Attached files
| file | filename |
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| 8-K - 8-K - OLD SECOND BANCORP INC | osbc-20150121x8k.htm |
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Exhibit 99.1 |
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Old Second Bancorp, Inc. |
For Immediate Release |
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(NASDAQ:OSBC) |
January 21, 2015 |
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Contact: |
J. Douglas Cheatham |
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Chief Financial Officer |
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(630) 906-5484 |
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Old Second Reports Fourth Quarter Net Income of $3.0 million.
Net interest income increased on a linked quarter basis continuing the trend seen throughout 2014. Net interest income increased 3.3% year over year.
Improved credit quality reflected in a $1.3 million loan loss reserve release in the quarter.
Year over year noninterest expense decreased $9.5 million across several categories most notably legal fees, general bank insurance and reduced expense on other real estate owned (OREO) properties.
Loans increased $18.5 million in the 4th quarter while OREO assets declined $8.9 million. Loans increased 5.3% from year end 2013.
AURORA, IL, January 21, 2015 – Old Second Bancorp, Inc. (the “Company” or “Old Second”) (NASDAQ: OSBC), parent company of Old Second National Bank (the “Bank”), today announced financial results for the fourth quarter of 2014 and the year ended December 31, 2014. The Company reported net income of $3.0 million for the fourth quarter of 2014, compared to net income of $213,000 in the fourth quarter of 2013. The Company’s net income available to common stockholders of $1.9 million, or $0.06 per diluted share, for the quarter, compared to a net loss available to common stockholders of $1.1 million, or $0.08 per diluted share, in the fourth quarter of 2013. The full year 2014 net income available to common stockholders of $11.9 million is down from $76.8 million in 2013. The full year 2013 included a tax benefit of $70.0 million in the third quarter primarily from the reversal of a significant portion of the valuation allowance against deferred tax assets.
Financial Highlights/Overview
|
· |
Fourth quarter 2014 net income before taxes increased by $4.8 million from the fourth quarter of 2013 and $116,000 from the third quarter of 2014. The increase from the fourth quarter of 2013 was driven by sharply higher gains on securities sales (a loss item in 2013), improved debit card interchange income reflecting an improving trend seen over recent quarters, and lower noninterest expense, notably legal fees and amortization expense on the core deposit intangible asset which was fully amortized in the third quarter. The small linked quarter increase reflects improved net interest income and the 4th quarter 2014 loan loss reserve release offset by reduced levels in many noninterest income categories most notably net gains on securities sales. |
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· |
Fourth quarter 2014 net income available to common stockholders was $1.9 million compared to a net loss of $1.1 million for the fourth quarter 2013. On a linked quarter basis, fourth quarter net income available to common stockholders is essentially unchanged from the 2014 third quarter of 2014. |
1
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· |
The tax-equivalent net interest margin was 3.35% during the fourth quarter of 2014 compared to 3.13% in the same quarter of 2013. |
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· |
Fourth quarter 2014 noninterest income of $7.1 million was $3.2 million higher than the fourth quarter of 2013 and $1.2 million lower than the third quarter of 2014. The year over year quarterly comparison reflects $262,000 in net gains on securities sales compared to a $4.1 million net loss on securities sales in the 2013 period and debit card interchange income of $1.0 million, or $142,000 greater than in 2013. On a linked quarter basis, reductions in service charges, residential mortgage banking, and a large decrease in securities gains lead to the reductions in noninterest income. |
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· |
Noninterest expenses of $18.8 million were 6.5% lower in the fourth quarter compared to the fourth quarter 2013. Expenses declined across several expense lines, notably FDIC insurance expense, amortization of core deposit expense, and legal fees. Fourth quarter expenses were up 2.3% compared to the third quarter 2014 as increases in other real estate owned (“OREO”) expenses and salaries and benefits outweigh decreased core deposit amortization expense. |
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· |
On December 30, 2014, the Company provided notice that it was redeeming approximately one-third of the issued and outstanding shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series B (the “Series B Preferred Stock”). The effective date for the redemption is January 31, 2015, and the redemption price will be the stated liquidation value of $1,000 per share, together with any accrued and unpaid dividends accumulated to, but excluding, the redemption date. As of December 30, 2014, there were 47,331 shares of the Series B Preferred Stock outstanding, and redeeming one-third of the Series B Preferred Stock will result in the redemption of approximately 15,778 shares of Series B Preferred Stock. Following the redemption, approximately 31,553 shares of the Series B Preferred Stock will remain outstanding. |
Capital Ratios
|
December 31, |
September 30, |
December 31, |
||||||
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2014 |
2014 |
2013 |
||||||
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The Bank's leverage capital ratio |
12.02 |
% |
11.67 |
% |
10.97 |
% |
||
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The Bank's total risk-based capital ratio |
18.72 |
% |
18.47 |
% |
18.04 |
% |
||
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The Company's leverage capital ratio |
9.93 |
% |
9.68 |
% |
6.96 |
% |
||
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The Company's total risk-based capital ratio |
17.67 |
% |
17.56 |
% |
15.16 |
% |
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The Company's tangible common equity to tangible assets |
7.12 |
% |
7.15 |
% |
3.67 |
% |
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· |
The 2014 ratios shown above reflect the capital raise completed in 2014. Repeating information found in previous 2014 releases or reports, the Company’s total risk-based capital ratio has been adjusted for December 31, 2013, to correctly account for the Company’s subordinated debt, a portion of which was excluded from Tier 2 capital because the subordinated debt is within five years of maturity. This change resulted in an immaterial reduction in the Company’s total risk-based capital ratio as of December 31, 2013. The reduction in regulatory capital amounts and ratios has no impact on the Company’s historical consolidated financial statements or stockholders’ equity, which were stated in accordance with generally accepted accounting principles. |
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· |
All ratios presented are based on the regulatory capital rules in effect in 2014 and do not reflect the new capital requirements of Basel III, which took effect on January 1, 2015. |
2
Asset Quality & Earning Assets
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· |
Nonperforming loans declined by $12.7 million to $27.1 million at December 31, 2014, from $39.8 million at December 31, 2013. This same metric decreased in the fourth quarter from $31.7 million at September 30, 2014. |
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· |
OREO assets declined from $41.5 million at December 31, 2013 and $40.9 million at September 30, 2014, to $32.0 million at December 31, 2014. A lower quarterly level of new properties added in the quarter was offset by a strong quarter in property dispositions and an elevated level of valuation writedowns. |
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· |
Loans increased $58.1 million since year end 2013 and $18.5 million in the fourth quarter of 2014. Fourth quarter 2014 average loans increased by $7.9 million from the third quarter and $69.0 million compared to the fourth quarter 2013. |
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· |
Securities held-to-maturity at amortized cost of $259.7 million at December 31, 2014 reflect a decrease from $263.0 million at September 30, 2014. The end of the fourth quarter of 2014 total compares to $256.6 million held-to-maturity at year end 2013. December 31, 2014, available-for-sale securities at fair value totaled $385.5 million, which is an increase from $362.2 million at end of the third quarter of 2014. |
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· |
Management review of the loan portfolio concluded that improvements in asset quality were sufficient to justify a loan loss reserve release of $1.3 million in the fourth quarter. |
3
Net Interest Income1
ANALYSIS OF AVERAGE BALANCES,
TAX EQUIVALENT INTEREST AND RATES
Three Months Ended December 31, 2014 and 2013
(Dollar amounts in thousands - unaudited)
|
2014 |
2013 |
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Average |
