 | | 73 | | 2.08 | |
Loans and loans held-for-sale (1) | | 1,230,180 | | 16,279 | | 5.18 | | 1,489,366 | | 19,899 | | 5.23 | |
Total interest earning assets | | 1,702,675 | | 18,404 | | 4.24 | | 1,751,347 | | 21,134 | | 4.73 | |
Cash and due from banks | | 31,850 | | — | | — | | 32,264 | | — | | — | |
Allowance for loan losses | | (40,823 | ) | — | | — | | (65,660 | ) | — | | — | |
Other noninterest bearing assets | | 228,859 | | — | | — | | 241,963 | | — | | — | |
Total assets | | $ | 1,922,561 | | | | | | $ | 1,959,914 | | | | | |
| | | | | | | | | | | | | |
Liabilities and Stockholders’ Equity | | | | | | | | | | | | | |
NOW accounts | | $ | 270,908 | | $ | 65 | | 0.10 | % | $ | 259,505 | | $ | 95 | | 0.15 | % |
Money market accounts | | 321,762 | | 137 | | 0.17 | | 285,712 | | 164 | | 0.23 | |
Savings accounts | | 213,927 | | 51 | | 0.09 | | 193,267 | | 68 | | 0.14 | |
Time deposits | | 526,314 | | 1,973 | | 1.49 | | 663,613 | | 3,436 | | 2.05 | |
Interest bearing deposits | | 1,332,911 | | 2,226 | | 0.66 | | 1,402,097 | | 3,763 | | 1.06 | |
Securities sold under repurchase agreements | | 7,164 | | 1 | | 0.06 | | 1,930 | | — | | — | |
Other short-term borrowings | | 652 | | — | | — | | 2,865 | | — | | — | |
Junior subordinated debentures | | 58,378 | | 1,243 | | 8.52 | | 58,378 | | 1,155 | | 7.91 | |
Subordinated debt | | 45,000 | | 223 | | 1.94 | | 45,000 | | 201 | | 1.75 | |
Notes payable and other borrowings | | 500 | | 5 | | 3.91 | | 500 | | 4 | | 3.13 | |
Total interest bearing liabilities | | 1,444,605 | | 3,698 | | 1.02 | | 1,510,770 | | 5,123 | | 1.35 | |
Noninterest bearing deposits | | 380,226 | | — | | — | | 344,757 | | — | | — | |
Other liabilities | | 28,130 | | — | | — | | 23,738 | | — | | — | |
Stockholders’ equity | | 69,600 | | — | | — | | 80,649 | | — | | — | |
Total liabilities and stockholders’ equity | | $ | 1,922,561 | | | | | | $ | 1,959,914 | | | | | |
Net interest income (tax equivalent) | | | | $ | 14,706 | | | | | | $ | 16,011 | | | |
Net interest income (tax equivalent) to total earning assets | | | | | | 3.44 | % | | | | | 3.63 | % |
Interest bearing liabilities to earning assets | | 84.84 | % | | | | | 86.26 | % | | | | |
(1) Interest income from loans is shown on a tax equivalent basis as discussed in the table on page 20 and includes fees of $498,000 and $448,000 for the third quarter of 2012 and 2011, respectively. Nonaccrual loans are included in the above stated average balances.
Note: Tax equivalent basis is calculated using a marginal tax rate of 35%.
18
ANALYSIS OF AVERAGE BALANCES,
TAX EQUIVALENT INTEREST AND RATES
Nine Months ended September 30, 2012, and 2011
(Dollar amounts in thousands - unaudited)
| | 2012 | | 2011 | |
| | Average | | | | | | Average | | | | | |
| | Balance | | Interest | | Rate | | Balance | | Interest | | Rate | |
Assets | | | | | | | | | | | | | |
Interest bearing deposits | | $ | 48,871 | | $ | 89 | | 0.24 | % | $ | 105,618 | | $ | 197 | | 0.25 | % |
Federal funds sold | | — | | — | | — | | 713 | | 1 | | 0.18 | |
Securities: | | | | | | | | | | | | | |
Taxable | | 365,549 | | 5,222 | | 1.90 | | 134,596 | | 2,691 | | 2.67 | |
Non-taxable (tax equivalent) | | 10,417 | | 467 | | 5.98 | | 13,364 | | 590 | | 5.89 | |
Total securities | | 375,966 | | 5,689 | | 2.02 | | 147,960 | | 3,281 | | 2.96 | |
Dividends from FRB and FHLB stock | | 12,562 | | 228 | | 2.42 | | 13,934 | | 216 | | 2.07 | |
Loans and loans held-for-sale (1) | | 1,293,533 | | 51,741 | | 5.26 | | 1,575,039 | | 62,024 | | 5.19 | |
Total interest earning assets | | 1,730,932 | | 57,747 | | 4.39 | | 1,843,264 | | 65,719 | | 4.70 | |
