Old Second Bancorp, Inc. Announces Second Quarter Net Income of $3.5 million
Continues to maintain strong capital ratios, improving asset quality and
Loan loss reserve release reflects overall credit quality management.
AURORA, Ill., July 24, 2013
AURORA, Ill., July 24, 2013 /PRNewswire/ -- Old Second Bancorp, Inc. (the
"Company" or "Old Second") (NASDAQ: OSBC), parent company of Old Second
National Bank (the "Bank"), today announced results of operations for the
second quarter of 2013. The Company reported net income of $3.5 million,
compared to net income of $1.3 million in the second quarter of 2012. The
Company's net income available to common shareholders of $2.2 million, or
$0.15 per diluted share, for the quarter compared to net income available to
common shareholders of $14,000, or $0.00 per diluted share, in the second
quarter of 2012.
The Company reported net income of $8.9 million in the first half of 2013,
compared to a loss of $1.7 million in the first half of 2012. The Company's
net income available to common shareholders of $6.4 million, or $0.45 per
diluted share, for the first half of 2013, compared to a net loss available to
common shareholders of $4.2 million, or $0.29 per diluted share, in the first
half of 2012.
Chairman Bill Skoglund said "Our second quarter and six month results are
encouraging as we continue to transition to consistent, high quality
earnings. The economic and competitive environments remain challenging and we
expect to be further tested as we progress through 2013. We have received
benefit from our traditional community banking programs in business and
personal lending, deposit services, card services, wealth management and
residential mortgage banking. Further, our experienced and dedicated
professional staff (augmented by several key additions) has continued to excel
at our relationship approach to banking related services. Last, our customers
remain loyal to Old Second as a long standing organization with outstanding
quality and deep roots in our market areas.
Mr. Skoglund continued "Customers continue to be cautious in expanding their
businesses in an uncertain economy. Our managers are fortifying relationships
and building pipelines with current and prospective clients. We expect to
grow our businesses and provide outstanding service while continuing to
maintain our disciplined approach. Of course, dependable, high caliber
earnings have been and will continue to be a top priority."
"As we work through transition, it is critical that we be viewed as an
institution that is unquestionably strong and stable. To that end, our
strength continues as measured in several ways -- by declining Classified
Assets (down to $141.1 million at June 30 from $168.0 million at March 31) and
our Bank Leverage Capital Ratio (at 10.40% on June 30 compared to 9.94%% for
March 31 and 9.35% for June 30, 2012)."
The Company's release of $1.8 million from its loan loss reserve for the
second quarter of 2013 benefited earnings and compares to a $200,000 provision
in the second quarter of 2012 and a $2.5 million release in the first quarter
of 2013. The second quarter release was done under our established loan loss
reserve methodology. The allowance for loan losses was 55.9% of nonperforming
loans as of June 30, 2013, an increase from 55.3% as of March 31, 2013, and
35.8% a year earlier. Old Second further improved its overall asset quality
by maintaining an elevated level of investment securities.
2013 Financial Highlights/Overview
oSecond quarter net income before taxes of $3.5 million compared to net
income before taxes of $1.3 million in the second quarter of 2012. The
increase was primarily due to release of $1.8 million in loan loss
reserves and reduced other real estate expenses.
oIn 2013, net income declined from $5.5 million in the first quarter to
$3.5 million in the second quarter. This decline primarily resulted from
a $514,000 decline in net interest income, a reduction in the amount of
loan loss reserve release from $2.5 million in the first quarter to a $1.8
million release in the second quarter and reduced gains on securities
sales from $1.5 million in first quarter to $745,000 in the second
oSecond quarter net income available to common stockholders of $2.2 million
compared to net income available to common stockholders of $14,000 in the
same quarter of 2012.