Average |
||||||||||||||||||
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Balance |
Interest |
Rate |
Balance |
Interest |
Rate |
||||||||||||||
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Assets |
|||||||||||||||||||
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Interest bearing deposits |
$ |
19,643 |
$ |
13 | 0.26 |
% |
$ |
26,370 |
$ |
17 | 0.25 |
% |
|||||||
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Securities: |
|||||||||||||||||||
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Taxable |
619,307 | 3,691 | 2.38 | 620,096 | 3,583 | 2.31 | |||||||||||||
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Non-taxable (TE) |
11,412 | 148 | 5.19 | 13,739 | 225 | 6.55 | |||||||||||||
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Total securities |
630,719 | 3,839 | 2.43 | 633,835 | 3,808 | 2.40 | |||||||||||||
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Dividends from Reserve Bank and FHLBC stock |
9,058 | 77 | 3.40 | 10,292 | 76 | 2.95 | |||||||||||||
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Loans and loans held-for-sale1 |
1,145,362 | 13,649 | 4.66 | 1,075,239 | 13,090 | 4.76 | |||||||||||||
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Total interest earning assets |
1,804,782 | 17,578 | 3.83 | 1,745,736 | 16,991 | 3.83 | |||||||||||||
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Cash and due from banks |
31,314 |
- |
- |
35,063 |
- |
- |
|||||||||||||
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Allowance for loan losses |
(23,231) |
- |
- |
(30,704) |
- |
- |
|||||||||||||
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Other noninterest bearing assets |
227,729 |
- |
- |
249,230 |
- |
- |
|||||||||||||
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Total assets |
$ |
2,040,594 |
$ |
1,999,325 | |||||||||||||||
|
Liabilities and Stockholders' Equity |
|||||||||||||||||||
|
NOW accounts |
$ |
321,662 |
$ |
69 | 0.09 |
% |
$ |
291,907 |
$ |
63 | 0.09 |
% |
|||||||
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Money market accounts |
298,134 | 70 | 0.09 | 313,793 | 101 | 0.13 | |||||||||||||
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Savings accounts |
237,870 | 37 | 0.06 | 227,031 | 40 | 0.07 | |||||||||||||
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Time deposits |
421,584 | 896 | 0.84 | 479,047 | 1,447 | 1.20 | |||||||||||||
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Interest bearing deposits |
1,279,250 | 1,072 | 0.33 | 1,311,778 | 1,651 | 0.50 | |||||||||||||
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Securities sold under repurchase agreements |
27,298 | 1 | 0.01 | 26,599 | 1 | 0.01 | |||||||||||||
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Other short-term borrowings |
24,946 | 8 | 0.13 | 3,532 | 1 | 0.11 | |||||||||||||
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Junior subordinated debentures |
58,378 | 1,072 | 7.35 | 58,378 | 1,361 | 9.33 | |||||||||||||
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Subordinated debt |
45,000 | 199 | 1.73 | 45,000 | 201 | 1.75 | |||||||||||||
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Notes payable and other borrowings |
500 | 4 | 3.13 | 500 | 4 | 3.13 | |||||||||||||
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Total interest bearing liabilities |
1,435,372 | 2,356 | 0.65 | 1,445,787 | 3,219 | 0.89 | |||||||||||||
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Noninterest bearing deposits |
400,001 |
- |
- |
373,058 |
- |
- |
|||||||||||||
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Other liabilities |
12,177 |
- |
- |
37,934 |
- |
- |
|||||||||||||
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Stockholders' equity |
193,044 |
- |
- |
142,546 |
- |
- |
|||||||||||||
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Total liabilities and stockholders' equity |
$ |
2,040,594 |
$ |
1,999,325 | |||||||||||||||
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Net interest income (TE) |
$ |
15,222 |
$ |
13,772 | |||||||||||||||
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Net interest income (TE) |
|||||||||||||||||||
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to total earning assets |
3.35 |
% |
3.13 |
% |
|||||||||||||||
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Interest bearing liabilities to earning assets |
79.53 |
% |
82.82 |
% |
|||||||||||||||
1 Interest income from loans is shown on a tax equivalent basis as discussed in the table on page 16 and includes fees of $572,000 and $532,000 for the fourth quarter of 2014 and 2013, respectively. Nonaccrual loans are included in the above stated average balances.
Note: Tax equivalent basis is calculated using a marginal tax rate of 35%.
4
ANALYSIS OF AVERAGE BALANCES,
TAX EQUIVALENT INTEREST AND RATES
Years ended December 31, 2014 and 2013
(Dollar amounts in thousands - unaudited)
|
2014 |
2013 |
||||||||||||||||||||
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Average |
Average |
||||||||||||||||||||
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Balance |
Interest |
Rate |
Balance |
Interest |
Rate |
||||||||||||||||
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Assets |
|||||||||||||||||||||
|
Interest bearing deposits |
$ |
28,106 |
$ |
73 | 0.26 |
% |
$ |
43,801 |
$ |
108 | 0.24 |
% |
|||||||||
|
Securities: |
|||||||||||||||||||||
|
Taxable |
616,187 | 14,131 | 2.29 | 586,188 | 11,692 | 1.99 | |||||||||||||||
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Non-taxable (TE) |
16,425 | 727 | 4.43 | 14,616 | 904 | 6.19 | |||||||||||||||
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Total securities |
632,612 | 14,858 | 2.35 | 600,804 | 12,596 | 2.10 | |||||||||||||||
|
Dividends from Reserve Bank and FHLBC stock |
9,677 | 309 | 3.19 | 10,629 | 304 | 2.86 | |||||||||||||||
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Loans and loans held-for-sale1 |
1,127,590 | 53,170 | 4.65 | 1,106,447 | 56,417 | 5.03 | |||||||||||||||
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Total interest earning assets |
1,797,985 | 68,410 | 3.76 | 1,761,681 | 69,425 | 3.90 | |||||||||||||||
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Cash and due from banks |
32,628 |
- |
- |
26,871 |
- |
- |
|||||||||||||||
|
Allowance for loan losses |
(24,981) |
- |
- |
(35,504) |
- |
- |
|||||||||||||||
|
Other noninterest bearing assets |
231,767 |
- |
- |
209,640 |
- |
- |
|||||||||||||||
|
Total assets |
$ |
2,037,399 |
$ |
1,962,688 | |||||||||||||||||
|
Liabilities and Stockholders' Equity |
|||||||||||||||||||||
|
NOW accounts |
$ |
314,212 |
$ |
266 | 0.08 |
% |
$ |
290,998 |
$ |
255 | 0.09 |
% |
|||||||||
|
Money market accounts |
305,595 | 317 | 0.10 | 318,343 | 443 | 0.14 | |||||||||||||||
|
Savings accounts |
238,326 | 155 | 0.07 | 226,404 | 161 | 0.07 | |||||||||||||||
|
Time deposits |
446,133 | 4,500 | 1.01 | 493,855 | 6,774 | 1.37 | |||||||||||||||
|
Interest bearing deposits |
1,304,266 | 5,238 | 0.40 | 1,329,600 | 7,633 | 0.57 | |||||||||||||||
|
Securities sold under repurchase agreements |
26,093 | 3 | 0.01 | 23,313 | 3 | 0.01 | |||||||||||||||
|
Other short-term borrowings |
12,534 | 16 | 0.13 | 15,849 | 25 | 0.16 | |||||||||||||||
|
Junior subordinated debentures |
58,378 | 4,919 | 8.43 | 58,378 | 5,298 | 9.08 | |||||||||||||||
|
Subordinated debt |
45,000 | 792 | 1.74 | 45,000 | 811 | 1.78 | |||||||||||||||
|
Notes payable and other borrowings |
500 | 16 | 3.16 | 500 | 16 | 3.16 | |||||||||||||||
|
Total interest bearing liabilities |
1,446,771 | 10,984 | 0.76 | 1,472,640 | 13,786 | 0.94 | |||||||||||||||
|
Noninterest bearing deposits |
388,295 |
- |
- |
362,871 |
- |
- |
|||||||||||||||
|
Other liabilities |
20,218 |
- |
- |
36,063 |
- |
- |
|||||||||||||||
|
Stockholders' equity |
182,115 |
- |
- |
91,114 |
- |
- |
|||||||||||||||
|
Total liabilities and stockholders' equity |
$ |
2,037,399 |
$ |
1,962,688 | |||||||||||||||||
|
Net interest income (TE) |
$ |
57,426 |
$ |
55,639 | |||||||||||||||||
|
Net interest income (TE) |
|||||||||||||||||||||
|
to total earning assets |
3.19 |
% |
3.16 |
% |
|||||||||||||||||
|
Interest bearing liabilities to earning assets |
80.47 |
% |
83.59 |
% |
|||||||||||||||||
1 Interest income from loans is shown on a tax equivalent basis as discussed in the table on page 16 and includes fees of $2.3 million and $2.5 million for the years ended December 31, 2014 and 2013, respectively. Nonaccrual loans are included in the above stated average balances.
Note: Tax equivalent basis is calculated using a marginal tax rate of 35%.
5
Net interest and dividend income on a linked quarter basis increased $471,000. Quarterly average earning assets increased $59.0 million from the fourth quarter of 2013 for a total of $1.75 billion. Management continued to emphasize asset quality in all securities purchases and the year over year quarterly average total securities decreased. Loan growth in each of the last four quarters, resulted in a year over year fourth quarter average loans increase of $69.0 million. On a linked quarter basis, fourth quarter average earning assets reflected increases in both securities and loans.
Asset Quality
Nonperforming loans consist of nonaccrual loans, nonperforming restructured accruing loans and loans 90 days or greater past due but still accruing. Total nonperforming loans were $27.1 million at December 31, 2014, a decrease from $31.7 million at September 30, 2014.
