EX-99.1 2 osbc-20151021ex9917787f1.htm EX-99.1 Ex_99-1

Picture 1

 

 

 

 

 

 

 

 

 

(NASDAQ:OSBC)

Exhibit 99.1

 

 

 

Contact:

J. Douglas Cheatham

For Immediate Release

 

Chief Financial Officer

October 21, 2015

 

(630) 906-5484

 

 

 

 

 

 

Old Second Reports Third Quarter 2015 Net Income of $3.9 million

 

 

AURORA, IL, October 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 third quarter of 2015.  The Company reported net income of $3.9 million for the third quarter of 2015, compared to net income of $2.9 million in  the third quarter of 2014.  The Company’s net income available to common stockholders of $3.6 million, or $0.12 per diluted share for the third quarter of 2015, compared to $1.9 million, or $0.06 per diluted share, in the third quarter of 2014.    The 2014 per share information reflects a redemption of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series B (the “Series B Stock”) that was completed in the second quarter of 2014.  Third quarter 2015 per share information reflects subsequent redemption and the final redemption in 2015 of the Company's remaining Series B Stock.

 

Operating Results

·

Third quarter 2015 net income before taxes increased by $1.7 million, or 35.7%, from the third quarter of 2014 but decreased 4.0% from the second quarter of 2015.  When compared to the third quarter of 2014, the quarter reflects slightly improved net interest income, lower noninterest expense and a loan loss reserve release of $2.1 million offset by lower noninterest income.    The net income decrease from the second quarter of 2015 was driven by reduced revenues largely offset by lower noninterest expense.    Third quarter 2015 noninterest income reflects a $1.1 million writedown on the now closed branch in Batavia, Illinois.  Noteworthy linked quarter expense decreases are found in other real estate owned (“OREO”) expense, resulting from decreased valuation reserve expense, reductions in bonus accrual, lower commissions on residential mortgage origination and moderation in healthcare costs. Third quarter 2015 net income available to common stockholders of $3.6 million compares to $3.4 million for the second quarter of 2015.  Results for 2015 reflect lower preferred stock dividends as a result of management’s decision to redeem an additional portion of the outstanding Series B Stock in 2015.

·

Noninterest expense of $16.2 million for the third quarter of 2015  was 11.4% lower than the results in the third quarter of 2014.  OREO expense, net for the third quarter of 2015 declined 51.3% from the third quarter of 2014.

·

On July 14, 2015, the Company provided notice that it was redeeming the remaining 31,553 issued and outstanding shares of the Company’s Series B stock. This redemption was completed in the third quarter with a redemption price of the stated liquidation value of $1,000 per share, together with any accrued and unpaid dividends accumulated to, but excluding, the redemption date.

 

1

 

Capital Ratios

 

 

 

 

 

 

 

 

 

 

 

September 30, 

 

June 30, 

 

March 31,

 

2015

 

2015

 

2015

The Bank's common equity tier 1 capital ratio
15.94

%

 
17.49

%

 
16.88

%

The Company's common equity tier 1 capital ratio
10.26

%

 
9.82

%

 
9.44

%

The Bank's total capital ratio
17.10

%

 
18.75

%

 
18.14

%

The Company's total capital ratio
15.36

%

 
17.10

%

 
17.28

%

The Company's tier 1 leverage capital ratio
8.46

%

 
10.02

%

 
9.82

%

 

·

All ratios presented are based on the regulatory capital rules in effect on January 1, 2015.  The Bank ratios shown above exceed levels required to be considered “well capitalized”.

All ratios have been adjusted to correctly account for the Company’s derivative holdings and bank owned life insurance as risk weighted assets under the regulatory capital rules in effect on January 1, 2015.  This resulted in immaterial changes in the capital ratios of the Bank and the Company.  The change in risk weighted assets and change in ratios has no impact on the Company’s historical financial statements or stockholders’ equity, which were stated in accordance with generally accepted accounting principles.

 

Asset Quality & Earning Assets

·

Nonperforming loans declined to $18.5 million at September 30, 2015, from $19.3 million at June 30, 2015, as nonaccrual loans were reduced.

·

OREO assets decreased in the third quarter to end at $24.5 million at September 30, 2015, compared to $32.0 million at June 30, 2015.  New additions to the OREO portfolio in third quarter were modest.  Valuation writedowns continued with a quarterly expense of $1.1 million.

·

Loans decreased from year end 2014 and are $26.0 million lower compared to June 30, 2015.  Third quarter 2015 average loans (including loans held-for-sale) decreased by $8.1 million from the second quarter of 2015, but increased $7.3 million compared to the third quarter of last year.

·

Securities held-to-maturity at amortized cost total $250.0 million at September 30, 2015.  This total compares to $253.4 million at June 30, 2015.    September 30, 2015, available-for-sale securities at fair value totaled $408.8 million, which is an increase from $399.8 million at June 30, 2015, and $385.5 at December 31, 2014.

·

Management review of the loan portfolio concluded that a loan loss reserve release of $2.1 million was appropriate in the third quarter. Loan loss reserve releases were taken in three quarters last year and also in the second quarter of 2015.  Management implemented changes in the process used to determine the required loan loss reserve to update the Bank’s reserve methodology.

 

2

 

Net Interest Income1

ANALYSIS OF AVERAGE BALANCES,

TAX EQUIVALENT INTEREST AND RATES

(In thousands - unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarters Ended

 

September 30, 2015

 

June 30, 2015

 

September 30, 2014

 

Average

 

 

 

 

Rate

 

Average

 

 

 

 

Rate

 

Average

 

 

 

 

Rate

 

Balance

 

Interest

 

%

 

Balance

 

Interest

 

%

 

Balance

 

Interest

 

%

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest bearing deposits with financial institutions

$
18,563

 

$
12

 
0.25

 

$
29,880

 

$
19

 
0.25

 

$
38,603

 

$
25

 
0.25

Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 
642,413

 

 
3,471

 
2.16

 

 
635,469

 

 
3,372

 
2.12

 

 
600,386

 

 
3,586

 
2.39

Non-taxable (TE)

 
19,318

 

 
187

 
3.87

 

 
29,424

 

 
251

 
3.41

 

 
12,237

 

 
169

 
5.52

Total securities

 
661,731

 

 
3,658

 
2.21

 

 
664,893

 

 
3,623

 
2.18

 

 
612,623

 

 
3,755

 
2.45

Dividends from Reserve Bank and FHLBC stock

 
8,271

 

 
76

 
3.68

 

 
8,409

 

 
77

 
3.66

 

 
9,085

 

 
78

 
3.43

Loans and loans held-for-sale1

 
1,144,413

 

 
13,415

 
4.59

 

 
1,152,485

 

 
13,566

 
4.66

 

 
1,137,137

 

