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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act
of 1934 (No Fee Required)
For the fiscal year ended December 31, 1997
or
Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act
of 1934 (No Fee Required)
For the Transition Period From __________ to __________.
Commission file number 0-10537
Old Second Bancorp, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 36-3143493
(State of Incorporation) (I.R.S. Employer I.D. 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)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Yes
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 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
Yes X No
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant. The aggregate market value shall be computed by reference
to the price at which the stock was sold, or the average bid and asked prices
of such stock, as of a specified date within 60 days prior to the date of
filing:
$189,049,780 as of March 12, 1998
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.
3,049,190 shares of No par value common stock at March 12, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the December 31, 1997 Annual Report to Stockholders and the
Registrant's Proxy Statement dated February 11, 1998, have been incorporated
by reference in Parts I, II and III of the Annual Report on Form 10-K, to
the extent indicated herein.
Index to Exhibits is in Part IV on pages 17 and 18.
This Form 10-K consists of 61 pages.
Page 1
FORM 10-K
TABLE OF CONTENTS
Part I
Item 1. Business 3
Item 2. Properties 14
Item 3. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Part II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters 15
Item 6. Selected Financial Data 15
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
Item 7a. Quantitative and Qualitative Disclosures about
Market Risk 15
Item 8. Financial Statements and Supplementary Data 15
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 15
Part III
Item 10. Directors and Executive Officers of the Registrant 16
Item 11. Executive Compensation 16
Item 12. Security Ownership of Certain Beneficial Owners and
Management 16
Item 13. Certain Relationships and Related Transactions 16
Part IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 17
Part I
Item 1. Business
OLD SECOND BANCORP, INC.
Old Second Bancorp, Inc. ("Bancorp") was organized on September 8, 1981 by
the directors of The Old Second National Bank of Aurora ("Old Second").
Bancorp was incorporated under the laws of the State of Delaware on September
18, 1981.
Bancorp is a multi-bank holding company principally engaged in the business of
attracting deposits and investing these funds, together with borrowings and
other funds, to primarily originate commercial, real estate and consumer
loans and purchase investment securities. At December 31, 1997, Bancorp had
seven subsidiary banks, as follows: The Old Second National Bank of Aurora,
The Old Second Community Bank of North Aurora, The Old Second Community Bank
of Aurora, The Yorkville National Bank, Burlington Bank, Kane County Bank and
Trust and Bank of Sugar Grove. In addition, Bancorp has a mortgage banking
subsidiary principally engaged in the business of originating, purchasing,
selling and servicing residential mortgage loans.
The directors of Bancorp are the same as the directors of Old Second. The
directors receive no fees for Bancorp meetings. Bancorp has no salaried
employees. The officers of Bancorp are also officers of Old Second.
Executive Officers of the Registrant
Shown below are the names and ages of the executive officers of Bancorp with
an indication of all positions and offices held with Bancorp:
Old Second Bancorp,
Name Age Inc. Offices (1)
- ---------------- --- -------------------
James E. Benson 67 Chairman, Chief Executive
Officer, and Director
R. J. Carlson 62 President, Chief Operating
Officer, Chief Financial
Officer, Secretary and Director
William B. Skoglund 47 Vice President, Assistant
Secretary and Director
George Starmann III 54 Vice President and
Director
(1) Offices with Bancorp have been held since the formation of Bancorp in
1981, with the following exceptions: James E. Benson was appointed Chairman
in 1992. R. J. Carlson was promoted from Vice-President to President in
1992 and was elected to the Board of Directors in January of 1987. William
B. Skoglund was appointed as an officer and elected as a director in March
of 1992. George Starmann III was appointed as Vice-President in 1994 and
elected as a director in March 1995. Officers are appointed annually by the
Board of Directors.
Page 3
OLD SECOND BANCORP SUBSIDIARIES
The Old Second National Bank of Aurora is located at 37 South River Street,
Aurora, Illinois. Old Second is the successor to a bank that was founded in
1871, and is incorporated under the laws of the United States. Old Second
offers complete banking and trust services for retail, commercial,
industrial, and public entity customers in Aurora and the surrounding area.