Net charge-offs for the fourth quarter of 2014 were slightly lower on a linked quarter basis and reflected decreases in both charge-offs and recoveries compared to the third quarter.
Classified loans include nonaccrual, performing troubled debt restructurings and all other loans considered substandard and also decreased in the quarter as shown below. Given the overall improvement in the loan asset quality profile, management concluded that a loan loss reserve release was justified in fourth quarter.
|
December 31, 2014 |
||||||||||||||||
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Classified loans as of |
Dollar Change From |
|||||||||||||||
|
(in thousands) |
December 31, |
September 30, |
December 31, |
September 30, |
December 31, |
|||||||||||
|
2014 |
2014 |
2013 |
2014 |
2013 |
||||||||||||
|
Real estate-construction |
$ |
4,045 |
$ |
4,298 |
$ |
3,024 |
$ |
(253) |
$ |
1,021 | ||||||
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Real estate-residential: |
||||||||||||||||
|
Investor |
2,263 | 3,407 | 9,750 | (1,144) | (7,487) | |||||||||||
|
Owner occupied |
7,343 | 7,797 | 7,699 | (454) | (356) | |||||||||||
|
Revolving and junior liens |
3,713 | 3,675 | 3,971 | 38 | (258) | |||||||||||
|
Real estate-commercial, nonfarm |
19,170 | 24,768 | 37,297 | (5,598) | (18,127) | |||||||||||
|
Real estate-commercial, farm |
- |
- |
- |
- |
- |
|||||||||||
|
Commercial |
4,403 | 4,251 | 481 | 152 | 3,922 | |||||||||||
|
Other |
1 | 1 | 1 |
- |
- |
|||||||||||
|
$ |
40,938 |
$ |
48,197 |
$ |
62,223 |
$ |
(7,259) |
$ |
(21,285) | |||||||
.
Allowance for Loan and Lease Losses
The Bank’s allowance for loan loss methodology generates an accounting estimate of loan and lease losses as of the financial statement date and incorporates management’s current judgments about the credit quality of the loan portfolio. The methodology is subject to periodic review by the Company’s independent auditors and banking regulators. No significant methodology changes were made in 2014.
Under established and reviewed methodology, management updated the appropriate specific allocations in the fourth quarter after receiving recent appraisals or information on cash flow trends related to the impaired credits. Specific allocations decreased markedly from December 31, 2013, and also decreased from the third quarter of 2014. Loan balances subject to general factors increased as of December 31, 2014, from year end 2013 and September 30, 2014. Management determined the estimate for the allowance for loan losses based upon a number of factors, including an evaluation of credit market circumstances, loan growth or contraction, the quality of the loan portfolio and loan loss experience.
6
After reviewing the loan portfolio, management believed that a loan loss reserve release of $1.3 million was appropriate in the quarter.
Other Real Estate Owned
OREO decreased by $8.9 million from $40.9 million at September 30, 2014, to $32.0 million at December 31, 2014, and was down from $41.5 million at December 31, 2013. While additions to the OREO portfolio again slowed in the fourth quarter compared to previous quarters in 2014, dispositions also increased dramatically in the fourth quarter. One addition to the OREO portfolio in the quarter reflects management’s expenditure on improvements to a property that was also sold in the fourth quarter. Further, the overall total was reduced by the $1.8 million in reserve writedown expense in the quarter, an amount higher than the elevated writedown expense recorded in the third quarter of 2014. Overall, a net gain on sale of $379,000 was realized in the fourth quarter.
|
4th Qtr 2014 |
||||||||||||||||
|
Three Months Ended |
Dollar Change From |
|||||||||||||||
|
(in thousands) |
4th Qtr |
3rd Qtr |
4th Qtr |
3rd Qtr |
4th Qtr |
|||||||||||
|
2014 |
2014 |
2013 |
2014 |
2013 |
||||||||||||
|
Trust income |
$ |
1,579 |
$ |
1,483 |
$ |
1,673 |
$ |
96 |
$ |
(94) | ||||||
|
Service charges on deposits |
1,725 | 1,838 | 1,877 | (113) | (152) | |||||||||||
|
Residential mortgage banking revenue |
1,100 | 1,340 | 1,858 | (240) | (758) | |||||||||||
|
Securities (loss) gains, net |
262 | 1,231 | 14 | (969) | 248 | |||||||||||
|
Loss on sale of CDO |
- |
- |
(4,117) |
- |
4,117 | |||||||||||
|
Total Securities gains (loss), net |
262 | 1,231 | (4,103) | (969) | 4,365 | |||||||||||
|
Increase in cash surrender value of bank-owned life insurance |
369 | 304 | 405 | 65 | (36) | |||||||||||
|
Debit card interchange income |
1,035 | 1,011 | 893 | 24 | 142 | |||||||||||
|
Other income |
1,021 | 1,116 | 1,263 | (95) | (242) | |||||||||||
|
Total noninterest income |
$ |
7,091 |
$ |
8,323 |
$ |
3,866 |
$ |
(1,232) |
$ |
3,225 | ||||||
As shown above, noninterest income experienced no significant linked quarter changes in the fourth quarter except for lower gains on securities. The number of applications for residential mortgages in the fourth quarter remained flat compared to earlier quarters in the year and below the number of applications received in first quarter 2013. For the full year 2014, residential mortgage banking revenue declined approximately 47.1%, primarily on a sharp reduction in gains on the sale of mortgage loans. Year over year noninterest income was down 6.3% from 2013 essentially across all categories, with the largest dollar and percentage declines found in residential mortgage banking.
7
Noninterest Expense
|
4th Qtr 2014 |
||||||||||||||||
|
Three Months Ended |
Dollar Change From |
|||||||||||||||
|
(in thousands) |
4th Qtr |
3rd Qtr |
4th Qtr |
3rd Qtr |
4th Qtr |
|||||||||||
|
2014 |
2014 |
2013 |
2014 |
2013 |
||||||||||||
|
Salaries |
$ |
7,299 |
$ |
7,141 |
$ |
7,141 |
$ |
158 |
$ |
158 | ||||||
|
Bonus |
180 | 475 | 686 | (295) | (506) | |||||||||||
|
Benefits and other |
1,548 | 1,240 | 1,353 | 308 | 195 | |||||||||||
|
Total salaries and employee benefits |
9,027 | 8,856 | 9,180 | 171 | (153) | |||||||||||
|
Occupancy expense, net |
1,154 | 1,143 | 1,245 | 11 | (91) | |||||||||||
|
Furniture and equipment expense |
1,016 | 989 | 990 | 27 | 26 | |||||||||||
|
FDIC insurance |
615 | 649 | 981 | (34) | (366) | |||||||||||
|
General bank insurance |
358 | 371 | 489 | (13) | (131) | |||||||||||
|
Amortization of core deposit intangible asset |
- |
154 | 525 | (154) | (525) | |||||||||||
|
Advertising expense |
225 | 291 | 384 | (66) | (159) | |||||||||||
|
Debit card interchange expense |
423 | 418 | 361 | 5 | 62 | |||||||||||
|
Legal fees |
335 | 332 | 642 | 3 | (307) | |||||||||||
|
Other real estate owned expense, net |
2,252 | 2,007 | 1,804 | 245 | 448 | |||||||||||
|
Other expense |
3,362 | 3,134 | 3,472 | 228 | (110) | |||||||||||
|
Total noninterest expense |
$ |
18,767 |
$ |
18,344 |
$ |
20,073 |
$ |
423 |
$ |
(1,306) | ||||||
Noninterest expense increased on a linked quarter basis primarily on higher compensation costs, increased costs related to employee health programs and elevated expense on OREO properties. Other expense shown above reflects a variety of items most notably a $56,000 loss of ATM debit card fraud. The linked quarter increase in OREO expense was driven by valuation expenses that were greater than gains on sales and the Company’s other reductions in OREO expense. Increased compensation costs reflect an annual payment to all Company employees in December and a quarter to quarter increase in employee health insurance group claims. The core deposit intangible asset was fully amortized in July providing some offset to other quarter over quarter line item expense increases. Expenses were flat or down in the fourth quarter 2014 compared to the same period in 2013 for most categories, excluding total OREO expense, net and debit card interchange expense. Noninterest expense was down 11.4% from 2013. All expense information in this release incorporates a year end 2013 Company decision to reclassify OREO revenues from noninterest income to noninterest expense.
