UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant To Section 13 Or 15(d)
Of The Securities Exchange Act Of 1934
For the quarterly period ended September 30, 1996
Commission file No. 0-10537
Old Second Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Delaware 36-3143493
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
37 South River Street, Aurora, Illinois 60507
(Address of principal executive offices) (Zip Code)
(630) 892-0202
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject
to such filing requirements for the past 91 days.
Yes [X] No[ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of the latest practicable
date.
2,937,484 shares of no par value common stock are outstanding
as of November 12, 1996.
There are no exhibits with this Form 10-Q.
Page 1 of 12 Pages
Part I - Financial Information
Item 1 - Financial Statements
OLD SECOND BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE DATA)
September 30, December 31,
1996 1995
--------- ---------
ASSETS
------
Cash and Due from Banks, Non-
Interest Bearing $ 28,934 $ 42,047
Interest Bearing Deposits With Banks 200 400
Federal Funds Sold 43,575 42,800
------- -------
Total Cash and Cash Equivalents 72,709 85,247
Available for Sale Securities 253,392 253,899
Loans 421,957 399,505
Less:Allowance For Possible Loan Losses 6,226 5,676
Unearned Income 418 502
------- -------
Loans, Net 415,313 393,327
Bank Premises and Equipment, Net 14,868 14,602
Other Assets 15,005 13,655
------- -------
TOTAL ASSETS $771,287 $760,730
======= =======
LIABILITIES
-----------
Deposits:
Demand $ 93,684 $100,169
Savings 283,455 271,769
Time 303,415 297,353
------- -------
Total Deposits 680,554 669,291
Securities Sold Under Agreements
to Repurchase 1,369 6,554
Other Short-Term Borrowings 3,991 2,585
Note Payable 20 40
Other Liabilities 6,151 6,842
------- -------
Total Liabilities 692,085 685,312
------- -------
STOCKHOLDERS' EQUITY
--------------------
Preferred Stock, no par value, 300,000 shares
authorized, none issued
Common Stock, no par value
shares authorized:
6,000,000 at September 30, 1996
3,500,000 at December 31, 1995
shares issued:
2,937,484 at September 30, 1996
2,350,165 at December 31, 1995 15,377 15,377
Retained Earnings 64,234 58,533
Net Unrealized Gain (Loss) on Investments (409) 1,508
------- -------
Total Stockholders' Equity 79,202 75,418
------- -------
TOTAL LIABILITIES&STOCKHOLDERS' EQUITY $771,287 $760,730
======= =======
<FN>
See accompanying notes.
Page 2
OLD SECOND BANCORP, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
Three Months Ended
September 30,
------------------
1996 1995
------ ------
INTEREST INCOME:
---------------
Loans $ 9,266 $ 8,625
Investment Securities:
Taxable 3,068 3,112
Exempt From Federal Income Tax 965 1,052
Federal Funds Sold 387 648
Interest Bearing Deposits 7 5
------ ------
Total Interest Income 13,693 13,442
------ ------
INTEREST EXPENSE:
----------------
Savings Deposits 1,853 1,998
Time Deposits 4,204 4,266
Securities Sold Under Agreements
To Repurchase 42 61
Other Short-Term Borrowings 35 54
Note Payable 0 1
------ ------
Total Interest Expense 6,134 6,380
------ ------
Net Interest Income 7,559 7,062
Provision for Possible
Loan Losses 230 20
------ ------
Net Interest Income After
Provision for Possible Loan Losses 7,329 7,042
OTHER INCOME:
------------
Trust Fees 910 789
Service Charges on Deposit Accounts 740 624
Other Income 286 380
------ ------
Total Other Income 1,936 1,793
------ ------
OTHER EXPENSES:
--------------
Salaries and Employee Benefits 3,101 3,007
Net Occupancy of Bank Premises 517 475
Furniture and Equipment 708 505
FDIC Insurance 6 (36)
Marketing 242 248
Stationery and Supplies 176 204
Goodwill Amortization 129 129
Other 995 1,088
------ ------
Total Other Expenses 5,874 5,620
------ ------
Income Before Income Taxes 3,391 3,215
Income Tax Expense 1,060 924
------ ------
Net Income $2,331 $2,291
====== ======
Per Share Amounts:
-----------------
Net Income $0.79 $0.78
Dividends Declared 0.20 0.16
Average Shares Outstanding 2,937,484 2,937,706
<FN>
See accompanying notes.