 
13,429

 
4.62

Total interest earning assets

 
1,832,978

 

 
17,161

 
3.68

 

 
1,855,667

 

 
17,285

 
3.69

 

 
1,797,448

 

 
17,287

 
3.78

Cash and due from banks

 
28,999

 

 

 -

 

 -

 

 
29,153

 

 

 -

 

 -

 

 
32,459

 

 

 -

 

 -

Allowance for loan losses

 
(18,607)

 

 

 -

 

 -

 

 
(20,546)

 

 

 -

 

 -

 

 
(24,492)

 

 

 -

 

 -

Other noninterest bearing assets

 
211,646

 

 

 -

 

 -

 

 
219,239

 

 

 -

 

 -

 

 
230,232

 

 

 -

 

 -

Total assets

$
2,055,016

 

 

 

 

 

 

$
2,083,513

 

 

 

 

 

 

$
2,035,647

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOW accounts

$
347,754

 

$
76

 
0.09

 

$
334,694

 

$
73

 
0.09

 

$
321,968

 

$
68

 
0.08

Money market accounts

 
291,663

 

 
71

 
0.10

 

 
296,872

 

 
71

 
0.10

 

 
299,846

 

 
70

 
0.09

Savings accounts

 
250,031

 

 
38

 
0.06

 

 
254,243

 

 
39

 
0.06

 

 
238,528

 

 
37

 
0.06

Time deposits

 
404,896

 

 
799

 
0.78

 

 
410,066

 

 
771

 
0.75

 

 
437,597

 

 
1,073

 
0.97

Interest bearing deposits

 
1,294,344

 

 
984

 
0.30

 

 
1,295,875

 

 
954

 
0.30

 

 
1,297,939

 

 
1,248

 
0.38

Securities sold under repurchase agreements

 
31,466

 

 
1

 
0.01

 

 
31,234

 

 

 -

 

 -

 

 
27,266

 

 
1

 
0.01

Other short-term borrowings

 
14,674

 

 
5

 
0.13

 

 
22,638

 

 
7

 
0.12

 

 
12,174

 

 
4

 
0.13

Junior subordinated debentures

 
58,378

 

 
1,072

 
7.35

 

 
58,378

 

 
1,071

 
7.34

 

 
58,378

 

 
1,072

 
7.35

Subordinated debt

 
45,000

 

 
205

 
1.78

 

 
45,000

 

 
202

 
1.78

 

 
45,000

 

 
199

 
1.73

Notes payable and other borrowings

 
500

 

 
1

 
0.78

 

 
500

 

 

 -

 

 -

 

 
500

 

 
4

 
3.13

Total interest bearing liabilities

 
1,444,362

 

 
2,268

 
0.62

 

 
1,453,625

 

 
2,234

 
0.61

 

 
1,441,257

 

 
2,528

 
0.70

Noninterest bearing deposits

 
431,052

 

 

 -

 

 -

 

 
435,093

 

 

 -

 

 -

 

 
389,246

 

 

 -

 

 -

Other liabilities

 
9,782

 

 

 -

 

 -

 

 
10,962

 

 

 -

 

 -

 

 
11,416

 

 

 -

 

 -

Stockholders' equity

 
169,820

 

 

 -

 

 -

 

 
183,833

 

 

 -

 

 -

 

 
193,728

 

 

 -

 

 -

Total liabilities and stockholders' equity

$
2,055,016

 

 

 

 

 

 

$
2,083,513

 

 

 

 

 

 

$
2,035,647

 

 

 

 

 

Net interest income (TE)

 

 

 

$
14,893

 

 

 

 

 

 

$
15,051

 

 

 

 

 

 

$
14,759

 

 

Net interest income (TE)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

to total earning assets

 

 

 

 

 

 
3.22

 

 

 

 

 

 

 
3.25

 

 

 

 

 

 

 
3.26

Interest bearing liabilities to earning assets

 
78.80

%

 

 

 

 

 

 
78.33

%

 

 

 

 

 

 
80.18

%

 

 

 

 

 

1 Interest income from loans is shown on a tax equivalent basis as discussed in the table on page 13 and includes fees of $459,000,  $463,000 and $600,000 for the third quarter of 2015, the second quarter of 2015 and the third quarter of 2014, respectively.  Nonaccrual loans are included in the above stated average balances.

 

Note: Tax equivalent basis is calculated using a marginal tax rate of 35%.

 

Net interest and dividend income on a linked quarter basis decreased $132,000.  Quarterly average earning assets decreased $22.7 million from the second quarter of 2015 for a total of $1.83 billion,  while yield on earning assets was essentially unchanged.  Year over year third quarter average loans, including loans held-for-sale, increased.

 

 

3

 

Noninterest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3rd Qtr 2015

 

 

 

Three Months Ended

 

Percent Change From

 

(in thousands)

 

3rd Qtr

 

2nd Qtr

 

3rd Qtr

 

2nd Qtr

 

3rd Qtr

 

 

    

2015

    

2015

    

2014

    

2015

    

2014

 

Trust income

 

$
1,444

 

$
1,596

 

$
1,483

 
(9.5)

 
(2.6)

 

Service charges on deposits

 

 
1,766

 

 
1,779

 

 
1,838

 
(0.7)

 
(3.9)

 

Residential mortgage banking revenue

 

 
1,275

 

 
2,476

 

 
1,340

 
(48.5)

 
(4.9)

 

Securities (loss) gains, net

 

 
(57)

 

 
(12)

 

 
1,231

 
(375.0)

 
(104.6)

 

Increase in cash surrender value of bank-owned life insurance

 

 
203

 

 
283

 

 
304

 
(28.3)

 
(33.2)

 

Debit card interchange income

 

 
1,004

 

 
1,050

 

 
1,011

 
(4.4)

 
(0.7)

 

Loss on disposal and transfer of fixed assets

 

 
(1,143)

 

 

 -

 

 
(121)

 

N/A

 

N/A

 

Other income

 

 
1,156

 

 
1,092

 

 
1,237

 
5.9

 
(6.5)

 

Total noninterest income

 

$
5,648

 

$
8,264

 

$
8,323

 
(31.7)

 
(32.1)

 

 

As shown above, noninterest income experienced no noteworthy linked quarter improvements in the third quarter.  The Company continued to experience good mortgage loan origination results in the quarter by operating effectively in a favorable market environment.  However, valuation adjustments in the third quarter detracted from total residential mortgage banking revenue.  Cash surrender value of bank-owned life insurance decreased on a linked quarter basis in light of market declines in investment value.  Other noninterest income for the third quarter of 2015 is impacted by the impairment charge related to the closing of a Bank branch in Batavia, Illinois.  Year over year quarterly noninterest income is down 31.7% with all categories essentially unchanged, reduced or down sharply.

