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, 1997
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.
3,049,190 shares of no par value common stock are outstanding
as of November 10, 1997.
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,
1997 1996
--------- ---------
ASSETS
------
Cash and Due from Banks, Non-
Interest Bearing $ 35,250 $ 40,132
Interest Bearing Deposits With Banks 350 200
Federal Funds Sold 40,050 40,675
------- -------
Total Cash and Cash Equivalents 75,650 81,007
Available for Sale Securities 268,514 287,064
Loans Held for Sale 15,344 6,137
Loans 530,348 481,914
Less:Allowance For Possible Loan Losses 7,023 6,968
------- -------
Loans, Net 538,669 481,083
Bank Premises and Equipment, Net 20,946 19,410
Other Assets 23,039 21,280
------- -------
TOTAL ASSETS $926,818 $889,844
======= =======
LIABILITIES
-----------
Deposits:
Demand $106,572 $118,336
Savings 293,744 305,272
Time 380,564 366,361
------- -------
Total Deposits 780,880 789,969
Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase 20,780 1,838
Other Short-Term Borrowings 6,995 4,401
Note Payable 19,353 1,017
Other Liabilities 9,508 8,419
------- -------
Total Liabilities 837,516 805,644
------- -------
STOCKHOLDERS' EQUITY
--------------------
Preferred Stock, no par value, 300,000 shares
authorized, none issued
Common Stock, no par value
shares authorized: 6,000,000
shares issued and
outstanding: 3,049,190 15,844 15,844
Retained Earnings 72,641 68,052
Net Unrealized Gain (Loss) on Investments 817 304
------- -------
Total Stockholders' Equity 89,302 84,200
------- -------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $926,818 $889,844
======= =======
[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,
------------------
1997 1996
------ ------
INTEREST INCOME:
---------------
Interest and Fees on Loans $12,020 $10,530
Interest and Dividends on
Available-for-Sale Securities:
Taxable 3,223 3,220
Exempt From Federal Income Tax 819 968
Interest on Federal Funds Sold 723 390
Interest on Interest Bearing Deposits 6 7
------ ------
Total Interest Income 16,791 15,115
------ ------
INTEREST EXPENSE:
----------------
Savings Deposits 1,988 1,933
Time Deposits 5,645 4,836
Other Short-Term Borrowings 303 287
Note Payable 265 0
------ ------
Total Interest Expense 8,201 7,056
------ ------
Net Interest Income 8,590 8,059
Provision for Possible
Loan Losses 356 265
------ ------
Net Interest Income After
Provision for Possible Loan Losses 8,234 7,794
OTHER INCOME:
------------
Trust Fees 939 910
Service Charges on Deposit Accounts 821 768
Gain on Sale of Loans 1,283 851
Other Income 761 863
------ ------
Total Other Income 3,804 3,392
------ ------
OTHER EXPENSES:
--------------
Salaries and Employee Benefits 4,584 4,176
Net Occupancy of Bank Premises 570 642
Furniture and Equipment 826 846
FDIC Insurance 35 21
Marketing 294 99
Stationery and Supplies 252 226
Amortization of Intangible Assets 289 257
Other 1,584 1,836
------ ------
Total Other Expenses 8,434 8,103
------ ------
Income Before Income Taxes 3,604 3,083
Income Tax Expense 1,104 995
------ ------
Net Income $2,500 $2,088
====== ======
Per Share Amounts:
-----------------
Net Income $0.82 $0.68
Dividends Declared 0.20 0.19
Average Shares Outstanding 3,049,190 3,049,412
[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,
----------------
1997 1996
------ ------
INTEREST INCOME:
---------------
Interest and Fees on Loans $34,057 $30,624
Interest and Dividends on
Available-for-Sale Securities:
Taxable 9,788 9,564
Exempt From Federal Income Tax 2,502 2,861
Interest on Federal Funds Sold 1,610 1,560
Interest on Interest Bearing Deposits 13 18
------ ------
Total Interest Income 47,970 44,627
------ ------
INTEREST EXPENSE:
----------------
Savings Deposits 5,770 5,785
Time Deposits 16,197 14,466
Other Short-Term Borrowings 659 574
Note Payable 265 1
------ ------
Total Interest Expense 22,891 20,826
------ ------
Net Interest Income 25,079 23,801
Provision for Possible
Loan Losses 901 544
------ ------
Net Interest Income After
Provision for Possible Loan Losses 24,178 23,257
OTHER INCOME:
------------
Trust Fees 2,961 2,877