Services include loans to all customer segments, checking, savings and time
deposits; lock box service and safe deposit boxes; trust and other fiduciary
services to commercial customers and individuals and other customer services.
Non-FDIC insured mutual funds, stocks, bonds, securities and annuities are
provided by LPL Financial Services, Inc., a registered broker/dealer and
member NASD, SIPC. Old Second has two offsite Automatic Teller Machines,
and its customers can use certain other financial institutions' offsite
teller machines to complete deposit, withdrawal, transfer, and other banking
transactions.
Old Second has full-service branches located at: 1991 West Wilson Street,
Batavia; 4080 Fox Valley Center Drive, Aurora; 555 Redwood Drive, Aurora;
1200 Douglas Road, Oswego, which opened in April of 1997; 1100 South County
Line Road, Maple Park, and 2S101 Harter Road, Kaneville, both of which were
acquired in June of 1997. Old Second has trust offices at 37 South River
Street in Aurora, 321 James Street in Geneva, and 122 North Main Street in
Elburn.
The Old Second Community Bank of North Aurora is located at 200 West John
Street, North Aurora. The Old Second Community Bank of Aurora is
located at 1350 North Farnsworth Avenue, Aurora. Yorkville
National Bank is located at 102 East Van Emmon Street, Yorkville, with
branches located at 408 East Countryside Parkway in Yorkville, 6800 West
Route 64 in Plano and 323 East Norris Drive in Ottawa. Burlington Bank is
located at 194 South Main Street in Burlington. Kane County Bank
and Trust Company is located at 749 North Main Street in Elburn,
with branches at 122 North Main Street in Elburn and 40W422 Route 64 in
Wasco. Bank of Sugar Grove is located on Cross Street at Illinois
Route 47, Sugar Grove.
These Banks offer banking services for retail, commercial, industrial, and
public entity customers in the Aurora, Batavia, Oswego, Maple Park,
Kaneville, North Aurora, Yorkville, Plano, Ottawa, Burlington, Elburn, Wasco
and Sugar Grove communities and surrounding areas. Services include loans
to all customer segments, checking, savings and time deposits, and other
customer services. With the exception of Yorkville's main banking facility,
these Banks have onsite 24 hour Automatic Teller Machines, whereas Yorkville
has one offsite Automated Teller Machine. Their customers can use certain
other financial institutions' offsite teller machines to complete deposit,
withdrawal, transfer, and other banking transactions as well.
The banks are subject to vigorous competition from other banks and many
savings and loan associations, as well as credit unions and other financial
institutions in the area. Within the Aurora banking market, which is
approximated by the southern two-thirds of Kane County and the northern
one-third of Kendall County, there are in excess of 20 other banks. Within the
Yorkville National Bank banking market, which includes portions of Kane and
LaSalle and all of Kendall counties, there are approximately 10 other banks
or banking facilities and several savings and loan associations.
At December 31, 1997, Bancorp and its subsidiaries had 396 full-time and 125
part-time employess.
The only industry segment in which Bancorp and its subsidiaries are engaged
in is banking, and there are no foreign operations. Maple Park Mortgage
("Maple Park") operates from leased offices in St. Charles, Sycamore, Oswego
and Bannockburn, Illinois. The main office is located at 1450 West Main
Street in St. Charles. Since 1992, Maple Park has developed a wholesale
(correspondent) division primarily engaged in soliciting mortgage loans in
Iowa, Colorado, Wyoming and Illinois. The wholesale division emphasizes
developing relationships with financial institutions. Maple Park currently
holds contracts with over 300 banks and credit unions. Maple Park operates
as a mortgage broker and servicer offering a wide range of products including
conventional, fixed and adjustable-rate mortgages. The New Leaf division
of Maple Park is located in St. Charles and specializes in assisting
prospective and current homeowners who do not qualify in the traditional
market to obtain mortgages. Maple Park currently has 57 full-time
employess and 2 part-time employees.
Maple Park faces vigorous competition in all phases of its retail and
correspondent divisions. Maple Park believes that competition for its retail
products is principally based on location, convenience, quality and price.
