0000357173-19-000047.txt : 20190724 0000357173-19-000047.hdr.sgml : 20190724 20190724161027 ACCESSION NUMBER: 0000357173-19-000047 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20190724 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20190724 DATE AS OF CHANGE: 20190724 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OLD SECOND BANCORP INC CENTRAL INDEX KEY: 0000357173 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 363143493 STATE OF INCORPORATION: DE FISCAL YEAR END: 1219 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-10537 FILM NUMBER: 19971030 BUSINESS ADDRESS: STREET 1: 37 S RIVER ST CITY: AURORA STATE: IL ZIP: 60507 BUSINESS PHONE: 6308920202 MAIL ADDRESS: STREET 1: 37 SOUTH RIVER STREET CITY: AURORA STATE: IL ZIP: 60507 8-K 1 osbc-20190724x8k.htm 8-K osbc-Current_Folio_8K_Earnings Release

 

I  

 

United States

Securities And Exchange Commission
Washington, D.C. 20549

FORM 8-K

Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  July 24, 2019

bancorp-inc-green
(Exact name of registrant as specified in its charter)

 

 

 

Delaware

000-10537

36-3143493

(State or other jurisdiction of incorporation)

(Commission File Number)

(I.R.S. Employer Identification No.)

 

37 South River Street
Aurora, Illinois  60507
(Address of principal executive offices) (Zip code)

(630) 892-0202
(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 under the Securities Act (17 CFR 230.405) or Rule 12b-2 under the Exchange Act (17 CFR 240.12b-2).

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

 

Title of each class

Trading Symbol(s)

Name of each exchange on  which registered

Common Stock

OSBC

The Nasdaq Stock Market

Preferred Securities of Old Second Capital Trust I

OSBCP

The Nasdaq Stock Market

 

 

 

 

 

 

 

 

Item 2.02 Results of Operations and Financial Condition

 

On July 24, 2019, Old Second Bancorp, Inc. issued a press release announcing its earnings for the second quarter ended June 30, 2019. The press release is attached as Exhibit 99.1.

 

 

Item 9.01 Financial Statements and Exhibits

 

(d) Exhibits

 

 99.1 Press release dated July 24, 2019.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

 

 

 

 

OLD SECOND BANCORP, INC.

 

 

 

 

 

 

Dated: July 24, 2019

By:

/s/ Bradley S. Adams

 

 

Bradley S. Adams

 

 

Executive Vice President

 

 

and Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EX-99.1 2 osbc-20190724ex9914309f0.htm EX-99.1 Ex_99-1

 

Picture 1

 

 

 

 

 

 

 

 

 

(NASDAQ:OSBC)

Exhibit 99.1

 

 

 

Contact:

Bradley S. Adams

For Immediate Release

 

Chief Financial Officer

July 24, 2019

 

(630) 906-5484

 

 

 

Old Second Reports Second Quarter 2019 Net Income of $9.3 million,

New Commercial Lending Additions

 

AURORA, IL, July 24, 2019 – Old Second Bancorp, Inc. (the “Company” or “Old Second”) (NASDAQ: OSBC), the parent company of Old Second National Bank (the “Bank”), today announced financial results for the second quarter of 2019.  The Company’s net income was $9.3 million, or $0.31 per diluted share, for the second quarter of 2019, compared to net income of $8.5 million, or $0.28 per diluted share, in the first quarter of 2019, and net income of $6.3 million, or $0.21 per diluted share, for the second quarter of 2018. 

Old Second is also pleased to announce the expansion of its commercial lending team with the addition of three new officers during the second quarter.  Louis L. Weinzelbaum joined the Bank as Group President, Senior Managing Director.  Louis was most recently with MB Financial Bank where he served as Group President of the Professional Services Group.  Alan H. Kohn joined the Bank as Group President, Senior Managing Director.  Alan was most recently with MB Financial Bank where he served as Group President for their Healthcare Banking Group. Donald J. Clark joined the Bank as Senior Vice President, Commercial Banking.  Don was most recently  with MB Financial Bank where he served as Managing Director/Senior Vice President with their Commercial Banking Group.  We are honored to announce these additions and we are extremely excited about the wealth of experience and knowledge they bring to our commercial team and our Chicago banking office.

Operating Results

·

Second quarter 2019 net income was $9.3 million, reflecting an increase in earnings of $809,000 from the first quarter of 2019, and an increase in earnings of $3.0 million from the second quarter of 2018.   Second quarter 2019 financial results were negatively impacted by a  $1.1 million mark to market loss on mortgage servicing rights (“MSRs”), of which $849,000 related solely to movements in interest rates, compared to a $819,000 loss in the first quarter of 2019, of which $642,000 related to movements in interest rates.

·

Adjusted net income, a non-GAAP financial measure, was $9.3 million, or $0.31 per diluted share, for the second quarter of 2019, compared to adjusted net income of $8.5 million, or $0.28 per diluted share, for the first quarter of 2019, and adjusted net income of $8.7 million, or $0.29 per diluted share, for the second quarter of 2018.  

o

Second quarter 2018 adjusted net income excluded $2.5 million in costs, after tax, related to our acquisition of Greater Chicago Financial Corp. and its wholly owned subsidiary, ABC Bank, which was completed on April 20, 2018.

See the discussion entitled “Non-GAAP Presentations” below and the table on page 15 that provides a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent.

·

Net interest and dividend income was $24.8 million for the second quarter of 2019, an increase of $718,000, or 3.0%, from $24.0 million for the first quarter of 2019, and an increase of $1.5 million, or 6.5%, from the second quarter of 2018.  Net interest and dividend income in the second quarter of 2019 was favorably impacted by loan growth over the past year, as well as the December 2018 increase in interest rates.

·

 Noninterest income was $8.1 million for the second quarter of 2019,  an increase of $1.7 million, or 25.6%, compared to $6.5 million for the first quarter of 2019, and a decrease of $390,000, or 4.6%, from $8.5 million for the second quarter of 2018.  Total noninterest income for the second quarter of 2019 was positively impacted by net security gains recorded of $986,000, as well as growth in trust income of $253,000, compared to the first quarter of 2019, and an increase in debit card interchange income of $180,000,

1

compared to the first quarter of 2019. The second quarter of 2019 was negatively impacted by a mark to market loss on MSRs of $1.1 million, compared to a mark to market loss on MSRs of $819,000 for the first quarter of 2019.  Noninterest income for the second quarter of 2019 decreased $390,000, compared to the second quarter of 2018, with increases in the second quarter of 2019 in securities gains, net, of $674,000 and service charges on deposits of $190,000, compared to the second quarter of 2018, which were more than offset by the mark to market loss on MSRs of $1.0 million in the second quarter of 2019, compared to the second quarter of 2018.  

·

Noninterest expense was $20.1 million for the second quarter of 2019, an increase of $932,000, or 4.9%, compared to $19.2 million for the first quarter of 2019, and a decrease of $2.2 million, or 9.7%, from $22.3 million for the second quarter of 2018.  The increase in noninterest expense in the second quarter of 2019, compared to the first quarter of 2019, was primarily attributable to increases in salaries, computer and data processing expense, advertising expense, debit card interchange expense, OREO valuation reserves and other expense.  The decrease in noninterest expense in the second quarter of 2019, compared to the second quarter of 2018, was primarily attributable to our ABC Bank acquisition in April 2018, which resulted in higher salaries and employee benefits expense and computer and data processing expense due to the core data conversion in the second quarter of 2018. 

·

The provision for income taxes totaled $3.0 million for the second quarter of 2019, compared to $2.4 million for the first quarter of 2019 and $1.8 million for the second quarter of 2018.  The linked quarter increase of $638,000 was primarily due to an increase of $1.4 million in pretax income in the second quarter of 2019, compared to the first quarter of 2019, as well as income tax credits in the first quarter of 2019 stemming from vested stock awards.  The $1.3 million increase in provision for income taxes for the year over year quarter was primarily due to the $4.3 million increase in pretax income in the second quarter of 2019 compared to the second quarter of 2018.

·

On July 16, 2019, the Company’s Board of Directors declared a cash dividend of $0.01 per share payable on August 5, 2019, to stockholders of record as of July 26, 2019.

Capital Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 

 

March 31, 

 

June 30, 

 

Well-Capitalized  1

 

2019

 

2019

 

2018

The Company

 

 

 

 

 

 

 

 

 

 

 

Common equity tier 1 capital ratio

N/A

 

 

10.26

%

 

9.75

%

 

8.49

%

Total risk-based capital ratio

N/A

 

 

13.70

%

 

13.17

%

 

11.87

%

Tier 1 risk-based capital ratio

N/A

 

 

12.83

%

 

12.30

%

 

10.99

%

Tier 1 leverage ratio

N/A

 

 

10.85

%

 

10.44

%

 

9.37

%

 

 

 

 

 

 

 

 

 

 

 

 

The Bank

 

 

 

 

 

 

 

 

 

 

 

Common equity tier 1 capital ratio

6.50

%

 

13.96

%

 

13.60

%

 

12.62

%

Total risk-based capital ratio

10.00

%

 

14.83

%

 

14.47

%

 

13.51

%

Tier 1 risk-based capital ratio

8.00

%

 

13.96

%

 

13.60

%

 

12.62

%

Tier 1 leverage ratio

5.00

%

 

11.96

%

 

11.54

%

 

10.75

%

 

1 Represents ratios required to be considered well capitalized under prompt corrective action provisions. The prompt corrective action provisions are only applicable at the bank level.