 

Noninterest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3rd Qtr 2015

 

 

 

Three Months Ended

 

Percent  Change From

 

(in thousands)

 

3rd Qtr

 

2nd Qtr

 

3rd Qtr

 

2nd Qtr

 

3rd Qtr

 

 

    

2015

    

2015

    

2014

    

2015

    

2014

 

Salaries

 

$
6,843

 

$
7,292

 

$
7,141

 
(6.2)

 
(4.2)

 

Bonus

 

 
238

 

 
454

 

 
475

 
(47.6)

 
(49.9)

 

Benefits and other

 

 
1,179

 

 
1,403

 

 
1,240

 
(16.0)

 
(4.9)

 

Total salaries and employee benefits

 

 
8,260

 

 
9,149

 

 
8,856

 
(9.7)

 
(6.7)

 

Occupancy expense, net

 

 
1,156

 

 
1,094

 

 
1,143

 
5.7

 
1.1

 

Furniture and equipment expense

 

 
1,110

 

 
1,065

 

 
989

 
4.2

 
12.2

 

FDIC insurance

 

 
373

 

 
377

 

 
649

 
(1.1)

 
(42.5)

 

General bank insurance

 

 
308

 

 
310

 

 
371

 
(0.6)

 
(17.0)

 

Amortization of core deposit intangible asset

 

 

 -

 

 

 -

 

 
154

 

N/A

 
(100.0)

 

Advertising expense

 

 
434

 

 
353

 

 
291

 
22.9

 
49.1

 

Debit card interchange expense

 

 
379

 

 
400

 

 
418

 
(5.3)

 
(9.3)

 

Legal fees

 

 
279

 

 
420

 

 
332

 
(33.6)

 
(16.0)

 

Other real estate owned expense, net

 

 
977

 

 
2,388

 

 
2,007

 
(59.1)

 
(51.3)

 

Other expense

 

 
2,968

 

 
3,371

 

 
3,134

 
(12.0)

 
(5.3)

 

Total noninterest expense

 

$
16,244

 

$
18,927

 

$
18,344

 
(14.2)

 
(11.4)

 

Efficiency ratio (defined below)

 

 
73.73

%

 
70.44

%

 
73.51

%

 

 

 

 

 

The efficiency ratio shown in the table above is calculated as noninterest expense excluding core deposit intangible amortization and OREO expenses divided by the sum of net interest income on a fully tax equivalent basis, total noninterest income less net gains and losses on securities and with a tax equivalent adjustment on the increase in cash surrender value of bank-owned life insurance.

Noninterest expense decreased on a linked quarter basis reflecting reduced bonus accrual expense, lower levels of residential mortgage commission expense, improved but still elevated OREO expense and reduced other

 

4

 

noninterest expense.  Expenses were flat or down in the third quarter 2015 compared to the same period in 2014 for most categories.  Third quarter 2015 total noninterest expense was 11.4% lower than the third quarter 2014 total.

Earning Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2015

 

 

 

Major Classification of Loans as of

 

Percent Change From

 

(in thousands)

 

September 30, 

 

June 30, 

 

September 30, 

 

June 30, 

 

September 30, 

 

 

    

2015

    

2015

    

2014

    

2015

    

2014

 

Commercial

 

$
120,036

 

$
123,372

 

$
106,592

 
(2.7)

 
12.6

 

Real estate - commercial

 

 
609,937

 

 
612,379

 

 
600,649

 
(0.4)

 
1.5

 

Real estate - construction

 

 
23,461

 

 
32,157

 

 
41,936

 
(27.0)

 
(44.1)

 

Real estate - residential

 

 
354,106

 

 
365,989

 

 
365,602

 
(3.2)

 
(3.1)

 

Consumer

 

 
4,005

 

 
3,854

 

 
3,142

 
3.9

 
27.5

 

Overdraft

 

 
423

 

 
408

 

 
1,198

 
3.7

 
(64.7)

 

Lease financing receivables

 

 
9,697

 

 
8,571

 

 
8,398

 
13.1

 
15.5

 

Other

 

 
10,345

 

 
11,391

 

 
12,757

 
(9.2)

 
(18.9)

 

 

 

 
1,132,010

 

 
1,158,121

 

 
1,140,274

 
(2.3)

 
(0.7)

 

Net deferred loan costs

 

 
902

 

 
762

 

 
608

 
18.4

 
48.4

 

 

 

$
1,132,912

 

$
1,158,883

 

$
1,140,882

 
(2.2)

 
(0.7)

 

 

Third quarter loan production did not improve from recent trends leading to an overall decrease of $26.0 million in total loans from June 30, 2015.  Volume decreases for the quarter are seen in most portfolio segments, most notably in real estate.  Management continued to emphasize loan quality and transactions in our core market area that the Company expects will develop as long-term relationship opportunities.

 

The investment portfolio ended the third quarter of 2015 at $658.9 million,  an increase from $653.3 million at June 30, 2015.  Available-for-sale purchases during the quarter totaled $33.2 million, $23.2 million of which were asset-backed securities collateralized by student loans, and a $10.0 million tax anticipation warrant issued by a local school district.  During the third quarter there were sales totaling $14.1 million, which included a $1.2 million corporate bond, a $9.4 million asset-backed security and the $3.4 million mortgage-backed security.  These sales generated a realized loss of $57,000 for the quarter.

 

 

 

 

 

Asset Quality

In Thousands

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As Of

 

Percent Change From

 

 

September 30, 

 

June 30, 

 

September 30, 

 

June 30, 

 

September 30, 

 

  

2015

  

2015

  

2014

  

2015

 

2014

Nonaccrual loans

 

$
18,224

 

$
18,976

 

$
31,508

 
(4.0)

 
(42.2)

Nonperforming troubled debt restructured loans accruing interest

 

 
307

 

 
308

 

 
107

 
(0.3)

 
186.9

Loans past due 90 days or more and still accruing interest

 

 

 -

 

 

 -

 

 
44

 

 -

 
(100.0)

Total nonperforming loans

 

 
18,531

 

 
19,284

 

 
31,659

 
(3.9)

 
(41.5)

Other real estate owned

 

 
24,451

 

 
31,964

 

 
40,877

 
(23.5)

 
(40.2)

Total nonperforming assets

 

$
42,982

 

$
51,248

 

$
72,536

 
(16.1)

 
(40.7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30-89 days past due loans

 

$
3,358

 

$
5,296

 

$
1,541

 

 

 

 

Nonaccrual loans to total loans

 

 
1.6

%

 
1.6

%

 
2.8

%

 

 

 

Nonperforming loans to total loans

 

 
1.6

%

 
1.7

%

 
2.8

%

 

 

 

Nonperforming assets to total loans plus OREO

 

 
3.7

%

 
4.3

%

 
6.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses

 

$
16,613

 

$
18,321

 

$
23,330

 

 

 

 

Allowance for loan losses to loans

 

 
1.5

%

 
1.6

%

 
2.0

%

 

 

 

Allowance for loan losses to nonaccrual loans

 

 
91.2

%

 
96.5

%

 
74.0

%

 

 

 

 

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 $18.5 million at September 30, 2015, compared to $19.3 million at June 30, 2015, on reductions in nonaccrual loans.