Within its retail mortgage banking market, there are approximately six large
companies offering mortgage banking products and services and a number of
small or mid-sized brokerage operations. Maple Park believes that
competition for its correspondent division is primarily based on convenience,
quality and price. There are several large national companies competing in
their correspondent markets.
Page 4
ADDITIONAL STATISTICAL INFORMATION - OLD SECOND BANCORP, INC.
CONSOLIDATED DAILY AVERAGE BALANCE SHEETS AND INTEREST RATES
Years Ended December 31,
1997 1996 1995
____________________________________________________________
Avg Income Yield Avg Income Yield Avg Income Yield
Bal Expense Rate Bal Expense Rate Bal Expense Rate
____________________________________________________________
ASSETS
Interest bearing
deposits with
banks 298 22 7.38% 301 22 7.31% 477 22 4.61%
Federal funds
sold 43,803 2,407 5.50% 41,377 2,227 5.38% 39,329 2,274 5.78%
Investment
securities:
Taxable 204,352 13,025 6.37% 196,791 12,723 6.47% 195,798 12,537 6.40%
Non taxable (1) 61,830 3,302 5.34% 68,276 3,755 5.50% 70,345 4,118 5.85%
Loans held for
sale and net
loans (2) 515,016 46,422 9.01% 448,422 40,959 9.13% 427,744 39,288 9.18%
------- ------ ---- ------- ------ ---- ------- ------ ----
Total interest
earning
assets (1) 825,299 65,178 7.90% 755,167 59,686 7.90% 733,693 58,239 7.94%
======= ====== ==== ======= ====== ==== ======= ====== ====
Cash and due
from banks 34,513 33,329 33,026
Bank premises
and equipment,
net 20,514 18,833 17,753
Other assets 21,034 19,267 23,453
------ ------ ------
Total assets 901,360 826,596 807,925
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing
transaction
deposits 111,170 2,194 1.97% 108,091 2,361 2.18% 102,168 2,399 2.35%
Savings
deposits 185,304 5,726 3.09% 179,103 5,374 3.00% 176,977 5,776 3.26%
Time deposits 373,433 21,672 5.80% 339,529 19,512 5.75% 319,255 18,071 5.66%
------- ------ ----- ------- ------ ---- ------- ------ ----
Total deposits 669,907 29,592 4.42% 626,723 27,247 4.35% 598,400 26,246 4.39%
Securities sold
under agreements
to repurchase 13,958 690 4.94% 3,632 181 4.98% 3,688 142 3.85%
Notes payable 8,991 589 6.55% 2,377 221 9.30% 9,970 650 6.52%
Other short-term
borrowings 3,415 180 5.27% 2,724 138 5.07% 4,555 284 6.23%
----- --- ---- ----- --- ---- ----- --- ----
Total interest
bearing
liabilities 696,271 31,051 4.46% 635,456 27,787 4.37% 616,613 27,322 4.43%
======= ====== ==== ======= ====== ==== ======= ====== ====
Demand
deposits 109,219 102,738 109,718
Other
liabilities 9,014 6,951 8,582
------- ------- -------
Total
liabilities 814,504 745,145 734,913
Stockholders'
equity 86,856 81,451 73,012
------- ------- -------
Total
liabilities and
stockholders'
equity 901,360 826,596 807,925
======= ======= =======
Net interest
spread (1) 3.44% 3.53% 3.51%
===== ===== ====
Net yield on
interest earning
assets (1) 4.14% 4.22% 4.21%
===== ===== =====
Page 5
(1) Interest income and yield on tax-exempt securities are not reflected in
the tables on a tax-equivalent basis. Net yield on interest-earning assets is
net interest income divided by total average interest-earning assets.
(2) Principal balances on nonaccruing loans, if any, are included in net
loans on the average balance sheet. There were no out-of-period adjustments
or foreign activities for any reportable period.