 

·

The ratios shown above exceed levels required to be considered “well capitalized.”

Asset Quality & Earning Assets

 

·

Nonperforming loans totaled $12.7 million at June 30, 2019, compared to $14.9 million at March 31, 2019, and $11.9 million at June 30, 2018.  Credit metrics continue to be relatively stable regarding nonperforming loan levels, and management is carefully monitoring loans considered to be in a classified status.  Nonperforming loans as a percent of total loans were 0.7% at June 30, 2019, 0.8% at March 31, 2019, and 0.6%  at June 30, 2018.  Purchased credit impaired (“PCI”) loans acquired in our acquisition of ABC Bank totaled $10.8 million, net of purchase accounting adjustments, at June 30, 2019.  We do not consider PCI loans, which showed evidence of deteriorated credit quality at acquisition, to be nonperforming assets as long as their cash flows and the timing of such cash flows continue to be estimable and probable of collection.

2

·

OREO assets totaled $5.7 million at June 30, 2019, compared to $6.4 million at March 31, 2019, $7.2 million at December 31, 2018, and $8.9 million at June 30, 2018.  Writedowns of $196,000 were recorded in the second quarter of 2019, compared to no writedowns in the first quarter of 2019, and $254,000 of valuation writedowns recorded in the second quarter of 2018.  Nonperforming assets, as a percent of total loans plus OREO, was 1.0% at June 30, 2019, 1.1% at both March 31, 2019 and June 30, 2018, and 1.2% at December 31, 2018.

·

Total loans were $1.90 billion at June 30, 2019, reflecting a slight decrease of $203,000 compared to March 31, 2019, an increase of  $5.9 million compared to December 31, 2018, and an increase of $53.8 million compared to June 30, 2018, due primarily to growth in the commercial, leases, and real estate-commercial portfolios.  Average loans (including loans held-for-sale) for the second quarter of 2019 were $1.90 billion, reflecting an increase of $1.8 million from the first quarter of 2019, and an increase of $88.2 million from the second quarter of 2018.  Growth in the year over year period is primarily due to our acquisition of ABC Bank on April 20, 2018, which included $227.6 million of loans recorded, net of purchase accounting adjustments, which did not yet have a full quarter of average impact in the second quarter of 2018.  In addition, the year over year period experienced organic growth in the commercial, leases, and real estate-commercial portfolios.

·

Available-for-sale securities totaled $492.1 million at June 30, 2019, compared to $509.1 million at March 31, 2019,  $541.2 million at December 31, 2018, and $543.6 million at June 30, 2018.  Pretax net security gains of $986,000 were recorded in the second quarter of 2019, compared to $27,000 of pretax net security gains recorded in the first quarter of 2019, and $312,000 of pretax net security gains recorded in the second quarter of 2018.  

Net Interest Income

ANALYSIS OF AVERAGE BALANCES,

TAX EQUIVALENT INCOME / EXPENSE AND RATES

(Dollars in thousands - unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarters Ended

 

June 30, 2019

 

March 31, 2019

 

June 30, 2018

 

Average

 

Income /

 

Rate

 

Average

 

Income /

 

Rate

 

Average

 

Income /

 

Rate

 

Balance

 

Expense

 

%

 

Balance

 

Expense

 

%

 

Balance

 

Expense

 

%

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest earning deposits with financial institutions

$

19,053

 

$

111

 

2.34

 

$

18,842

 

$

114

 

2.45

 

$

19,161

 

$

97

 

2.03

Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

229,263

 

 

2,223

 

3.89

 

 

236,882

 

 

2,414

 

4.13

 

 

268,591

 

 

2,392

 

3.57

Non-taxable (TE)

 

290,743

 

 

2,710

 

3.74

 

 

276,609

 

 

2,656

 

3.89

 

 

286,611

 

 

2,676

 

3.74

Total securities

 

520,006

 

 

4,933

 

3.80

 

 

513,491

 

 

5,070

 

4.00

 

 

555,202

 

 

5,068

 

3.66

Dividends from FHLBC and FRBC

 

11,317

 

 

156

 

5.53

 

 

11,463

 

 

149

 

5.27

 

 

8,619

 

 

111

 

5.17

Loans and loans held-for-sale 1, 2

 

1,897,324

 

 

24,958

 

5.28

 

 

1,895,512

 

 

24,126

 

5.16

 

 

1,809,077

 

 

22,552

 

5.00

Total interest earning assets

 

2,447,700

 

 

30,158

 

4.94

 

 

2,439,308

 

 

29,459

 

4.90

 

 

2,392,059

 

 

27,828

 

4.67

Cash and due from banks

 

33,618

 

 

 -

 

 -

 

 

33,749

 

 

 -

 

 -

 

 

36,720

 

 

 -

 

 -

Allowance for loan and lease losses

 

(19,435)

 

 

 -

 

 -

 

 

(19,235)

 

 

 -

 

 -

 

 

(18,494)

 

 

 -

 

 -

Other noninterest bearing assets

 

174,075

 

 

 -

 

 -

 

 

181,767

 

 

 -

 

 -

 

 

176,608

 

 

 -

 

 -

Total assets

$

2,635,958

 

 

 

 

 

 

$

2,635,589

 

 

 

 

 

 

$

2,586,893

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOW accounts

$

442,430

 

$

373

 

0.34

 

$

448,518

 

$

379

 

0.34

 

$

443,586

 

$

238

 

0.22

Money market accounts

 

288,698

 

 

262

 

0.36

 

 

299,305

 

 

270

 

0.37

 

 

317,775

 

 

193

 

0.24

Savings accounts

 

313,822

 

 

124

 

0.16

 

 

307,740

 

 

122

 

0.16

 

 

298,240

 

 

70

 

0.09

Time deposits

 

422,975

 

 

1,641

 

1.56

 

 

445,076

 

 

1,618

 

1.47

 

 

460,909

 

 

1,444

 

1.26

Interest bearing deposits

 

1,467,925

 

 

2,400

 

0.66

 

 

1,500,639

 

 

2,389

 

0.65

 

 

1,520,510

 

 

1,945

 

0.51

Securities sold under repurchase agreements

 

44,184

 

 

147

 

1.33

 

 

45,157

 

 

149

 

1.34

 

 

44,655

 

 

104

 

0.93

Other short-term borrowings

 

93,369

 

 

575

 

2.47

 

 

98,328

 

 

607

 

2.50

 

 

58,199

 

 

276

 

1.90

Junior subordinated debentures

 

57,704

 

 

931

 

6.47

 

 

57,692

 

 

927

 

6.52

 

 

57,657

 

 

927

 

6.45

Senior notes

 

44,196

 

 

672

 

6.10

 

 

44,171

 

 

672

 

6.17

 

 

44,096

 

 

672

 

6.11

Notes payable and other borrowings

 

13,101

 

 

107

 

3.28

 

 

15,273

 

 

116

 

3.08

 

 

19,795

 

 

95

 

1.92

Total interest bearing liabilities

 

1,720,479

 

 

4,832

 

1.13

 

 

1,761,260

 

 

4,860

 

1.12

 

 

1,744,912

 

 

4,019

 

0.92

Noninterest bearing deposits

 

645,580

 

 

 -

 

 -

 

 

625,423

 

 

 -

 

 -

 

 

618,765

 

 

 -

 

 -

Other liabilities

 

19,586

 

 

 -

 

 -

 

 

13,750

 

 

 -

 

 -

 

 

15,679

 

 

 -

 

 -

Stockholders' equity

 

250,313

 

 

 -

 

 -

 

 

235,156

 

 

 -

 

 -

 

 

207,537

 

 

 -

 

 -

Total liabilities and stockholders' equity

$

2,635,958

 

 

 

 

 

 

$

2,635,589

 

 

 

 

 

 

$

2,586,893

 

 

 

 

 

Net interest income (TE) 2

 

 

 

$

25,326

 

 

 

 

 

 

$

24,599

 

 

 

 

 

 

$

23,809

 

 

Net interest margin (TE)  2

 

 

 

 

 

 

4.15

 

 

 

 

 

 

 

4.09

 

 

 

 

 

 

 

3.99

Interest bearing liabilities to earning assets

 

70.29

%

 

 

 

 

 

 

72.20

%

 

 

 

 

 

 

72.95

%

 

 

 

 

 

3

1 Interest income from loans is shown on a tax equivalent basis, which is a non-GAAP financial measure as discussed in the table on page 15, and includes fees of $184,000 for the second quarter of 2019, $229,000 for the first quarter of 2019, and $233,000 for the second quarter of 2018. Nonaccrual loans are included in the above stated average balances.

2 Tax equivalent basis is calculated using a marginal tax rate of 21% in 2019 and 2018. See the discussion entitled “Non-GAAP Presentations” below and the table on page 15 that provides a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent.