 

 

5

 

Classified loans include nonaccrual, performing troubled debt restructurings and all other loans considered substandard,  as shown below.  The increase in classified loans is essentially limited to one large relationship.  Management review of the loan portfolio concluded that a loan loss reserve release of $2.1 million was appropriate in the third quarter.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2015

 

 

 

Classified loans as of

 

Percent Change From

 

(in thousands)

 

September 30, 

 

June 30, 

 

September 30, 

 

June 30, 

 

September 30, 

 

 

    

2015

    

2015

    

2014

    

2015

    

2014

 

Real estate-construction

 

$
3,803

 

$
3,952

 

$
4,298

 
(3.8)

 
(11.5)

 

Real estate-residential:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investor

 

 
806

 

 
975

 

 
3,407

 
(17.3)

 
(76.3)

 

Owner occupied

 

 
7,179

 

 
7,051

 

 
7,797

 
1.8

 
(7.9)

 

Revolving and junior liens

 

 
3,599

 

 
3,292

 

 
3,675

 
9.3

 
(2.1)

 

Real estate-commercial, nonfarm

 

 
7,354

 

 
3,705

 

 
24,768

 
98.5

 
(70.3)

 

Real estate-commercial, farm

 

 
1,272

 

 
1,272

 

 

 -

 

 -

 

 -

 

Commercial

 

 
616

 

 
698

 

 
4,251

 
(11.7)

 
(85.5)

 

Other

 

 
1

 

 
1

 

 
1

 

 -

 

 -

 

 

 

$
24,630

 

$
20,946

 

$
48,197

 
17.6

 
(48.9)

 

 

Net Charge-off Summary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loan Charge-offs, net of recoveries

Three Months Ended

(in thousands)

September 30, 

 

% of

 

June 30, 

 

% of

 

September 30, 

 

% of

 

2015

 

Total

 

2015

 

Total

 

2014

 

Total

Real estate-construction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Homebuilder

$
(9)

 
2.3

 

$
(47)

 
(8.4)

 

$

 -

 

 -

Land

 
(4)

 
1.0

 

 
(2)

 
(0.4)

 

 

 -

 

 -

Commercial speculative

 
(190)

 
48.5

 

 

 -

 

 -

 

 

 -

 

 -

All other

 
(1)

 
0.3

 

 
(11)

 
(2.0)

 

 
(2)

 
(0.4)

Total real estate-construction

 
(204)

 
52.1

 

 
(60)

 
(10.8)

 

 
(2)

 
(0.4)

Real estate-residential

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investor

 
(10)

 
2.6

 

 
(104)

 
(18.6)

 

 
59

 
11.2

Owner occupied

 
163

 
(41.6)

 

 
(25)

 
(4.5)

 

 
(108)

 
(20.5)

Revolving and junior liens

 
(3)

 
0.8

 

 
(115)

 
(20.5)

 

 
328

 
62.4

Total real estate-residential

 
150

 
(38.2)

 

 
(244)

 
(43.6)

 

 
279

 
53.1

Real estate-commercial, nonfarm

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner general purpose

 
20

 
(5.1)

 

 
709

 
126.6

 

 
237

 
45.1

Owner special purpose

 
(126)

 
32.1

 

 
109

 
19.5

 

 
49

 
9.3

Non-owner general purpose

 
(9)

 
2.3

 

 
(915)

 
(163.4)

 

 
(419)

 
(79.7)

Non-owner special purpose

 
(139)

 
35.5

 

 
163

 
29.1

 

 
255

 
48.5

Retail properties

 

 -

 

 -

 

 

 -

 

 -

 

 
(455)

 
(86.5)

Total real estate-commercial, nonfarm

 
(254)

 
64.8

 

 
66

 
11.8

 

 
(333)

 
(63.3)

Real estate-commercial, farm

 

 -

 

 -

 

 

 -

 

 -

 

 

 -

 

 -

Commercial

 
(112)

 
28.50

 

 
775

 
138.4

 

 
506

 
96.2

Other

 
28

 
(7.2)

 

 
23

 
4.2

 

 
76

 
14.4

Net (recovery)/charge-off

$
(392)

 
100.0

 

$
560

 
100.0

 

$
526

 
100.0

 

 

 

 

 

 

Net recoveries for the quarter reflect continuing management attention to credit quality.

 

Deposits

 

Total deposits were $1.72 billion at September 30, 2015.  That amount reflects an increase from total deposits of $1.71 billion at June 30, 2015, and an increase from $1.69 billion at year end 2014.  Demand /Savings / NOW / Money Market balances were essentially unchanged in the third quarter while time deposits or certificates of deposit reflect a modest increase for the period.

 

 

6

 

Borrowings

The Bank’s borrowing at the Federal Home Loan Bank of Chicago (the “FHLBC”) requires the Bank to be a member and invest in the stock of the FHLBC.  As of September 30, 2015, the Bank had $35.0 million outstanding under FHLBC advances compared to $20.0 million outstanding in advances at June 30, 2015.  Management borrowed overnight funds under the advance program virtually every day in the third quarter.

 

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 proceeds to pay interest accrued but previously unpaid on the trust preferred securities and, as of the date hereof, the Company continues to be current on the payments due on these securities.

 

In August, the Bank entered into an interest rate swap as a cash flow hedge with an effective date of June 15, 2017.  The Bank will pay the counterparty a fixed rate and receive a floating rate based on three month LIBOR.  Management concluded that it would be advantageous to enter this transaction given that the Company has trust preferred securities that will change from fixed rate to floating rate on June 15, 2017.  The cash flow hedge has a maturity date of June 15, 2037.

 

Capital

 

 

 

 

 

 

 

 

 

 

 

September 30, 

 

June 30, 

 

March 31,

 

2015

 

2015

 

2015

The Company's common equity tier 1 capital ratio
10.26

%

 
9.82

%

 
9.44

%

(minimum 4.5% for adequately capitalized)

 

 

 

 

 

 

 

 

The Company's tier 1 capital ratio
11.96

%

 
14.21

%

 
13.65

%

(minimum 6.0% for adequately capitalized)

 

 

 

 

 

 

 

 

The Company's total capital ratio
15.36

%

 
17.10

%

 
17.28

%

(minimum 8.0% for adequately capitalized)

 

 

 

 

 

 

 

 

The Company's tier 1 leverage capital ratio
8.46

%

 
10.02

%

 
9.82

%

(minimum 4.0% for adequately capitalized)

 

 

 

 

 

 

 

 

 

All ratios presented are based on the regulatory capital rules of Basel III, which took effect on January 1, 2015.  As of September 30, 2015, the Bank’s common equity tier 1 capital ratio of 15.94% and total capital ratio of 17.10% exceeded the minimum capital ratios to be deemed “well capitalized”.

