AURORA, IL / ACCESSWIRE / July 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 second quarter of 2018. The Company's net income was $6.3 million, or $0.21 per diluted share, for the second quarter of 2018, compared to net income of $9.5 million, or $0.31 per diluted share, in the first quarter of 2018, and net income of $5.1 million, or $0.17 per diluted share, for the second 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. ABC Bank loans purchased, net of purchase accounting adjustments, totaled $227.6 million, and deposits, net of purchase accounting adjustments, totaled $248.5 million. Data conversion activities were substantially completed by June 30, 2018, resulting in acquisition related costs of $2.5 million after tax, or $0.08 per diluted share, for the second quarter.

Operating Results

• The Company's second quarter 2018 net income was $6.3 million, reflecting a reduction in earnings of $3.2 million from the first quarter of 2018, and an increase in earnings of $1.1 million from the second quarter of 2017.
• Adjusted net income, a non-GAAP financial measure, was $8.7 million, or $0.29 per diluted share, for the second quarter of 2018, compared to $8.1 million, or $0.27 per diluted share, for the first quarter of 2018.
• Second quarter 2018 adjusted net income excluded $2.5 million in costs, after tax, related to our acquisition of ABC Bank.
• 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.
• Net interest and dividend income was $23.2 million for the second quarter of 2018, reflecting an increase of $3.6 million, or 18.5%, from the $19.6 million recorded in the first quarter of 2018, and an increase of $4.6 million, or 24.5%, over the second quarter of 2017. Net interest income in the second quarter of 2018 was favorably impacted by the rising interest rate environment, as well as $1.1 million of purchase accounting accretion, $946,000 of which related to the Company's acquisition of ABC Bank, compared to $141,000 of purchase accounting accretion in the first quarter of 2018, and $495,000 in the second quarter of 2017. Purchase accounting accretion income realized prior to the second quarter of 2018 was due to the Company's purchase of the Chicago branch of Talmer Bank and Trust in late 2016.
• The Company recorded a provision for loan and lease losses of $1.5 million in the second quarter of 2018. A release of the provision for loan and lease losses of $722,000 was recorded in the first quarter of 2018, compared to provision expense of $750,000 in the second quarter of 2017.
• Noninterest income was $8.5 million for both the second and first quarters of 2018, compared to $7.3 million in the second quarter of 2017. Noninterest income in the second quarter of 2018 reflects $312,000 of security gains, net, as well as growth in trust income and service charges on deposits compared to the first quarter of 2018. The first quarter of 2018 reflected a $1.0 million death benefit received on a BOLI claim, as well as an increase in the mortgage servicing rights mark to market adjustment.
• Noninterest expense was $22.3million for the second quarter of 2018 which reflects an increase of $4.9 million, or 28.4%, as compared to the first quarter of 2018, and an increase of $4.3 million, or 23.9%, from the second quarter of 2017. The increase in noninterest expense in the second quarter of 2018 compared to the first quarter of 2018 and the second quarter of 2017 is primarily due to increases in salaries and employee benefits costs, as well as computer and data processing expenses stemming from costs incurred related to the Company's acquisition of ABC Bank. The year over year increase was partially offset by a decrease in OREO related costs due to a decline in OREO assets.
• On July 17, 2018, the Company's Board of Directors declared a cash dividend of $0.01 per share payable on August 6, 2018, to stockholders of record as of July 27, 2018.

Capital Ratios

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

Asset Quality & Earning Assets

• Nonperforming loans totaled $11.9 million at June30,2018, compared to $12.8 million at March 31, 2018, and $15.6 million at June 30,2017. 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 0.6% as of June 30,2018, 0.8% as of March 31, 2018, and 1.0% as of June30,2017. Purchase credit impaired ("PCI") loans from the Company's acquisition of ABC Bank totaled $11.2 million, net of purchase accounting adjustments, as of June 30, 2018.
• OREO assets totaled $8.9 million as of June 30,2018, compared to $7.1 million at March 31,2018, and $11.7 million at June 30,2017. Valuation writedowns of $254,000 were recorded in the second quarter of 2018, compared to $112,000 in the first quarter of 2018 and $392,000 in the second quarter of 2017. Nonperforming assets as a percent of total loans plus OREO decreased to 1.1% as of June 30,2018, as compared to 1.2% as of March 31, 2018 and 1.8% as of June 30,2017.
• Total loans were $1.85 billion at June 30,2018, reflecting an increase of $247.4 million compared to March 31,2018, and an increase of $309.5 million compared to June 30, 2017, primarily due to the Company's acquisition of ABC Bank, which included $227.6 million of loans recorded, net of purchase accounting adjustments. Average loans (including loans held-for-sale) for the second quarter of 2018 were $1.81 billion, reflecting an increase of $206.1 million from quarterly average loans for the first quarter of 2018, and an increase of $299.9 million from quarterly average loans for the second quarter of 2017.
• Available-for-sale securities at fair value totaled $543.6 million at June 30,2018, compared to $550.9 million at March 31, 2018, and $568.2 million at June 30, 2017. Pretax net gains of $312,000 on the sale of securities were realized in the second quarter of 2018, compared to pretax net security gains of $35,000 in the first quarter of 2018 and pretax net security losses of $131,000 in the second 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, July 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 August 2, 2018, by dialing 877-481-4010, using Conference ID: 33651.

Contact:

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

SOURCE: Old Second Bancorp, Inc.