Cash and due from banks | | 27,528 | | — | | — | | 34,023 | | — | | — | |
Allowance for loan losses | | (46,824 | ) | — | | — | | (73,201 | ) | — | | — | |
Other noninterest bearing assets | | 236,281 | | — | | — | | 238,975 | | — | | — | |
Total assets | | $ | 1,947,917 | | | | | | $ | 2,043,061 | | | | | |
| | | | | | | | | | | | | |
Liabilities and Stockholders’ Equity | | | | | | | | | | | | | |
NOW accounts | | $ | 275,712 | | $ | 204 | | 0.10 | % | $ | 265,126 | | $ | 347 | | 0.17 | % |
Money market accounts | | 311,046 | | 438 | | 0.19 | | 297,603 | | 670 | | 0.30 | |
Savings accounts | | 211,331 | | 165 | | 0.10 | | 191,256 | | 258 | | 0.18 | |
Time deposits | | 565,183 | | 6,920 | | 1.64 | | 724,219 | | 11,220 | | 2.07 | |
Interest bearing deposits | | 1,363,272 | | 7,727 | | 0.76 | | 1,478,204 | | 12,495 | | 1.13 | |
Securities sold under repurchase agreements | | 4,502 | | 2 | | 0.06 | | 1,911 | | — | | — | |
Other short-term borrowings | | 4,635 | | 4 | | 0.11 | | 2,900 | | — | | — | |
Junior subordinated debentures | | 58,378 | | 3,660 | | 8.36 | | 58,378 | | 3,401 | | 7.77 | |
Subordinated debt | | 45,000 | | 684 | | 2.00 | | 45,000 | | 610 | | 1.79 | |
Notes payable and other borrowings | | 500 | | 13 | | 3.42 | | 500 | | 12 | | 3.16 | |
Total interest bearing liabilities | | 1,476,287 | | 12,090 | | 1.09 | | 1,586,893 | | 16,518 | | 1.39 | |
Noninterest bearing deposits | | 373,975 | | — | | — | | 354,038 | | — | | — | |
Other liabilities | | 25,629 | | — | | — | | 21,651 | | — | | — | |
Stockholders’ equity | | 72,026 | | — | | — | | 80,479 | | — | | — | |
Total liabilities and stockholders’ equity | | $ | 1,947,917 | | | | | | $ | 2,043,061 | | | | | |
Net interest income (tax equivalent) | | | | $ | 45,657 | | | | | | $ | 49,201 | | | |
Net interest income (tax equivalent) to total earning assets | | | | | | 3.52 | % | | | | | 3.57 | % |
Interest bearing liabilities to earning assets | | 85.29 | % | | | | | 86.09 | % | | | | |
(1) Interest income from loans is shown on a tax equivalent basis as discussed in the table on page 20 and includes fees of $1.4 million and $1.7 million for the first nine months of 2012 and 2011, respectively. Nonaccrual loans are included in the above stated average balances.
Note: Tax equivalent basis is calculated using a marginal tax rate of 35%.
19
The following tables provide a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent. (Dollar amounts in thousands- unaudited)
| | Three Months Ended | | Nine Months Ended | |
| | September 30, | | September 30, | |
| | 2012 | | 2011 | | 2012 | | 2011 | |
Net Interest Margin | | | | | | | | | |
Interest income (GAAP) | | $ | 18,333 | | $ | 21,045 | | $ | 57,519 | | $ | 65,451 | |
Taxable equivalent adjustment: | | | | | | | | | |
Loans | | 18 | | 27 | | 64 | | 61 | |
Securities | | 53 | | 62 | | 164 | | 207 | |
Interest income (TE) | | 18,404 | | 21,134 | | 57,747 | | 65,719 | |
Interest expense (GAAP) | | 3,698 | | 5,123 | | 12,090 | | 16,518 | |
Net interest income (TE) | | $ | 14,706 | | $ | 16,011 | | $ | 45,657 | | $ | 49,201 | |
Net interest income (GAAP) | | $ | 14,635 | | $ | 15,922 | | $ | 45,429 | | $ | 48,933 | |
Average interest earning assets | | $ | 1,702,675 | | $ | 1,751,347 | | $ | 1,730,932 | | $ | 1,843,264 | |
Net interest margin (GAAP) | | 3.42 | % | 3.61 | % | 3.51 | % | 3.55 | % |
Net interest margin (TE) | | 3.44 | % | 3.63 | % | 3.52 | % | 3.57 | % |
| | | | | | | | | |
Efficiency Ratio | | | | | | | | | |
Noninterest expense | | $ | 24,863 | | $ | 22,820 | | $ | 71,949 | | $ | 71,776 | |