 

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 other non-GAAP measures in the discussion above and in the following tables.  The efficiency ratio is discussed in the noninterest expense presentation on page 4.  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.

 

 

7

 

Conference Call

 

The Company will also host an earnings call on Thursday, October 22, 2015, at 11:00 a.m. Eastern Time (10:00 a.m. Central Time). Investors may listen to the Company’s earnings call via telephone by dialing 877-407-8035. Investors should call into the dial-in number set forth above at least 10 minutes prior to the scheduled start of the call.

 

A replay of the earnings call will be available until 11:59 p.m. Eastern Time (10:59 p.m. Central Time) on November 5, 2015, by dialing 877-660-6853, using Conference ID #: 13621280.

 

 

 

8

 

Old Second Bancorp, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share data)

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

 

 

 

September 30, 

 

December 31, 

 

    

2015

    

2014

Assets

 

 

 

 

 

 

Cash and due from banks

 

$
35,443

 

$
30,101

Interest bearing deposits with financial institutions

 

 
18,329

 

 
14,096

Cash and cash equivalents

 

 
53,772

 

 
44,197

Securities available-for-sale, at fair value

 

 
408,836

 

 
385,486

Securities held-to-maturity, at amortized cost

 

 
250,044

 

 
259,670

Federal Home Loan Bank and Federal Reserve Bank stock

 

 
8,271

 

 
9,058

Loans held-for-sale

 

 
3,899

 

 
5,072

Loans

 

 
1,132,912

 

 
1,159,332

Less: allowance for loan losses

 

 
16,613

 

 
21,637

Net loans

 

 
1,116,299

 

 
1,137,695

Premises and equipment, net

 

 
39,701

 

 
42,335

Other real estate owned

 

 
24,451

 

 
31,982

Mortgage servicing rights, net

 

 
5,470

 

 
5,462

Bank-owned life insurance (BOLI)

 

 
57,647

 

 
56,807

Deferred tax assets, net

 

 
65,150

 

 
70,141

Other assets

 

 
16,054

 

 
13,882

Total assets

 

$
2,049,594

 

$
2,061,787

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

Noninterest bearing demand

 

$
430,810

 

$
400,447

Interest bearing:

 

 

 

 

 

 

Savings, NOW, and money market

 

 
878,226

 

 
865,103

Time

 

 
411,443

 

 
419,505

Total deposits

 

 
1,720,479

 

 
1,685,055

Securities sold under repurchase agreements

 

 
27,074

 

 
21,036

Other short-term borrowings

 

 
35,000

 

 
45,000

Junior subordinated debentures

 

 
58,378

 

 
58,378

Subordinated debt

 

 
45,000

 

 
45,000

Notes payable and other borrowings

 

 
500

 

 
500

Other liabilities

 

 
9,520

 

 
12,655

Total liabilities

 

 
1,895,951

 

 
1,867,624

 

 

 

 

 

 

 

Stockholders’ Equity

 

 

 

 

 

 

Preferred stock

 

 

 -

 

 
47,331

Common stock

 

 
34,423

 

 
34,365

Additional paid-in capital

 

 
115,773

 

 
115,332

Retained earnings

 

 
110,376

 

 
100,697

Accumulated other comprehensive loss

 

 
(10,963)

 

 
(7,713)

Treasury stock

 

 
(95,966)

 

 
(95,849)

Total stockholders’ equity

 

 
153,643

 

 
194,163

Total liabilities and stockholders’ equity

 

$
2,049,594

 

$
2,061,787

 

 

9

 

 

 

Old Second Bancorp, Inc. and Subsidiaries

Consolidated Statements of Income

(In thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(unaudited)

 

(unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30, 

 

September 30, 

 

    

2015

    

2014

    

2015

    

2014

Interest and dividend income

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$
13,353

 

$
13,362

 

$
40,038

 

$
39,346

Loans held-for-sale

 

 
38

 

 
38

 

 
153

 

 
92

Securities:

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 
3,471

 

 
3,586

 

 
10,218

 

 
10,440

Tax exempt

 

 
122

 

 
110

 

 
426

 

 
376

Dividends from Federal Reserve Bank and Federal Home Loan Bank stock

 

 
76

 

 
78

 

 
230

 

 
232

Interest bearing deposits with financial institutions

 

 
12

 

 
25

 

 
43

 

 
60

Total interest and dividend income

 

 
17,072

 

 
17,199

 

 
51,108

 

 
50,546

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

Savings, NOW, and money market deposits

 

 
185

 

 
175

 

 
547

 

 
562

Time deposits

 

 
799

 

 
1,073

 

 
2,377

 

 
3,604

Other short-term borrowings

 

 
6

 

 
5

 

 
22

 

 
10

Junior subordinated debentures

 

 
1,072

 

 
1,072

 

 
3,215

 

 
3,847

Subordinated debt

 

 
205

 

 
199

 

 
604

 

 
593

Notes payable and other borrowings

 

 
1

 

 
4

 

 
5

 

 
12

Total interest expense

 

 
2,268

 

 
2,528

 

 
6,770

 

 
8,628

Net interest and dividend income

 

 
14,804

 

 
14,671

 

 
44,338

 

 
41,918

Loan loss reserve release

 

 
(2,100)

 

 

 -

 

 
(4,400)

 

 
(2,000)

Net interest and dividend income after provision for loan losses

 

 
16,904

 

 
14,671

 

 
48,738

 

 
43,918

Noninterest income

 

 

 

 

 

 

 

 

 

 

 

 

Trust income

 

 
1,444

 

 
1,483

 

 
4,526

 

 
4,619

Service charges on deposits

 

 
1,766

 

 
1,838

 

 
5,086

 

 
5,354

Secondary mortgage fees

 

 
190

 

 
174

 

 
715

 

 
441

Mortgage servicing (loss) gain, net of changes in fair value

 

 
(274)

 

 
252

 

 
18

 

 
269

Net gain on sales of mortgage loans

 

 
1,359

 

 
914

 

 
4,677

 

 
2,614

Securities (loss) gain, net

 

 
(57)

 

 
1,231

 

 
(178)

 

 
1,457

Increase in cash surrender value of bank-owned life insurance

 

 
203

 

 
304

 

 
840

 