Page 3
OLD SECOND BANCORP, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
Nine Months Ended
September 30,
----------------
1996 1995
------ ------
INTEREST INCOME:
---------------
Loans $27,132 $25,281
Investment Securities:
Taxable 9,088 9,141
Exempt From Federal Income Tax 2,854 3,015
Federal Funds Sold 1,431 1,520
Interest Bearing Deposits 18 16
------ ------
Total Interest Income 40,523 38,973
------ ------
INTEREST EXPENSE:
----------------
Savings Deposits 5,532 5,739
Time Deposits 12,537 11,659
Securities Sold Under Agreements
To Repurchase 119 90
Other Short-Term Borrowings 79 152
Note Payable 1 3
------ ------
Total Interest Expense 18,268 17,643
------ ------
Net Interest Income 22,255 21,330
Provision for Possible
Loan Losses 509 79
------ ------
Net Interest Income After
Provision for Possible Loan Losses 21,746 21,251
OTHER INCOME:
------------
Trust Fees 2,877 2,383
Service Charges on Deposit Accounts 2,045 1,845
Other Income 1,080 961
------ ------
Total Other Income 6,002 5,189
------ ------
OTHER EXPENSES:
--------------
Salaries and Employee Benefits 9,258 9,101
Net Occupancy of Bank Premises 1,350 1,221
Furniture and Equipment 1,917 1,440
FDIC Insurance 18 661
Marketing 642 584
Stationery and Supplies 570 527
Goodwill Amortization 387 387
Other 2,874 3,100
------ ------
Total Other Expenses 17,016 17,021
------ ------
Income Before Income Taxes 10,732 9,419
Income Tax Expense 3,376 2,667
------ ------
Net Income $7,356 $6,752
====== ======
Per Share Amounts:
-----------------
Net Income $2.50 $2.30
Dividends Declared 0.60 0.48
Average Shares Outstanding 2,937,620 2,937,706
<FN>
See accompanying notes.
Page 4
OLD SECOND BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
For the Nine Months
Ended September 30,
1996 1995
----- -----
CASH FLOWS FROM OPERATING ACTIVITIES:
-------------------------------------
Interest Received $40,665 $38,728
Interest Paid (18,430) (16,956)
Paid to Suppliers and Employees (16,086) (16,297)
Trust Fees Received 2,877 2,383
Income Taxes Paid (3,465) (2,595)
Service Charges Received on Deposit
Accounts 2,045 1,845
Other Income Received 1,080 961
------ ------
Net Cash Provided By Operating Activities 8,686 8,069
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
-------------------------------------
Net Increase in Loans (22,495) (29,320)
Purchases of Available for Sale
Securities (36,303) (33,409)
Proceeds from Maturities of Available
for Sale Securities 33,599 27,383
Capital Expenditures (1,281) (775)
Decrease in Other Real Estate Owned 0 789
Other, Net (324) 0
------ ------
Net Cash Used in Investing Activities (26,804) (35,332)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
-------------------------------------
Net Increase in Deposits 11,263 37,702
Increase (Decrease)in Other
Short-term Borrowings (3,799) 2,013
Decrease in Notes Payable (40)
Dividends Paid (1,891) (1,500)
Other, Net 7 40
------- ------
Net Cash Provided by
Financing Activities 5,580 38,215
------- ------
Net Increase (Decrease) in Cash
& Cash Equivalents (12,538) 10,952
Cash & Cash Equivalents
at Beginning of Period 85,247 78,751
------ ------
Cash & Cash Equivalents at End of Period $72,709 $89,703
====== ======
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net Income $7,356 $6,752
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation 1,015 961
Provision for Possible Loan Losses 509 79
Increase in Taxes Payable 35 142
Benefit for Deferred Income Taxes (124) (70)
(Increase) Decrease in Interest
Receivable 63 (723)
Increase(Decrease) in Interest
Payable (161) 688
Net Premium Amortization 78 477
Goodwill Amortization 387 387
Decrease in Accrued Expenses (334) (347)
Increase in Prepaid Expenses (138) (277)
------ ------
Total Adjustments 1,330 1,317
------ ------
Net Cash Provided by
Operating Activities $8,686 $8,069
====== ======
<FN>
See accompanying notes.
