OLD SECOND BANCORP INC [OSBC] Filings

10-Q 1 tmb-20240630x10q.htm 10-Q UNITED STATES

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
	THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

For transition period from to

Commission File Number 000-10537

(Exact name of Registrant as specified in its charter)


Delaware		36-3143493
(State or other jurisdiction		(I.R.S. Employer Identification Number)
of incorporation or organization)

37 South River Street, Aurora, Illinois 60507

(Address of principal executive offices) (Zip Code)

(630) 892-0202

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

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

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ ‘‘smaller reporting company,’’ and ‘‘emerging growth company’’ in Rule 12b–2 of the Exchange Act.

Large accelerated filer☐Accelerated filer☒

Non-accelerated filer☐Smaller reporting company☐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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).

Yes ☐ No ☒

As of August 6, 2024, the Registrant has 44,849,591 shares of common stock outstanding at $1.00 par value per share.

Table of Contents

OLD SECOND BANCORP, INC.

Form 10-Q Quarterly Report

Table of Contents

Cautionary Note Regarding Forward-Looking Statements


	PART I
		Page Number
Item 1.	Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	63
Item 4.	Controls and Procedures	64
	PART II

Item 1.	Legal Proceedings	65
Item 1.A.	Risk Factors	65
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	65
Item 3.	Defaults Upon Senior Securities	65
Item 4.	Mine Safety Disclosure	66
Item 5.	Other Information	66
Item 6.	Exhibits	67

	Signatures	68

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report and other publicly available documents of the Company contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, including, but not limited to, management’s expectations regarding future plans, strategies and financial performance, including regulatory developments, industry and economic trends and estimates and assumptions underlying accounting policies. Forward-looking statements are based on our current beliefs, expectations and assumptions and on information currently available and, can be identified by the use of words such as “expects,” “intends,” “believes,” “may,” “will,” “would,” “could,” “should,” “plan,” “anticipate,” “estimate,” “possible,” “likely” or the negative thereof as well as other similar words and expressions of the future. Forward-looking statements are subject to risks, uncertainties and assumptions that are difficult to predict as to timing, extent, likelihood and degree of occurrence, which could cause our actual results to differ materially from those anticipated in or by such statements. Potential risks and uncertainties include, but are not limited to, the following:

●

our ability to execute our growth strategy;

●

negative economic conditions that adversely affect the economy, real estate values, the job market and other factors nationally and in our market area, in each case that may affect our liquidity and the performance of our loan portfolio;

●

risks with respect to our ability to successfully expand and integrate businesses and operations that we acquire, as well our ability to identify and complete future mergers or acquisitions;

●

the financial success and viability of the borrowers of our commercial loans;

●

changes in U.S. monetary policy, the level and volatility of interest rates, the capital markets and other market conditions that may affect, among other things, our liquidity and the value of our assets and liabilities;

●

competitive pressures from other financial service businesses and from nontraditional financial technology (“FinTech”) companies;

●

any negative perception of our reputation or financial strength;

●

our ability to raise additional capital on acceptable terms when needed;

●

our ability to raise cost-effective funding to support business plans when needed:

●

our ability to use technology to provide products and services that will satisfy customer demands and create efficiencies in operations;

●

adverse effects on our information technology systems resulting from system failures, human error or cyberattacks;

●

adverse effects of failures by our vendors to provide agreed upon services in the manner and at the cost agreed, particularly our information technology vendors and those vendors performing a service on the Company’s behalf;

●

the impact of any claims or legal actions, including any effect on our reputation;

●

losses incurred in connection with repurchases and indemnification payments related to mortgages;

●

the soundness of other financial institutions and other counter-party risk;

●

changes in accounting standards, rules and interpretations and the related impact on our financial statements;

●

our ability to receive dividends from our subsidiaries;

●

a decrease in our regulatory capital ratios or negative changes in our capital position;

●

adverse federal or state tax assessments, or changes in tax laws or policies;

●

risks associated with actual or potential litigation or investigations by customers, regulatory agencies or others;

●

economic, legislative or regulatory changes, including the impact of changes to Congress and the Office of the President, particularly changes in regulation of financial services companies;

●

increased costs of compliance, heightened regulatory capital requirements and other risks associated with changes in regulation and the current regulatory environment;

●

risks associated with complex and changing regulatory environments, including, among others, with respect to data privacy, artificial intelligence, information security, climate change or other environmental, social and governance matters, and labor matters, relating to our operations;

●

the adverse effects of events beyond our control that may have a destabilizing effect on financial markets and the economy, such as epidemics and pandemics, war or terrorist activities, such as the war in Ukraine, the Middle East conflict, and the conflict between China and Taiwan, essential utility outages, deterioration in the global economy, instability in the credit markets, disruptions in our customers’ supply chains or disruption in transportation and disruptions caused from widespread cybersecurity incidents;

●

changes in trade policy and any related tariffs; and

●

each of the factors and risks under the heading “Risk Factors” in our 2023 Annual Report on Form 10-K and in subsequent filings we make with the SEC.