Fees included in the above interest income computations are as follows, in
thousands:
Years Ended December 31,
1997 $719
1996 $731
1995 $648
Changes in Interest Income and Expense
The following table shows the dollar amount of changes in interest income and
expense, by major categories of assets and liabilities, attributable to
changes in volume or rate or both, for the periods indicated, in thousands
of dollars:
1997 Compared to 1996
Increase (Decrease) Due To
Interest income: Volume (1) Rate(1) Net
-----------------------------------
Interest bearing deposits
with banks $ 0 $ (0) $ (0)
Investment securities:
Taxable 482 (180) 302
Non taxable (344) (109) (453)
Federal funds sold 133 47 180
Loans, net 5,972 (509) 5,463
------- ------- -------
Net increase (decrease) $ 6,243 $ (751) $ 5,492
------- ------- -------
Interest expense:
Interest bearing deposits $ 61 $ (228) $ (167)
Savings deposits 192 160 352
Time deposits 1,968 192 2,160
Securities sold under
agreements to repurchase 510 (1) 509
Notes payable 411 (43) 368
Other 36 6 42
------- ------ --------
Net increase $ 3,178 $ 86 $ 3,264
Increase (decrease) ------- ------ --------
in net interest margin $ 3,065 $ (837) $ 2,228
------- ------ --------
Page 6
1996 Compared to 1995
Increase (Decrease) Due To
Interest income: Volume (1) Rate(1) Net
-------------------------------------
Interest bearing deposits
with banks $ (13) $ 13 $ 0
Investment securities:
Taxable 65 121 186
Non taxable (114) (249) (363)
Federal funds sold 110 (157) (47)
Loans, net 1,918 (247) 1,671
------- ------- -------
Net increase (decrease) $ 1,966 $ (519) $ 1,447
------- ------- -------
Interest expense:
Interest bearing deposits $ 129 $ (167) $ (38)
Savings deposits 64 (466) (402)
Time deposits 1,165 276 1,441
Securities sold under
agreements to repurchase (3) 42 39
Notes payable (591) 162 (429)
Other (93) (53) (146)
------- ------- -------
Net increase (decrease) $ 671 $ (206) $ 465
------- ------- -------
Increase (decrease)
in net interest margin $ 1,295 $ (313) $ 982
------- ------- -------
1) The change in interest due to both rate and volume has been allocated to
change due to volume and change due to rate in proportion to the the
relationship of the absolute dollar amounts of the change in each.
Page 7
Interest Rate Repricing Gaps
The management of interest rate sensitivity is accomplished by monitoring the
maturities and repricing opportunities of interest-earning assets and
interest-bearing liabilities. Amounts are positioned into rate maturity
periods based upon contractual or historical experience of frequency of
repricing the respective assets and liabilities. The following table
summarizes the interest rate repricing gaps for selected maturity periods
as of December 31, 1997:
OLD SECOND BANCORP, INC.
(In thousands) Rate Maturity Period
---------------------------------------------
0-90 91-180 181-365 Over 1
Days Days Days Year Total
---------------------------------------------
INTEREST-EARNING ASSETS:
- -----------------------
Interest-earning
deposits $ 350 $ 350
Federal funds sold 46,050 46,050
Investment securities 24,486 $ 7,186 $ 19,754 $213,041 264,467
Loans held for sale 26,927 26,927
Loans, net 188,968 27,780 47,176 270,708 534,632
-------- -------- -------- -------- -------
Total interest-earning
assets $286,781 $ 34,966 $ 66,930 $483,749 $872,426
INTEREST-BEARING
LIABILITIES:
- ------------------
Money market, savings
and NOW accounts $203,902 $100,755 $304,657
Time deposits 121,080 $ 61,938 $ 77,302 109,188 369,508
Other borrowed funds 53,477 1,629 50 55,156
-------- -------- -------- -------- --------
Total interest- bearing
liabilities $378,459 $ 63,567 $ 77,352 $209,943 $729,321
Period gap $ (91,678) $(28,601) $(10,422) $273,806 $143,105
Cumulative gap $ (91,678) $(120,279) $(130,701) $143,105
Total interest-earning assets exceeded interest-bearing liabilities by
$143,105,000 at December 31, 1997. This difference was funded through
noninterest-bearing liabilities and stockholders' equity. The above table
shows that total interest-bearing liabilities maturing or repricing within
one year exceed interest-earning assets maturing or repricing by
$130,701,000. Theoretically, in a period of rising interest rates, it is
preferable to have a positive gap (interest-earning assets in excess of
interest-bearing liabilities) because more interest-earning assets should
mature or reprice within a given time period than interest-bearing
liabilities to increase interest income in excess of the increase in
interest expense. Conversely, theoretically, in a period of declining
interest rates, it is preferable to be in a negative gap position (interest-
bearing liabilities in excess of interest-earning assets) because more
interest-bearing liabilities should mature or reprice to lower interest
expense in excess of the decline in interest income. Because assets and
liabilities do not reprice in exactly the same manner as interest levels
change, the above table should not be viewed as a sole indicator of how the
Bancorp will be affected by changes in interest rates.
