Washington, D.C. 20549

 

FORM 10-Q

 

ý         QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2004

 

OR

 

o        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

 

For 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 or other jurisdiction		(I.R.S. Employer Identification Number)
of incorporation or organization)
37 South River Street, Aurora, Illinois        60507
(Address of principal executive offices)     (Zip Code)
(630) 892-0202
(Registrant’s telephone number, including area code)

 

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 ý  No o

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).  Yes ý  No o

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: As of May 1, 2004, the Registrant had outstanding 6,706,107 shares of common stock, $1.00 par value per share.

 

 

OLD SECOND BANCORP, INC.

 

Form 10-Q Quarterly Report

 

Table of Contents

 

PART I
Item 1.	Financial Statements
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosures about Market Risk
Item 4.	Controls and Procedures
PART II
Item 1.	Legal Proceedings
Item 2.	Changes in Securities, Use of Proceeds and Issuer of Purchases of Equity Securities
Item 3.	Defaults Upon Senior Securities
Item 4.	Submission of Matters to a Vote of Security Holders
Item 5.	Other Information
Item 6.	Exhibits and Reports on Form 8-K
	Signatures

 

2

 

PART I - FINANCIAL INFORMATION

 

Item 1.  Financial Statements

 

Old Second Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share data)

 

		March 31,			December 31,
		2004			2003
		(Unaudited)
Assets
Cash and due from banks		$	45,088		$	54,999
Interest bearing balances with banks		88			169
Cash and cash equivalents		45,176			55,168
Securities available for sale		391,004			411,035
Loans held for sale		19,890			14,756
Loans		1,391,220			1,319,538
Allowance for loan losses		18,311			18,301
Net loans		1,372,909			1,301,237
Premises and equipment, net		33,199			33,033
Other real estate owned		921			663
Goodwill, net		2,130			2,130
Core deposit intangible assets, net		977			1,066
Accrued interest and other assets		34,199			19,756
Total assets		$	1,900,405		$	1,838,844
Liabilities
Deposits:
Demand		$	210,666		$	214,439
Savings		727,538			737,838
Time		634,457			572,357
Total deposits		1,572,661			1,524,634
Securities sold under repurchase agreements		35,161			47,848
Other short-term borrowings		123,020			106,046
Trust preferred debentures		30,231			30,216
Notes payable		500			500
Accrued interest and other liabilities		15,390			12,606
Total liabilities		1,776,963			1,721,850
Stockholders’ Equity
Preferred stock, no par value; authorized 300,000 shares; none issued		—			—
Common stock, $1.00 par value; authorized 10,000,000 shares; issued 8,242,221 in 2004 and 8,229,854 in 2003; outstanding 6,706,107 in 2004 and 6,693,740 in 2003		8,242			8,230
Additional paid-in capital		12,316			11,940
Retained earnings		148,885			144,157
Accumulated other comprehensive income		4,337			3,005
Treasury stock, at cost, 1,536,114 shares in 2004 and 2003		(50,338		)	(50,338		)
Total stockholders’ equity		123,442			116,994
Total liabilities and stockholders’ equity		$	1,900,405		$	1,838,844

 

See accompanying notes to consolidated financial statements.

 

3

 

Old Second Bancorp, Inc. and Subsidiaries

Consolidated Statements of Income

(In thousands, except share data)

 

		Three months ended March 31,
		2004			2003
		(Unaudited)
Interest income
Loans, including fees		$	19,596		$	16,930
Loans held for sale		114			506
Securities:
Taxable		2,825			2,976
Tax-exempt		718			587
Federal funds sold		1			60
Total interest income		23,254			21,059
Interest expense
Savings deposits		1,314			1,787
Time deposits		4,011			4,460
Repurchase agreements		94			165
Other short-term borrowings		371			23
Trust preferred debentures		617			—
Notes payable		5			—
Total interest expense		6,412			6,435
Net interest income		16,842			14,624
Provision for loan losses		—			855
Net interest income after provision for loan losses		16,842			13,769
Noninterest income
Trust income		1,373			1,262
Service charges on deposits		1,708			1,618
Secondary mortgage fees		197			452
Gain on sale of loans		1,217			3,118
Securities gains, net		640			34
Other income		1,076			926
Total noninterest income		6,211			7,410
Noninterest expense
Salaries and employee benefits		8,426			8,535
Occupancy expense, net		946			849
Furniture and equipment expense		1,019			1,063
Amortization of core deposit intangible assets		89			89
Other expense		3,289			2,620
Total noninterest expense		13,769			13,156
Income before income taxes		9,284			8,023
Provision for income taxes		3,214			2,816
Net income		$	6,070		$	5,207
Per share information:
Ending number of shares		6,706,107			7,420,505
Average number of shares		6,700,042			7,414,354
Diluted average number of shares		6,770,058			7,471,445
Basic earnings per share		$	0.91		$	0.70
Diluted earnings per share		$	0.90		$	0.70
Dividends paid per share		$	0.20		$	0.20

 

See accompanying notes to consolidated financial statements.

 

4

 

Old Second Bancorp, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

Three Months Ended March 31, 2004 and 2003

(In thousands)

 

		2004			2003
		(Unaudited)			(Unaudited)
Cash flows from operating activities
Net income		$	6,070		$	5,207
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Depreciation		741			667
Changes in mortgage servicing rights,net		(8		)	28
Provision for loan losses		—			855
Net change in mortgage loans held for sale		(5,134		)	15,446
Change in current income taxes payable		7,745			2,829
Change in accrued interest and other assets		(14,435		)	(290		)
Change in accrued interest and other liabilities		(5,845		)	192
Premium amortization and discount accretion on securities		827			1,184
Securities gains, net		(640		)	(34		)
Amortization of core deposit intangible assets		89			89
Tax benefit from stock options exercised		150			235
Net cash provided (used) by operating activities		(10,440		)	26,408
Cash flows from investing activities
Proceeds from sales and maturities of securities available for sale		40,390			72,164
Purchases of securities available for sale		(18,333		)	(70,896		)
Net change in loans		(71,672		)	(54,302		)
(Purchase) sales of other real estate		(258		)	69
Net purchases of premises and equipment		(907		)	(1,480		)
Net cash used by investing activities		(50,780		)	(54,445		)
Cash flows from financing activities
Net change in deposits		48,027			5,436
Net change in repurchase agreements		(12,687		)	7,513
Net change in other borrowings		16,989			(4,203		)
Proceeds from exercise of stock options		238			615
Dividends paid		(1,339		)	(1,479		)
Purchase of treasury stock		—			(189		)
Net cash provided (used) by financing activities		51,228			7,693
Net change in cash and cash equivalents		(9,992		)	(20,344		)
Cash and cash equivalents at beginning of period		55,168			73,064
Cash and cash equivalents at end of period		$	45,176		$	52,720

 

See accompanying notes to consolidated financial statements.