Service Charges on Deposit Accounts 2,326 2,121
Gain on Sale of Loans 2,426 2,727
Other Income 2,235 3,025
------ ------
Total Other Income 9,948 10,750
------ ------
OTHER EXPENSES:
--------------
Salaries and Employee Benefits 13,364 13,250
Net Occupancy of Bank Premises 1,629 1,695
Furniture and Equipment 2,411 2,349
FDIC Insurance 149 130
Marketing 829 642
Stationery and Supplies 740 768
Amortization of Intangible Assets 848 709
Other 4,961 4,863
------ ------
Total Other Expenses 24,931 24,406
------ ------
Income Before Income Taxes 9,195 9,601
Income Tax Expense 2,926 3,075
------ ------
Net Income $6,269 $6,526
====== ======
Per Share Amounts:
-----------------
Net Income $2,06 $2.14
Dividends Declared 0.59 0.58
Average Shares Outstanding 3,049,190 3,049,412
[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,
1997 1996
----- -----
CASH FLOWS FROM OPERATING ACTIVITIES:
-------------------------------------
Interest Received $46,894 $44,881
Interest Paid (22,708) (20,940)
Paid to Suppliers and Employees (22,832) (20,206)
Trust Fees Received 2,961 2,877
Income Taxes Paid (2,441) (4,210)
Service Charges Received on Deposit
Accounts 2,326 2,121
Net(Increase) Decrease in Mortgage Loans
Held for Sale (11,598) 22,856
Other Income Received 2,235 3,025
------ ------
Net Cash (Used in)
Provided by Operating Activities (5,163) 30,404
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
-------------------------------------
Net Increase in Loans (44,582) (21,619)
Purchases of Available for Sale
Securities (44,786) (38,331)
Proceeds from Maturities of Available
for Sale Securities 63,752 35,181
Capital Expenditures (2,960) (1,006)
Purchase of Mortgage Servicing Rights (120) (658)
Other, Net (431) (141)
------ ------
Net Cash Used in Investing Activities (29,127) (26,574)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
-------------------------------------
Net Increase (Decrease)in Deposits (9,089) 490
Increase (Decrease)in Other
Short-term Borrowings 21,536 (13,169)
Increase in Note Payable 18,336 0
Dividends Paid (2,079) (1,891)
Other, Net 229 7
------- ------
Net Cash (Used in) Provided by
Financing Activities 28,933 (14,563)
------- ------
Net Increase (Decrease) in Cash
& Cash Equivalents (5,357) (10,733)
Cash & Cash Equivalents
at Beginning of Period (81,007) (86,921)
------ ------
Cash & Cash Equivalents at End of Period $75,650 $76,188
====== ======
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net Income $6,269 $6,526
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation 1,526 1,284
Provision for Possible Loan Losses 901 544
Increase (Decrease) in Taxes Payable 796 (1,128)
(Increase) Decrease in Mortgages
held for Sale (11,598) 22,856
(Increase) Decrease in Interest
Receivable (1,508) 131
Increase (Decrease) in Interest
Payable 183 (103)
Net Premium Amortization 431 123
Gains on Sales of Loans (2,426) (2,727)
Amortization of Intangible Assets 848 709
Decrease in Accrued Expenses (11) (1,340)
(Increase) Decrease in Prepaid
Expenses (574) 3,529
------ ------
Total Adjustments (11,432) 23,878
------ ------
Net Cash (Used in) Provided by
Operating Activities ($5,163) $30,404
====== ======
[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, 1997 are not
necessarily indicative of the results that may be expected for
the year ended December 31, 1997.
NOTE 2 - ACCOUNTING FOR EARNING PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard (SFAS) No. 128 "Earnings
Per Share" which prescribes the calculation of earnings per share
for both interim and annual financial statements. Adoption of this
standard is required for periods ending after December 31, 1997 and
is not expected to have a material affect on the corporation's
earnings per share computation.
NOTE 3 - BUSINESS COMBINATIONS
On May 13, 1997 Old Second issued 111,706 shares of common stock to
acquire 100% of the outstanding common stock of Maple Park
Bancshares, Inc. The acquisition of Maple Park Bancshares, Inc.
was accounted for as a pooling-of-interests; accordingly, the
financial statements have been restated for all periods presented
to include the accounts and results of operation of Maple Park
Bancshares, Inc.