Tax equivalent net interest income was $25.3 million for the quarter ended June 30, 2019, which reflects an increase of $726,000 compared to the first quarter of 2019, and an increase of $1.5 million compared to the second quarter of 2018.  The tax equivalent adjustment for the second quarter of 2019 was $572,000, compared to $563,000 for the first quarter of 2019, and $567,000 for the second quarter of 2018.  Growth in interest earning assets in the second quarter of 2019, compared to the first quarter of 2019, was primarily due to non-taxable securities growth and organic loan growth, while growth in both the second and first quarters of 2019 compared to the second quarter of 2018, was primarily due to our acquisition of ABC Bank on April 20, 2018, which resulted in the addition of $227.6 million of loans recorded, net of purchase accounting adjustments. Quarterly average earning assets increased $8.4 million to $2.45 billion for the quarter ended June 30, 2019,  compared to $2.44 billion for the first quarter of 2019, while the yield on average earning assets increased four basis points over the same period.  Average loan growth, including loans held-for-sale, was $1.8 million for the quarter ended June 30, 2019, compared to the quarter ended March 31, 2019, while the year over year growth in the second quarter average loans, including loans held-for-sale, was $88.2 million.   In addition to the ABC Bank acquisition in the second quarter of 2018, the year over year growth was also due to organic loan growth over the last twelve months, driven primarily by commercial loan and lease portfolio originations, as well as a home equity loan (“HELOC”) portfolio purchase of $20.7 million in the fourth quarter of 2018.  

Tax equivalent securities income decreased $137,000 in the second quarter of 2019 compared to the first quarter of 2019, due to a reduction in yields.  Tax equivalent securities income decreased by $135,000 in the second quarter of 2019, compared to the second quarter of 2018,  due primarily to a reduction in average balances.    Minimal security portfolio composition changes have occurred over the past year due to lack of relative value among possible investment sectors and consequent opportunities to shift allocation of investments from lower return sectors to those with higher returns.   This resulted in a lower security volume, but a higher yield overall in the year over year period.    Our overall yield on tax equivalent securities was 3.80% for the second quarter of 2019, 4.00% for the first quarter of 2019 and 3.66% for the second quarter of 2018. 

 The cost of interest bearing liabilities for the second quarter of 2019 increased by one basis point from the first quarter of 2019, and increased by 21 basis points from the second quarter of 2018.  Average interest bearing liabilities decreased $40.8 million in the second quarter of 2019, compared to the first quarter of 2019, primarily driven by a decrease in interest-bearing time, money market and NOW deposits.  In addition, interest bearing liabilities declined as average other short-term borrowings decreased $5.0 million in the second quarter of 2019, compared to the first quarter of 2019.  Total average interest bearing liabilities decreased $24.4 million in the second quarter of 2019, compared to the second quarter of 2018, due to the reduction in interest bearing deposits of $52.6 million.  Growth in average demand deposits over the linked quarter period of $20.2 million and in the year over year period of $26.8 million has assisted the Company in controlling its cost of funds stemming from average interest bearing deposits, which totaled 0.66% for the second quarter of 2019, compared to 0.65% in the first quarter of 2019 and 0.51% in the second quarter of 2018.       

 

For the quarter ended June 30, 2019, average other short-term borrowings, which consisted solely of FHLBC advances, totaled  $93.4 million, compared to $98.3 million for the quarter ended March 31, 2019, and $58.2 million for the quarter ended June 30, 2018.  Average rates paid on short-term FHLBC advances have increased from 1.90% in the second quarter of 2018 to 2.47% for the second quarter of 2019, reflecting the rising interest rate environment.  The Company’s junior subordinated debt issuances and senior debt issuance reflected no material change in rates or volume from the linked quarter or year over year periods. Finally, average notes payable and other borrowings included  long-term FHLBC advances acquired in our acquisition of ABC Bank of $13.1 million for the second quarter of 2019, $15.3 million for the first quarter of 2019, and $19.8 million for the second quarter of 2018.

 

The net interest margin (TE) increased six basis points to 4.15% for the second quarter of 2019 compared to 4.09% for the first quarter of 2019 due primarily to growth in loan yields impacted by the rising interest rate environment, which increased income from average earning assets more significantly than expenses related to average interest bearing liabilities, as well as growth in non-interest bearing deposits.   The net interest margin (TE) in the second quarter of 2019 was 16 basis points higher than the second quarter of 2018, due primarily to increases in total interest earning assets, as well as the rising interest rate environment, which increased income from average earning assets more significantly than expenses on average interest bearing liabilities.

4

 

Noninterest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2nd Qtr 2019

 

Noninterest Income

 

Three Months Ended

 

Percent Change From

 

(dollars in thousands)

 

June 30, 

 

March 31, 

 

June 30, 

 

March 31, 

 

June 30, 

 

 

    

2019

    

2019

    

2018

    

2019

    

2018

 

Trust income

 

$

1,739

 

$

1,486

 

$

1,645

 

17.0

 

5.7

 

Service charges on deposits

 

 

1,959

 

 

1,862

 

 

1,769

 

5.2

 

10.7

 

Residential mortgage banking revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secondary mortgage fees

 

 

203

 

 

136

 

 

195

 

49.3

 

4.1

 

Mortgage servicing rights mark to market (loss)

 

 

(1,137)

 

 

(819)

 

 

(105)

 

(38.8)

 

(982.9)

 

Mortgage servicing income

 

 

491

 

 

457

 

 

627

 

7.4

 

(21.7)

 

Net gain on sales of mortgage loans

 

 

1,163

 

 

762

 

 

1,240

 

52.6

 

(6.2)

 

Total residential mortgage banking revenue

 

 

720

 

 

536

 

 

1,957

 

34.3

 

(63.2)

 

Securities gain, net

 

 

986

 

 

27

 

 

312

 

N/M

 

216.0

 

Increase in cash surrender value of BOLI

 

 

320

 

 

458

 

 

351

 

(30.1)

 

(8.8)

 

Debit card interchange income

 

 

1,166

 

 

987

 

 

1,132

 

18.1

 

3.0

 

Other income

 

 

1,253

 

 

1,126

 

 

1,366

 

11.3

 

(8.3)

 

Total noninterest income

 

$

8,143

 

$

6,482

 

$

8,532

 

25.6

 

(4.6)

 

N/M - Not meaningful.

The $1.7 million increase in noninterest income in the second quarter of 2019, compared to the first quarter of 2019, was driven by aggregate increases of $1.8 million in trust income, service charges on deposits, total residential mortgage banking income, securities gains, net, debit card interchange income and other income which increased net income, which were partially offset by a decrease of $138,000 of income recorded related to the cash surrender value of BOLI.

The decrease in noninterest income for the year over year period of $389,000 was primarily driven by a $1.2 million reduction in total residential mortgage banking revenue stemming from rising interest rates and the resultant mark to market loss on MSRs in the second quarter of 2019.  These reductions were partially offset by aggregate increases of $992,000 resulting from growth in trust income, service charges on deposits, securities gains, net and debit card interchange income.  The decrease in other income for the second quarter of 2019, compared to the second quarter of 2018, was primarily attributable to a reduction in commercial interest rate swap fees of $255,000 and lease syndication fees of $39,000 partially offset by certain contract incentive fees of $80,000 recorded in the second quarter of 2019. 

Noninterest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2nd Qtr 2019

 

Noninterest Expense

 

Three Months Ended

 

Percent  Change From

 

(dollars in thousands)

 

June 30, 

 

March 31, 

 

June 30, 

 

March 31, 

 

June 30, 

 

 

    

2019

    

2019

    

2018

    

2019

    

2018

 

Salaries

 

$

9,004

 

$

8,634

 

$

9,703

 

4.3

 

(7.2)

 

Officers incentive

 

 

893

 

 

882

 

 

740

 

1.2

 

20.7

 

Benefits and other

 

 

1,690

 

 

2,096

 

 

1,912

 

(19.4)

 

(11.6)

 

Total salaries and employee benefits

 

 

11,587

 

 

11,612

 

 

12,355

 

(0.2)

 

(6.2)

 

Occupancy, furniture and equipment expense

 

 

1,925

 

 

1,989

 

 

1,652

 

(3.2)

 

16.5

 

Computer and data processing

 

 

1,524

 

 

1,332

 

 

2,741

 

14.4

 

(44.4)

 

FDIC insurance

 

 

116

 

 

174

 

 

165

 

(33.3)

 

(29.7)

 

General bank insurance

 

 

236

 

 

250

 

 

299

 

(5.6)

 

(21.1)

 

Amortization of core deposit intangible asset

 

 

121

 

 

132

 

 

97

 

(8.3)

 

24.7

 

Advertising expense

 

 

381

 

 

234

 

 

492

 

62.8

 

(22.6)

 

Debit card interchange expense

 

 

233

 

 

147

 

 

301

 

58.5

 

(22.6)

 

Legal fees

 

 

243

 

 

126

 

 

286

 

92.9

 

(15.0)

 

Other real estate owned expense, net

 

 

248

 

 

50

 

 

429

 

396.0

 

(42.2)

 

Other expense

 

 

3,512

 

 

3,148

 

 

3,469

 

11.6

 

1.2

 

Total noninterest expense

 

$

20,126

 

$

19,194

 

$

22,286

 

4.9

 

(9.7)

 

Efficiency ratio (GAAP)1

 

 

61.91

%

 

62.35

%

 

69.16

%

 

 

 

 

Adjusted efficiency ratio (non-GAAP)2

 

 

60.66

%

 

60.98

%

 

57.88

%

 

 

 

 

 

5

1  The efficiency ratio shown in the table above is a GAAP financial measure calculated as noninterest expense, excluding OREO expenses and amortization of core deposits, divided by the sum of net interest income and total noninterest income less net gains and losses on securities and any BOLI death benefit recorded.