 

5

 

Old Second Bancorp, Inc. and Subsidiaries

Notes to 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 normal and recurring adjustments, which are necessary, in the opinion of management, for a fair statement of results for the interim period presented.  Results for the period ended March 31, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004.  These interim financial statements should be read in conjunction with the audited financial statements and notes included in the Company’s 2003 Form 10-K.  Unless otherwise indicated, amounts in the tables contained in these Notes are in thousands.

 

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States and follow general practices within the banking industry. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements. Future changes in information may affect these estimates, assumptions, and judgments, which, in turn, may affect amounts, reported in the financial statements.

 

All significant accounting policies are presented in Note 1 to the consolidated financial statements for the year ended December 31, 2003. These policies, along with the disclosures presented in the other financial statement notes and in this discussion, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined.

 

6

 

Note 2 – Securities

 

Securities available for sale are summarized as follows:

 

 

					Gross			Gross
		Amortized			Unrealized			Unrealized			Fair
		Cost			Gains			Losses			Value
March 31, 2004:
U.S. Treasuries		$	2,003		$	6		$	—		$	2,009
U.S. Government agencies		281,910			5,154			42			287,022
States and political subdivisions		93,929			2,277			228			95,978
Mortgage backed securities		1,252			38			1			1,289
Other securities		4,706			—			—			4,706
		$	383,800		$	7,475		$	271		$	391,004
December 31, 2003:
U.S. Treasuries		$	2,004		$	7		$	—		$	2,011
U.S. Government agencies		317,353			3,726			540			320,539
States and political subdivisions		80,559			2,133			396			82,296
Mortgage backed securities		1,479			62			—			1,541
Other securities		4,648			—			—			4,648
		$	406,043		$	5,928		$	936		$	411,035

 

Note 3 – Loans

 

Major classifications of loans were as follows:

 

		March 31,			December 31,
		2004			2003
Commercial and industrial		$	183,165		$	192,444
Real estate - commercial		474,572			459,014
Real estate - construction		270,582			218,519
Real estate - residential		423,414			408,789
Installment		42,857			44,449
		1,394,590			1,323,215
Unearned origination fees		(3,370		)	(3,677		)
		$	1,391,220		$	1,319,538

 

7

 

Note 4 – Allowance for Loan Losses

 

Changes in the allowance for loan losses as of  March 31, are summarized as follows:

 

		2004			2003
Balance, January 1		$	18,301		$	15,769
Provision for loan losses		—			855
Loans charged-off		(75		)	(572		)
Recoveries		85			203
Balance, end of period		$	18,311		$	16,255

 

Note 5 – Deposits

 

Major classifications of deposits were as follows:

 

		March 31,			December 31,
		2004			2003
Noninterest bearing		$	210,666		$	214,439
Savings		124,245			116,565
NOW accounts		232,746			234,184
Money market accounts		370,547			387,089
Certificates of deposit of less than $100,000		419,949			390,353
Certificates of deposit of $100,000 or more		214,508			182,004
		$	1,572,661		$	1,524,634

 

Note 6 – Borrowings

 

The Company had a $30 million line of credit available with Marshall & Ilsley under which there was an outstanding balance of $500,000 as of March 31, 2004, and also had a $20 million line of credit available with Marshall & Ilsley under which there was an outstanding balance of $500,000 as of December 31, 2003.  A revolving business note dated May 1, 2003 secures the line of credit and is guaranteed by the Company.   The note provides that any outstanding principal will bear interest at our option; at the rate of either 1% over the previous month average Federal Reserve targeted rate (federal funds rate) or 0.90% over the adjusted interbank rate with a minimum interest rate of 2.20%.  This borrowing is for general corporate purposes.

 

8

 

The Company enters into sales of securities under agreements to repurchase (repurchase agreements).  These repurchase agreements are treated as financings.  The dollar amounts of securities underlying the agreements remain in the asset accounts.  Securities sold under agreements to repurchase consisted of U.S. government agencies at March 31, 2004 and December 31, 2003.

 

The Company borrowings at the FHLB are limited to the lesser of 35% of total assets or 60% of the book value of certain mortgage loans. In addition, these notes are collateralized by FHLB stock of $3.7 million at March 31, 2004 and December 31, 2003.

 

The Company is a Treasury Tax & Loan (TT&L) depository for the Federal Reserve Bank (FRB), and as such, they accept TT&L deposits. The Company is allowed to hold these deposits for the FRB until they are called. The interest rate is the federal funds rate less 25 basis points. U.S. Treasury Securities with a face value greater than or equal to the amount borrowed are pledged as a condition of borrowing TT&L deposits. As of March 31, 2004 and December 31, 2003, the TT&L deposits were $1.3 million and $3.1 million, respectively.

 

At March 31, 2004 and December 31, 2003, respectively, short-term borrowings totaled $158.7 million at a weighted average rate of .96% and $154.4 million at a weighted average rate of 1.2%.   The increase in short-term borrowings was primarily the result of asset growth during 2004 that exceeded deposit growth. During 2004, loans and securities grew $56.8 million while deposits grew $48.0 million.