 
1,028

Debit card interchange income

 

 
1,004

 

 
1,011

 

 
3,013

 

 
2,771

Loss on disposal and transfer of fixed assets

 

 
(1,143)

 

 
(121)

 

 
(1,143)

 

 
(121)

Other income

 

 
1,156

 

 
1,237

 

 
4,331

 

 
3,693

Total noninterest income

 

 
5,648

 

 
8,323

 

 
21,885

 

 
22,125

Noninterest expense

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 
8,260

 

 
8,856

 

 
26,664

 

 
27,140

Occupancy expense, net

 

 
1,156

 

 
1,143

 

 
3,521

 

 
3,809

Furniture and equipment expense

 

 
1,110

 

 
989

 

 
3,176

 

 
2,956

FDIC insurance

 

 
373

 

 
649

 

 
1,023

 

 
1,555

General bank insurance

 

 
308

 

 
371

 

 
975

 

 
1,203

Amortization of core deposit

 

 

 -

 

 
154

 

 

 -

 

 
1,177

Advertising expense

 

 
434

 

 
291

 

 
992

 

 
1,053

Debit card interchange expense

 

 
379

 

 
418

 

 
1,131

 

 
1,208

Legal fees

 

 
279

 

 
332

 

 
922

 

 
998

Other real estate expense, net

 

 
977

 

 
2,007

 

 
4,717

 

 
4,665

Other expense

 

 
2,968

 

 
3,134

 

 
9,203

 

 
9,148

Total noninterest expense

 

 
16,244

 

 
18,344

 

 
52,324

 

 
54,912

Income before income taxes

 

 
6,308

 

 
4,650

 

 
18,299

 

 
11,131

Provision for income taxes

 

 
2,384

 

 
1,726

 

 
6,747

 

 
3,984

Net income

 

$
3,924

 

$
2,924

 

$
11,552

 

$
7,147

Preferred stock dividends and accretion of discount

 

 
339

 

 
1,065

 

 
1,873

 

 
3,985

Dividends waived upon preferred stock redemption

 

 

 -

 

 

 -

 

 

 -

 

 
(5,433)

Gain on preferred stock redemption

 

 

 -

 

 

 -

 

 

 -

 

 
(1,348)

Net income available to common stockholders

 

$
3,585

 

$
1,859

 

$
9,679

 

$
9,943

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$
0.12

 

$
0.06

 

$
0.33

 

$
0.41

Diluted earnings per share

 

 
0.12

 

 
0.06

 

 
0.33

 

 
0.41

 

 

 

 

 

 

 

 

 

 

 

 

Ending common shares outstanding

 
29,478,429

 
29,442,508

 
29,478,429

 
29,442,508

Weighted-average common shares outstanding

 
29,478,429

 
29,442,508

 
29,474,833

 
23,905,205

Diluted average common shares outstanding

 
29,746,429

 
29,767,508

 
29,724,234

 
24,127,635

 

 

10

 

Old Second Bancorp, Inc. and Subsidiaries

Quarterly Consolidated Average Balance

(In thousands, except share data, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

 

2015

Assets

    

1st Qtr

    

2nd Qtr

    

3rd Qtr

    

4th Qtr

    

1st Qtr

    

2nd Qtr

    

3rd Qtr

Cash and due from banks

 

$
29,901

 

$
36,827

 

$
32,459

 

$
31,314

 

$
31,744

 

$
29,153

 

$
28,999

Interest bearing deposits with financial institutions

 

 
23,775

 

 
30,333

 

 
38,603

 

 
19,643

 

 
18,022

 

 
29,880

 

 
18,563

Cash and cash equivalents

 

 
53,676

 

 
67,160

 

 
71,062

 

 
50,957

 

 
49,766

 

 
59,033

 

 
47,562

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities available-for-sale, at fair value

 

 
371,229

 

 
388,309

 

 
348,791

 

 
368,944

 

 
380,180

 

 
409,600

 

 
410,083

Securities held-to-maturity, at amortized cost

 

 
263,765

 

 
264,070

 

 
263,832

 

 
261,775

 

 
258,637

 

 
255,293

 

 
251,648

Federal Home Loan Bank and Federal Reserve Bank stock

 

 
10,292

 

 
10,292

 

 
9,085

 

 
9,058

 

 
9,058

 

 
8,409

 

 
8,271

Loans held-for-sale

 

 
2,344

 

 
2,829

 

 
3,758

 

 
4,065

 

 
4,782

 

 
7,880

 

 
3,789

Loans

 

 
1,104,065

 

 
1,118,089

 

 
1,133,379

 

 
1,141,297

 

 
1,156,662

 

 
1,144,605

 

 
1,140,624

Less : allowance for loan losses

 

 
27,102

 

 
25,146

 

 
24,492

 

 
23,231

 

 
21,605

 

 
20,546

 

 
18,607

Net loans

 

 
1,076,963

 

 
1,092,943

 

 
1,108,887

 

 
1,118,066

 

 
1,135,057

 

 
1,124,059

 

 
1,122,017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Premises and equipment, net

 

 
45,972

 

 
45,575

 

 
45,116

 

 
42,516

 

 
42,306

 

 
41,937

 

 
41,572

Other real  estate owned

 

 
39,971

 

 
39,094

 

 
38,757

 

 
39,566

 

 
32,392

 

 
34,637

 

 
29,049

Mortgage servicing rights, net

 

 
5,569

 

 
5,527

 

 
5,522

 

 
5,468

 

 
5,202

 

 
5,416

 

 
5,776

Core deposit intangible, net

 

 
916

 

 
399

 

 
23

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Bank-owned life insurance (BOLI)

 

 
55,551

 

 
55,894

 

 
56,262

 

 
56,566

 

 
56,927

 

 
57,283

 

 
57,561

Deferred tax assets, net

 

 
75,387

 

 
74,082

 

 
71,937

 

 
71,628

 

 
69,936

 

 
67,657

 

 
66,174

Other assets

 

 
12,990

 

 
12,798

 

 
12,615

 

 
11,985

 

 
11,781

 

 
12,309

 

 
11,514

Total other assets

 

 
236,356

 

 
233,369

 

 
230,232

 

 
227,729

 

 
218,544

 

 
219,239

 

 
211,646

Total assets

 

$
2,014,625

 

$
2,058,972

 

$
2,035,647

 

$
2,040,594

 

$
2,056,024

 

$
2,083,513

 

$
2,055,016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest bearing demand

 

$
373,711

 

$
389,926

 

$
389,246

 

$
400,001

 

$
405,933

 

$
435,093

 

$
431,052

Interest bearing:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Savings, NOW, and money market

 

 
852,709

 

 
861,735

 

 
860,342

 

 
857,666

 

 
881,714

 

 
885,809

 

 
889,448

Time

 