Page 8
INVESTMENT PORTFOLIO
The required information for book value, market value and maturities of
investment securities appears in Note D of the Annual Report to Stockholders
and is incorporated by reference in this Annual Report on Form 10-K.
Weighted Average Yield of Investment Securities
The weighted average yield for each range of maturities of investment
securities is shown below as of December 31, 1997:
Maturing
----------------------------------------------
Within From 1 To From 5 To After
1 Year 5 Years 10 Years 10 Years
----------------------------------------------
U.S. Government and agency
obligations 6.17% 6.31% 7.02% 6.48%
States & political
subdivisions 6.17 5.76 5.25 6.30
Collateralized mortgage
obligations 5.44 6.21
Other 6.60
[FN]
Note: Yields on tax-exempt obligations are not computed on a tax equivalent
basis.
LOAN PORTFOLIO
Classification of Loans
The following table shows the classification of loans in thousands of
dollars, on the dates indicated:
December 31,
--------------------------------------------
1997 1996 1995 1994 1993
--------------------------------------------
Commercial, financial, and
agricultural $146,591 $143,961 $141,948 $146,890 $135,555
Real estate-construction 43,095 40,437 35,653 32,548 25,744
Real estate-mortgage 287,167 248,742 239,081 185,698 181,886
Installment 58,127 49,164 45,847 45,120 37,134
-------- -------- ------- ------- --------
Total $534,980 $482,304 $462,529 $410,256 $380,319
======== ======== ======== ======== ========
The following table shows the percentage of total loans represented by each
classification of loans on the dates indicated:
December 31,
-------------------------------------------
1997 1996 1995 1994 1993
-------------------------------------------
Commercial, financial, and
agricultural 27.4% 29.8% 30.7% 35.8% 35.6%
Real estate-construction 8.1 8.4 7.7 7.9 6.8
Real estate-mortgage 53.6 51.6 51.7 45.3 47.8
Installment 10.9 10.2 9.9 11.0 9.8
---- ---- ---- ---- ----
Total 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
Page 9
LOAN PORTFOLIO (continued)
Maturities of Loans and Sensitivity to Changes in Interest Rates
The following table is a summary of maturities of loans by certain categories
at December 31, 1997 in thousands of dollars:
Due
after
Due in 1 1 year
year or through Due after
less 5 years 5 years Total
--------------------------------------
Commercial, financial,
and agricultural $71,959 $61,519 $13,113 $146,591
Real estate construction 35,043 8,052 0 43,095
Commercial, financial, and agricultural loans due after one year in the
amount of $80,353,000 at December 31, 1997 have floating or adjustable
interest rates. Such loans with fixed rates totaled $66,238,000. Real
estate construction loans due after one year in the amount of $29,849,000
have floating or adjustable interest rates. Such loans with fixed rates
totaled $13,246,000. Floating or adjustable interest rate loans are those
on which the interest rate can be adjusted to changes in the prime rate or
other rate changes. Fixed rate loans are those on which the interest rate
cannot be changed for the term of the loan.
Page 10
Risk Elements
Nonaccrual, past due and restructured loans include, respectively, loans on
which no interest is currently being accrued, accruing loans which are past
due 90 days or more as to principal or interest payments, and loans neither
in nonaccrual status nor 90 day delinquent status on which the terms of
maturity or interest rate have been renegotiated to provide a reduction or
deferral of interest or principal payments due to a deterioration in the
financial position of the borrower. It is management's general policy to
discontinue the accrual of interest on a loan when it is past due 90 days
with regard to either interest or principal payments. At any given date,
Bancorp's subsidiaries may have various loans outstanding, which are accruing
interest, are not contractually past due more than 90 days, and are not
renegotiated, but which, in management's opinion, may not be repaid according
to original terms; these are shown below as "potential loan problems".