 

The following table reflects categories of short-term borrowings having average balances during the period greater than 30% of stockholders’ equity of the Company at the end of the period. For the year ended December 31, 2003, securities sold under repurchase agreements met the criteria. For the quarter ended March 31, 2004, securities sold under repurchase agreements and federal funds sold met the criteria.   Information presented is as of or for the periods indicated:

 

		March 31,			December 31,
		2004			2003
Balance at end of period		$	130,038		$	47,848
Weighted average interest rate		1.28		%	0.85		%
Maximum month-end amount outstanding during the year		$	149,790		$	63,681
Average amount outstanding during the year		$	136,261		$	46,990
Weighted average interest rate during the year		1.22		%	1.09		%

 

 

Note 7– Cumulative Trust Preferred Securities

 

During June 2003, the Company completed its tender offer for shares of its common stock, in which 723,053 shares were repurchased at $42.50 per share.  The total cash payment required to complete the tender offer was approximately $30.7 million, which was funded by the sale of trust preferred securities.  The Company completed the sale of $27.5 million of

 

9

 

cumulative trust preferred securities by its subsidiary, Old Second Capital Trust I in June 2003.  An additional $4.1 million of cumulative trust preferred securities was sold in the first week of July 2003.  The costs associated with the tender offer of the cumulative trust preferred securities are being amortized over 30 years using the straight-line method.  Cash distributions on the securities are payable quarterly at an annual rate of 7.80% and are included in interest expense in the consolidated financial statements.

 

Note 8– Long-Term Incentive Plan

 

The Long-Term Incentive Plan the “Incentive Plan” currently authorizes the issuance of up to 666,000 shares of the Company’s common stock, including the granting of qualified stock options, nonqualified stock options, restricted stock and stock appreciation rights. Stock based awards may be granted to selected directors and officers or employees at the discretion of the board of directors. The Incentive Plan requires the exercise price of any incentive stock option issued to an employee to be at least equal to the fair market value of Company common stock on the date the option is granted. All stock options are granted for a maximum term of ten years, with vesting occurring during the first three years.

 

Nonqualified stock options may be granted to directors based on a formula. These options, along with other awards under the Incentive Plan, may be granted subject to a vesting requirement, and would become fully vested upon a merger or change in control of the Company. Since December 31, 1998, there have been no nonqualified stock options, stock appreciation rights, or restricted stock issued under the Incentive Plan.

 

A summary of activity in the Incentive Plan and options outstanding is included below:

 

		March31, 2004					December 31, 2003
				Weighted					Weighted
				Average					Average
				Exercise					Exercise
		Shares		Price			Shares		Price
Beginning outstanding		285,133		$	30.381		264,400		$	24.802
Granted		—		—			55,000		50.150
Exercised		(12,067	)	19.293			(34,267	)	19.064
Expired		—		—			—		—
Ending outstanding		273,066		$	30.871		285,133		$	30.381
At period-end:
Options exercisable		164,731					176,798
Range of exercise price				$	11.70 - $50.15				$	11.70 - $50.15
Weighted average contractual life in years		6.2					7.5
Weighted average fair value of options granted during the year				$	—				$	15.95

 

10

 

The Company accounts for stock options in accordance with APB No. 25, as allowed under SFAS No. 123.  No expense for stock options is recorded, as the grant price equals the market price of the stock at grant date.  There were no stock options granted in 2004.

 

The following pro forma information presents net income and earnings per share had the fair value method of S F A S No. 123 been used to measure compensation cost for stock option plans.

 

		March 31,			March 31,
		2004			2003
Net income as reported		$	6,070		$	5,270
Pro forma net income		5,975			5,112
Basic earnings per share as reported		0.91			0.70
Pro forma basic earnings per share		0.89			0.69
Diluted earnings per share as reported		0.90			0.70
Pro forma diluted earnings per share		0.88			0.69

 

The pro forma effects were computed using option-pricing models with the following assumptions:

 

Risk free interest rate		4.00	%  -	4.45	%
Expected option life, in years		10
Expected stock price volatility		24.3	%  -	26.7	%
Dividend yield		2.00	%

 

Note 9 – Earnings Per Share

 

Earnings per share is included below (share data not in thousands):

 

		Three Months Ended March 31,
		2004			2003
Basic earnings per share:
Weighted-average common shares outstanding		6,700,042			7,414,354
Net income		$	6,070		$	5,207
Basic earnings per share		$	0.91		$	0.70
Diluted earnings per share:
Weighted-average common shares outstanding		6,700,042			7,414,354
Dilutive effect of stock options		70,016			57,091
Diluted average common shares outstanding		6,770,058			7,471,445
Net income		$	6,070		$	5,207
Diluted earnings per share		$	0.90		$	0.70

 

11

 

Note 10 – Comprehensive Income

 

Comprehensive income is included below:

 

		Three Months Ended March 31,
		2004			2003
Change in net holding gains on available for sale securities arising during the period		$	2,212		$	(622	)
Related tax expense		(880		)	248
Net unrealized gains/ (losses)		1,332			(374		)
Less: Reclassification adjustment for the net gains realized during the period
Realized net gains		629			34
Related tax expense		(220		)	(12		)
Net realized gains		409			22
Total other comprehensive income		$	1,741		$	(352	)

 

Note 11 – Retirement Plans

 

The Company has a tax-qualified noncontributory defined benefit retirement plan covering substantially all full-time and regular part-time employees of the Company. Generally, benefits are based on years of service and compensation. Certain participants in the defined benefit plan are also covered by an unfunded supplemental retirement plan. The purpose of the supplemental retirement plan is to extend full retirement benefits to individuals without regard to statutory limitations under tax-qualified plans.

 

		Three Months Ended March 31,
		Pension Benefits						Other Benefits
		2004			2003			2004			2003
Service cost		$	354,863		$	272,417		$	19,111		$	14,992
Interest cost		217,690			184,212			22,414			18,016
Expected return on plan assets		(190,509		)	(166,821		)	—			—
Amortization of transition obligation / (asset)		—			(21,488		)	—			—
Amortization of prior service cost		1,360			1,360			4,254			4,254
Recognized net actuarial (gain) / loss		55,725			26,480			19,038			10,067
Net periodic benefit cost		$	439,129		$	296,160		$	64,817		$	47,329

 

				2004		2003
Key assumptions:
Discount rate				5.80	%	5.80	%
Long-term rate of return on assets				7.50	%	7.50	%
Salary increases				5.00	%	5.00	%

 

The Company maintains tax-qualified contributory and non-contributory profit sharing plans covering substantially all full-time and regular part-time employees. The expense of these plans was $419,000 and $444,000 in the first quarter of 2004 and 2003, respectively.