Table of Contents

Because the Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain, there can be no assurances that future actual results will correspond to any forward-looking statements and you should not rely on any forward-looking statements. Additionally, all statements in this Form 10-Q, 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, except as required by applicable law.

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Old Second Bancorp, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share data)


	(unaudited)
	June 30,		December 31,
	2024		2023
Assets
Cash and due from banks	$	54,888	$	55,534
Interest earning deposits with financial institutions		66,004		44,611
Cash and cash equivalents		120,892		100,145
Securities available-for-sale, at fair value		1,173,661		1,192,829
Federal Home Loan Bank Chicago (“FHLBC”) and Federal Reserve Bank Chicago (“FRBC”) stock		32,005		33,355
Loans held-for-sale		2,291		1,322
Loans		3,976,595		4,042,953
Less: allowance for credit losses on loans		42,269		44,264
Net loans		3,934,326		3,998,689
Premises and equipment, net		82,871		79,310
Other real estate owned		6,920		5,123
Mortgage servicing rights, at fair value		10,488		10,344
Goodwill		86,478		86,478
Core deposit intangible		10,063		11,217
Bank-owned life insurance (“BOLI”)		110,535		109,318
Deferred tax assets, net		28,710		31,077
Other assets		63,460		63,592
Total assets	$	5,662,700	$	5,722,799

Liabilities
Deposits:
Noninterest bearing demand	$	1,728,487	$	1,834,891
Interest bearing:
Savings, NOW, and money market		2,161,426		2,207,949
Time		631,815		527,906
Total deposits		4,521,728		4,570,746
Securities sold under repurchase agreements		46,542		26,470
Other short-term borrowings		330,000		405,000
Junior subordinated debentures		25,773		25,773
Subordinated debentures		59,425		59,382
Other liabilities		59,897		58,147
Total liabilities		5,043,365		5,145,518

Stockholders’ Equity
Common stock		44,908		44,705
Additional paid-in capital		204,012		202,223
Retained earnings		432,037		393,311
Accumulated other comprehensive loss		(60,769)		(62,781)
Treasury stock		(853)		(177)
Total stockholders’ equity		619,335		577,281
Total liabilities and stockholders’ equity	$	5,662,700	$	5,722,799


	June 30, 2024		December 31, 2023
	Common		Common
	Stock		Stock
Par value	$	1.00	$	1.00
Shares authorized		60,000,000		60,000,000
Shares issued		44,907,619		44,705,150
Shares outstanding		44,849,591		44,697,917
Treasury shares		58,028		7,233

See accompanying notes to consolidated financial statements.

Table of Contents

Old Second Bancorp, Inc. and Subsidiaries

Consolidated Statements of Income

(In thousands, except per share data)


	(unaudited)				(unaudited)
	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Interest and dividend income
Loans, including fees	$	62,151	$	61,561	$	124,824	$	118,771
Loans held-for-sale		19		19		33		31
Securities:
Taxable		8,552		9,930		16,644		20,665
Tax exempt		1,292		1,337		2,598		2,674
Dividends from FHLBC and FRBC stock		584		396		1,219		676
Interest bearing deposits with financial institutions		625		643		1,235		1,228
Total interest and dividend income		73,223		73,886		146,553		144,045
Interest expense
Savings, NOW, and money market deposits		4,317		1,742		8,354		2,891
Time deposits		4,961		1,156		9,002		1,820
Securities sold under repurchase agreements		83		7		169		16
Other short-term borrowings		3,338		5,160		7,895		7,505
Junior subordinated debentures		288		281		568		560
Subordinated debentures		546		546		1,092		1,092
Senior notes		-		1,414		-		2,408
Notes payable and other borrowings		-		-		-		87
Total interest expense		13,533		10,306		27,080		16,379
Net interest and dividend income		59,690		63,580		119,473		127,666
Provision for credit losses		3,750		2,000		7,250		5,501
Net interest and dividend income after provision for credit losses		55,940		61,580		112,223		122,165
Noninterest income
Wealth management		2,779		2,458		5,340		4,728
Service charges on deposits		2,508		2,362		4,923		4,786
Secondary mortgage fees		65		76		115		135
Mortgage servicing rights mark to market (loss) gain		(238)		96		(144)		(429)
Mortgage servicing income		513		499		1,001		1,015
Net gain on sales of mortgage loans		468		398		782		704
Securities (losses) gains, net		-		(1,547)		1		(3,222)
Change in cash surrender value of BOLI		820		418		1,992		660
Death benefit realized on BOLI		893		-		893		-
Card related income		2,577		2,690		4,953		4,934
Other income		742		773		1,772		2,262
Total noninterest income		11,127		8,223		21,628		15,573
Noninterest expense
Salaries and employee benefits		23,424		21,798		47,736		44,046
Occupancy, furniture and equipment		3,899		3,639		7,826		7,114
Computer and data processing		2,184		1,290		4,439		3,064
FDIC insurance		616		794		1,283		1,378
Net teller & bill paying		578		515		1,099		1,017
General bank insurance		312		306		621		611
Amortization of core deposit intangible		574		618		1,154		1,242
Advertising expense		472		103		664		245
Card related expense		1,323		1,222		2,600		2,438
Legal fees		238		283		464		602
Consulting & management fees		797		520		1,133		1,310
Other real estate expense, net		(87)		(98)		(41)		208
Other expense		3,547		3,840		7,140		7,477
Total noninterest expense		37,877		34,830		76,118		70,752
Income before income taxes		29,190		34,973		57,733		66,986
Provision for income taxes		7,299		9,411		14,530		17,817
Net income	$	21,891	$	25,562	$	43,203	$	49,169