Less amortization of core deposit and other intangible asset | | 420 | | 276 | | 865 | | 711 | |
Less other real estate expense | | 6,545 | | 5,353 | | 17,987 | | 16,618 | |
Adjusted noninterest expense | | 17,898 | | 17,191 | | 53,097 | | 54,447 | |
Net interest income (GAAP) | | 14,635 | | 15,922 | | 45,429 | | 48,933 | |
Taxable-equivalent adjustment: | | | | | | | | | |
Loans | | 18 | | 27 | | 64 | | 61 | |
Securities | | 53 | | 62 | | 164 | | 207 | |
Net interest income (TE) | | 14,706 | | 16,011 | | 45,657 | | 49,201 | |
Noninterest income | | 10,348 | | 8,508 | | 31,208 | | 26,846 | |
Less litigation related income | | 6 | | — | | 125 | | — | |
Less securities gain (loss) , net | | 513 | | (63 | ) | 1,306 | | 588 | |
Less gain on sale of OREO | | 20 | | 297 | | 398 | | 933 | |
Adjusted noninterest income, plus net interest income (TE) | | 24,515 | | 24,285 | | 75,036 | | 74,526 | |
Efficiency ratio | | 73.01 | % | 70.79 | % | 70.76 | % | 73.06 | % |
20
| | | | | | | | | | |
| | (unaudited) | | (unaudited) | |
| | As of September 30, | | December 31, | |
| | 2012 | | 2011 | | 2011 | |
| | (dollars in thousands) | |
Tier 1 capital | | | | | | | |
Total stockholders’ equity | | $ | 70,741 | | $ | 78,278 | | $ | 74,002 | |
Tier 1 adjustments: | | | | | | | |
Trust preferred securities | | 24,432 | | 27,128 | | 25,901 | |
Cumulative other comprehensive loss | | 2,556 | | 3,107 | | 3,702 | |
Disallowed intangible assets | | (3,813 | ) | (4,814 | ) | (4,678 | ) |
Disallowed deferred tax assets | | — | | (2,175 | ) | (2,592 | ) |
Other | | (360 | ) | (360 | ) | (349 | ) |
Tier 1 capital | | $ | 93,556 | | $ | 101,164 | | $ | 95,986 | |
| | | | | | | |
Total capital | | | | | | | |
Tier 1 capital | | $ | 93,556 | | $ | 101,164 | | $ | 95,986 | |
Tier 2 additions: | | | | | | | |
Allowable portion of allowance for loan losses | | 18,399 | | 20,288 | | 19,736 | |
Additional trust preferred securities disallowed for tier 1 captial | | 32,193 | | 29,497 | | 30,724 | |
Subordinated debt | | 45,000 | | 45,000 | | 45,000 | |
Tier 2 additions subtotal | | 95,592 | | 94,785 | | 95,460 | |
Allowable Tier 2 | | 93,556 | | 94,785 | | 95,460 | |
Other Tier 2 capital components | | (6 | ) | (7 | ) | (7 | ) |
Total capital | | $ | 187,106 | | $ | 195,942 | | $ | 191,439 | |
| | | | | | | |
Tangible common equity | | | | | | | |
Total stockholders’ equity | | $ | 70,741 | | $ | 78,278 | | $ | 74,002 | |
Less: Preferred equity | | 71,611 | | 70,622 | | 70,863 | |
Intangible assets | | 3,813 | | 4,814 | | 4,678 | |
Tangible common equity | | $ | (4,683 | ) | $ | 2,842 | | $ | (1,539 | ) |
| | | | | | | |
Tier 1 common equity | | | | | | | |
Tangible common equity | | $ | (4,683 | ) | $ | 2,842 | | $ | (1,539 | ) |
Tier 1 adjustments: | | | | | | | |
Cumulative other comprehensive loss | | 2,556 | | 3,107 | | 3,702 | |
Other | | (360 | ) | (2,535 | ) | (2,941 | ) |
Tier 1 common equity | | $ | (2,487 | ) | $ | 3,414 | | $ | (778 | ) |
| | | | | | | |
Tangible assets | | | | | | | |
Total assets | | $ | 1,903,400 | | $ | 1,940,704 | | $ | 1,941,418 | |
Less: | | | | | | | |
Intangible assets | | 3,813 | | 4,814 | | 4,678 | |
Tangible assets | | $ | 1,899,587 | | $ | 1,935,890 | | $ | 1,936,740 | |
| | | | | | | |
Total risk-weighted assets | | | | | | | |
On balance sheet | | $ | 1,409,071 | | $ | 1,533,543 | | $ | 1,511,815 | |
Off balance sheet | | 40,958 | | 49,902 | | 34,824 | |
Total risk-weighted assets | | $ | 1,450,029 | | $ | 1,583,445 | | $ | 1,546,639 | |
| | | | | | | |
Average assets | | | | | | | |
Total average assets for leverage | | $ | 1,918,388 | | $ | 1,952,565 | | $ | 1,925,953 | |
21