2 The adjusted efficiency ratio shown in the table above is a non-GAAP financial measure calculated as noninterest expense, excluding OREO expenses, amortization of core deposits and acquisition related costs 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 includes a tax equivalent adjustment on the increase in cash surrender value of BOLI. See the discussion entitled “Non-GAAP Presentations” below and the table on page 16 that provides a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent.

Noninterest expense for the second quarter of 2019 increased $932,000, or 4.9%, compared to the first quarter of 2019, and decreased $2.2 million, or 9.7%, compared to the second quarter of 2018.  The linked quarter increase is primarily attributable to a $192,000 increase in computer and data processing, a $147,000 increase in advertising expense, an $86,000 increase in debit card interchange expense, a $117,000 increase in legal fees, a $198,000 increase in other real estate owned expense due to valuation writedowns in the second quarter of 2019, and a $364,000 increase in other expense. Other expense increased in the second quarter of 2019, compared to the first quarter of 2019, due to external audit fees, commercial loan-related expenses, appraisal fees, and ATM operating expenses. These increases were partially offset by aggregate decreases of $133,000 in occupancy, furniture and equipment expense, FDIC insurance and amortization of core deposit intangible assets in the second quarter of 2019 compared to the first quarter of 2019.

The year over year decrease in noninterest expense is primarily attributable to our ABC Bank acquisition in the first quarter of 2018, which resulted in higher costs for the second quarter of 2018 due to conversion related expenses.  Salaries and employee benefits expense, computer and data processing and advertising expense decreased an aggregate of $2.1 million due to acquisition costs incurred; in addition, other real estate owned expense, net, decreased $181,000 in the second quarter of 2019, compared to the second quarter of 2018, due to a reduction in the balance of OREO held.  Partially offsetting the year over year decreases were increases to occupancy, furniture and equipment expense of $273,000 and amortization of core deposit intangibles of $24,000.

Earning Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2019

 

Loans

 

As of

 

Percent Change From

 

(dollars in thousands)

 

June 30, 

 

March 31, 

 

June 30, 

 

March 31, 

 

June 30, 

 

 

    

2019

    

2019

    

2018

    

2019

    

2018

 

Commercial

 

$

337,848

 

$

324,450

 

$

299,536

 

4.1

 

12.8

 

Leases

 

 

98,379

 

 

87,730

 

 

66,687

 

12.1

 

47.5

 

Real estate - commercial

 

 

825,091

 

 

835,904

 

 

808,264

 

(1.3)

 

2.1

 

Real estate - construction

 

 

93,079

 

 

94,787

 

 

115,486

 

(1.8)

 

(19.4)

 

Real estate - residential

 

 

393,547

 

 

399,866

 

 

404,908

 

(1.6)

 

(2.8)

 

Home equity line of credit "HELOC"

 

 

128,673

 

 

133,859

 

 

127,986

 

(3.9)

 

0.5

 

Other1  

 

 

13,533

 

 

14,018

 

 

13,969

 

(3.5)

 

(3.1)

 

Total loans, excluding deferred loan costs and PCI

 

 

1,890,150

 

 

1,890,614

 

 

1,836,836

 

(0.0)

 

2.9

 

Net deferred loan costs

 

 

1,959

 

 

1,681

 

 

1,112

 

16.5

 

76.2

 

Total loans, excluding PCI

 

 

1,892,109

 

 

1,892,295

 

 

1,837,948

 

(0.0)

 

2.9

 

PCI loans, net of purchase accounting adjustments

 

 

10,834

 

 

10,851

 

 

11,214

 

(0.2)

 

(3.4)

 

Total loans

 

$

1,902,943

 

$

1,903,146

 

$

1,849,162

 

(0.0)

 

2.9

 

 

1 Other class includes consumer and overdrafts.

 

Total loans decreased by $203,000 for the second quarter of 2019 compared to March 31, 2019,  and increased $53.8 million for the year over year period.  The majority of the year over year increase is due to organic growth in commercial loans, leases, and real estate-commercial loans.

6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2019

 

Securities

 

As of

 

Percent Change From

 

(dollars in thousands)

 

June 30, 

 

March 31, 

 

June 30, 

 

March 31, 

 

June 30, 

 

 

    

2019

    

2019

    

2018

    

2019

    

2018

 

Securities available-for-sale, at fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

4,025

 

$

3,960

 

$

3,876

 

1.6

 

3.8

 

U.S. government agencies

 

 

9,812

 

 

10,360

 

 

12,216

 

(5.3)

 

(19.7)

 

U.S. government agency mortgage-backed

 

 

16,999

 

 

15,306

 

 

13,407

 

11.1

 

26.8

 

States and political subdivisions

 

 

251,295

 

 

281,172

 

 

276,112

 

(10.6)

 

(9.0)

 

Corporate bonds

 

 

 -

 

 

 -

 

 

700

 

 -

 

(100.0)

 

Collateralized mortgage obligations

 

 

64,867

 

 

64,330

 

 

61,432

 

0.8

 

5.6

 

Asset-backed securities

 

 

82,725

 

 

70,811

 

 

109,263

 

16.8

 

(24.3)

 

Collateralized loan obligations

 

 

62,357

 

 

63,151

 

 

66,638

 

(1.3)

 

(6.4)

 

Total securities available-for-sale

 

$

492,080

 

$

509,090

 

$

543,644

 

(3.3)

 

(9.5)

 

 

The investment portfolio was $492.1 million as of June 30, 2019, a decrease of $17.0 million from $509.1 million as of March 31, 2019, and a decrease of $51.6 million from June 30, 2018.  The portfolio composition has remained relatively static over the past year, with exceptions noted in states and political subdivisions and asset-backed securities due to sales, calls or maturities in those portfolios.   The largely consistent portfolio composition is due to lack of relative value among possible investment sectors and consequent opportunities to shift allocation of investments from lower return sectors to those with higher returns.  Security sales recorded in the second quarter of 2019 resulted in net securities gains of $986,000, compared to $27,000 of net securities gains in the first quarter of 2019, and $312,000 of net security gains in the second quarter of 2018.

 

Asset Quality

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2019

Nonperforming assets

 

As of

 

Percent Change From

(dollars in thousands)

 

June 30, 

 

March 31, 

 

June 30, 

 

March 31, 

 

June 30, 

 

  

2019

  

2019

  

2018

  

2019

 

2018

Nonaccrual loans

 

$

11,089

 

$

13,383

 

$

9,421

 

(17.1)

 

17.7

Performing troubled debt restructured loans accruing interest

 

 

1,570

 

 

1,550

 

 

1,300

 

1.3

 

20.8

Loans past due 90 days or more and still accruing interest

 

 

 -

 

 

 4

 

 

1,153

 

(100.0)

 

(100.0)

Total nonperforming loans

 

 

12,659

 

 

14,937

 

 

11,874

 

(15.3)

 

6.6

Other real estate owned

 

 

5,668

 

 

6,365

 

 

8,912

 

(11.0)

 

(36.4)

Total nonperforming assets

 

$

18,327

 

$

21,302

 

$

20,786

 

(14.0)

 

(11.8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PCI loans, net of purchase accounting adjustments

 

$

10,834

 

$

10,851

 

$

11,214

 

(0.2)

 

(3.4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30-89 days past due loans

 

$

8,888

 

$

7,544

 

$

9,617

 

 

 

 

Nonaccrual loans to total loans

 

 

0.6

%

 

0.7

%

 

0.5

%

 

 

 

Nonperforming loans to total loans

 

 

0.7

%

 

0.8

%

 

0.6

%

 

 

 

Nonperforming assets to total loans plus OREO

 

 

1.0

%

 

1.1

%

 

1.1

%

 

 

 

Purchased credit-impaired loans to total loans

 

 

0.6

%

 

0.6

%

 

0.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan and lease losses

 

$

19,372

 

$

19,316

 

$

19,321

 

 

 

 

Allowance for loan and lease losses to total loans

 

 

1.0

%

 

1.0

%

 

1.0

%

 

 

 

Allowance for loan and lease losses to nonaccrual loans

 

 

174.7

%

 

144.3

%

 

205.1

%

 

 

 

 

Nonperforming loans consist of nonaccrual loans, performing troubled debt restructured loans accruing interest and loans 90 days or more past due and still accruing interest.  We do not consider PCI loans, which showed evidence of deteriorated credit quality at acquisition, to be nonperforming assets as long as their cash flows and the timing of such cash flows continue to be estimable and probable of collection.  Nonperforming loans to total loans was 0.7% in the second quarter of 2019, 0.8% in the first quarter of 2019, and 0.6% for the second quarter of 2018. Nonperforming assets to total loans plus OREO ended at 1.0% in the second quarter of 2019 compared to 1.1% in both the first quarter of 2019 and the second quarter of 2018, reflecting stable nonperforming metrics as loan portfolio growth occurred over the last year, as well as continued OREO liquidations over the past year and write-downs recorded in 2019 and 2018.  Finally, the allowance for loan and lease losses to total loans was 1.0% as of June 30, 2019, March 31, 2019, and June 30, 2018. 

