Old Second Reports Second Quarter 2016 Net Income of $3.8 Million

AURORA, IL / ACCESSWIRE / July 26, 2016 / 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 second quarter of 2016. The Company reported net income of $3.8 million for the second quarter of 2016, compared to net income of $4.1 million in the second quarter of 2015. The Company’s net income available to common stockholders of $3.8 million, or $0.13 per diluted share for the second quarter of 2016, compared to $3.4 million, or $0.12 per diluted share, in the second quarter of 2015.

Operating Results

On July 19, 2016, the Company’s Board of Directors declared a cash dividend of 1 cent per share payable on August 9, 2016, to stockholders of record as of July 29, 2016.
Second quarter 2016 net income available to common stockholders increased by $426,000, or 12.5%, from the second quarter of 2015 and increased approximately 15.7% from the first quarter of 2016. When compared to the second quarter of 2015, the second quarter 2016 reflects higher net interest income of $427,000. No release of loan loss reserves was recorded in the second quarter of 2016, as compared to a $2.3 million reserve release in the like 2015 quarter. Finally, comparing the year over year quarters, the second quarter of 2016 experienced lower noninterest income of $987,000 primarily due to reductions in residential mortgage banking income, and lower noninterest expense stemming from decreases in compensation costs and other real estate owned (“OREO”) expenses. Noninterest expense of $16.7 million for the second quarter of 2016 was $2.2 million or 11.8% lower than the second quarter of 2015.
Net interest income in the second quarter of 2016 was $142,000 higher than the first quarter of 2016, and noninterest income was $1.0 million, or 16.0%, higher in the second quarter of 2016 as compared to the first quarter, primarily due to residential mortgage banking income. Noninterest expense was also higher in the second quarter of 2016 as compared to the prior quarter, which was primarily due to a one-time expense recorded on a debit card contract change.

Capital Ratios

June 30, 

December 31, 

June 30, 

2016

2015

The Bank’s common equity tier 1 capital ratio

 14.67

 14.10

 17.49

The Company’s common equity tier 1 capital ratio

 10.30

 10.55

 9.82

The Bank’s total capital ratio

 15.74

 15.23

 18.75

The Company’s total capital ratio

 15.03

 15.56

 17.10

The Company’s tier 1 leverage capital ratio

 8.94

 8.69

 10.02

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

Asset Quality & Earning Assets

Nonperforming loans increased to $18.4 million at June 30, 2016, from $14.6 million at December 31, 2015, and $19.3 million at June 30, 2015. The increase in 2016 was due to 2 relationships secured by commercial real estate which have each lost one large tenant in recent months. Both borrowers have indicated they are aggressively pursuing new tenants, and one borrower has noted that refinancing is in process with another institution.
OREO assets decreased in the second quarter to end at $16.3 million on June 30, 2016, compared to $19.1 million at December 31, 2015, and $32.0 million at June 30, 2015. Valuation write-downs continued in the second quarter of 2016 with a quarterly expense of $489,000 compared to $451,000 in the first quarter of 2016.
Total loans at June 30, 2016, were $1.16 billion, reflecting an increase of $27.4 million when compared to December 31, 2015 and an increase of $2.3 million as compared to June 30, 2015. Average loans (including loans held-for-sale) for the second quarter of 2016 were $1.15 billion, reflecting an increase of $9.8 million from the fourth quarter of 2015 and a decrease of $2.4 million when compared to the second quarter of 2015. Loan growth in the 2016 period stems primarily from commercial and industrial loan originations.
June 30, 2016 available-for-sale securities at fair value totaled $764.6 million, which is an increase of $308.5 million from $456.1 million at December 31, 2015, and $399.8 million balance at June 30, 2015. The increase is primarily due to the reclassification in the second quarter 2016 of the securities held-to-maturity portfolio to available-for-sale. This portfolio transfer was completed to allow flexibility to fund loan growth or to restructure the securities portfolio as management deems appropriate. The total securities portfolio has also increased in the last twelve months by $111.3 million, which is commensurate with deposit and short-term borrowing growth.

Management review of the loan portfolio concluded that neither a loan loss reserve release nor a loan loss provision was appropriate in the second quarter of 2016 or the last quarter of 2015. The second quarter of 2015 reflected a loan loss reserve release of $2.3 million.

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.

Conference Call

The Company will also host an earnings call on Wednesday, July 27, 2016, 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 August 11, 2016, by dialing 877-481-4010, using Conference ID: 10039.

SOURCE: Old Second Bancorp, Inc.

ReleaseID: 442690

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