 

12

 

Item 2.   Managements’ Discussion and Analysis of Financial Condition and Results for Operations

 

Overview

 

Old Second Bancorp is a financial services company with its main headquarters located in Aurora, Illinois.  The Company has offices located in Kane, Kendall, DeKalb, DuPage and LaSalle counties in Illinois.  The Company provides financial services through its three subsidiary banks at its twenty-three banking locations.  Old Second Mortgage, which also conducts business as “Maple Park Mortgage”, provides mortgage-banking services at its four offices.  Old Second Financial, Inc provides insurance products.  The Old Second National Bank of Aurora, the Company’s lead subsidiary bank, also engages in trust operations.

 

Results of Operations

 

Net income for the first quarter of 2004 was $6.07 million, or $ 0.90 diluted earnings per share, compared with $5.21 million, or $ 0.70 diluted earnings per share in the first quarter of 2003.  The result was a 16.57% increase in earnings, or 28.57% on a per share basis. Earnings were enhanced by strong asset growth, the gain on sale of securities, the reduction of the loan loss provision and a decrease in the tax provision.  The return on equity increased to 20.22% in the first three months of 2004, from 15.57% for the same period of 2003.  In June 2003, the Company completed its tender offer for shares of its common stock, in which 723,053 shares were repurchased, thereby reducing the average shares outstanding in 2004 and increasing earnings per share and return on equity.

 

Net Interest Income

 

The increase in net income for the three-month period was primarily the result of an increase in net interest income.  Net interest income was $16.8 million and $14.6 million during the three months ended March 31, 2004 and 2003, respectively, an increase of 15.2%.

 

Management, in order to evaluate and measure performance, uses certain non-GAAP performance measures and ratios. These include taxable-equivalent net interest income (including its individual components) and net interest margin (including its individual components). Management believes that these measures and ratios provide users of the financial information with a more accurate view of the performance of the interest-earning assets and interest-bearing liabilities and of The Company’s operating efficiency for comparison purposes. Other financial holding companies may define or calculate these measures and ratios differently. See the table below for supplemental data and the corresponding reconciliation to GAAP financial measures for the three months ended March 31, 2004 and 2003.

 

13

 

The following table sets forth certain information relating to the Company’s average consolidated balance sheets and reflects the yield on average earning assets and cost of average liabilities for the periods indicated. The rates are determined by dividing the related interest by the average balance of assets or liabilities. Average balances are derived from daily balances.

 

ANALYSIS OF AVERAGE BALANCES,

TAX EQUIVALENT INTEREST AND RATES

For periods ended March 31, 2004 and 2003

 

		2004								2003
		Average								Average
		Balance			Interest			Rate		Balance			Interest			Rate
Assets
Interest bearing deposits		$	112		$	0		1.21	%	$	58		$	0		1.29	%
Federal funds sold		528			1			0.86		21,145			60			1.15
Securities:
Taxable		328,810			2,825			3.46		326,270			2,976			3.70
Non-taxable (tax equivalent)		80,959			1,159			5.76		56,318			952			6.86
Total securities		409,769			3,984			3.91		382,588			3,928			4.16
Loans and loans held for sale		1,368,188			19,710			5.79		1,118,846			17,436			6.32
Total interest earning assets		1,778,597			23,695			5.36		1,522,637			21,424			5.71
Cash and due from banks		47,916			—			—		44,107			—			—
Allowance for loan losses		(18,445		)	—			—		(16,120		)	—			—
Other noninterest-bearing assets		52,425			—			—		49,270			—			—
Total assets		$	1,860,493							$	1,599,894
Liabilities and stockholder’s equity
Interest bearing transaction accounts		$	616,320		1,241			0.81		$	568,185		1,621			1.16
Savings accounts		119,782			73			0.25		110,521			166			0.61
Time deposits		598,632			4,011			2.69		529,466			4,460			3.42
Interest bearing deposits		1,334,734			5,325			1.60		1,208,172			6,247			2.10
Repurchase agreements		40,763			94			0.93		56,437			165			1.19
Federal funds purchased and other borrowed funds		113,629			371			1.31		6,249			23			1.49
Trust preferred debentures		30,223			617			8.21		—			—			0.00
Notes payable		981			5			2.22		—			—			0.00
Total interest bearing liabilities		1,520,330			6,412			1.70		1,270,858			6,435			2.05
Noninterest bearing deposits		208,808			—			—		181,596			—			—
Accrued interest and other liabilities		10,632			—			—		11,840			—			—
Stockholders’ equity		120,723			—			—		135,600			—			—
Total liabilities and stockholder’s equity		$	1,860,493							$	1,599,894
Net interest income (tax equivalent)					$	17,283							$	14,989
Net interest income (tax equivalent) to total earning assets								3.91	%							3.99	%
Interest bearing liabilities to earnings assets		85.48		%						83.46		%

 

Notes:             Nonaccrual loans are included in the above stated average balances.
Tax equivalent basis is calculated using a marginal tax rate of 35%.

 

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Yields on certain asset categories and the net interest margin of the Company and its banking subsidiaries are reviewed on a fully taxable-equivalent basis (“FTE”). In this non-GAAP presentation, net interest income is adjusted to reflect tax-exempt interest income on an equivalent before-tax basis. This measure ensures comparability of net interest income arising from both taxable and tax-exempt sources.