Management periodically reviews these accounts which are currently in its
portfolio and is of the opinion that, although some restructuring of loan
terms may be required, no material loss of principal will occur.
The following is a summary of loans described above at the dates indicated,
in thousands of dollars:
December 31,
--------------------------------------
1997 1996 1995 1994 1993
--------------------------------------
Nonaccrual, past due and
restructured loans
a) Nonaccrual $2,189 $3,505 $4,514 $2,344 $4,428
b) Past Due 1,011 622 245 555 603
c) Restructured 122 0 58 69 86
Potential Loan Problems(1) 6,911 7,334 5,198 4,389 2,188
(1)Loans in this category represent those which have been periodically
delinquent as to the payment of principal and interest and are vulnerable to
adverse economic conditions. The collateral position of Bancorp's
subsidiaries on these loans mitigates the amount of loss exposure when viewed
in their entirety. There were no foreign outstandings or loan concentrations
at the dates indicated.
Following is information regarding interest income for the year ended
December 31, 1997 for domestic loans which are on a nonaccrual basis or
restructured as of December 31, 1997, in thousands of dollars:
Gross interest income that would have been
included in income for 1997 if the loans
had been current in accordance with their
original terms $273
Gross interest income included in income on
these loans for 1997 $ 84
Page 11
SUMMARY OF LOAN LOSS EXPERIENCE
Loan loss experience for the indicated periods in thousands of dollars is
summarized as follows:
Years Ended December 31,
-------------------------------------------
1997 1996 1995 1994 1993
-------------------------------------------
Average loans held for sale
and loans net of unearned
income $521,906 $454,708 $434,403 $389,769 $362,752
======== ======== ======== ======== ========
Allowance for possible
loan losses:
Balance at beginning of
period $ 6,968 $ 6,686 $ 6,370 $ 5,110 $ 5,230
Additions (deductions):
Charge-offs:
Commercial, financial and
agricultural $ 1,285 $ 615 $ 3,299 $ 1,701 $ 1,577
Real estate-construction 81 0 0 0 0
Real estate-mortgage 67 117 134 130 438
Installment 209 169 185 108 210
------- ------ ------- ------- -------
Total charge-offs 1,642 901 3,618 1,939 2,225
Recoveries:
Commercial, financial and
agricultural 176 362 431 783 342
Real estate-construction 0 0 0 0 0
Real estate-mortgage 105 0 11 425 170
Installment 60 73 93 209 74
------ ----- ------ ------ -------
Total recoveries 341 435 535 1,417 586
------ ----- ------ ------ -------
Net (charge-offs) (1,301) (466) (3,083) (522) (1,639)
Provision charged to
operating expense 1,256 748 3,399 1,782 1,519
------ ----- ------ ----- -----
Balance at the end of period 6,923 6,968 6,686 6,370 5,110
====== ===== ====== ===== =====
The amount of additions to the allowance for possible loan losses charged to
operating expense for the periods indicated was based on a variety of factors,
including actual charge-offs during the year, historical loss experience,
industry guidelines and an evaluation of current and prospective economic
conditions in the market area, and a review of the loans currently outstanding.