The following table details the accretable discount on all of our purchased loans for the quarters ended June 30, 2019,  and March 31, 2019.

7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchased Accounting Accretion

 

 

 

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

Accretable Discount- Non-PCI Loans

 

Accretable Discount- PCI Loans

 

Non-Accretable Discount- PCI Loans

 

Total

Beginning balance, April 1, 2019

 

$

1,502

 

$

1,085

 

$

5,969

 

$

8,556

Accretion

 

 

(286)

 

 

(108)

 

 

 -

 

 

(394)

Charge-offs

 

 

 -

 

 

(48)

 

 

(467)

 

 

(515)

Transfer

 

 

 -

 

 

 2

 

 

(2)

 

 

 -

Ending balance, June 30, 2019

 

$

1,216

 

$

931

 

$

5,500

 

$

7,647

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accretable Discount - Non-PCI Loans

 

Accretable Discount - PCI Loans

 

Non-Accretable Discount - PCI Loans

 

Total

Beginning balance, January 1, 2019

 

$

1,867

 

$

1,099

 

$

5,969

 

$

8,935

Accretion

 

 

(365)

 

 

(14)

 

 

 -

 

 

(379)

Ending balance, March 31, 2019

 

$

1,502

 

$

1,085

 

$

5,969

 

$

8,556

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following table shows classified assets by segment for the following periods.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2019

 

Classified loans

 

As of

 

Percent Change From

 

(dollars in thousands)

 

June 30, 

 

March 31, 

 

June 30, 

 

March 31, 

 

June 30, 

 

 

    

2019

    

2019

    

2018

    

2019

    

2018

 

Commercial

 

$

7,704

 

$

7,075

 

$

393

 

8.9

 

N/M

 

Leases

 

 

125

 

 

114

 

 

539

 

9.6

 

(76.8)

 

Real estate-commercial, nonfarm

 

 

19,186

 

 

22,079

 

 

12,362

 

(13.1)

 

55.2

 

Real estate-commercial, farm

 

 

1,210

 

 

1,222

 

 

1,248

 

(1.0)

 

(3.0)

 

Real estate-construction

 

 

273

 

 

2,589

 

 

366

 

(89.5)

 

(25.4)

 

Real estate-residential:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investor

 

 

1,029

 

 

991

 

 

1,029

 

3.8

 

 -

 

Multi-Family

 

 

493

 

 

487

 

 

3,302

 

1.2

 

(85.1)

 

Owner occupied

 

 

3,773

 

 

4,728

 

 

5,428

 

(20.2)

 

(30.5)

 

HELOC

 

 

2,078

 

 

1,966

 

 

1,633

 

5.7

 

27.3

 

Other1

 

 

24

 

 

28

 

 

18

 

(14.3)

 

33.3

 

Total classified loans, excluding PCI

 

 

35,895

 

 

41,279

 

 

26,318

 

(13.0)

 

36.4

 

PCI loans, net of purchase accounting adjustments

 

 

10,834

 

 

10,851

 

 

11,214

 

(0.2)

 

(3.4)

 

Total classified loans

 

$

46,729

 

$

52,130

 

$

37,532

 

(10.4)

 

24.5

 

 

N/M - Not meaningful.

1  Other class includes consumer and overdrafts.

 

Classified loans include nonaccrual, performing troubled debt restructurings, PCI loans, and all other loans considered substandard, as shown above.  Classified loans totaled $46.7 million as of June 30, 2019, a decrease of $5.4 million, or 10.4%, from the prior linked quarter, and an increase of $9.2 million, or 24.5%, from the second quarter of 2018.  The $10.8 million of PCI loans as of June 30, 2019, $10.9 million as of March 31, 2019, and $11.2 million as of June 30, 2018, stems from our acquisition of ABC Bank in 2018.

 

8

Net Charge-off Summary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loan Charge-offs, net of recoveries

Quarters Ended

(dollars in thousands)

June 30, 

 

% of

 

March 31, 

 

% of

 

June 30, 

 

% of

 

2019

 

Total 2

 

2019

 

Total  2

 

2018

 

Total 2

Commercial

$

61

 

15.5

 

$

(18)

 

(12.9)

 

$

(77)

 

(24.3)

Leases

 

 -

 

 -

 

 

 -

 

 -

 

 

 8

 

2.5

Real estate-commercial, nonfarm

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner general purpose

 

42

 

10.7

 

 

87

 

62.1

 

 

27

 

8.5

Owner special purpose

 

 -

 

 -

 

 

(3)

 

(2.1)

 

 

 -

 

 -

Non-owner general purpose

 

(12)

 

(3.0)

 

 

(15)

 

(10.7)

 

 

(20)

 

(6.3)

Non-owner special purpose

 

 -

 

 -

 

 

139

 

99.3

 

 

476

 

150.2

Retail properties

 

 -

 

 -

 

 

 -

 

 -

 

 

 -

 

 -

Total real estate-commercial, nonfarm

 

30

 

7.7

 

 

208

 

148.6

 

 

483

 

152.4

Real estate-construction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Homebuilder

 

 -

 

 -

 

 

(1)

 

(0.7)

 

 

 -

 

 -

Land

 

 -

 

 -

 

 

 -

 

 -

 

 

(2)

 

(0.6)

Commercial speculative

 

(2)

 

(0.5)

 

 

 2

 

1.4

 

 

 -

 

 -

All other

 

 1

 

0.3

 

 

 -

 

 -

 

 

 2

 

0.6

Total real estate-construction

 

(1)

 

(0.2)

 

 

 1

 

0.7

 

 

 -

 

 -

Real estate-residential

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investor

 

(3)

 

(0.8)

 

 

(10)

 

(7.1)

 

 

(63)

 

(19.9)

Multi-Family

 

 -

 

 -

 

 

(8)

 

(5.7)

 

 

(11)

 

(3.5)

Owner occupied

 

(11)

 

(2.8)

 

 

(14)

 

(10.0)

 

 

(26)

 

(8.2)

Total real estate-residential

 

(14)

 

(3.6)

 

 

(32)

 

(22.8)

 

 

(100)

 

(31.6)

HELOC

 

267

 

67.8

 

 

(46)

 

(32.9)

 

 

(26)

 

(8.2)

Other1

 

51

 

12.8

 

 

27

 

19.3

 

 

29

 

9.2

Net charge-offs / (recoveries) 

$

394

 

100.0

 

$

140

 

100.0

 

$

317

 

100.0

 

1  Other class includes consumer and overdrafts.

2 Represents the percentage of net charge-offs attributable to each category of loans.

 

Gross charge-offs for the quarter ended June 30, 2019, were $474,000, compared to $345,000 for the quarter ended March 31, 2019, and $699,000 for the quarter ended June 30, 2018.  Gross recoveries were $80,000 for the quarter ended June 30, 2019, compared to $205,000 for the quarter ended March 31, 2019, and $382,000 for the second quarter of 2018. Continued recoveries are indicative of the ongoing aggressive efforts by management to effectively manage and resolve prior charge-offs.    

 

Deposits

 

Total deposits were $2.08 billion at June 30, 2019, which reflects a decrease of $45.7 million compared to March 31, 2019, stemming from aggregate decreases in savings, NOW, money market and time deposits of $48.7 million, partially offset by an increase in demand deposits of $3.0 million.  Total deposits decreased $84.1 million in the year over year period reflecting decreases in NOW, money market and time deposits of $106.2 million, partially offset by aggregate increases in demand deposits and savings accounts of $22.1 million. 

 

Borrowings

 

As of June 30, 2019, we had $87.1 million outstanding in other short-term borrowings compared to $85.0 million as of March 31, 2019, and $76.6 million as of June 30, 2018.

 

The Company is indebted on senior notes totaling $44.2 million, net of deferred issuance costs, as of June 30, 2019.  The Company is also indebted on $57.7 million of junior subordinated debentures, net of deferred issuance costs, which are related to the trust preferred securities issued by its two statutory trust subsidiaries, Old Second Capital Trust I and Old Second Capital Trust II.  Notes payable and other borrowings is comprised of $11.0 million of long-term FHLBC advances acquired with our ABC Bank acquisition, with terms ranging from June 9, 2020, to February 2, 2026.