 

		Three Months Ended March 31,
		2004			2003
(A) Interest income (GAAP)		$	23,254		$	21,059
Taxable-equivalent adjustment - Loans		54			48
Taxable-equivalent adjustment - Investments		387			316
Interest income - FTE		$	23,695		$	21,424
(B) Interest expense (GAAP)		6,412			6,435
Net interest income - FTE		$	17,283		$	14,989
(C) Net interest income - (GAAP) (A minus B)		$	16,842		$	14,624
Net interest margin (GAAP)		3.81		%	3.90		%
Net interest margin - FTE		3.91		%	3.99		%

 

Provision for Loan Losses

 

The Company did not make a provision for loan losses during the first quarter compared to a provision of $855,000 during the first quarter of the previous year. The determination by management to maintain the level of the allowance for loan losses at the year-end level was based on a number of factors, including the quality of the loan portfolio and past favorable loan loss experience. Provisions for loan losses are made to provide for probable and estimable losses inherent in the loan portfolio.  The provision reflects a number of factors, including the size of the loan portfolio, the amount of past due accruing loans (90 days or more), the amount of non-accrual loans and management’s overall view on current credit quality.  Net recoveries for the first quarter of 2004 were $10,000 compared with net charge-offs of $369,000 in the first quarter of 2003.  Total loan charge-offs were $75,000 during the first three months of 2004, compared with $572,000 during the first three months of 2003, while recoveries for the same periods were $85,000 and $203,000, respectively.

 

The allowance for loan losses represents management’s estimate of probable credit losses inherent in the loan portfolio. Determining the amount of the allowance for loan losses requires significant judgment and the use of estimates related to the amount and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience, and consideration of current economic trends and conditions, all of which may be susceptible to significant change. The loan portfolio also represents the largest asset type on the consolidated statement of condition.

 

One measure of the adequacy of the allowance for loan losses is the ratio of the allowance to total loans. The allowance for loan losses as a percentage of total loans was 1.32% as of March 31, 2004, compared to 1.39% as of December 31, 2003 and 1.46% as of March 31, 2003.  In

 

15

 

management’s judgment, an adequate allowance for estimated losses has been established; however, there can be no assurance that such loss will not exceed the estimated amounts in the future.

 

Nonperforming loans of $2.2 million as of March 31, 2004, were down from $2.6 million as of December 31, 2003. Nonperforming loans include loans in nonaccrual status, renegotiated loans, and loans past due ninety days or more and still accruing.  Nonaccrual loans decreased from $2.3 million as of December 31, 2003 to $2.0 million as of March 31, 2004.  The allowance for loan losses as a percentage of nonperforming loans was 826.68% at March 31, 2004 as compared to 691.65% as of December 31, 2003.  Asset quality has remained strong, as demonstrated by net charge-offs decreasing from $369,000 in the first quarter of 2003 to net recoveries of $10,000 in the first quarter of 2004.

 

Past due and nonaccrual loans for periods ended March 31, 2004 and December 31, 2003 were as follows:

 

		March 31, 2004			December 31, 2003
Nonaccrual loans		$	1,967		$	2,265
Interest income recorded on nonaccrual loans		351			183
Interest income which would have  been accrued on nonaccrual loans		40			165
Loans 90 days or more past due and still accruing interest		248			381

 

Noninterest Income

 

Noninterest income was $6.2 million during the first quarter of 2004 and $7.4 million in the first quarter of 2003, a decrease of $1.2 million, or 16.20%.  A decrease in loan originations in the first quarter of 2004 led to a decrease in the gain on sale of loans of $1.9 million, or 60.97% and a decrease in secondary mortgage fees of $255,000 or 56.42%.  During the first quarter of 2004, increased activity resulted in a gain on the sale of securities of $640,000, compared with $34,000 in the first quarter 2003.  Service charges on deposits increased $90,000, or 5.56% for the three-month period.  Trust assets under management increased from $746.8 million at March 31, 2003 to $863.0 million at March 31, 2004 resulting in an increase in trust income of  $111,000 or 8.8% for the first quarter of 2004.

 

Noninterest Expense

 

Noninterest expense was $13.8 million for the first three months of 2004, an increase of $613,000, or 4.66%, from $13.2 million in the first three months of 2003.  Salaries and benefits, which is the largest component of noninterest expense, decreased $109,000, or 1.28% from the same quarter of 2003.  The full-time equivalent number of employees was 535 as of March 31, 2004, as compared with 522 one year earlier.  In addition to increased staffing and merit increases, commissions and incentives tied to earnings performance also increased.  Employee benefit expenses increased as well, primarily due to higher employee healthcare insurance, retirement benefits, and payroll taxes associated with the salary increases.  Net occupancy

 

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expenses increased $97,000, or 11.43%, and furniture and equipment expenses decreased $44,000 or 4.14% from the first quarter of the prior year.  As the Company continues to expand into and develop new markets, related facility and employee expenses have increased accordingly.

 

Other expense, which consists primarily of postage, processing fees, professional fees and marketing fees, increased from $2.6 million in the first quarter of 2003 to $3.3 million in the first quarter of 2004 due to the increased expenses related to expansion into and development of new markets.

 

On September 24, 2001, Sheryl H. Kuzman brought suit against Old Second Bank-Yorkville, a wholly owned subsidiary of Old Second Bancorp Inc. and formerly known as Yorkville National Bank, in the 12^th Judicial Circuit Court, Will County, Illinois.  The plaintiff alleged defamation by the bank and a bank official and sought monetary damages.  On March 30, 2004, a jury verdict in favor of the plaintiff was entered awarding approximately $700,000 in compensatory damages and $1.5 million in punitive damages. Old Second intends to file post-trial motions, including a request to overturn the verdict or grant a new trial, or, in the alternative, reduce the amount awarded by the jury.  If those motions are not granted, Old Second expects to appeal to the Third Appellate District of the State of Illinois.    Old Second has not taken a charge against earnings in its financial statements for the quarter ended March 31, 2004 related to this matter.

 

Income Taxes

 

The Company’s provision for Federal and State of Illinois income taxes was $3.2 million and $2.8 million for the first quarter of 2004 and 2003 respectively. The first quarter average effective income tax rate for 2004 and 2003 was 34.6% and 35.1%, respectively.

 

Financial Condition

 

Assets

 

Total assets were $1.90 billion at March 31, 2004, an increase of $61.6 million from $1.84 billion at December 31, 2003.