8
Additional Loan Detail
|
December 31, 2014 |
||||||||||||||||
|
Major Classification of Loans as of |
Dollar Change From |
|||||||||||||||
|
(in thousands) |
December 31, |
September 30, |
December 31, |
September 30, |
December 31, |
|||||||||||
|
2014 |
2014 |
2013 |
2014 |
2013 |
||||||||||||
|
Commercial |
$ |
119,158 |
$ |
106,592 |
$ |
94,736 |
$ |
12,566 |
$ |
24,422 | ||||||
|
Real estate - commercial |
600,629 | 600,649 | 560,233 | (20) | 40,396 | |||||||||||
|
Real estate - construction |
44,795 | 41,936 | 29,351 | 2,859 | 15,444 | |||||||||||
|
Real estate - residential |
370,191 | 365,602 | 390,201 | 4,589 | (20,010) | |||||||||||
|
Consumer |
3,504 | 3,142 | 2,760 | 362 | 744 | |||||||||||
|
Overdraft |
649 | 1,198 | 628 | (549) | 21 | |||||||||||
|
Lease financing receivables |
8,038 | 8,398 | 10,069 | (360) | (2,031) | |||||||||||
|
Other |
11,630 | 12,757 | 12,793 | (1,127) | (1,163) | |||||||||||
| 1,158,594 | 1,140,274 | 1,100,771 | 18,320 | 57,823 | ||||||||||||
|
Net deferred loan costs |
738 | 608 | 485 | 130 | 253 | |||||||||||
|
$ |
1,159,332 |
$ |
1,140,882 |
$ |
1,101,256 |
$ |
18,450 |
$ |
58,076 | |||||||
Fourth quarter 2014 loan production resulted in an increase of $18.5 million in loans outstanding from the third quarter. Increases for the quarter are seen in most portfolio segments, most notably in Commercial. Management continued to emphasize loan portfolio quality and transactions in our core market area that the Company expects will develop as long-term relationship opportunities. This approach also develops client relationships with core clientele, reduced portfolio runoff and potential long term business development beneficial to both the Company and the client.
Commercial relationship managers continue to focus on building the loan pipeline with opportunities after a long period of runoff. Management believes that the competitive landscape within the Chicago market is challenging and that it may remain so for a prolonged period. New business development continues as a priority focus and management believes solid progress has been made both in terms of 2014 production and in building a pipeline for future loans.
Additional Securities Detail
|
December 31, 2014 |
||||||||||||||||
|
(in thousands) |
Securities Portfolio As of |
Dollar Change From |
||||||||||||||
|
December 31, |
September 30, |
December 31, |
September 30, |
December 31, |
||||||||||||
|
Securities available-for-sale, at fair value |
2014 |
2014 |
2013 |
2014 |
2013 |
|||||||||||
|
U.S. Treasury |
$ |
1,527 |
$ |
1,532 |
$ |
1,544 |
$ |
(5) |
$ |
(17) | ||||||
|
U.S. government agencies |
1,624 | 1,638 | 1,672 | (14) | (48) | |||||||||||
|
States and political subdivisions |
22,018 | 13,879 | 16,794 | 8,139 | 5,224 | |||||||||||
|
Corporate bonds |
30,985 | 30,781 | 15,102 | 204 | 15,883 | |||||||||||
|
Collateralized mortgage obligations |
63,627 | 28,417 | 63,876 | 35,210 | (249) | |||||||||||
|
Asset-backed securities |
173,496 | 192,798 | 273,203 | (19,302) | (99,707) | |||||||||||
|
Collateralized loan obligations |
92,209 | 93,198 |
- |
(989) | 92,209 | |||||||||||
|
Total securities available-for-sale |
$ |
385,486 |
$ |
362,243 |
$ |
372,191 |
$ |
23,243 |
$ |
13,295 | ||||||
|
Securities held-to-maturity, at amortized cost |
||||||||||||||||
|
U.S. government agency mortgage-backed |
$ |
37,125 |
$ |
37,321 |
$ |
35,268 |
$ |
(196) |
$ |
1,857 | ||||||
|
Collateralized mortgage obligations |
222,545 | 225,719 | 221,303 | (3,174) | 1,242 | |||||||||||
|
Total securities held-to-maturity |
$ |
259,670 |
$ |
263,040 |
$ |
256,571 |
$ |
(3,370) |
$ |
3,099 | ||||||
|
Total securities |
$ |
645,156 |
$ |
625,283 |
$ |
628,762 |
$ |
19,873 |
$ |
16,394 | ||||||
9
The investment portfolio ended 2014 at $645.2 million, an increase of $19.9 million during the fourth quarter and $16.4 million from December 2013. There were no purchases or sales to the held-to-maturity portion of the portfolio during the fourth quarter of 2014. Fourth quarter of 2014 purchases totaled $56.4 million, which included $11.9 million in asset-backed securities, $36.5 million in collateralized mortgage obligations, and an $8.0 million tax anticipation warrant for a local school district. During the fourth quarter of 2014 there were sales totaling $31.5 million, all in the asset-backed security category.
Realized gains on sales were $262,000 during the fourth quarter of 2014 down from gains of $1.2 million in the third quarter. Unrealized losses, net of deferred taxes, increased $481,000 over the previous quarter end.
At December 31, 2014, the Company was holding investments by three issuers (down from four issuers at September 30, 2014) where each holding exceeds 10% of stockholders’ equity. Company investment managers have assessed the quality of the issuers to confirm that underwriting standards meet expectation and requirements under the Company’s investment policy. All of the investments for these issuers are guaranteed by the U.S. Department of Education.
Deposits Detail
|
December 31, 2014 |
||||||||||||||||
|
Deposit Detail As of |
Dollar Change From |
|||||||||||||||
|
(in thousands) |
December 31, |
September 30, |
December 31, |
September 30, |
December 31, |
|||||||||||
|
2014 |
2014 |
2013 |
2014 |
2013 |
||||||||||||
|
Noninterest bearing |
$ |
400,447 |
$ |
380,687 |
$ |
373,389 |
$ |
19,760 |
$ |
27,058 | ||||||
|
Savings |
239,845 | 236,289 | 228,589 | 3,556 | 11,256 | |||||||||||
|
NOW accounts |
328,641 | 315,665 | 297,852 | 12,976 | 30,789 | |||||||||||
|
Money market accounts |
296,617 | 296,418 | 309,859 | 199 | (13,242) | |||||||||||
|
Certificates of deposits: |
||||||||||||||||
|
of less than $100,000 |
251,108 | 256,452 | 288,345 | (5,344) | (37,237) | |||||||||||
|
of $100,000 or more |
168,397 | 171,244 | 184,094 | (2,847) | (15,697) | |||||||||||
|
$ |
1,685,055 |
$ |
1,656,755 |
$ |
1,682,128 |
$ |
28,300 |
$ |
2,927 | |||||||
The December 31, 2014, change in total deposits of $28.3 million when compared to the end of third quarter 2014 resulted from several factors. Notably, certificates of deposit continued to decline as deposits taken in during a higher interest rate environment have matured and are not renewed at the current rate structure. The rate of decline slowed in the fourth quarter. However, as shown above, the decline was offset by quarterly increases in transactional deposit accounts. Total deposits ended 2014 at the level seen throughout late 2013 and in the first half of 2014.
Borrowings
The Company's borrowings at the Federal Home Loan Bank of Chicago (the “FHLBC”) require the Bank to be a member and invest in the stock of the FHLBC. Total borrowings are generally limited to the lower of 35% of total assets or 60% of the book value of certain mortgage loans. As of December 31, 2014, the Bank had $45.0 million outstanding under FHLBC advances compared to $40.0 million outstanding in advances at September 30, 2014.
10
At December 31, 2014, the Company was in compliance with all covenants contained in the credit agreement supporting the $45.5 million credit facility with a correspondent bank. As of September 30, 2014, the Company reported being out of compliance on two of the financial covenants contained in the referenced credit agreement.
The Company is also indebted on $58.4 million of junior subordinated debentures related to the trust preferred securities issued by its two statutory trust subsidiaries, Old Second Capital Trust I and Old Second Capital Trust II. In April, 2014, the Company concluded a successful capital raise and used some of the capital raise proceeds to pay interest accrued but previously unpaid on the trust preferred securities and, as of the date fereof, the Company is current on the payments due on these securities.
Capital
At December 31, 2014, the Bank’s Tier 1 capital leverage ratio was 12.02%, up 35 basis points from September 30, 2014. The Bank’s total capital ratio was 18.72%, up 25 basis points from September 30, 2014. The Bank’s board of directors has determined that the Bank should maintain a Tier 1 leverage capital ratio at or above 8% and a total risk-based capital ratio at or above 12%. The Bank currently exceeds those thresholds. All capital ratios discussed in this paragraph reflect additional capital from the previously disclosed 2014 capital raise.