Page 5
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies followed in the preparation of interim
financial statements are consistent with those used in the
preparation of annual financial information. The interim
financial statements reflect all adjustments, which are normal
and recurring in nature, necessary in the opinion of management
for a fair statement of results for the interim periods presented.
Results for the nine months ended September 30, 1996 are not
necessarily indicative of the results that may be expected for
the year ended December 31, 1996.
NOTE 2 - ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND
LONG-LIVED ASSETS TO BE DISPOSED OF
Effective January 1, 1996, the Corporation adopted Financial
Accounting Standards Number 121 "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of".
Adoption of this standard did not have a material effect on the
Corporation's financial position or results of operations.
NOTE 3 - ACCOUNTING FOR STOCK BASED COMPENSATION
As of January 1, 1996, the Corporation adopted Financial Accounting
Standards Number 123 "Accounting for Stock Based Compensation",
which applies to the Corporation's Long-Term Incentive Plan.
Adoption of this standard did not have any effect on the
Corporation's financial position or results of operations because
the Corporation has elected to adopt only the disclosure
requirements of the standard and will continue to account for stock
based compensation as it has in the past under the provisions of
Accounting Principles Board Opinion No. 25.
NOTE 4 - PER SHARE AMOUNTS
Income per share amounts are based on the weighted average number
of shares of Common Stock outstanding during each reported period,
after giving retroactive effect to a five-for-four stock split
effective June 17, 1996.
NOTE 5 - PROPOSED ACQUISITION
Old Second Bancorp has signed a Definitive Agreement to acquire the
First of America Bank-Illinois branch in Ottawa ("Ottawa"). The
scheduled effective date for the acquisition, subject to the
approval of federal regulators is December 27, 1996. The Ottawa
branch had total deposits of approximately 30,000,000 at September
30, 1996. Old Second will operate the new location as a branch of
Yorkville National Bank.
Page 6
PART 1 - FINANCIAL INFORMATION
ITEM 2
OLD SECOND BANCORP, INC. AND SUBSIDIARIES
MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion analyzes the consolidated financial
condition and results of operations of Old Second Bancorp, Inc.
and its subsidiaries.
FINANCIAL CONDITION
Total Assets at September 30, 1996 of $771,287,000 were up slightly
from the 1995 year-end total of $760,730,000. Available for Sale
Securities of $253,392,000 were down $507,000 and Net Loans of
$415,313,000 were up $21,986,000 (5.6%).
Total Deposits were $680,554,000 compared to the 1995 year-end
total of $669,291,000. Savings Deposits of $283,455,000 were up
$11,686,000 (4.3%). Time Deposits increased $6,062,000 (2.0%) as
depositors appear to be taking advantage of rates on Certificates
of Deposits. Demand Deposits of $93,684,000 were down $6,485,000
(6.5%). Securities Sold Under Agreements to Repurchase of
$1,369,000 decreased $5,185,000 while Other Short-Term Borrowings
of $3,991,000 were up $1,406,000.
Total Stockholders' Equity of $79,202,000 increased by $3,784,000
from the 1995 year-end total of $75,418,000. The increase resulted
from additional retained earnings of $5,701,000 offset by a decline
of $1,917,000 in Net Unrealized Gain (Loss) on Investments.
Page 7
RESULTS OF OPERATIONS
Operating results include Net Income for Old Second Bancorp, Inc.
and its subsidiaries for the three and nine months ended September
30, 1996 and 1995, respectively.