 

Loans

 

Total loans were $1.39 billion as of March 31, 2004, an increase of $71.7 million or 5.43% for the three-month period, from $1.32 billion as of December 31, 2003. The largest increases in loan classifications were in real estate construction loans, which increased $52.1 million, or 23.8%. These changes reflected the continuing loan demand in the markets in which the Company operates.  The loan portfolio generally reflects the profile of the communities in which the Company operates. Because the Company is located in growing areas, real estate lending (including commercial, residential, and construction) is a significant portion of the portfolio. These categories comprised 82.1% of the portfolio as of December 31, 2003 and 83.8% of the portfolio as of March 31, 2004.

 

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Securities

 

Securities totaled $391.0 million as of March 31, 2004 a decrease of $20.0 million from $411.0 million as of December 31, 2003.  During March 2004, the Company purchased $20 million in bank-owned life insurance (BOLI) that was reported in other assets on the financial statements. The BOLI purchase was funded by the sale of $20 million of securities, which resulted in a net gain of $629,000.   The net unrealized gains, net of deferred taxes, in the portfolio increased from  $3.0 million as of December 31, 2003 to $4.3 million as of March 31, 2004.

 

Deposits and Borrowings

 

Total deposits were $1.57 billion as of March 31, 2004, an increase of $48.0 million from $1.52 billion as of December 31, 2003.  Demand deposits decreased $3.8 million during the first three months from $214.4 million to $210.7 million or 1.76%.  At the same time, savings deposits, which include money market accounts, decreased $10.3 million or 1.4% from $737.8 million to $727.5 million.  Time deposits increased $62.1 million from $572.4 million to $634.5 million or 10.9% during the same period.  Given the lower interest rate environment in which retail time deposits were maturing, pricing and sales strategies targeted growth in transactional deposit accounts and customer reinvestment of maturing time deposit balances in longer-term maturities.  Successful selling efforts in these areas resulted in an increase in new account relationships and core funding sources.

 

Securities sold under repurchase agreements, which are typically of short-term duration, decreased from $47.8 million as of December 31, 2003, to $35.2 million as of March 31, 2004. Other short-term borrowings increased from $106.0 million to $123.0 million due to a Federal Home Loan advance of $26.5 million.  The Company is currently maintaining liquid assets and delivering consistent growth in core funding to provide funding for loan growth.

 

Capital

 

The Company and its three subsidiary banks are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines provide for five classifications, the highest of which is well capitalized. The Company and its subsidiary banks were categorized as well capitalized as of March 31, 2004.

 

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The accompanying table shows the capital ratios of the Company and Old Second National Bank, the Company’s lead subsidiary bank, as of March 31, 2004.

 

Capital levels and minimum required levels:

 

							Minimum Required					Minimum Required
							for Capital					to be Well
		Actual					Adequacy Purposes					Capitalized
		Amount			Ratio		Amount			Ratio		Amount			Ratio
March 31, 2004:
Total capital to risk weighted assets
Consolidated		$	164,523		11.19	%	$	117,621		8.00	%	$	147,027		10.00	%
Old Second National Bank		114,714			11.34		80,927			8.00		101,159			10.00
Tier 1 capital to risk weighted assets
Consolidated		146,212			9.94		58,838			4.00		88,257			6.00
Old Second National Bank		102,127			10.09		40,486			4.00		60,730			6.00
Tier 1 capital to average assets
Consolidated		146,212			7.86		74,408			4.00		93,010			5.00
Old Second National Bank		102,127			7.87		51,907			4.00		64,884			5.00
December 31, 2003:
Total capital to risk weighted assets
Consolidated		$	158,377		11.40	%	$	111,142		8.00	%	$	138,927		10.00	%
Old Second National Bank		110,872			11.79		75,231			8.00		94,039			10.00
Tier 1 capital to risk weighted assets
Consolidated		140,993			10.14		55,619			4.00		83,428			6.00
Old Second National Bank		99,105			10.54		37,611			4.00		56,417			6.00
Tier 1 capital to average assets
Consolidated		140,993			7.91		71,299			4.00		89,123			5.00
Old Second National Bank		99,105			7.98		49,677			4.00		62,096			5.00

 

During June 2003, the Company completed its tender offer for shares of its common stock, in which 723,053 shares were repurchased at $42.50 per share.  The total cash payment required to complete the tender offer was approximately $31.6 million, which was funded by the issuance of cumulative trust preferred securities by its subsidiary, Old Second Capital Trust I (Nasdaq:OSBCP).  The costs associated with the tender offer of the cumulative trust preferred securities are being amortized over 30 years using the straight-line method.  Cash distributions on the securities are payable quarterly at an annual rate of 7.80%, and are included in interest expense in the consolidated financial statements.

 

Liquidity and Market Risk

 

Liquidity is the Company’s ability to fund its operations, to meet depositor withdrawals, to provide for customer’s credit needs, to meet maturing obligations and its existing commitments, to withstand fluctuations in deposit levels, and to meet maturing obligations and existing commitments.  The liquidity of the Company principally depends on cash flows from operating activities, investment in and maturity of assets, changes in balances of deposits and borrowings, and its ability to borrow funds in the money or capital markets.

 

Net cash outflows from operating activities were $10.4 million in the first three months of 2004, compared with net cash inflows of $26.4 million in the first three months of 2003. The

 

19

 

decrease in cash inflows was related to the increase in loans held for sale of $5.1 million.  The cash outflow in accrued interest and other assets was directly related to the $20 million purchase of BOLI recorded in other assets. The cash outflows in accrued interest and other liabilities were related to the changes in income taxes payable.  Interest received, net of interest paid, was the principal use of operating cash outflows in both periods reported.  Management of investing and financing activities, as well as market conditions, determines the level and the stability of net interest cash flows.  Management’s policy is to mitigate the impact of changes in market interest rates to the extent possible, so that balance sheet growth is the principal determinant of growth in net interest cash flows.

 

Net cash outflows from investing activities were $50.8 million in the three months ended March 31, 2004, compared to $54.4 million a year earlier. In the first three months of 2004, securities transactions accounted for a net inflow of $22.1 million, and net principal disbursed on loans accounted for net outflows of $71.7 million. In the first three months of 2003, securities transactions accounted for a net inflow of $1.3 million, and net principal disbursed on loans accounted for net outflows of $54.3 million.  Cash outflows for property and equipment were $907,000 in 2004 compared to $1.5 million for the same three months of 2003.