At December 31, 2014, the Company, on a consolidated basis, exceeded the minimum thresholds to be considered “adequately capitalized” under the then current regulatory defined capital ratios. The Company and the Bank are subject to regulatory capital requirements administered by federal banking agencies. In addition to the above regulatory ratios, the Company’s non-GAAP tangible common equity to tangible assets slightly decreased to 7.12% at December 31, 2014, compared to 7.15% at September 30, 2014. The Tier 1 common equity to risk weighted assets increased to 6.80% at December 31, 2014, compared to 6.50% at September 30, 2014.
Non-GAAP Presentations: Management has traditionally disclosed certain non-GAAP ratios to evaluate and measure the Company’s performance, including a net interest margin calculation. The net interest margin is calculated by dividing net interest income on a tax equivalent basis by average earning assets for the period. Management believes this measure provides investors with information regarding balance sheet profitability. Consistent with industry practice, management also disclosed the tangible common equity to tangible assets and the Tier 1 common equity to risk weighted assets in the discussion immediately above and in the following tables. The tables provide a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent.
Forward Looking Statements: This report may contain forward-looking statements. Forward looking statements are identifiable by the inclusion of such qualifications as expects, intends, believes, may, likely or other indications that the particular statements are not based upon facts but are rather based upon the Company’s beliefs as of the date of this release. Actual events and results may differ significantly from those described in such forward-looking statements, due to changes in the economy, interest rates or other factors. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events. For additional information concerning the Company and its business, including other factors that could materially affect the Company’s financial results or cause actual results to differ substantially from those discussed or implied in forward looking statements contained in this release, please review our filings with the Securities and Exchange Commission.
11
Old Second Bancorp, Inc. and Subsidiaries
(In thousands, except share data)
|
(Unaudited) |
||||||
|
December 31, |
December 31, |
|||||
|
2014 |
2013 |
|||||
|
Assets |
||||||
|
Cash and due from banks |
$ |
30,101 |
$ |
33,210 | ||
|
Interest bearing deposits with financial institutions |
14,096 | 14,450 | ||||
|
Cash and cash equivalents |
44,197 | 47,660 | ||||
|
Securities available-for-sale, at fair value |
385,486 | 372,191 | ||||
|
Securities held-to-maturity, at amortized cost |
259,670 | 256,571 | ||||
|
Federal Home Loan Bank and Federal Reserve Bank stock |
9,058 | 10,292 | ||||
|
Loans held-for-sale |
5,072 | 3,822 | ||||
|
Loans |
1,159,332 | 1,101,256 | ||||
|
Less: allowance for loan losses |
21,637 | 27,281 | ||||
|
Net loans |
1,137,695 | 1,073,975 | ||||
|
Premises and equipment, net |
42,335 | 46,005 | ||||
|
Other real estate owned |
31,982 | 41,537 | ||||
|
Mortgage servicing rights, net |
5,462 | 5,807 | ||||
|
Core deposit intangible, net |
- |
1,177 | ||||
|
Bank-owned life insurance (BOLI) |
56,807 | 55,410 | ||||
|
Deferred tax assets, net |
70,141 | 75,303 | ||||
|
Other assets |
13,882 | 14,284 | ||||
|
Total assets |
$ |
2,061,787 |
$ |
2,004,034 | ||
|
Liabilities |
||||||
|
Deposits: |
||||||
|
Noninterest bearing demand |
$ |
400,447 |
$ |
373,389 | ||
|
Interest bearing: |
||||||
|
Savings, NOW, and money market |
865,103 | 836,300 | ||||
|
Time |
419,505 | 472,439 | ||||
|
Total deposits |
1,685,055 | 1,682,128 | ||||
|
Securities sold under repurchase agreements |
21,036 | 22,560 | ||||
|
Other short-term borrowings |
45,000 | 5,000 | ||||
|
Junior subordinated debentures |
58,378 | 58,378 | ||||
|
Subordinated debt |
45,000 | 45,000 | ||||
|
Notes payable and other borrowings |
500 | 500 | ||||
|
Other liabilities |
12,655 | 42,776 | ||||
|
Total liabilities |
1,867,624 | 1,856,342 | ||||
|
Stockholders’ Equity |
||||||
|
Preferred stock |
47,331 | 72,942 | ||||
|
Common stock |
34,365 | 18,830 | ||||
|
Additional paid-in capital |
115,332 | 66,212 | ||||
|
Retained earnings |
100,697 | 92,549 | ||||
|
Accumulated other comprehensive loss |
(7,713) | (7,038) | ||||
|
Treasury stock |
(95,849) | (95,803) | ||||
|
Total stockholders’ equity |
194,163 | 147,692 | ||||
|
Total liabilities and stockholders’ equity |
$ |
2,061,787 |
$ |
2,004,034 | ||
12
Old Second Bancorp, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except share data)
|
(unaudited) |
(unaudited) |
|||||||||||
|
Three Months Ended |
Year Ended |
|||||||||||
|
December 31, |
December 31, |
|||||||||||
|
2014 |
2013 |
2014 |
2013 |
|||||||||
|
Interest and dividend income |
||||||||||||
|
Loans, including fees |
$ |
13,580 |
$ |
13,040 |
$ |
52,926 |
$ |
56,193 | ||||
|
Loans held-for-sale |
41 | 32 | 133 | 156 | ||||||||
|
Securities: |
||||||||||||
|
Taxable |
3,691 | 3,583 | 14,131 | 11,692 | ||||||||
|
Tax exempt |
96 | 146 | 472 | 587 | ||||||||
|
Dividends from Federal Reserve Bank and Federal Home Loan Bank stock |
77 | 76 | 309 | 304 | ||||||||
|
Interest bearing deposits with financial institutions |
13 | 17 | 73 | 108 | ||||||||
|
Total interest and dividend income |
17,498 | 16,894 | 68,044 | 69,040 | ||||||||
|
Interest expense |
||||||||||||
|
Savings, NOW, and money market deposits |
176 | 204 | 738 | 859 | ||||||||
|
Time deposits |
896 | 1,447 | 4,500 | 6,774 | ||||||||
|
Other short-term borrowings |
9 | 2 | 19 | 28 | ||||||||
|
Junior subordinated debentures |
1,072 | 1,361 | 4,919 | 5,298 | ||||||||
|
Subordinated debt |
199 | 201 | 792 | 811 | ||||||||
|
Notes payable and other borrowings |
4 | 4 | 16 | 16 | ||||||||
|
Total interest expense |
2,356 | 3,219 | 10,984 | 13,786 | ||||||||
|
Net interest and dividend income |
15,142 | 13,675 | 57,060 | 55,254 | ||||||||
|
Loan loss reserve release |
(1,300) | (2,500) | (3,300) | (8,550) | ||||||||