Net Interest Income for the three months ending September 30, 1996
of $7,559,000 was up $497,000 (7.0%) over the like period of 1995.
Total Interest Income for the three months of 1996 was higher than
1995 by $251,000, while Total Interest Expense was lower than 1995
by $246,000.
Total Other Income for the three months ending September 30, 1996
of $1,936,000 was up $143,000 (8.0%) from the same period a year
ago. Trust Fees increased $121,000 (15.3%) and Service Charges on
Deposit Accounts increased $116,000 (18.6%) for the quarter.
Total Other Expenses for the three months ending September 30, 1996
increased $254,000 (4.5%) from the same period in 1995. Net
Occupancy and Furniture and Equipment increased $42,000 (8.8%) and
$203,000 (40.2%), respectively.
For the nine months ending September 30, 1996 Net Interest Income
of $22,255,000 was up $925,000 (4.3%) over the first nine months of
1995. Total Interest Income for the nine months of 1996 was higher
than 1995 by $1,550,000 (4.0%), while Total Interest Expense was
higher than 1995 by $625,000 (3.5%).
Total Other Income for the nine months ending September 30, 1996
increased $813,000 (15.7%) from the like period in 1995. Trust Fees
increased $494,000 (20.7%) and Other Income increased $119,000
(12.4%) for the nine month period due primarily to higher mortgage
origination fees from Mortgages Held for Resale.
For the nine months, Total Other Expenses were substantially the
same as last year. Net Occupancy and Furniture and Equipment
increased $129,000 (10.6%) and $477,000 (33.1%), respectively. FDIC
expense decreased $643,000 (97.3%), Marketing increased $58,000
(9.9%) and Stationary and Supplies increased $43,000 (8.2%). Other
Expenses were down $226,000 (7.3%) from the same period in 1995.
Page 8
LIQUIDITY
Liquidity is generally defined as the ability to meet cash flow
requirements. For a bank, meeting cash flow requirements means
having funds available to satisfy customer credit needs as well
as having funds available to meet depositor withdrawal requests.
For the Corporation, liquidity means having funds available to
pay cash dividends, debt service and operating expenses. Liquid
assets consist primarily of non-interest bearing and interest
bearing deposits, overnight federal funds sold and unpledged
investment securities. The Consolidated Statements of Cash Flows
included with the financial statements herein set forth the cash
flows from operating, investing and financing activities for the
various time periods.
Net cash provided by operating activities was $8,686,000 and
$8,069,000 for the nine months ended September 30, 1996 and 1995,
respectively.
Net cash used in investing activities was $26,804,000 for the nine
months in 1996; in 1995 net cash used in investing activities
totaled $35,332,000. The primary components of cash flows from
investing activities are funding and repayment of customer loans
and purchases and sales of investment securities. For 1996, net
increases in loans resulted in cash outflows of $22,495,000 and net
investment activity resulted in cash outflows of $2,704,000.
During 1995, net increases in loans resulted in cash outflows of
$29,320,000 while net investment activity resulted in cash outflows
of $6,026,000.
Cash flows from financing activities are primarily attributable
to changes in deposit levels, short-term borrowings, notes
payable and the payment of dividends to stockholders. For the nine
months ending September 30, 1996, net cash provided by financing
activities was $5,580,000; in 1995 net cash provided by financing
activities totaled $38,215,000. For 1996, an increase in deposits
generated cash inflows of $11,263,000 and a decrease in Short-term
Borrowings generated cash outflows of $3,799,000. In 1995 an
increase in deposits generated cash inflows of $37,702,000 and
Short-term Borrowings resulted in cash inflows of $2,013,000.
Page 9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
Exhibit 27. Financial Data Schedule
B. Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter
because of the absence of conditions under which they are
required.
Page 10
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
OLD SECOND BANCORP, INC.
/S/ Ronald J. Carlson
By: Ronald J. Carlson,
President, Chief Financial Officer,
Chief Operating Officer, Secretary
and Director
Date: 11/14/96
Page 11
OLD SECOND BANCORP, INC.
37 SOUTH RIVER STREET
AURORA ILLINOIS 60507
Page 12