Allowance for possible loan
losses by category:
Commercial, financial and
agricultural $ 4,100 $ 4,100 $ 3,990 $ 3,730 $ 2,985
Real estate-construction 185 185 180 160 115
Real estate-mortgage 1,060 1,060 1,040 1,000 815
Installment 1,430 1,430 1,248 1,275 995
Unallocated 148 193 228 205 200
-------- ------- -------- -------- -------
Total $ 6,923 $ 6,968 $ 6,686 $ 6,370 $ 5,110
======== ======== ======== ======== ========
Ratio of net (charge-offs)
recoveries to average loans
outstanding for the period (.25)% (.10)% (.71)% (.13)% (.45)%
=== === === === ===
Page 12
Maturities of Certificates of Deposit of $100,000 or more
The following table sets forth the maturity of Time Deposits of $100,000 or
more, in thousands of dollars, at the date indicated:
December 31,
1997
-----------
Maturing within 3 months $ 26,878
After 3 but within 6 months 9,516
After 6 but within 12 months 15,532
After 12 months 18,531
-----------
Total $ 70,457
===========
Return on Equity and Assets
The following table presents certain ratios relating to equity and assets:
Years Ended
December 31,
1997 1996 1995
--------------------------------
Return on total average assets 1.06% 1.01% 1.08%
Return on average stockholders' equity 11.04% 10.24% 11.99%
Dividend payout ratio 28.34% 30.40% 24.39%
Average equity to average assets ratio 9.64% 9.85% 9.04%
Page 13
Item 2. Properties
Except for certain teller machine locations, Old Second Bancorp subsidiaries
own 18 bank locations. Old Second National Bank leases space for the Trust
office in Geneva and Yorkville National Bank leases space for a branch in the
Super Wal-Mart in Plano. Maple Park Mortgage operates its retail division
from leased offices in St. Charles, Sycamore, Oswego and Bannockburn. The
administrative offices of Maple Park Mortgage are located in St. Charles.
Old Second's main banking office located at 37 South River Street,
Aurora, Illinois, has a total of approximately 82,000 square feet. The
original five story, 30,000 square foot building was built in 1925, and a two
story, 24,000 square foot addition was constructed in 1982. A 28,000 square
foot building adjacent to the main bank is used for a ten lane drive-up bank
facility and banking offices. Parking facilities are provided for
approximately one hundred cars. Old Second leases to others about 13,700
square feet of building space and utilizes the remainder for its own
operations.
Item 3. Legal Proceedings
In the normal course of business, Old Second Bancorp, Inc. and its
subsidiaries are party to several legal proceedings, none of which are
expected to have a materially adverse effect on its financial condition.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of stockholders during the fourth quarter
of fiscal 1997.
Page 14
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
The Common Stock of Bancorp, has been traded in the over-the-counter market on
the NASDAQ National Market System under the symbol OSBC since November 11,
1993. Prior to that date, there was no established public trading market for
Bancorp's Common Stock. However, the stock was quoted on the over-the-counter
market even though there was relatively little trading activity in the stock.
Information regarding the number of stockholders and market price for
Bancorp's Common Stock for 1997 and 1996 appears on page 52 of the Annual
Report to Stockholders and is incorporated by reference in this Annual Report
on Form 10-K.
Information regarding dividends declared on the Common Stock of Bancorp is
described in the Capital and Dividends' portion of Management's Discussion on
page 32 of the Annual Report to Stockholders and is incorporated by reference
in this Annual Report on Form 10-K.
Information regarding dividend restrictions regarding Bancorp is described in
Note P on page 46 of the Annual Report to Stockholders and is incorporated
by reference in this Annual Report on Form 10-K.
Item 6. Selected Financial Data
"Selected Consolidated Financial Data" for the five years ended December 31,
1997 appears on page 32 of the Annual Report to Stockholders and is
incorporated by reference in this Annual Report on Form 10-K.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appears on pages 26 through 31 of the Annual Report to
Stockholders and is incorporated by reference in this Annual Report on
Form 10-K.
Item 7a. Quantitative and Qualitative Disclosures about Market Risk
Quantitative and Qualitative disclosures on market risk appears in the
Management's Discussion and Analysis on page of 29 of the Annual Report to
Shareholders and is incorporated by reference in this Annual Report on
Form 10-K.
Item 8. Financial Statements and Supplementary Data
The Consolidated Financial Statements and Related Notes, and the report
thereon of Ernst & Young LLP dated January 16, 1998, appear on pages 33
through 54 of the Annual Report to Stockholders and are incorporated by
reference in this Annaul Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Page 15
Part III
Item 10. Directors and Executive Officers of the Registrant
The required information for directors of the Registrant is shown on pages 4
through 8, under "Election of Directors" in the Registrant's Proxy Statement
and is incorporated by reference in this Annual Report on Form 10-K. The
required information for executive officers of the Registrant is included in
Part I of this Form 10-K.