|
Net interest and dividend income after provision for loan losses |
16,442 | 16,175 | 60,360 | 63,804 | ||||||||
|
Noninterest income |
||||||||||||
|
Trust income |
1,579 | 1,673 | 6,198 | 6,339 | ||||||||
|
Service charges on deposits |
1,725 | 1,877 | 7,079 | 7,256 | ||||||||
|
Secondary mortgage fees |
180 | 141 | 621 | 821 | ||||||||
|
Mortgage servicing gain, net of changes in fair value |
(60) | 691 | 209 | 1,913 | ||||||||
|
Net gain on sales of mortgage loans |
980 | 1,026 | 3,594 | 5,627 | ||||||||
|
Securities gains (loss), net |
262 | (4,103) | 1,719 | (1,912) | ||||||||
|
Increase in cash surrender value of bank-owned life insurance |
369 | 405 | 1,397 | 1,603 | ||||||||
|
Death benefit realized on bank-owned life insurance |
- |
- |
- |
381 | ||||||||
|
Debit card interchange income |
1,035 | 893 | 3,806 | 3,458 | ||||||||
|
Other income |
1,021 | 1,263 | 4,593 | 5,697 | ||||||||
|
Total noninterest income |
7,091 | 3,866 | 29,216 | 31,183 | ||||||||
|
Noninterest expense |
||||||||||||
|
Salaries and employee benefits |
9,027 | 9,180 | 36,167 | 36,688 | ||||||||
|
Occupancy expense, net |
1,154 | 1,245 | 4,963 | 5,032 | ||||||||
|
Furniture and equipment expense |
1,016 | 990 | 3,972 | 4,264 | ||||||||
|
FDIC insurance |
615 | 981 | 2,170 | 4,027 | ||||||||
|
General bank insurance |
358 | 489 | 1,561 | 2,318 | ||||||||
|
Amortization of core deposit |
- |
525 | 1,177 | 2,099 | ||||||||
|
Advertising expense |
225 | 384 | 1,278 | 1,225 | ||||||||
|
Debit card interchange expense |
423 | 361 | 1,631 | 1,433 | ||||||||
|
Legal fees |
335 | 642 | 1,333 | 2,066 | ||||||||
|
Other real estate expense, net |
2,252 | 1,804 | 6,917 | 10,747 | ||||||||
|
Other expense |
3,362 | 3,472 | 12,510 | 13,245 | ||||||||
|
Total noninterest expense |
18,767 | 20,073 | 73,679 | 83,144 | ||||||||
|
Income (loss) before income taxes |
4,766 | (32) | 15,897 | 11,843 | ||||||||
|
Provision (benefit) for income taxes |
1,777 | (245) | 5,761 | (70,242) | ||||||||
|
Net income |
$ |
2,989 |
$ |
213 |
$ |
10,136 |
$ |
82,085 | ||||
|
Preferred stock dividends and accretion of discount |
1,077 | 1,341 | 5,062 | 5,258 | ||||||||
|
Dividends waived upon preferred stock redemption |
- |
- |
(5,433) |
- |
||||||||
|
Gain on preferred stock redemption |
- |
- |
(1,348) |
- |
||||||||
|
Net income (loss) available to common stockholders |
$ |
1,912 |
$ |
(1,128) |
$ |
11,855 |
$ |
76,827 | ||||
|
Basic earnings (loss) per share |
$ |
0.06 |
$ |
(0.08) |
$ |
0.46 |
$ |
5.45 | ||||
|
Diluted earnings (loss) per share |
0.06 | (0.08) | 0.46 | 5.45 | ||||||||
13
Old Second Bancorp, Inc. and Subsidiaries
Quarterly Consolidated Average Balance
(In thousands, except share data, unaudited)
|
2013 |
2014 |
|||||||||||||||||||||||
|
Assets |
1st Qtr |
2nd Qtr |
3rd Qtr |
4th Qtr |
1st Qtr |
2nd Qtr |
3rd Qtr |
4th Qtr |
||||||||||||||||
|
Cash and due from banks |
$ |
29,913 |
$ |
22,948 |
$ |
19,584 |
$ |
35,063 |
$ |
29,901 |
$ |
36,827 |
$ |
32,459 |
$ |
31,314 | ||||||||
|
Interest bearing deposits with financial institutions |
68,995 | 43,933 | 36,456 | 26,370 | 23,775 | 30,333 | 38,603 | 19,643 | ||||||||||||||||
|
Cash and cash equivalents |
98,908 | 66,881 | 56,040 | 61,433 | 53,676 | 67,160 | 71,062 | 50,957 | ||||||||||||||||
|
Securities available-for-sale, at fair value |
558,233 | 590,629 | 544,500 | 376,488 | 371,229 | 388,309 | 348,791 | 261,775 | ||||||||||||||||
|
Securities held-to-maturity, at amortized cost |
- |
- |
74,983 | 257,347 | 263,765 | 264,070 | 263,832 | 368,944 | ||||||||||||||||
|
Federal Home Loan Bank and Federal Reserve Bank stock |
11,202 | 10,742 | 10,292 | 10,292 | 10,292 | 10,292 | 9,085 | 9,058 | ||||||||||||||||
|
Loans held-for-sale |
5,087 | 5,577 | 3,449 | 2,919 | 2,344 | 2,829 | 3,758 | 4,065 | ||||||||||||||||
|
Loans |
1,138,579 | 1,113,315 | 1,085,487 | 1,072,320 | 1,104,065 | 1,118,089 | 1,133,379 | 1,141,297 | ||||||||||||||||
|
Less : allowance for loan losses |
38,994 | 38,228 | 34,197 | 30,704 | 27,102 | 25,146 | 24,492 | 23,231 | ||||||||||||||||
|
Net loans |
1,099,585 | 1,075,087 | 1,051,290 | 1,041,616 | 1,076,963 | 1,092,943 | 1,108,887 | 1,118,066 | ||||||||||||||||
|
Premises and equipment, net |
47,208 | 47,136 | 46,679 | 46,236 | 45,972 | 45,575 | 45,116 | 42,516 | ||||||||||||||||
|
Other real estate owned |
71,061 | 63,377 | 57,081 | 48,055 | 39,971 | 39,094 | 38,757 | 39,566 | ||||||||||||||||
|
Mortgage servicing rights, net |
4,292 | 4,552 | 5,489 | 5,432 | 5,569 | 5,527 | 5,522 | 5,468 | ||||||||||||||||
|
Core deposit intangible, net |
3,012 | 2,480 | 1,955 | 1,428 | 916 | 399 | 23 |
- |
||||||||||||||||
|
Bank-owned life insurance (BOLI) |
54,331 | 54,727 | 54,730 | 55,136 | 55,551 | 55,894 | 56,262 | 56,566 | ||||||||||||||||
|
Deferred tax assets, net |
2,480 | 1,968 | 9,302 | 78,907 | 75,387 | 74,082 | 71,937 | 71,628 | ||||||||||||||||
|
Other assets |
21,033 | 20,542 | 15,600 | 14,036 | 12,990 | 12,798 | 12,615 | 11,985 | ||||||||||||||||
|
Total Other assets |
203,417 | 194,782 | 190,836 | 249,230 | 236,356 | 233,369 | 230,232 | 227,729 | ||||||||||||||||
|
Total assets |
$ |
1,976,432 |
$ |
1,943,698 |
$ |
1,931,390 |
$ |
1,999,325 |
$ |
2,014,625 |
$ |
2,058,972 |
$ |
2,035,647 |
$ |
2,040,594 | ||||||||
|
Liabilities |
||||||||||||||||||||||||
|
Deposits: |
||||||||||||||||||||||||
|
Noninterest bearing demand |
$ |
353,476 |
$ |
357,802 |
$ |
366,889 |
$ |
373,058 |
$ |
373,711 |
$ |
389,926 |
$ |
389,246 |
$ |
400,001 | ||||||||
|
Interest bearing: |
||||||||||||||||||||||||
|
Savings, NOW, and money market |
842,317 | 847,976 | 820,230 | 832,731 | 852,709 | 861,735 | 860,342 | 857,666 | ||||||||||||||||
|
Time |
505,685 | 497,262 | 493,722 | 479,047 | 468,138 | 457,818 | 437,597 | 421,584 | ||||||||||||||||
|
Total deposits |
1,701,478 | 1,703,040 | 1,680,841 | 1,684,836 | 1,694,558 | 1,709,479 | 1,687,185 | 1,679,251 | ||||||||||||||||
|
Securities sold under repurchase agreements |
20,264 | 24,692 | 21,646 | 26,599 | 24,539 | 25,224 | 27,266 | 27,298 | ||||||||||||||||
|
Other short-term borrowings |
43,833 | 769 | 15,707 | 3,532 | 4,111 | 8,681 | 12,174 | 24,946 | ||||||||||||||||