Basic earnings per share	$	0.48	$	0.57	$	0.96	$	1.10
Diluted earnings per share		0.48		0.56		0.95		1.08
Dividends declared per share		0.05		0.05		0.10		0.10

See accompanying notes to consolidated financial statements.

Table of Contents

Old Second Bancorp, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(In thousands)


	(unaudited)				(unaudited)
	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net Income	$	21,891	$	25,562	$	43,203	$	49,169

Unrealized holding gains (losses) on available-for-sale securities arising during the period		2,405		(8,360)		1,529		7,850
Related tax (expense) benefit		(673)		2,342		(428)		(2,194)
Holding gains (losses), after tax, on available-for-sale securities		1,732		(6,018)		1,101		5,656

Less: Reclassification adjustment for the net gains (losses) realized during the period
Net realized (losses) gains		-		(1,547)		1		(3,222)
Related tax benefit		-		434		-		905
Net realized (losses) gains, after tax		-		(1,113)		1		(2,317)
Other comprehensive income (loss) on available-for-sale securities		1,732		(4,905)		1,100		7,973

Changes in fair value of derivatives used for cash flow hedges		1,194		(3,017)		1,246		(1,415)
Related tax (expense) benefit		(334)		836		(334)		380
Other comprehensive income (loss) on cash flow hedges		860		(2,181)		912		(1,035)

Total other comprehensive income (loss)		2,592		(7,086)		2,012		6,938
Total comprehensive income	$	24,483	$	18,476	$	45,215	$	56,107

OLD SECOND BANCORP INC [OSBC] Filings
10-Q	[2024-08-08]
10-Q	[2024-05-09]
10-K	[2024-03-07]
10-Q	[2023-11-08]
10-Q	[2023-08-08]
10-Q	[2023-05-09]
10-K	[2023-03-09]
10-Q	[2022-11-08]
10-Q	[2022-08-08]
10-Q	[2022-05-09]
10-K	[2022-03-10]
10-Q	[2021-11-05]
10-Q	[2021-08-06]
10-Q	[2021-05-07]
10-K	[2021-03-08]
10-Q	[2020-11-06]
10-Q	[2020-08-07]
10-Q	[2020-05-11]
10-K	[2020-03-06]
10-Q	[2019-11-07]
10-Q	[2019-08-07]
10-Q	[2019-05-07]
10-K	[2019-03-07]
10-Q	[2018-11-07]
10-Q	[2018-08-07]
10-Q	[2018-05-08]
10-K	[2018-03-13]
10-Q	[2017-11-07]
10-Q	[2017-08-07]
10-Q	[2017-05-08]
10-K	[2017-03-13]
10-Q	[2016-11-08]
10-Q	[2016-08-08]
10-Q	[2016-05-06]
10-K	[2016-03-11]
10-Q	[2015-11-06]
10-Q	[2015-08-07]
10-Q	[2015-05-08]
10-K	[2015-03-12]
10-Q	[2014-11-12]
10-Q	[2014-08-13]
10-Q	[2014-05-13]
10-K	[2014-02-26]
S-1	[2014-01-17]
10-Q	[2013-11-12]
10-Q	[2013-08-14]
10-Q	[2013-05-15]
10-K	[2013-03-20]
10-Q	[2012-11-14]
10-Q	[2012-08-14]
10-Q	[2012-05-10]
10-K	[2012-03-15]