Item 11. Executive Compensation
The required information for executive compensation of the Registrant is shown
on pages 8 through 14 under "Executive Compensation" in the Registrant's Proxy
Statement and is incorporated by reference in the Annual Report on Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The required information for security ownership of certain beneficial owners
and management of the registrant is shown on pages 3 and 4 under "Voting
Securities and Principal Holders Thereof" in the Registrant's Proxy Statement
and is incorporated by reference in this Annual Report on Form 10-K.
Item 13. Certain Relationships and Related Transactions
The required information for Certain Relationships and Related Transactions is
shown on page 18 in the Registrant's Proxy Statement and is incorporated by
reference in this Annual Report on Form 10-K.
Page 16
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a)(1) Financial Statements Reference
-------------------- -------------
Form 10-K
Incorporated by reference in Part Annual Report
II, Item 8 of this report: (page)
Consolidated Balance Sheets as of
December 31, 1997 and 1996 33
Consolidated Statements of Income
for the years ended December 31,
1997, 1996, and 1995 34
Consolidated Statements of Cash Flows
for the years ended December 31,
1997, 1996, and 1995 35-36
Consolidated Statements of Changes
in Stockholders' Equity for the
years ended December 31, 1997,
1996, and 1995 36
Notes to Consolidated Financial
Statements 37-51
Report of Independent Accountants 52
(2) Financial Statement Schedules
-----------------------------
No schedules are included as they are not required.
(3) Exhibits
--------
The Registrant hereby incorporates
by reference its By-Laws as filed
as exhibits to its Registration
Statement on Form S-14 (File
No.2-75588) which was filed
with the Securities and Exchange
Commission on January 22, 1982.
Page 17
(a)(3) Exhibits (Continued) Reference
------------
Form 10-K
Annual Report
(page)
13.1 Old Second Bancorp, Inc. - 1997
Annual Report to Stockholders is
furnished for the information of
the Commission and iS not deemed to
be "filed as a part of this 10-K,"
except for portions incorporated
herein. 22-57
22.1 Subsidiaries of the Registrant 58
23.1 Consent of Independent Accountant 59
25.1 Audit Opinion of Independent Accountant 60
27.1 Financial Data Schedule 61
Other exhibits are omitted because of the absence of conditions under which
they are required.
(b) Reports on Form 8-K:
There were no Form 8-K reports filed during the fourth quarter of 1997.
Page 18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities 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.
(Registrant)
Date -------------------- By /s/ James E. Benson
James E. Benson- Chairman,
Chief Executive Officer,
and Director
Date -------------------- By /s/ Ronald J. Carlson
Ronald J. Carlson -
President, Chief Financial
Officer, Secretary and
Director
Page 19
SIGNATURES, Continued
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities on the dates indicated.
Date SIGNATURE AND TITLE
---- -------------------
/s/ Walter Alexander
---------- ---------------------------
Walter Alexander - Director
/s/ James E. Benson
---------- ---------------------------
James E. Benson - Chairman
Chief Executive Officer,
and Director
/s/ Ronald J. Carlson
---------- ---------------------------
Ronald J. Carlson-President,
Chief Financial Officer,
Secretary and Director
---------- ---------------------------
Marvin Fagel - Director
---------- ---------------------------
Joanne Hansen - Director
/s/ Kenneth F. Lindgren
---------- -----------------------------
Kenneth F. Lindgren - Director
---------- -----------------------------
Jesse Maberry - Director
---------- -----------------------------
Gary McCarter - Director
Page 20
SIGNATURES, continued
Date SIGNATURE AND TITLE
---------- ------------------------
D. Chet McKee - Director
/s/ William J. Meyer
----------- ---------------------------
William J. Meyer - Director
---------- ---------------------------
Larry A. Schuster - Director
/s/ Willaim B. Skoglund
---------- ---------------------------
William B. Skoglund -
Vice President, Assistant
Secretary, and Director
/s/ George Starmann III
---------- --------------------------
George Starmann III
Vice President and Director
Page 21