oThe tax-equivalent net interest margin was 3.07% during the second quarter
of 2013 compared to 3.65% in the same quarter of 2012. The second quarter
of 2013 was a decrease of 11 basis points compared to the first quarter of
oNoninterest income of $21.1 million was $219,000 higher in the first half
of 2013 than in the same period of 2012 reflecting higher gains on
securities sold, recapture of expense previously recorded on restricted
stock awards and one time card services revenue.
oNoninterest expenses of $43.7 million were $3.4 million or 7.1% lower in
the first half of 2013 than in the same period of 2012, reflecting overall
expense control and reduced expenses in most categories most notably in
other real estate owned ("OREO") expenses (down $3.8 million year over
year on elevated but improved valuation adjustment expense) and legal fees
at least partially on accounting recovery of some legal fees paid on OREO.
June 30, March 31, Basis Point
2013 2013 Change
The Bank's leverage capital ratio 10.40% 9.94% 0.46%
The Bank's total capital ratio 16.30% 15.79% 0.51%
The Company's leverage capital ratio 5.46% 5.11% 0.35%
The Company's total capital ratio 14.70% 14.33% 0.37%
The Company's tangible common (0.18)% 0.05% (0.23)%
equity to tangible assets
Asset Quality & Earning Assets Review
oNonperforming loans declined $19.9 million (24.1%) during the six months
of 2013 to $62.7 million as of June 30, 2013, from $82.6 million as of
December 31, 2012. Our June 30, 2013, lower level of nonperforming loans
as measured at quarter-end was the lowest since June 30, 2008.
Nonperforming loans declined primarily because of successful negotiations
by our staff with guarantors and movement to OREO, as well as loans being
upgraded to accruing status when borrowers financial condition showed
oLoans that were classified as performing but 30 to 89 days past due and
still accruing interest decreased to $4.3 million at June 30, 2013, from
$12.9 million at December 31, 2012, and from $6.4 million at June 30,
oOREO declined from $72.4 million at December 31, 2012, to $59.5 million at
June 30, 2013. OREO dispositions totaling $19.5 million in the six month
period were somewhat offset by new OREO and improvements to existing OREO
of $11.2 million. Valuation write-downs of properties held for sale
reduced the reported total by $4.7 million with related expense
oSecurities available-for-sale increased $5.1 million during 2013 to $584.9
million from $579.9 million at December 31, 2012. At $290.9 million
(49.7% of the portfolio) and $168.5 million (28.8% of total) asset-backed
securities and collateralized mortgage-backed securities, respectively,
were the largest components of the portfolio as of June 30, 2013. The
Company's asset-backed securities were heavily oriented to those backed by
student loan debt under a guarantee from the U.S. Department of Education.
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. Management also
presents an efficiency ratio that is non-GAAP. The efficiency ratio is
calculated by dividing adjusted noninterest expense by the sum of net interest
income on a tax equivalent basis and adjusted noninterest income. Management
believes this measure provides investors with information regarding the
Company's operating efficiency and how management evaluates performance
internally. Consistent with industry practice, management also disclosed the
tangible common equity to tangible assets and the Tier 1 common equity to risk
weighted assets in the discussion immediately above and in the following
tables. The tables provide a reconciliation of each non-GAAP measure to the
most comparable GAAP equivalent.
Forward Looking Statements: This report may contain forward-looking
statements. Forward looking statements are identifiable by the inclusion of
such qualifications as expects, intends, believes, may, likely or other
indications that the particular statements are not based upon facts but are
rather based upon the Company's beliefs as of the date of this release.
Actual events and results may differ significantly from those described in
such forward-looking statements, due to changes in the economy, interest rates
or other factors. Additionally, all statements in this document, including
forward-looking statements, speak only as of the date they are made, and the
Company undertakes no obligation to update any statement in light of new
information or future events. For additional information concerning the
Company and its business, including other factors that could materially affect
the Company's financial results, please review our filings with the Securities
and Exchange Commission.
SOURCE Old Second Bancorp, Inc.
Contact: J. Douglas Cheatham, Chief Financial Officer, (630) 906-5484
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