9

Non-GAAP Presentations: Management has disclosed in this earnings release certain non-GAAP financial measures to evaluate and measure the Company’s performance, including adjusted net income, adjusted earnings per share, the presentation of net interest income and net interest margin on a fully taxable equivalent basis, and efficiency ratio calculations.  Management believes the adjusted earnings per share data is more informative for the user if the per share impact of certain activity is excluded for quarterly comparative purposes. 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 has disclosed the efficiency ratio including and excluding certain items, which is discussed in the noninterest expense presentation on page 6.  These non-GAAP financial measures should not be considered as a substitute for GAAP financial measures, and we strongly encourage investors to review the GAAP financial measures included in this earnings release and not to place undue reliance upon any single financial measure. In addition, because non-GAAP financial measures are not standardized, it may not be possible to compare the non-GAAP financial measures presented in this earnings release with other companies’ non-GAAP financial measures having the same or similar names. The tables on page 15-16 provide a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent.    

 

Forward-Looking Statements:  This earnings release contains forward-looking statements.  Forward looking statements can be identified by words such  as “anticipated,” “expects,”  “intends,” “believes,” “may,” “likely,” “will” or other that indicate future periods.  Such forward-looking statements are subject to risks, uncertainties, and other factors, including a downturn in the economy, particularly in the Company’s markets, volatile credit and financial markets both domestic and foreign, potential deterioration in real estate values, regulatory changes and excessive loan losses, as well as additional risks and uncertainties contained in the “Risk Factors” and forward-looking statements disclosure contained in the Company’s most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, any or all of which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. The inclusion of this forward-looking information should not be construed as a representation by the Company or any person that future events, plans, or expectations contemplated by the Company will be achieved. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

 

Conference Call

 

The Company will host an earnings call on Thursday, July 25, 2019, 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 844-369-8770.  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 11:00 a.m. Eastern Time (10:00 a.m. Central Time) on August 1, 2019, by dialing 877-481-4010, using Conference ID:  49597.

10

 

Old Second Bancorp, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands)

 

 

 

 

 

 

 

 

 

 

(unaudited)

 

 

 

 

 

June 30, 

 

December 31, 

 

    

2019

    

2018

Assets

 

 

 

 

 

 

Cash and due from banks

 

$

38,036

 

$

38,599

Interest earning deposits with financial institutions

 

 

20,181

 

 

16,636

Cash and cash equivalents

 

 

58,217

 

 

55,235

Securities available-for-sale, at fair value

 

 

492,080

 

 

541,248

Federal Home Loan Bank Chicago ("FHLBC") and Federal Reserve Bank Chicago ("FRBC") stock

 

 

10,608

 

 

13,433

Loans held-for-sale

 

 

5,142

 

 

2,984

Loans

 

 

1,902,943

 

 

1,897,027

Less: allowance for loan and lease losses

 

 

19,372

 

 

19,006

Net loans

 

 

1,883,571

 

 

1,878,021

Premises and equipment, net

 

 

42,551

 

 

42,439

Other real estate owned

 

 

5,668

 

 

7,175

Mortgage servicing rights, net

 

 

5,818

 

 

7,357

Goodwill and core deposit intangible

 

 

21,561

 

 

21,814

Bank-owned life insurance ("BOLI")

 

 

62,322

 

 

61,544

Deferred tax assets, net

 

 

14,277

 

 

21,280

Other assets

 

 

21,791

 

 

23,473

Total assets

 

$

2,623,606

 

$

2,676,003

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

Noninterest bearing demand

 

$

632,900

 

$

618,830

Interest bearing:

 

 

 

 

 

 

Savings, NOW, and money market

 

 

1,023,621

 

 

1,040,668

Time

 

 

421,253

 

 

457,175

Total deposits

 

 

2,077,774

 

 

2,116,673

Securities sold under repurchase agreements

 

 

54,166

 

 

46,632

Other short-term borrowings

 

 

87,125

 

 

149,500

Junior subordinated debentures

 

 

57,710

 

 

57,686

Senior notes

 

 

44,208

 

 

44,158

Notes payable and other borrowings

 

 

11,035

 

 

15,379

Other liabilities

 

 

34,324

 

 

16,894

Total liabilities

 

 

2,366,342

 

 

2,446,922

 

 

 

 

 

 

 

Stockholders’ Equity

 

 

 

 

 

 

Common stock

 

 

34,825

 

 

34,720

Additional paid-in capital

 

 

119,762

 

 

119,081

Retained earnings

 

 

192,612

 

 

175,463

Accumulated other comprehensive income (loss)

 

 

6,112

 

 

(4,079)

Treasury stock

 

 

(96,047)

 

 

(96,104)

Total stockholders’ equity

 

 

257,264

 

 

229,081

Total liabilities and stockholders’ equity

 

$

2,623,606

 

$

2,676,003

11

 

 

Old Second Bancorp, Inc. and Subsidiaries

Consolidated Statements of Income

(In thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(unaudited)

 

(unaudited)

 

 

 

Three Months Ended  June 30, 

 

Six Months Ended  June 30, 

 

    

2019

    

2018

    

2019

    

2018

    

Interest and dividend income

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

24,924

 

$

22,512

 

$

49,023

 

$

41,248

 

Loans held-for-sale

 

 

31

 

 

35

 

 

53

 

 

55

 

Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

2,223

 

 

2,392

 

 

4,637

 

 

4,562

 

Tax exempt

 

 

2,141

 

 

2,114

 

 

4,239

 

 

4,175

 

Dividends from FHLBC and FRBC stock

 

 

156

 

 

111

 

 

305

 

 

217

 

Interest bearing deposits with financial institutions

 

 

111

 

 

97

 

 

225

 

 

146

 

Total interest and dividend income

 

 

29,586

 

 

27,261

 

 

58,482

 

 

50,403

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Savings, NOW, and money market deposits

 

 

759

 

 

501

 

 

1,530

 

 

845

 

Time deposits

 

 

1,641

 

 

1,444

 

 

3,259

 

 

2,619

 

Securities sold under repurchase agreements

 

 

147

 

 

104

 

 

296

 

 

183

 

Other short-term borrowings

 

 

575

 

 

276

 

 

1,182

 

 

605

 

Junior subordinated debentures

 

 

931

 

 

927

 

 

1,858

 

 

1,854

 

Senior notes

 

 

672

 

 

672

 

 

1,344

 

 

1,344

 

Notes payable and other borrowings

 

 

107

 

 

95

 

 

223

 

 

95

 

Total interest expense

 

 

4,832

 

 

4,019

 

 

9,692

 

 

7,545

 

Net interest and dividend income

 

 

24,754

 

 

23,242

 

 

48,790

 

 

42,858

 

Provision for loan and lease losses

 

 

450

 

 

1,450

 

 

900

 

 

728

 

Net interest and dividend income after provision for loan and lease losses

 

 

24,304

 

 

21,792

 

 

47,890

 

 

42,130

 

Noninterest income

 

 

 

 

 

 

 

 

 

 

 

 

 

Trust income

 

 

1,739

 

 

1,645

 

 

3,225

 

 

3,140

 

Service charges on deposits

 

 

1,959

 

 

1,769

 

 

3,821

 

 

3,361

 

Secondary mortgage fees

 

 

203

 

 

195

 

 

339

 

 

357

 

Mortgage servicing rights mark to market (loss) gain

 

 

(1,137)

 

 

(105)

 

 

(1,956)

 

 

200

 

Mortgage servicing income

 

 

491

 

 

627

 

 

948

 

 

1,079

 

Net gain on sales of mortgage loans

 

 

1,163

 

 

1,240

 

 

1,925

 

 

2,157

 

Securities gains, net

 

 

986

 

 

312

 

 

1,013

 

 

347

 

Increase in cash surrender value of BOLI

 

 

320

 

 

351

 

 

778

 

 

599

 

Death benefit realized on BOLI

 

 

 -

 

 

 -

 

 

 -

 

 

1,026

 

Debit card interchange income

 

 

1,166

 

 

1,132

 

 

2,153

 

 

2,144

 

Other income

 

 

1,253

 

 

1,366

 

 

2,379

 

 

2,627

 

Total noninterest income

 

 

8,143

 

 

8,532

 

 

14,625

 

 

17,037

 

Noninterest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

11,587

 

 

12,355

 

 

23,199

 

 

22,562

 

Occupancy, furniture and equipment

 

 

1,925

 

 

1,652

 

 

3,914

 

 

3,210

 

Computer and data processing

 

 

1,524

 

 

2,741

 

 

2,856

 

 

4,085

 

FDIC insurance

 

 

116

 

 

165

 

 

290

 

 

321

 

General bank insurance

 

 

236

 

 

299

 

 

486

 

 

550

 

Amortization of core deposit intangible

 

 

121

 

 

97

 

 

253

 

 

118

 

Advertising expense

 

 

381

 

 

492

 

 

615

 

 

833

 

Debit card interchange expense

 

 

233

 

 

301

 

 

380

 

 

582

 

Legal fees

 

 

243

 

 

286

 

 

369

 

 

445

 

Other real estate expense, net

 

 

248

 

 

429

 

 

298

 

 

602

 

Other expense

 

 

3,512

 

 

3,469

 

 

6,660

 

 

6,332

 

Total noninterest expense

 

 

20,126

 

 

22,286

 

 

39,320

 

 

39,640

 

Income before income taxes

 

