Old Second Bancorp Earnings 2020-09-30
| Balance Sheet | Income Statement | Cash Flow |
|---|---|---|
I
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF | |
THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE | |
SECURITIES EXCHANGE ACT OF 1934 |
For transition period from to
Commission File Number
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of incorporation or organization) |
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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.
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).
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☐
Non-accelerated filer☐Smaller reporting company
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Yes
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
As of November 4, 2020, the Registrant has
OLD SECOND BANCORP, INC.
Form 10-Q Quarterly Report
Table of Contents
Cautionary Note Regarding Forward-Looking Statements
Page Number | ||
5 | ||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 42 | |
69 | ||
70 | ||
71 | ||
71 | ||
71 | ||
72 | ||
72 | ||
72 | ||
73 | ||
74 |
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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 with respect to management’s expectations regarding future plans, strategies and financial performance, including regulatory developments, industry and economic trends, and other matters. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the Company's management and on information currently available to management, can be identified by the inclusion of such qualifications as “expects,” “intends,” “believes,” “may,” “will,” “would,” “could,” “should,” “plan,” “anticipate,” “estimate,” “possible,” “likely” or other indications that the particular statements are not historical facts and refer to future periods. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and may be outside of the Company’s control. Actual events and results may differ materially from those described in such forward-looking statements due to numerous factors, including:
| ● | our ability to execute our growth strategy; |
| ● | the impact of the outbreak of the novel coronavirus, or COVID-19, on our business, including the impact of the actions taken by governmental authorities to try and contain the virus or address the impact of the virus on the United States economy (including, without limitation, the Coronavirus Aid, Relief and Economic Security Act, or the CARES Act), and the resulting effect of these items on our operations, liquidity and capital position, and on the financial condition of our borrowers and other customers; |
| ● | 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; |
| ● | impairment of goodwill, other intangible assets or deferred tax assets; |
| ● | our ability to achieve anticipated results from any bank acquisition depends on the state of the economic and financial markets going forward. Specifically, we may incur more credit losses than expected, cost savings may be less than expected, anticipated strategic gains may be significantly harder or take longer to achieve than expected or may not be achieved in their entirety, and customer attrition may be greater than expected; |
| ● | 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; |
| ● | ability to raise additional capital on acceptable terms when needed; |
| ● | ability to raise cost-effective funding to support business plans when needed: |
| ● | 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 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 impact on our financial statements; |
| ● | our ability to receive dividends from our subsidiaries; |
| ● | a decrease in our regulatory capital ratios; |
| ● | adverse federal or state tax assessments; |
| ● | risks associated with actual or potential litigation or investigations by customers, regulatory agencies or others; |
| ● | legislative or regulatory changes, 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, including the Dodd-Frank Act; |
| ● | negative changes in our capital position; |
| ● | the adverse effects of events such as outbreaks of contagious disease, war or terrorist activities, or essential utility outages, including deterioration in the global economy, instability in credit markets and disruptions in our customers’ supply chains and transportation; |
| ● | changes in trade policy and any related tariffs; and |
3
| ● | each of the factors and risks under the heading “Risk Factors” in our 2019 Annual Report on Form 10-K, Part II, Item 1A, Risk Factors, in our Quarterly Reports on Form 10-Q, and in subsequent filings we make with the SEC. |
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.