 

Cash inflows from financing activities included an increase in deposits of $48.0 million and a decrease in fed funds purchased and repurchase agreements of $12.7 million in the first three months of 2004, offset by a $17.0 million increase in other short-term borrowings.  This compares with a net cash inflow of $7.7 million associated with an increase in deposits of $5.4 million, and an increase in repurchase agreements of $7.5 million, offset by a reduction to other short-term borrowings of $4.2 million during the first three months of 2003.

 

Interest Rate Risk

 

The impact of movements in general market interest rates on a financial institution’s financial condition, including capital adequacy, earnings, and liquidity, is known as interest rate risk. Interest rate risk is the Company’s primary market risk. As a financial institution, accepting and managing this risk is an inherent aspect of the Company’s business. However, safe and sound management of interest rate risk requires that it be maintained at prudent levels.

 

The Company analyzes interest rate risk by examining the extent to which assets and liabilities are interest rate sensitive. The interest sensitivity gap is defined as the difference between the amount of interest earning assets maturing or repricing within a specific time period, and the amount of interest-bearing liabilities maturing or repricing within that time period. A gap is considered positive when the amount of interest sensitive assets exceeds the amount of interest sensitive liabilities. A gap is considered negative when the amount of interest sensitive liabilities exceeds the amount of interest sensitive assets. During a period of rising interest rates, a negative gap would tend to result in a decrease in net interest income, while a positive gap would tend to positively affect net interest income. The Company’s policy is to manage the balance sheet so that fluctuations in the net interest margin are minimized, regardless of the level of interest rates.

 

The accompanying table does not necessarily indicate the future impact of general interest rate movements on the Company’s net interest income, because the repricing of certain assets and liabilities is discretionary, and is subject to competitive and other pressures. As a result, assets and liabilities indicated as repricing within the same period may in fact reprice at different times

 

20

 

and at different rate levels. Assets and liabilities are reported in the earliest time frame in which maturity or repricing may occur. Although securities available for sale are reported in the earliest time frame in which maturity or repricing may occur, these securities may be sold in response to changes in interest rates or liquidity needs.

 

Expected Maturity of Interest-Earning Assets and Interest-Bearing Liabilities

 

3/31/2004

 

		Expected Maturity Dates
		1 Year			2 Years			3 Years			4 Years			5 Years			Thereafter			Total
Interest-earning Assets
Deposit with banks		$	88		$	—		$	—		$	—		$	—		$	—		$	88
Average interest rate		0.88		%	0.00		%	0.00		%	0.00		%	0.00		%	0.00		%	0.88		%
Federal funds sold		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Average interest rate		0.00		%	0.00		%	0.00		%	0.00		%	0.00		%	0.00		%	0.00		%
Securities		$	67,328		$	58,870		$	70,293		$	57,881		$	40,810		$	95,822		$	391,004
Average interest rate		3.17		%	3.03		%	3.02		%	3.12		%	3.48		%	3.90		%	3.33		%
Fixed rate loans		$	96,634		$	74,316		$	60,804		$	203,647		$	87,842		$	87,490		$	610,733
Average interest rate		5.76		%	6.70		%	6.70		%	6.14		%	6.10		%	5.91		%	6.16		%
Adjustable rate loans		$	289,192		$	48,994		$	40,086		$	52,611		$	22,548		$	346,946		$	800,377
Average interest rate		4.78		%	4.43		%	4.43		%	4.69		%	4.69		%	5.01		%	4.83		%
Total		$	453,242		$	182,180		$	171,183		$	314,139		$	151,200		$	530,258		$	1,802,202
Interest-bearing Liabilities
Interest-bearing deposits		$	756,510		$	173,001		$	82,925		$	61,297		$	14,543		$	273,719		$	1,361,995
Average interest rate		1.42		%	3.05		%	2.86		%	3.04		%	2.90		%	0.53		%	1.62		%
Short-term borrowing		$	158,181		$	—		$	—		$	—		$	—		$	—		$	158,181
Average interest rate		0.96		%	0.00		%	0.00		%	0.00		%	0.00		%	0.00		%	0.96		%
Notes payable		$	500		$	—		$	—		$	—		$	—		$	—		$	500
Average interest rate		2.22		%	0.00		%	0.00		%	0.00		%	0.00		%	0.00		%	2.22		%
Subordinate debentures note		$	—		$	—		$	—		$	—		$	—		$	30,231		$	30,231
Average interest rate		0.00		%	0.00		%	0.00		%	0.00		%	0.00		%	7.80		%	7.80		%
Total		$	915,191		$	173,001		$	82,925		$	61,297		$	14,543		$	303,950		$	1,550,907
Period gap		$	(461,949	)	$	9,179		$	88,258		$	252,842		$	136,657		$	226,308		$	251,295
Cumulative gap		(461,949		)	(452,770		)	(364,512		)	(111,670		)	24,987			251,295

 

Recent Regulatory Developments

 

On March 31, 2004, Illinois Governor Blagojevich signed an Executive Order that would create a new state agency called the Department of Financial and Professional Regulation (the ”DFPR”).  As issued, the Executive Order provides that the DFPR would replace the Office of Banks and Real Estate, the Department of Financial Institutions, the Department of Insurance and the Department of Professional Regulation.  The DFPR would be established on July 1, 2004, unless the Executive Order is challenged.  At this time, it is not possible to predict the impact that the creation of the DFPR would have on the Company and its subsidiaries.

 

21

 

Item 4.   Controls and Procedures

 

An evaluation was performed under the supervision and participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of March 31, 2004. Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective. There have been no significant changes in the Company’s internal controls, or in other factors that could significantly affect internal controls.

 

SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS

 

This document contains, and future oral and written statements of the Company and its management may contain, forward-looking statements, within the meaning of such term in the Private Securities Litigation Reform Act of 1995, with respect to the financial condition, results of operations, plans, objectives, future performance and business of the Company.  Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the Company’s management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “plan,” “intend,” “estimate,” “may,” “will,” “would,” “could,” “should” or other similar expressions.

 

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.