Page 6
Operating results of Old Second and Maple Park Bancshares, Inc. for
the three months and nine months ended September 30, 1997 and 1996,
prior to restatement are as follows:
Three Months Ended September 30,
1997 1996
(In thousands)
Old Second
Net Interest Income 8,590 7,559
Net Income 2,500 2,331
Maple Park Bancshares
Net Interest Income 0 500
Net Income 0 (243)
Combined
Net Interest Income 8,590 8,059
Net Income 2,500 2,088
Nine Months Ended September 30,
1997 1996
(In thousands)
Old Second
Net Interest Income 24,358 22,255
Net Income 6,882 7,356
Maple Park Bancshares
Net Interest Income 721 1,546
Net Income (613) (830)
Combined
Net Interest Income 25,079 23,801
Net Income 6,269 6,526
Page 7
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, 1997 of $926,818,000 an increase of
$36,974,000 (4.2%) the 1996 year-end total of $889,844,000. Available
for Sale Securities of $268,514,000 were down $18,550,000 and Net Loans of
$538,669,000 were up $57,586,000 (12.0%).
Total Deposits were $780,880,000 compared to the 1996 year-end
total of $789,969,000. Savings Deposits of $293,744,000 were down
$11,528,000 (3.8%). Time Deposits increased $14,203,000 (3.9%) as
depositors appear to be taking advantage of rates on Certificates
of Deposits. Demand Deposits of $106,572,000 were down $11,764,000
(9.9%). Securities Sold Under Agreements to Repurchase of
$20,780,000 increased $18,942,000 while Other Short-Term Borrowings
of $6,995,000 were up $2,594,000.
Total Stockholders' Equity of $89,302,000 increased by $5,102,000
from the 1996 year-end total of $84,200,000. The increase resulted
from additional retained earnings of $4,589,000 and by an
increase of $513,000 in Net Unrealized Gain (Loss) on Investments.
Page 8
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, 1997 and 1996, respectively.
Net Interest Income for the three months ending September 30, 1997
of $8,590,000 was up 531,000 (6.6%) over the like period of 1996.
Total Interest Income for the three months of 1997 was higher than
1996 by $1,676,000, while Total Interest Expense was higher than
1996 by $1,145,000.
Total Other Income for the three months ending September 30, 1997
of $3,804,000 was up $412,000 (12.1%) from the same period a year
ago. Trust Fees increased $29,000 (3.2%) and Service Charges on
Deposit Accounts increased $53,000 (6.9%) for the quarter.
Total Other Expenses for the three months ending September 30, 1997
increased $331,000 (4.1%) from the same period in 1996.
For the nine months ending September 30, 1997 Net Interest Income
of $25,079,000 was up $1,278,000 (5.4%) over the first nine months
of 1996. Total Interest Income for the nine months of 1997 was
higher than 1996 by $3,343,000 (7.5%), while Total Interest Expense
was higher than 1996 by 2,065,000 (9.9%).
Total Other Income for the nine months ending September 30, 1997
decreased $802,000 (7.5%) from the like period in 1996.
Other Income decreased $790,000 (26.1%) for the nine month period due to
lower mortgage servicing and lease revenue attributable to Maple Park's
operations.
For the nine months, Total Other Expenses increased $525,000 (2.2%) for
1996.
Page 9
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 used in operating activities for the nine months ended
September 30, 1997 was $5,163,000 and net cash provided by operating
activities for the nine months ended September 30, 1996 was $30,404,000.
The decline in cash inflows from operating activities was primarily
attributable to increases in mortgage loans held for sale for the nine
months as compared to the same period in 1996.
Net cash used in investing activities was $29,127,000 for the nine
months in 1997; in 1996 net cash used in investing activities
totaled $26,574,000. The primary components of cash flows from
investing activities are funding and repayment of customer loans
and purchases and sales of investment securities. For 1997, net
increases in loans resulted in cash outflows of $44,582,000 and net
investment activity resulted in cash inflows of $18,966,000.
During 1996, net increases in loans resulted in cash outflows of
$21,619,000 while net investment activity resulted in cash outflows
of $3,150,000.
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, 1997, net cash provided by financing
activities was $28,933,000; in 1996 net cash used by financing
activities totaled $14,563,000. For 1997, a decrease in deposits
generated cash outflows of $9,089,000 and an increase in Short-term
Borrowings generated cash inflows of $21,536,000. In 1996 an
increase in deposits generated cash inflows of $490,000 and a decrease
in Short-term Borrowings resulted in cash outflows of $13,169,000.
Page 10
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
Form 8-K, Item 5, dated August 1, 1997
Page 11
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/ R. J. Carlson
By: Ronald J. Carlson,
President, Chief Financial Officer,
Chief Operating Officer, Secretary
and Director
Date: 11/14/97
Page 12