|
Junior subordinated debentures |
58,378 | 58,378 | 58,378 | 58,378 | 58,378 | 58,378 | 58,378 | 58,378 | ||||||||||||||||
|
Subordinated debt |
45,000 | 45,000 | 45,000 | 45,000 | 45,000 | 45,000 | 45,000 | 45,000 | ||||||||||||||||
|
Notes payable and other borrowings |
500 | 500 | 500 | 500 | 500 | 500 | 500 | 500 | ||||||||||||||||
|
Other liabilities |
33,585 | 35,202 | 37,466 | 37,934 | 38,966 | 19,210 | 11,416 | 12,177 | ||||||||||||||||
|
Total liabilities |
1,903,038 | 1,867,581 | 1,859,538 | 1,856,779 | 1,866,052 | 1,866,472 | 1,841,919 | 1,847,550 | ||||||||||||||||
|
Stockholders' equity |
||||||||||||||||||||||||
|
Preferred stock |
72,002 | 72,266 | 72,534 | 72,808 | 72,991 | 54,947 | 47,331 | 47,331 | ||||||||||||||||
|
Common stock |
18,768 | 18,780 | 18,785 | 18,830 | 18,840 | 33,104 | 34,365 | 34,365 | ||||||||||||||||
|
Additional paid-in capital |
66,154 | 66,128 | 66,174 | 66,183 | 66,241 | 111,279 | 115,220 | 115,263 | ||||||||||||||||
|
Retained earnings |
14,032 | 17,421 | 21,786 | 93,020 | 93,508 | 96,002 | 98,256 | 99,553 | ||||||||||||||||
|
Accumulated other comprehensive loss |
(2,483) | (2,768) | (11,707) | (12,493) | (7,177) | (6,982) | (5,594) | (7,618) | ||||||||||||||||
|
Treasury stock |
(95,079) | (95,710) | (95,720) | (95,802) | (95,830) | (95,850) | (95,850) | (95,850) | ||||||||||||||||
|
Total stockholders' equity |
73,394 | 76,117 | 71,852 | 142,546 | 148,573 | 192,500 | 193,728 | 193,044 | ||||||||||||||||
|
Total liabilities and stockholder's equity |
$ |
1,976,432 |
$ |
1,943,698 |
$ |
1,931,390 |
$ |
1,999,325 |
$ |
2,014,625 |
$ |
2,058,972 |
$ |
2,035,647 |
$ |
2,040,594 | ||||||||
|
Total Earning Assets |
$ |
1,782,096 |
$ |
1,764,196 |
$ |
1,755,167 |
$ |
1,745,736 |
$ |
1,775,470 |
$ |
1,813,922 |
$ |
1,797,448 |
$ |
1,804,782 | ||||||||
|
Total Interest Bearing Liabilities |
1,515,977 | 1,474,577 | 1,455,183 | 1,445,787 | 1,453,375 | 1,457,336 | 1,441,257 | 1,435,372 | ||||||||||||||||
14
Old Second Bancorp, Inc. and Subsidiaries
Quarterly Consolidated Statements of Operations
(In thousands, except share data, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013 |
|
2014 |
||||||||||||||||||||
|
|
|
1st Qtr |
|
2nd Qtr |
|
3rd Qtr |
|
4th Qtr |
|
1st Qtr |
|
2nd Qtr |
|
3rd Qtr |
|
4th Qtr |
||||||||
|
Interest and Dividend Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, including fees |
|
$ |
14,914 |
|
$ |
13,912 |
|
$ |
14,327 |
|
$ |
13,040 |
|
$ |
12,938 |
|
$ |
13,046 |
|
$ |
13,362 |
|
$ |
13,580 |
|
Loans held-for-sale |
|
|
41 |
|
|
45 |
|
|
38 |
|
|
32 |
|
|
25 |
|
|
29 |
|
|
38 |
|
|
41 |
|
Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
|
|
2,298 |
|
|
2,698 |
|
|
3,113 |
|
|
3,583 |
|
|
3,502 |
|
|
3,352 |
|
|
3,586 |
|
|
3,691 |
|
Tax exempt |
|
|
119 |
|
|
174 |
|
|
148 |
|
|
146 |
|
|
148 |
|
|
118 |
|
|
110 |
|
|
96 |
|
Dividends from Federal Reserve Bank and Federal Home Loan Bank stock |
|
|
76 |
|
|
76 |
|
|
76 |
|
|
76 |
|
|
76 |
|
|
78 |
|
|
78 |
|
|
77 |
|
Interest bearing deposits with financial institutions |
|
|
42 |
|
|
27 |
|
|
22 |
|
|
17 |
|
|
15 |
|
|
20 |
|
|
25 |
|
|
13 |
|
Total interest and dividend income |
|
|
17,490 |
|
|
16,932 |
|
|
17,724 |
|
|
16,894 |
|
|
16,704 |
|
|
16,643 |
|
|
17,199 |
|
|
17,498 |
|
Interest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW, and money market deposits |
|
|
228 |
|
|
221 |
|
|
206 |
|
|
204 |
|
|
199 |
|
|
188 |
|
|
175 |
|
|
176 |
|
Time deposits |
|
|
1,853 |
|
|
1,800 |
|
|
1,674 |
|
|
1,447 |
|
|
1,321 |
|
|
1,210 |
|
|
1,073 |
|
|
896 |
|
Other short-term borrowings |
|
|
20 |
|
|
- |
|
|
6 |
|
|
2 |
|
|
2 |
|
|
3 |
|
|
5 |
|
|
9 |
|
Junior subordinated debentures |
|
|
1,287 |
|
|
1,314 |
|
|
1,336 |
|
|
1,361 |
|
|
1,387 |
|
|
1,388 |
|
|
1,072 |
|
|
1,072 |
|
Subordinated debt |
|
|
196 |
|
|
205 |
|
|
209 |
|
|
201 |
|
|
196 |
|
|
198 |
|
|
199 |
|
|
199 |
|
Notes payable and other borrowings |
|
|
4 |
|
|
4 |
|
|
4 |
|
|
4 |
|
|
4 |
|
|
4 |
|
|
4 |
|
|
4 |
|
Total interest expense |
|
|
3,588 |
|
|
3,544 |
|
|
3,435 |
|
|
3,219 |
|
|
3,109 |
|
|
2,991 |
|
|
2,528 |
|
|
2,356 |
|
Net interest and dividend income |
|
|
13,902 |
|
|
13,388 |
|
|
14,289 |
|
|
13,675 |
|
|
13,595 |
|
|
13,652 |
|
|
14,671 |
|
|
15,142 |
|
Loan loss reserve release |
|
|
(2,500) |
|
|
(1,800) |
|
|
(1,750) |
|
|
(2,500) |
|
|
(1,000) |
|
|
(1,000) |
|
|
- |
|
|
(1,300) |
|
Net interest and dividend income after provision for loan losses |
|
|
16,402 |
|
|
15,188 |
|
|
16,039 |
|
|
16,175 |
|
|
14,595 |
|
|
14,652 |
|
|
14,671 |
|
|
16,442 |
|
Noninterest Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust income |
|
|
1,491 |
|
|
1,681 |
|
|
1,494 |
|
|
1,673 |
|
|
1,459 |
|
|
1,677 |
|
|
1,483 |
|
|
1,579 |
|
Service charges on deposits |
|
|
1,676 |
|
|
1,799 |
|
|
1,904 |
|
|
1,877 |
|
|
1,720 |
|
|
1,796 |
|
|
1,838 |
|
|
1,725 |
|
Secondary mortgage fees |
|
|
230 |
|
|
267 |
|
|
183 |
|
|
141 |
|
|
112 |
|
|
155 |
|
|
174 |
|
|
180 |
|
Mortgage servicing gain (loss), net of changes in fair value |
|
|
244 |
|
|
743 |
|
|
235 |
|
|
691 |
|
|
(47) |
|
|
64 |
|
|
252 |
|
|
(60) |
|
Net gain on sales of mortgage loans |
|
|
1,976 |
|
|
1,811 |
|
|
814 |
|
|
1,026 |
|
|
662 |
|
|
1,038 |
|
|
914 |
|
|
980 |
|
Securities gains (losses), net |
|
|
1,453 |
|
|
745 |
|
|
(7) |
|
|
(4,103) |
|
|
(69) |
|
|
295 |
|
|
1,231 |
|
|
262 |
|
Increase in cash surrender value of bank-owned life insurance |
|
|
407 |
|
|
372 |
|
|
419 |
|
|
405 |
|
|
358 |
|
|
366 |
|
|
304 |
|
|
369 |
|
Death benefit realized on bank-owned life insurance |
|
|
- |
|
|
375 |
|
|
6 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Debit card interchange income |
|
|
792 |
|
|
900 |
|
|
873 |
|
|
893 |
|
|
830 |
|
|
930 |
|
|
1,011 |
|
|
1,035 |
|
Other income |
|
|
1,738 |
|
|
1,147 |
|
|
1,549 |
|
|
1,263 |
|
|
1,296 |
|
|
1,160 |
|
|
1,116 |
|
|
1,021 |
|
Total noninterest income |
|
|
10,007 |
|
|
9,840 |
|
|
7,470 |
|
|
3,866 |
|
|
6,321 |
|
|
7,481 |
|
|
8,323 |
|
|
7,091 |
|
Noninterest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
|
9,032 |
|
|
9,177 |
|
|
9,299 |
|
|
9,180 |
|
|
9,101 |