 

12,321

 

 

8,038

 

 

23,195

 

 

19,527

 

Provision for income taxes

 

 

3,043

 

 

1,777

 

 

5,449

 

 

3,777

 

Net income

 

$

9,278

 

$

6,261

 

$

17,746

 

$

15,750

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.31

 

$

0.21

 

$

0.59

 

$

0.53

 

Diluted earnings per share

 

 

0.31

 

 

0.21

 

 

0.58

 

 

0.52

 

Dividends declared per share

 

 

0.01

 

 

0.01

 

 

0.02

 

 

0.02

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending common shares outstanding

 

29,896,529

 

29,747,078

 

29,896,529

 

29,747,078

Weighted-average basic shares outstanding

 

29,896,231

 

29,747,078

 

29,871,081

 

29,703,508

Weighted-average diluted shares outstanding

 

30,389,892

 

30,337,282

 

30,366,889

 

30,253,440

12

Old Second Bancorp, Inc. and Subsidiaries

Quarterly Consolidated Average Balance

(In thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2018

 

2019

Assets

    

1st Qtr

    

2nd Qtr

    

3rd Qtr

    

4th Qtr

    

1st Qtr

    

2nd Qtr

Cash and due from banks

 

$

29,776

 

$

36,720

 

$

34,608

 

$

34,915

 

$

33,749

 

$

33,618

Interest earning deposits with financial institutions

 

 

13,819

 

 

19,161

 

 

17,975

 

 

19,142

 

 

18,842

 

 

19,053

Cash and cash equivalents

 

 

43,595

 

 

55,881

 

 

52,583

 

 

54,057

 

 

52,591

 

 

52,671

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities available-for-sale, at fair value

 

 

549,161

 

 

555,202

 

 

542,297

 

 

538,882

 

 

513,491

 

 

520,006

FHLBC and FRBC stock

 

 

8,920

 

 

8,619

 

 

8,905

 

 

10,758

 

 

11,463

 

 

11,317

Loans held-for-sale

 

 

2,353

 

 

2,868

 

 

3,220

 

 

2,617

 

 

1,853

 

 

2,870

Loans

 

 

1,600,594

 

 

1,806,209

 

 

1,839,341

 

 

1,855,283

 

 

1,893,659

 

 

1,894,454

Less: allowance for loan and lease losses

 

 

18,263

 

 

18,494

 

 

19,696

 

 

19,247

 

 

19,235

 

 

19,435

Net loans

 

 

1,582,331

 

 

1,787,715

 

 

1,819,645

 

 

1,836,036

 

 

1,874,424

 

 

1,875,019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Premises and equipment, net

 

 

37,472

 

 

41,796

 

 

42,651

 

 

42,731

 

 

42,270

 

 

42,271

Other real  estate owned

 

 

7,884

 

 

7,951

 

 

7,801

 

 

7,159

 

 

6,779

 

 

6,012

Mortgage servicing rights, net

 

 

7,347

 

 

7,697

 

 

7,915

 

 

8,130

 

 

7,334

 

 

6,551

Goodwill and core deposit intangible

 

 

8,911

 

 

9,035

 

 

21,990

 

 

21,879

 

 

21,747

 

 

21,618

Bank-owned life insurance ("BOLI")

 

 

61,273

 

 

60,920

 

 

61,283

 

 

61,616

 

 

61,661

 

 

62,124

Deferred tax assets, net

 

 

26,739

 

 

26,825

 

 

27,680

 

 

25,531

 

 

20,878

 

 

16,458

Other assets

 

 

16,881

 

 

22,384

 

 

21,976

 

 

20,309

 

 

21,098

 

 

19,041

Total other assets

 

 

166,507

 

 

176,608

 

 

191,296

 

 

187,355

 

 

181,767

 

 

174,075

Total assets

 

$

2,352,867

 

$

2,586,893

 

$

2,617,946

 

$

2,629,705

 

$

2,635,589

 

$

2,635,958

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest bearing demand

 

$

554,624

 

$

618,765

 

$

625,982

 

$

634,611

 

$

625,423

 

$

645,580

Interest bearing:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Savings, NOW, and money market

 

 

970,998

 

 

1,059,601

 

 

1,064,801

 

 

1,045,744

 

 

1,055,563

 

 

1,044,950

Time

 

 

382,422

 

 

460,909

 

 

467,933

 

 

461,677

 

 

445,076

 

 

422,975

Total deposits

 

 

1,908,044

 

 

2,139,275

 

 

2,158,716

 

 

2,142,032

 

 

2,126,062

 

 

2,113,505

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities sold under repurchase agreements

 

 

40,275

 

 

44,655

 

 

46,850

 

 

44,628

 

 

45,157

 

 

44,184

Other short-term borrowings

 

 

87,444

 

 

58,199

 

 

55,119

 

 

83,588

 

 

98,328

 

 

93,369

Junior subordinated debentures

 

 

57,645

 

 

57,657

 

 

57,669

 

 

57,681

 

 

57,692

 

 

57,704

Senior Notes

 

 

44,071

 

 

44,096

 

 

44,121

 

 

44,146

 

 

44,171

 

 

44,196

Notes payable and other borrowings

 

 

 -

 

 

19,795

 

 

20,768

 

 

17,987

 

 

15,273

 

 

13,101

Other liabilities

 

 

13,969

 

 

15,679

 

 

20,142

 

 

17,108

 

 

13,750

 

 

19,586

Total liabilities

 

 

2,151,448

 

 

2,379,356

 

 

2,403,385

 

 

2,407,170

 

 

2,400,433

 

 

2,385,645

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

34,647

 

 

34,717

 

 

34,717

 

 

34,717

 

 

34,775

 

 

34,825

Additional paid-in capital

 

 

117,734

 

 

117,793

 

 

118,366

 

 

118,800

 

 

119,051

 

 

119,381

Retained earnings

 

 

147,309

 

 

155,553

 

 

162,486

 

 

172,363

 

 

180,398

 

 

188,453

Accumulated other comprehensive loss

 

 

(1,871)

 

 

(4,232)

 

 

(4,714)

 

 

(7,204)

 

 

(3,102)

 

 

3,705

Treasury stock

 

 

(96,400)

 

 

(96,294)

 

 

(96,294)

 

 

(96,141)

 

 

(95,966)

 

 

(96,051)

Total stockholders' equity

 

 

201,419

 

 

207,537

 

 

214,561

 

 

222,535

 

 

235,156

 

 

250,313

Total liabilities and stockholders' equity

 

$

2,352,867

 

$

2,586,893

 

$

2,617,946

 

$

2,629,705

 

$

2,635,589

 

$

2,635,958

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Earning Assets

 

$

2,174,847

 

$

2,392,059

 

$

2,411,738

 

$

2,426,682

 

$

2,439,308

 

$

2,447,700

Total Interest Bearing Liabilities

 

 

1,582,855

 

 

1,744,912

 

 

1,757,261

 

 

1,755,451

 

 

1,761,260

 

 

1,720,479

 

 

 

13

 

 

Old Second Bancorp, Inc. and Subsidiaries

Quarterly Consolidated Statements of Income

(In thousands, except per share data, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2018

 

2019

 

 

    

1st Qtr

    

2nd Qtr

    

3rd Qtr

    

4th Qtr

    

1st Qtr

    

2nd Qtr

    

Interest and Dividend Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

18,732

 

$

22,512

 

$

23,377

 

$

24,144

 

$

24,099

 

$

24,924

 

Loans held-for-sale

 

 

24

 

 

35

 

 

39

 

 

33

 

 

22

 

 

31

 

Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

2,170

 

 

2,392

 

 

2,491

 

 

2,524

 

 

2,414

 

 

2,223

 

Tax exempt

 

 

2,061

 

 

2,114

 

 

2,064

 

 

2,102

 

 

2,098

 

 

2,141

 

Dividends from FHLB and FRBC stock

 

 

106

 

 

111

 

 

121

 

 

131

 

 

149

 

 

156

 

Interest bearing deposits with financial institutions

 

 

49

 

 

97

 

 

84

 

 

104

 

 

114

 

 

111

 

Total interest and dividend income

 

 

23,142

 

 

27,261

 

 

28,176

 

 

29,038

 

 

28,896

 

 

29,586

 

Interest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Savings, NOW, and money market deposits

 

 

344

 

 

501

 

 

642

 

 

670

 

 

771

 

 

759

 

Time deposits

 

 

1,175

 

 

1,444

 

 

1,568

 

 

1,643

 

 

1,618

 

 

1,641

 

Securities sold under repurchase agreements

 

 

79

 

 

104

 

 

140

 

 

138

 

 

149

 

 

147

 

Other short-term borrowings

 

 

329

 

 

276

 

 

311

 

 

512

 

 

607

 

 

575

 

Junior subordinated debentures

 

 

927

 

 

927

 

 

930

 

 

933

 

 

927

 

 

931

 

Senior notes

 

 

672

 

 

672

 

 

672

 

 

672

 

 

672

 

 

672

 

Notes payable and other borrowings

 

 

 -

 

 

95

 

 

173

 

 

130

 

 

116

 

 

107

 