4
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Old Second Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share data)
(unaudited) | ||||||
September 30, | December 31, | |||||
| 2020 |
| 2019 | |||
Assets | ||||||
Cash and due from banks | $ | | $ | | ||
Interest earning deposits with financial institutions | | | ||||
Cash and cash equivalents | | | ||||
Securities available-for-sale, at fair value | | | ||||
Federal Home Loan Bank Chicago ("FHLBC") and Federal Reserve Bank Chicago ("FRBC") stock | | | ||||
Loans held-for-sale | | | ||||
Loans | | | ||||
Less: allowance for credit losses on loans | | | ||||
Net loans | | | ||||
Premises and equipment, net | | | ||||
Other real estate owned | | | ||||
Mortgage servicing rights, net | | | ||||
Goodwill and core deposit intangible | | | ||||
Bank-owned life insurance ("BOLI") | | | ||||
Deferred tax assets, net | | | ||||
Other assets | | | ||||
Total assets | $ | | $ | | ||
Liabilities | ||||||
Deposits: | ||||||
Noninterest bearing demand | $ | | $ | | ||
Interest bearing: | ||||||
Savings, NOW, and money market | | | ||||
Time | | | ||||
Total deposits | | | ||||
Securities sold under repurchase agreements | | | ||||
Other short-term borrowings | | | ||||
Junior subordinated debentures | | | ||||
Senior notes | | | ||||
Notes payable and other borrowings | | | ||||
Other liabilities | | | ||||
Total liabilities | | | ||||
Stockholders’ Equity | ||||||
Common stock | | | ||||
Additional paid-in capital | | | ||||
Retained earnings | | | ||||
Accumulated other comprehensive income | | | ||||
Treasury stock | ( | ( | ||||
Total stockholders’ equity | | | ||||
Total liabilities and stockholders’ equity | $ | | $ | | ||
September 30, 2020 | December 31, 2019 | ||||
Common | Common | ||||
Stock |
| Stock | |||
Par value | $ | | $ | | |
Shares authorized | | | |||
Shares issued | | | |||
Shares outstanding | | | |||
Treasury shares | | | |||
See accompanying notes to consolidated financial statements.
5
Old Second Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income
(In thousands, except per share data)
(unaudited) | (unaudited) | ||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 |
| |||||
Interest and dividend income | |||||||||||||
Loans, including fees | $ | | $ | | $ | | $ | | |||||
Loans held-for-sale | | | | | |||||||||
Securities: | |||||||||||||
Taxable | | | | | |||||||||
Tax exempt | | | | | |||||||||
Dividends from FHLBC and FRBC stock | | | | | |||||||||
Interest bearing deposits with financial institutions | | | | | |||||||||
Total interest and dividend income | | | | | |||||||||
Interest expense | |||||||||||||
Savings, NOW, and money market deposits | | | | | |||||||||
Time deposits | | | | | |||||||||
Securities sold under repurchase agreements | | | | | |||||||||
Other short-term borrowings | | | | | |||||||||
Junior subordinated debentures | | | | | |||||||||
Senior notes | | | | | |||||||||
Notes payable and other borrowings | | | | | |||||||||
Total interest expense | | | | | |||||||||
Net interest and dividend income | | | | | |||||||||
Provision for credit losses | | | | | |||||||||
Net interest and dividend income after provision for credit losses | | | | | |||||||||
Noninterest income | |||||||||||||
Trust income | | | | | |||||||||
Service charges on deposits | | | | | |||||||||
Secondary mortgage fees | | | | | |||||||||
Mortgage servicing rights mark to market loss | ( | ( | ( | ( | |||||||||
Mortgage servicing income | | | | | |||||||||
Net gain on sales of mortgage loans | | | | | |||||||||
Securities (losses) gains , net | ( | | ( | | |||||||||
Change in cash surrender value of BOLI | | | | | |||||||||
Death benefit realized on BOLI | ( | - | | - | |||||||||
Card related income | | | | | |||||||||
Other income | | | | | |||||||||
Total noninterest income | | | | | |||||||||
Noninterest expense | |||||||||||||
Salaries and employee benefits | | | | | |||||||||
Occupancy, furniture and equipment | | | | | |||||||||
Computer and data processing | | | | | |||||||||
FDIC insurance | | ( | | | |||||||||
General bank insurance | | | | | |||||||||
Amortization of core deposit intangible | | | | | |||||||||
Advertising expense | | | | | |||||||||
Card related expense | | | | | |||||||||
Legal fees | | | | | |||||||||
Other real estate expense, net | | | | | |||||||||
Other expense | | | | | |||||||||
Total noninterest expense | | | | | |||||||||
Income before income taxes | | | | | |||||||||
Provision for income taxes | | | | | |||||||||
Net income | $ | | $ | | $ | | $ | | |||||