 
468,138

 

 
457,818

 

 
437,597

 

 
421,584

 

 
418,615

 

 
410,066

 

 
404,896

Total deposits

 

 
1,694,558

 

 
1,709,479

 

 
1,687,185

 

 
1,679,251

 

 
1,706,262

 

 
1,730,968

 

 
1,725,396

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities sold under repurchase agreements

 

 
24,539

 

 
25,224

 

 
27,266

 

 
27,298

 

 
23,437

 

 
31,234

 

 
31,466

Other short-term borrowings

 

 
4,111

 

 
8,681

 

 
12,174

 

 
24,946

 

 
25,722

 

 
22,638

 

 
14,674

Junior subordinated debentures

 

 
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

Notes payable and other borrowings

 

 
500

 

 
500

 

 
500

 

 
500

 

 
500

 

 
500

 

 
500

Other liabilities

 

 
38,966

 

 
19,210

 

 
11,416

 

 
12,177

 

 
11,734

 

 
10,962

 

 
9,782

Total liabilities

 

 
1,866,052

 

 
1,866,472

 

 
1,841,919

 

 
1,847,550

 

 
1,871,033

 

 
1,899,680

 

 
1,885,196

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock

 

 
72,991

 

 
54,947

 

 
47,331

 

 
47,331

 

 
36,637

 

 
31,553

 

 
15,091

Common stock

 

 
18,840

 

 
33,104

 

 
34,365

 

 
34,365

 

 
34,414

 

 
34,419

 

 
34,422

Additional paid-in capital

 

 
66,241

 

 
111,279

 

 
115,220

 

 
115,263

 

 
115,413

 

 
115,553

 

 
115,692

Retained earnings

 

 
93,508

 

 
96,002

 

 
98,256

 

 
99,553

 

 
102,050

 

 
105,208

 

 
108,858

Accumulated other comprehensive loss

 

 
(7,177)

 

 
(6,982)

 

 
(5,594)

 

 
(7,618)

 

 
(7,558)

 

 
(6,935)

 

 
(8,277)

Treasury stock

 

 
(95,830)

 

 
(95,850)

 

 
(95,850)

 

 
(95,850)

 

 
(95,965)

 

 
(95,965)

 

 
(95,966)

Total stockholders' equity

 

 
148,573

 

 
192,500

 

 
193,728

 

 
193,044

 

 
184,991

 

 
183,833

 

 
169,820

Total liabilities and stockholder's equity

 

$
2,014,625

 

$
2,058,972

 

$
2,035,647

 

$
2,040,594

 

$
2,056,024

 

$
2,083,513

 

$
2,055,016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Earning Assets

 

$
1,775,470

 

$
1,813,922

 

$
1,797,448

 

$
1,804,782

 

$
1,827,341

 

$
1,855,667

 

$
1,832,978

Total Interest Bearing Liabilities

 

 
1,453,375

 

 
1,457,336

 

 
1,441,257

 

 
1,435,372

 

 
1,453,366

 

 
1,453,625

 

 
1,444,362

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11

 

 

 

Old Second Bancorp, Inc. and Subsidiaries

Quarterly Consolidated Statements of Income

(In thousands, except share data, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

2015

 

    

1st Qtr

    

2nd Qtr

    

3rd Qtr

    

4th Qtr

    

1st Qtr

    

2nd Qtr

    

3rd Qtr

Interest and Dividend Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$
12,938

 

$
13,046

 

$
13,362

 

$
13,580

 

$
13,218

 

$
13,467

 

$
13,353

Loans held-for-sale

 

 
25

 

 
29

 

 
38

 

 
41

 

 
43

 

 
72

 

 
38

Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 
3,502

 

 
3,352

 

 
3,586

 

 
3,691

 

 
3,375

 

 
3,372

 

 
3,471

Tax exempt

 

 
148

 

 
118

 

 
110

 

 
96

 

 
141

 

 
163

 

 
122

Dividends from Federal Reserve Bank and Federal Home Loan Bank stock

 

 
76

 

 
78

 

 
78

 

 
77

 

 
77

 

 
77

 

 
76

Interest bearing deposits with financial institutions

 

 
15

 

 
20

 

 
25

 

 
13

 

 
12

 

 
19

 

 
12

Total interest and dividend income

 

 
16,704

 

 
16,643

 

 
17,199

 

 
17,498

 

 
16,866

 

 
17,170

 

 
17,072

Interest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Savings, NOW, and money market deposits

 

 
199

 

 
188

 

 
175

 

 
176

 

 
179

 

 
183

 

 
185

Time deposits

 

 
1,321

 

 
1,210

 

 
1,073

 

 
896

 

 
807

 

 
771

 

 
799

Other short-term borrowings

 

 
2

 

 
3

 

 
5

 

 
9

 

 
9

 

 
7

 

 
6

Junior subordinated debentures

 

 
1,387

 

 
1,388

 

 
1,072

 

 
1,072

 

 
1,072

 

 
1,071

 

 
1,072

Subordinated debt

 

 
196

 

 
198

 

 
199

 

 
199

 

 
197

 

 
202

 

 
205

Notes payable and other borrowings

 

 
4

 

 
4

 

 
4

 

 
4

 

 
4

 

 

 -

 

 
1

Total interest expense

 

 
3,109

 

 
2,991

 

 
2,528

 

 
2,356

 

 
2,268

 

 
2,234

 

 
2,268

Net interest and dividend income

 

 
13,595

 

 
13,652

 

 
14,671

 

 
15,142

 

 
14,598

 

 
14,936

 

 
14,804

Loan loss reserve release

 

 
(1,000)

 

 
(1,000)

 

 

 -

 

 
(1,300)

 

 

 -

 

 
(2,300)

 

 
(2,100)

Net interest and dividend income after provision for loan losses

 

 
14,595

 

 
14,652

 

 
14,671

 

 
16,442

 

 
14,598

 

 
17,236

 

 
16,904

Noninterest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trust income

 

 
1,459

 

 
1,677

 

 
1,483

 

 
1,579

 

 
1,486

 

 
1,596

 

 
1,444

Service charges on deposits

 

 
1,720

 

 
1,796

 

 
1,838

 

 
1,725

 

 
1,541

 

 
1,779

 

 
1,766

Secondary mortgage fees

 

 
112

 

 
155

 

 
174

 

 
180

 

 
244

 

 
281

 

 
190

Mortgage servicing (loss) gain, net of changes in fair value

 

 
(47)

 

 
64

 

 
252

 

 
(60)

 

 
(208)

 

 
500

 

 
(274)

Net gain on sales of mortgage loans

 

 
662

 

 
1,038

 

 
914

 

 
980

 

 
1,623

 

 
1,695

 

 
1,359

Securities (losses) gains, net

 