 

The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain.  Factors that could have a material adverse effect on the operations and future prospects of the Company and its subsidiaries include, but are not limited to, the following:

 

•                                         The strength of the United States economy in general and the strength of the local economies in which the Company conducts its operations which may be less favorable than expected and may result in, among other things, a deterioration in the credit quality and value of the Company’s assets.

 

•                                         The economic impact of past and future terrorist attacks, acts of war or threats thereof, and the response of the United States to any such threats and attacks.

 

•                                         The effects of, and changes in, federal, state and local laws, regulations and policies affecting banking, securities, insurance and monetary and financial matters.

 

•                                         The effects of changes in interest rates (including the effects of changes in the rate of prepayments of the Company’s assets) and the policies of the Board of Governors of the Federal Reserve System.

 

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•                                         The ability of the Company to compete with other financial institutions as effectively as the Company currently intends due to increases in competitive pressures in the financial services sector.

 

•                                         The inability of the Company to obtain new customers and to retain existing customers.

 

•                                         The timely development and acceptance of products and services, including products and services offered through alternative delivery channels such as the Internet.

 

•                                         Technological changes implemented by the Company and by other parties, including third party vendors, which may be more difficult or more expensive than anticipated or which may have unforeseen consequences to the Company and its customers.

 

•                                         The ability of the Company to develop and maintain secure and reliable electronic systems.

 

•                                         The ability of the Company to retain key executives and employees and the difficulty that the Company may experience in replacing key executives and employees in an effective manner.

 

•                                         Consumer spending and saving habits which may change in a manner that affects the Company’s business adversely.

 

•                                         Business combinations and the integration of acquired businesses that may be more difficult or expensive than expected.

 

•                                         The costs, effects and outcomes of existing or future litigation.

 

•                                         Changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies and the Financial Accounting Standards Board.

 

•                                         The ability of the Company to manage the risks associated with the foregoing as well as anticipated.

 

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.  Additional information concerning the Company and its business, including other factors that could materially affect the Company’s financial results is included in the Company’s Form 10-K for the year ended December 31, 2003 and in its other filings with the Securities and Exchange Commission.

 

23

 

PART II - OTHER INFORMATION

 

Item 1.   Legal Proceedings

 

On September 24, 2001, Sheryl H. Kuzman brought suit against Old Second Bank-Yorkville, a wholly owned subsidiary of the Company and formerly known as Yorkville National Bank, in the 12th Judicial Circuit Court, Will County, Illinois.  The plaintiff alleged defamation by the bank and a bank official and sought monetary damages.  On March 30, 2004, a jury verdict in favor of the plaintiff was entered awarding approximately $700,000 in compensatory damages and $1.5 million in punitive damages.  The Company has filed post-trial motions, including a request to overturn the verdict or grant a new trial, or, in the alternative, reduce the amount awarded by the jury.  If those motions are not granted, the Company expects to appeal to the Third Appellate District of the State of Illinois.

 

The Company and its subsidiaries have, from time to time, collection suits in the ordinary course of business against its debtors and are defendants in legal actions arising from normal business activities. Management, after consultation with legal counsel, believes that the ultimate liabilities, if any, resulting from those actions will not have a material adverse effect on the consolidated financial position of the Company and its subsidiaries.

 

Item 2.   Changes in Securities and Use of Proceeds

 

None.

 

Item 3.   Defaults Upon Senior Securities

 

None.

 

Item 4.   Submission of Matters to a Vote of Security Holders

 

The Annual Meeting of Stockholders of the Company was held on April 20, 2004.  At the meeting, stockholders voted to elect six nominees to the board of directors having staggered terms of service; to approve an amendment to the certificate of incorporation of Old Second to increase the number of authorized shares of Old Second’s common stock from 10,000,000 to 20,000,000; and to ratify the selection of Ernst & Young LLP as the Company’s independent auditors for the year ended December 31, 2004.

 

At the meeting, the stockholders elected Walter Alexander (to serve as director until 2005 when he will turn 70 and will be unable to serve as a director after that time pursuant to Old Second’s bylaws).  J. Douglas Cheatham was appointed to serve as a director in October 2003 and was elected to continue to serve until 2006.  Edward Bonifas, William Meyer and William B. Skoglund and Christine Sobek were elected to continue as directors with their terms expiring in 2007.  Marvin Fagel, William Kane, Kenneth Lindgren, and Jesse Marberry will continue as directors with their terms expiring in 2005.  D. Chet McKee, Gerald Palmer, and James Carl Schmitz will also continue as directors with their terms expiring in 2006.  The stockholders also ratified the selection of Ernst & Young LLP to serve as the Company’s independent auditors.

 

24

 

The matters approved by stockholders at the meeting and the number of votes cast for, against or withheld (as well as the number of abstentions) as to each matter are set forth below:

 

1.                                       The election of directors for a staggered terms expiring in 2005, 2006 and 2007.

 

 

2.                                       The amendment to certificate of incorporation of Old Second to increase the number of authorized shares of Old Second’s common stock from 10,000,000 to 20,000,000.

 

 

3.                                       The ratification of Ernst & Young LLP, as the auditors for the year ending   December 31, 2004.

 

 

 

Item 5.           Other Information

 

None.

 

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Item 6.   Exhibits and Reports on Form 8-K

 

Exhibits:

 

31.1                           Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)

 

31.2                           Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a)

 

32.1                           Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

32.2                           Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

Reports on Form 8-K:

 

A report on Form 8-K was filed on January 16, 2004, under Item 5, which reported the Company’s fourth quarter financial information in the form of a press release.

 

A report on Form 8-K was filed on April 16, 2004, which reported the Company’s first quarter financial information in the form of a press release, under Item 12, and a jury verdict in connection with litigation involving a subsidiary of the company, under item 5.

 

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) 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.
		BY:	/s/ William B. Skoglund
			William B. Skoglund
			Chairman of the Board, Director
			President and Chief Executive Officer
			(principal executive officer)
		BY:	/s/ J. Douglas Cheatham
			J. Douglas Cheatham
			Senior Vice-President and
			Chief Financial Officer, Director
			(principal financial officer)

 

 

DATE: May 6, 2004

 

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