Total interest expense

 

 

3,526

 

 

4,019

 

 

4,436

 

 

4,698

 

 

4,860

 

 

4,832

 

Net interest and dividend income

 

 

19,616

 

 

23,242

 

 

23,740

 

 

24,340

 

 

24,036

 

 

24,754

 

(Release) provision  for loan and lease losses

 

 

(722)

 

 

1,450

 

 

 -

 

 

500

 

 

450

 

 

450

 

Net interest and dividend income after (release) provision  for loan and lease losses

 

 

20,338

 

 

21,792

 

 

23,740

 

 

23,840

 

 

23,586

 

 

24,304

 

Noninterest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trust income

 

 

1,495

 

 

1,645

 

 

1,644

 

 

1,633

 

 

1,486

 

 

1,739

 

Service charges on deposits

 

 

1,592

 

 

1,769

 

 

1,923

 

 

2,044

 

 

1,862

 

 

1,959

 

Secondary mortgage fees

 

 

162

 

 

195

 

 

199

 

 

140

 

 

136

 

 

203

 

Mortgage servicing rights mark to market gain (loss)

 

 

305

 

 

(105)

 

 

(11)

 

 

(923)

 

 

(819)

 

 

(1,137)

 

Mortgage servicing income

 

 

452

 

 

627

 

 

471

 

 

389

 

 

457

 

 

491

 

Net gain on sales of mortgage loans

 

 

917

 

 

1,240

 

 

965

 

 

669

 

 

762

 

 

1,163

 

Securities gains, net

 

 

35

 

 

312

 

 

13

 

 

 -

 

 

27

 

 

986

 

Increase in cash surrender value of BOLI

 

 

248

 

 

351

 

 

347

 

 

38

 

 

458

 

 

320

 

Death benefit realized on BOLI

 

 

1,026

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 

 

Debit card interchange income

 

 

1,012

 

 

1,132

 

 

1,135

 

 

1,141

 

 

987

 

 

1,166

 

Other income

 

 

1,261

 

 

1,366

 

 

1,128

 

 

1,371

 

 

1,126

 

 

1,253

 

Total noninterest income

 

 

8,505

 

 

8,532

 

 

7,814

 

 

6,502

 

 

6,482

 

 

8,143

 

Noninterest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

10,207

 

 

12,355

 

 

11,165

 

 

10,435

 

 

11,612

 

 

11,587

 

Occupancy, furniture and equipment

 

 

1,558

 

 

1,652

 

 

1,782

 

 

1,922

 

 

1,989

 

 

1,925

 

Computer and data processing

 

 

1,344

 

 

2,741

 

 

1,247

 

 

1,413

 

 

1,332

 

 

1,524

 

FDIC insurance

 

 

156

 

 

165

 

 

162

 

 

170

 

 

174

 

 

116

 

General bank insurance

 

 

251

 

 

299

 

 

230

 

 

259

 

 

250

 

 

236

 

Amortization of core deposit intangible

 

 

21

 

 

97

 

 

136

 

 

133

 

 

132

 

 

121

 

Advertising expense

 

 

341

 

 

492

 

 

492

 

 

242

 

 

234

 

 

381

 

Debit card interchange expense

 

 

281

 

 

301

 

 

320

 

 

38

 

 

147

 

 

233

 

Legal fees

 

 

159

 

 

286

 

 

243

 

 

147

 

 

126

 

 

243

 

Other real estate expense, net

 

 

173

 

 

429

 

 

(370)

 

 

165

 

 

50

 

 

248

 

Other expense

 

 

2,863

 

 

3,469

 

 

3,304

 

 

3,853

 

 

3,148

 

 

3,512

 

Total noninterest expense

 

 

17,354

 

 

22,286

 

 

18,711

 

 

18,777

 

 

19,194

 

 

20,126

 

Income before income taxes

 

 

11,489

 

 

8,038

 

 

12,843

 

 

11,565

 

 

10,874

 

 

12,321

 

Provision for income taxes

 

 

2,000

 

 

1,777

 

 

3,201

 

 

2,945

 

 

2,406

 

 

3,043

 

Net income

 

$

9,489

 

$

6,261

 

$

9,642

 

$

8,620

 

$

8,468

 

$

9,278

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share

 

$

0.32

 

$

0.21

 

$

0.32

 

$

0.29

 

$

0.28

 

$

0.31

 

Diluted earnings (loss) per share

 

 

0.31

 

 

0.21

 

 

0.32

 

 

0.28

 

 

0.28

 

 

0.31

 

Dividends paid per share

 

 

0.01

 

 

0.01

 

 

0.01

 

 

0.01

 

 

0.01

 

 

0.01

 

 

14

 

Reconciliation of Non-GAAP Financial Measures

The tables below provide a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure for the periods indicated. Dollar amounts below in thousands, except per share data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarters Ended

 

 

June 30, 2019

 

March 31, 2019

 

June 30, 2018

 

 

Amount

 

Per share

 

Amount

 

Per Share

 

Amount

 

Per Share

Adjusted Net Income and adjusted diluted earnings per share (EPS), including certain items

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (GAAP)

 

$

9,278

 

$

0.31

 

$

8,468

 

$

0.28

 

$

6,261

 

$

0.21

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition related costs, net, after tax

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

2,468

 

 

0.08

Adjusted net income, including certain items

 

$

9,278

 

$

0.31

 

$

8,468

 

$

0.28

 

$

8,729

 

$

0.29

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarters Ended

 

 

 

June 30, 

 

March 31, 

 

June 30, 

 

 

    

2019

    

2019

 

2018

 

Net Interest Margin

 

 

 

 

 

 

 

 

 

 

Interest income (GAAP)

 

$

29,586

 

$

28,896

 

$

27,261

 

Taxable-equivalent adjustment:

 

 

 

 

 

 

 

 

 

 

Loans

 

 

 3

 

 

 5

 

 

 5

 

Securities

 

 

569

 

 

558

 

 

562

 

Interest income (TE)

 

 

30,158

 

 

29,459

 

 

27,828

 

Interest expense (GAAP)

 

 

4,832

 

 

4,860

 

 

4,019

 

Net interest income (TE)

 

$

25,326

 

$

24,599

 

$

23,809

 

Net interest income  (GAAP)

 

$

24,754

 

$

24,036

 

$

23,242

 

Average interest earning assets

 

$

2,447,700

 

$

2,439,308

 

$

2,392,059

 

Net interest margin (GAAP)

 

 

4.06

%

 

4.00

%

 

3.90

%

Net interest margin  (TE)

 

 

4.15

%

 

4.09

%

 

3.99

%

 

15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP

 

Non-GAAP

 

 

 

 

Three Months Ended

 

 

Three Months Ended

 

 

 

June 30, 

 

March 31, 

 

June 30, 

 

June 30, 

 

March 31, 

 

June 30, 

 

 

 

2019

 

2019

 

2018

 

2019

 

2019

 

2018

 

Efficiency Ratio / Adjusted Efficiency Ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense

 

$

20,126

 

$

19,194

 

$

22,286

 

$

20,126

 

$

19,194

 

$

22,286

 

Less amortization of core deposit

 

 

121

 

 

132

 

 

97

 

 

121

 

 

132

 

 

97

 

Less other real estate expense, net

 

 

248

 

 

50

 

 

429

 

 

248

 

 

50

 

 

429

 

Less acquisition related costs

 

 

N/A

 

 

N/A

 

 

N/A

 

 

 -

 

 

 -

 

 

3,168

 

Noninterest expense less adjustments

 

$

19,757

 

$

19,012

 

$

21,760

 

$

19,757

 

$

19,012

 

$

18,592

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

24,754

 

$

24,036

 

$

23,242

 

$

24,754

 

$

24,036

 

$

23,242

 

Taxable-equivalent adjustment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

 

N/A

 

 

N/A

 

 

N/A

 

 

 3

 

 

 5

 

 

 5

 

Securities

 

 

N/A

 

 

N/A

 

 

N/A

 

 

569

 

 

558

 

 

562

 

Net interest income including adjustments

 

 

24,754

 

 

24,036

 

 

23,242

 

 

25,326

 

 

24,599

 

 

23,809

 

Noninterest income

 

 

8,143

 

 

6,482

 

 

8,532

 

 

8,143

 

 

6,482

 

 

8,532

 

Less securities gain, net

 

 

986

 

 

27

 

 

312

 

 

986

 

 

27

 

 

312

 

Taxable-equivalent adjustment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase in cash surrender value of BOLI

 

 

N/A

 

 

N/A

 

 

N/A

 

 

85

 

 

122

 

 

93

 

Noninterest income (less) / including adjustments

 

 

7,157

 

 

6,455

 

 

8,220

 

 

7,242

 

 

6,577

 

 

8,313

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income including adjustments plus noninterest income (less) / including adjustments

 

$

31,911

 

$

30,491

 

$

31,462

 

$

32,568

 

$

31,176

 

$

32,122

 

Efficiency ratio / Adjusted efficiency ratio

 

 

61.91

%

 

62.35

%

 

69.16

%

 

60.66

%

 

60.98

%

 

57.88

%

 

16

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