 
(69)

 

 
295

 

 
1,231

 

 
262

 

 
(109)

 

 
(12)

 

 
(57)

Increase in cash surrender value of bank-owned life insurance

 

 
358

 

 
366

 

 
304

 

 
369

 

 
354

 

 
283

 

 
203

Debit card interchange income

 

 
830

 

 
930

 

 
1,011

 

 
1,035

 

 
959

 

 
1,050

 

 
1,004

Loss on disposal and transfer of fixed assets

 

 

 -

 

 

 -

 

 
(121)

 

 

 -

 

 

 -

 

 

 -

 

 
(1,143)

Other income

 

 
1,296

 

 
1,160

 

 
1,237

 

 
1,021

 

 
2,083

 

 
1,092

 

 
1,156

Total noninterest income

 

 
6,321

 

 
7,481

 

 
8,323

 

 
7,091

 

 
7,973

 

 
8,264

 

 
5,648

Noninterest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 
9,101

 

 
9,183

 

 
8,856

 

 
9,027

 

 
9,255

 

 
9,149

 

 
8,260

Occupancy expense, net

 

 
1,481

 

 
1,185

 

 
1,143

 

 
1,154

 

 
1,271

 

 
1,094

 

 
1,156

Furniture and equipment expense

 

 
983

 

 
984

 

 
989

 

 
1,016

 

 
1,001

 

 
1,065

 

 
1,110

FDIC insurance

 

 
279

 

 
627

 

 
649

 

 
615

 

 
273

 

 
377

 

 
373

General bank insurance

 

 
489

 

 
343

 

 
371

 

 
358

 

 
357

 

 
310

 

 
308

Amortization of core deposit

 

 
512

 

 
511

 

 
154

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Advertising expense

 

 
303

 

 
459

 

 
291

 

 
225

 

 
205

 

 
353

 

 
434

Debit card interchange expense

 

 
378

 

 
412

 

 
418

 

 
423

 

 
352

 

 
400

 

 
379

Legal fees

 

 
257

 

 
409

 

 
332

 

 
335

 

 
223

 

 
420

 

 
279

Other real estate expense, net

 

 
1,008

 

 
1,650

 

 
2,007

 

 
2,252

 

 
1,352

 

 
2,388

 

 
977

Other expense

 

 
2,725

 

 
3,289

 

 
3,134

 

 
3,362

 

 
2,864

 

 
3,371

 

 
2,968

Total noninterest expense

 

 
17,516

 

 
19,052

 

 
18,344

 

 
18,767

 

 
17,153

 

 
18,927

 

 
16,244

Income before income taxes

 

 
3,400

 

 
3,081

 

 
4,650

 

 
4,766

 

 
5,418

 

 
6,573

 

 
6,308

Provision for income taxes

 

 
1,198

 

 
1,060

 

 
1,726

 

 
1,777

 

 
1,919

 

 
2,444

 

 
2,384

Net income

 

 
2,202

 

 
2,021

 

 
2,924

 

 
2,989

 

 
3,499

 

 
4,129

 

 
3,924

Preferred stock dividends and accretion of discount

 

 
1,572

 

 
1,348

 

 
1,065

 

 
1,077

 

 
824

 

 
710

 

 
339

Dividends waived upon preferred stock redemption

 

 

 -

 

 
(5,433)

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Gain on preferred stock redemption

 

 

 -

 

 
(1,348)

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Net income available to common stockholders

 

$
630

 

$
7,454

 

$
1,859

 

$
1,912

 

$
2,675

 

$
3,419

 

$
3,585

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$
0.04

 

$
0.26

 

$
0.06

 

$
0.06

 

$
0.09

 

$
0.12

 

$
0.12

Diluted earnings per share

 

 
0.04

 

 
0.26

 

 
0.06

 

 
0.06

 

 
0.09

 

 
0.12

 

 
0.12

 

 

12

 

 

 

 

 

 

The table below provides a reconciliation of each non-GAAP tax equivalent measure to the most comparable GAAP measure for the periods indicated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

September 30, 

 

June 30, 

 

September 30, 

 

 

    

2015

 

2015

 

2014

 

Net Interest Margin

 

 

 

 

 

 

 

 

 

 

Interest income (GAAP)

 

$
17,072

 

$
17,170

 

$
17,199

 

Taxable-equivalent adjustment:

 

 

 

 

 

 

 

 

 

 

Loans

 

 
24

 

 
27

 

 
29

 

Securities

 

 
65

 

 
88

 

 
59

 

Interest income - TE

 

 
17,161

 

 
17,285

 

 
17,287

 

Interest expense (GAAP)

 

 
2,268

 

 
2,234

 

 
2,528

 

Net interest income -TE

 

$
14,893

 

$
15,051

 

$
14,759

 

Net interest income  (GAAP)

 

$
14,804

 

$
14,936

 

$
14,671

 

Average interest earning assets

 

$
1,832,978

 

$
1,855,667

 

$
1,797,448

 

Net interest margin (GAAP)

 

 
3.20

%

 
3.23

%

 
3.24

%

Net interest margin - TE

 

 
3.22

%

 
3.25

%

 
3.26

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

September 30, 

 

June 30, 

 

September 30, 

 

 

 

2015

 

2015

 

2014

 

Efficiency Ratio

 

 

 

 

 

 

 

 

 

 

Noninterest expense

 

$
16,244

 

$
18,927

 

$
18,344

 

Less amortization of core deposit, net

 

 

 -

 

 

 -

 

 
154

 

Less other real estate expense, net

 

 
977

 

 
2,388

 

 
2,007

 

Adjusted noninterest expense

 

 
15,267

 

 
16,539

 

 
16,183

 

Net interest income (GAAP)

 

 
14,804

 

 
14,936

 

 
14,671

 

Taxable-equivalent adjustment:

 

 

 

 

 

 

 

 

 

 

Loans

 

 
24

 

 
27

 

 
29

 

Securities

 

 
65

 

 
88

 

 
59

 

Net interest income (TE)

 

 
14,893

 

 
15,051

 

 
14,759

 

Noninterest income

 

 
5,648

 

 
8,264

 

 
8,323

 

Taxable-equivalent adjustment:

 

 

 

 

 

 

 

 

 

 

Increase in cash surrender value of BOLI - (TE)

 

 
109

 

 
152

 

 
164

 

Noninterest income - (TE)

 

 
5,757

 

 
8,416

 

 
8,487

 

Less securities (losses) gain, net

 

 
(57)

 

 
(12)

 

 
1,231

 

Adjusted noninterest income, plus net interest income (TE)

 

$
20,707

 

$
23,479

 

$
22,015

 

Efficiency ratio

 

 
73.73

%

 
70.44

%

 
73.51

%

 

 

 

13