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Old Second Reports First Quarter 2018 Net Income of $9.5 million

Successfully Completed the Acquisition of Greater Chicago Financial Corp. (ABC Bank)

AURORA, IL / ACCESSWIRE / April 25, 2018 / 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 first quarter of 2018. The Company's net income was $9.5 million, or $0.31 per diluted share, for the first quarter of 2018, compared to a net loss of $2.5 million, or $0.08 per diluted share, in the fourth quarter of 2017, and net income of $4.4 million, or $0.15 per diluted share, for the first quarter of 2017.

On April 20, 2018, the Company completed its previously announced acquisition of Greater Chicago Financial Corp., and its wholly-owned bank subsidiary, ABC Bank. In connection with the merger, Greater Chicago Financial Corp merged with and into the Company, with the Company as the surviving company in the merger. Immediately following the merger, ABC Bank, an Illinois state-chartered bank and wholly owned subsidiary of Greater Chicago Financial Corp., merged with and into the Bank, with the Bank as the surviving bank.

Operating Results

  • First quarter 2018 net income was $9.5 million, reflecting an increase in earnings of $12.0 million from the fourth quarter of 2017, and an increase in earnings of $5.1 million from the first quarter of 2017.
  • Adjusted net income, a non-GAAP financial measure, was $8.1 million, or $0.27 per diluted share, for the first quarter of 2018, compared to $7.0 million, or $0.23 per diluted share, for the fourth quarter of 2017.
    • First quarter 2018 adjusted net income excluded a $1.0 million BOLI death claim, $596,000 of insurance proceeds, after tax, recovered on a previously charged off credit that was taken as a release to the provision for loan losses, and $203,000 in costs, after tax, related to our acquisition of ABC Bank.
    • Fourth quarter 2017 adjusted net income excluded a $9.5 million noncash charge that was recorded as tax expense in the fourth quarter of 2017, stemming from the late December 2017 enactment of the "Tax Cuts and Jobs Act" which lowered the Federal corporate income tax rate and caused the Company to record a valuation allowance with respect to its deferred tax asset.
  • Net interest and dividend income was $19.6 million for the first quarter of 2018, reflecting an increase of $230,000, or 1.2%, from the $19.4 million recorded in the fourth quarter of 2017, and an increase of $2.1 million, or 11.8%, over the first quarter of 2017. Net interest income in the first quarter of 2018 was favorably impacted by a recovery of $495,000 of interest income on a payoff of a nonaccrual loan, as well as the rising interest rate environment. Purchase accounting accretion income realized in the first quarter of 2018, stemming from the purchase of the Chicago branch of Talmer Bank and Trust in late 2016, totaled $141,000, compared to $213,000 in the fourth quarter of 2017, and $355,000 in the first quarter of 2017.
  • The Company recorded a release of the provision for loan and lease losses of $722,000 in the first quarter of 2018, compared to provision expense of $750,000 in the fourth quarter of 2017. No provision adjustment was recorded in the first quarter of 2017.
  • Noninterest income was $8.5 million for the first quarter of 2018, which reflects an increase of $321,000, or 3.9%, over the fourth quarter of 2017, and an increase of $1.5 million, or 21.0%, compared to the first quarter of 2017. The increase in noninterest income in the first quarter of 2018 compared to both the fourth quarter of 2017 and the first quarter of 2017 was driven primarily by the death benefit received on a BOLI claim in the first quarter of 2018, as well as increases in mortgage servicing rights mark to market adjustments.
  • Noninterest expense was $17.4 million for the first quarter of 2018 which reflects an increase of $1.2 million, or 7.2%, as compared to the fourth quarter of 2017, and a decrease of $700,000, or 3.9%, from the first quarter of 2017. The increase in noninterest expense in the first quarter of 2018 compared to the fourth quarter of 2017 is primarily due to increases in salaries and employee benefits and computer and data processing expenses stemming from costs incurred related to our acquisition of ABC Bank, partially offset by a decrease in OREO related costs. The year over year decrease is primarily due to reductions in salaries and employee benefits and OREO related costs.
  • On April 17 2018, the Company's Board of Directors declared a cash dividend of $0.01 per share payable on May 7, 2018, to stockholders of record as of April 27, 2018.

March 31, December 31, March 31,
Well-Capitalized 2018 2017 2017
The Company
Common equity tier 1 capital ratioN/A9.82 %9.25 %8.42 %
Total risk-based capital ratioN/A13.58 %12.93 %12.11 %
Tier 1 risk-based capital ratioN/A12.63 %12.03 %10.86 %
Tier 1 leverage ratioN/A10.44 %10.08 %8.84 %
The Bank
Common equity tier 1 capital ratio6.50 %13.56 %12.88 %12.46 %
Total risk-based capital ratio10.00 %14.51 %13.78 %13.33 %
Tier 1 risk-based capital ratio8.00 %13.56 %12.88 %12.46 %
Tier 1 leverage ratio5.00 %11.19 %10.79 %10.14 %

  • The ratios shown above exceed levels required to be considered "well capitalized."

Asset Quality & Earning Assets

  • Nonperforming loans totaled $12.8 million at March 31, 2018, compared to $15.6 million at December 31, 2017, and $12.5 million at March 31, 2017. 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 0.8% as of March 31, 2018, 0.97% as of December 31, 2017, and 0.8% as of March 31, 2017.
  • OREO assets totaled $7.1 million as of March 31, 2018, compared to $8.4 million at December 31, 2017, and $13.5 million at March 31, 2017. The $1.3 million OREO reduction for the quarter is due to five property sales. Modest OREO valuation writedowns continued in the first quarter of 2018 with expense of $112,000 compared to $78,000 in the fourth quarter of 2017 and $318,000 in the first quarter of 2017. Nonperforming assets as a percent of total loans plus OREO decreased to 1.2% as of March 31, 2018, as compared to 1.5% as of December 31, 2017 and 1.7% as of March 31, 2017.
  • Total loans were $1.60 billion at March 31, 2018, reflecting a decrease of $15.8 million compared to December 31, 2017. Average loans (including loans held-for-sale) for the first quarter of 2018 were $1.60 billion, reflecting an increase of $3.3 million from quarterly average loans for the fourth quarter of 2017, and an increase of $115.7 million from quarterly average loans for the first quarter of 2017.
  • Available-for-sale securities at fair value totaled $550.9 million at March 31, 2018, compared to $541.4 million at December 31, 2017, and $611.1 million at March 31, 2017. Pretax net gains of $35,000 on the sale of securities were realized in the first quarter of 2018, compared to net gains of $639,000 in the fourth quarter of 2017 and net losses of $136,000 in the first quarter of 2017.

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, 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.

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, April 26, 2018, 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 May 3, 2018, by dialing 877-481-4010, using Conference ID: 27186.

Contact:

Bradley S. Adams
Chief Financial Officer
(630) 906-5484

SOURCE: Old Second Bancorp, Inc.

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