|
|
9,183 |
|
|
8,856 |
|
|
9,027 |
|
Occupancy expense, net |
|
|
1,279 |
|
|
1,242 |
|
|
1,266 |
|
|
1,245 |
|
|
1,481 |
|
|
1,185 |
|
|
1,143 |
|
|
1,154 |
|
Furniture and equipment expense |
|
|
1,144 |
|
|
1,104 |
|
|
1,026 |
|
|
990 |
|
|
983 |
|
|
984 |
|
|
989 |
|
|
1,016 |
|
FDIC insurance |
|
|
1,035 |
|
|
1,024 |
|
|
987 |
|
|
981 |
|
|
279 |
|
|
627 |
|
|
649 |
|
|
615 |
|
General bank insurance |
|
|
849 |
|
|
491 |
|
|
489 |
|
|
489 |
|
|
489 |
|
|
343 |
|
|
371 |
|
|
358 |
|
Amortization of core deposit |
|
|
525 |
|
|
525 |
|
|
524 |
|
|
525 |
|
|
512 |
|
|
511 |
|
|
154 |
|
|
- |
|
Advertising expense |
|
|
166 |
|
|
328 |
|
|
347 |
|
|
384 |
|
|
303 |
|
|
459 |
|
|
291 |
|
|
225 |
|
Debit card interchange expense |
|
|
344 |
|
|
362 |
|
|
366 |
|
|
361 |
|
|
378 |
|
|
412 |
|
|
418 |
|
|
423 |
|
Legal fees |
|
|
323 |
|
|
486 |
|
|
615 |
|
|
642 |
|
|
257 |
|
|
409 |
|
|
332 |
|
|
335 |
|
Other real estate expense, net |
|
|
3,097 |
|
|
3,302 |
|
|
2,544 |
|
|
1,804 |
|
|
1,008 |
|
|
1,650 |
|
|
2,007 |
|
|
2,252 |
|
Other expense |
|
|
3,144 |
|
|
3,510 |
|
|
3,119 |
|
|
3,472 |
|
|
2,725 |
|
|
3,289 |
|
|
3,134 |
|
|
3,362 |
|
Total noninterest expense |
20,938 | 21,551 | 20,582 | 20,073 | 17,516 | 19,052 | 18,344 | 18,767 | ||||||||||||||||
|
Income before (loss) income taxes |
|
|
5,471 |
|
|
3,477 |
|
|
2,927 |
|
|
(32) |
|
|
3,400 |
|
|
3,081 |
|
|
4,650 |
|
|
4,766 |
|
(Benefit) provision for income taxes |
|
|
- |
|
|
- |
|
|
(69,997) |
|
|
(245) |
|
|
1,198 |
|
|
1,060 |
|
|
1,726 |
|
|
1,777 |
|
Net income |
|
|
5,471 |
|
|
3,477 |
|
|
72,924 |
|
|
213 |
|
|
2,202 |
|
|
2,021 |
|
|
2,924 |
|
|
2,989 |
|
Preferred stock dividends and accretion of discount |
|
|
1,289 |
|
|
1,305 |
|
|
1,323 |
|
|
1,341 |
|
|
1,572 |
|
|
1,348 |
|
|
1,065 |
|
|
1,077 |
|
Dividends waived upon preferred stock redemption |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(5,433) |
|
|
- |
|
|
- |
|
Gain on preferred stock redemption |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(1,348) |
|
|
- |
|
|
- |
|
Net income (loss) available to common stockholders |
|
$ |
4,182 |
|
$ |
2,172 |
|
$ |
71,601 |
|
$ |
(1,128) |
|
$ |
630 |
|
$ |
7,454 |
|
$ |
1,859 |
|
$ |
1,912 |
|
Basic earnings (loss) per share |
|
$ |
0.30 |
|
$ |
0.15 |
|
$ |
5.08 |
|
$ |
(0.08) |
|
$ |
0.04 |
|
$ |
0.26 |
|
$ |
0.06 |
|
$ |
0.06 |
|
Diluted earnings (loss) per share |
|
|
0.30 |
|
|
0.15 |
|
|
5.08 |
|
|
(0.08) |
|
|
0.04 |
|
|
0.26 |
|
|
0.06 |
|
|
0.06 |
15
The table below provides a reconciliation of each non GAAP tax equivalent measure to the GAAP equivalent for the periods indicated:
|
Three Months Ended |
Year Ended |
|||||||||||||
|
December 31, |
December 31, |
|||||||||||||
|
2014 |
2013 |
2014 |
2013 |
|||||||||||
|
Net Interest Margin |
||||||||||||||
|
Interest income (GAAP) |
$ |
17,498 |
$ |
16,894 |
$ |
68,044 |
$ |
69,040 | ||||||
|
Taxable-equivalent adjustment: |
||||||||||||||
|
Loans |
28 | 18 | 111 | 68 | ||||||||||
|
Securities |
52 | 79 | 255 | 317 | ||||||||||
|
Interest income - TE |
17,578 | 16,991 | 68,410 | 69,425 | ||||||||||
|
Interest expense (GAAP) |
2,356 | 3,219 | 10,984 | 13,786 | ||||||||||
|
Net interest income -TE |
$ |
15,222 |
$ |
13,772 |
$ |
57,426 |
$ |
55,639 | ||||||
|
Net interest income (GAAP) |
$ |
15,142 |
$ |
13,675 |
$ |
57,060 |
$ |
55,254 | ||||||
|
Average interest earning assets |
$ |
1,804,782 |
$ |
1,745,736 |
$ |
1,797,985 |
$ |
1,761,681 | ||||||
|
Net interest margin (GAAP) |
3.33 |
% |
3.11 |
% |
3.17 |
% |
3.14 |
% |
||||||
|
Net interest margin - TE |
3.35 |
% |
3.13 |
% |
3.19 |
% |
3.16 |
% |
||||||
16
|
(unaudited) |
(unaudited) |
||||||||
|
As of December 31, |
As of September 30, |
||||||||
|
(dollars in thousands) |
2014 |
2013 |
2014 |
||||||
|
Tier 1 capital |
|||||||||
|
Total equity |
$ |
194,163 |
$ |
147,692 |
$ |
192,691 | |||
|
Tier 1 adjustments: |
|||||||||
|
Trust preferred securities allowed |
56,625 | 51,577 | 56,625 | ||||||
|
Cumulative other comprehensive loss |
7,713 | 7,038 | 7,232 | ||||||
|
Disallowed goodwill and intangible assets |
- |
(1,177) |
- |
||||||
|
Disallowed deferred tax assets |
(61,456) | (70,350) | (65,260) | ||||||
|
Other |
(546) | (581) | (564) | ||||||
|
Tier 1 capital |
$ |
196,499 |
$ |
134,199 |
$ |
190,724 | |||
|
Total capital |
|||||||||
|
Tier 1 capital |
$ |
196,499 |
$ |
134,199 |
$ |
190,724 | |||
|
Tier 2 additions: |
|||||||||
|
Allowable portion of allowance for loan losses |
17,083 | 15,898 | 16,782 | ||||||
|
Additional trust preferred securities disallowed for tier 1 capital |
- |
5,048 |
- |
||||||
|
Subordinated debt |
27,000 | 36,000 | 27,000 | ||||||
|
Tier 2 additions subtotal |
44,083 | 56,946 | 43,782 | ||||||
|
Allowable Tier 2 |
44,083 | 56,946 | 43,782 | ||||||
|
Other Tier 2 capital components |
(6) | (6) | (6) | ||||||
|
Total capital |
$ |
240,576 |
$ |
191,139 |
$ |
234,500 | |||
|
Tangible common equity |
|||||||||
|
Total equity |
$ |
194,163 |
$ |
147,692 |
$ |
192,691 | |||
|
Less: Preferred equity |
47,331 | 72,942 | 47,331 | ||||||
|
Goodwill and intangible assets |
- |
1,177 |
- |
||||||
|
Tangible common equity |
$ |
146,832 |
$ |
73,573 |
$ |
145,360 | |||
|
Tier 1 common equity |
|||||||||
|
Tangible common equity |
$ |
146,832 |
$ |
73,573 |
$ |
145,360 | |||
|
Tier 1 adjustments: |
|||||||||
|
Cumulative other comprehensive loss |
7,713 | 7,038 | 7,232 | ||||||
|
Other |
(62,002) | (70,931) | (65,824) | ||||||
|
Tier 1 common equity |
$ |
92,543 |
$ |
9,680 |
$ |
86,768 | |||
|
Tangible assets |
|||||||||
|
Total assets |
$ |
2,061,787 |
$ |
2,004,034 |
$ |
2,033,099 | |||
|
Less: |
|||||||||
|
Goodwill and intangible assets |
- |
1,177 |
- |
||||||
|
Tangible assets |
$ |
2,061,787 |
$ |
2,002,857 |
$ |
2,033,099 | |||
|
Total risk-weighted assets |
|||||||||
|
On balance sheet |
$ |
1,328,238 |
$ |
1,224,438 |
$ |
1,300,773 | |||
|
Off balance sheet |
33,570 | 36,023 | 34,883 | ||||||
|
Total risk-weighted assets |
$ |
1,361,808 |
$ |
1,260,461 |
$ |
1,335,656 | |||
|
Average assets |
|||||||||
|
Total average assets for leverage |
$ |
1,978,591 |
$ |
1,927,217 |
$ |
1,969,823 | |||
17