AURORA, IL / ACCESSWIRE / October 24, 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 third quarter of 2018. The Company's net income was $9.6 million, or $0.32 per diluted share, for the third quarter of 2018, compared to net income of $6.3 million, or $0.21 per diluted share, in the second quarter of 2018, and net income of $8.1 million, or $0.27 per diluted share, for the third quarter of 2017.

Operating Results

• Third quarter 2018 net income was $9.6 million, reflecting an increase in earnings of $3.4 million from the second quarter of 2018, and an increase in earnings of $1.6 million from the third quarter of 2017.
• Adjusted net income, a non-GAAP financial measure, was $9.6 million, or $0.32 per diluted share, compared to $8.7 million, or $0.29 per diluted share, for the second quarter of 2018, and $6.5 million, or $0.22 per diluted share, for the third quarter of 2017.
• Second quarter 2018 adjusted net income excluded $2.5 million in costs, after tax, related to our acquisition of ABC Bank.
• Third quarter 2017 adjusted net income excluded a $1.6 million tax benefit related to the Illinois income tax increase, effective July 1, 2017, which resulted in a remeasurement of the Company's net deferred tax asset.

• Net interest and dividend income was $23.7 million for the third quarter of 2018, an increase of $498,000, or 2.1%, from the $23.2 million recorded in the second quarter of 2018, and an increase of $4.5 million, or 23.1%, over the third quarter of 2017. Net interest income in the third quarter of 2018 was favorably impacted by the rising interest rate environment, as well as $722,000 of purchase accounting accretion, compared to $1.1 million of purchase accounting accretion in the second quarter of 2018, and $265,000 in the third 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. Beginning in the second quarter of 2018, purchase accounting accretion income also included the impact of the ABC Bank purchase on April 20, 2018.
• Noninterest income was $7.8 million for the third quarter of 2018, compared to $8.5 million in the second quarter of 2018 and $7.8 million in the third quarter of 2017. The decrease in noninterest income in the third quarter of 2018 compared to the second quarter of 2018 was driven primarily by reductions in total residential mortgage banking revenue of $333,000, security gains, net, of $299,000, and commercial swap fee income of $235,000, which is recorded within other income. Trust income remained steady from the second to third quarter of 2018, and reflected $176,000 of growth over the third quarter of 2017.
• Noninterest expense was $18.7 million for the third quarter of 2018, a decrease of $3.6 million, or 16.0%, compared to the second quarter of 2018, and an increase of $1.8 million, or 10.6%, from the third quarter of 2017. The decrease in noninterest expense in the third quarter of 2018, compared to second quarter of 2018 was primarily due to decreases 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 in the second quarter of 2018. The increase in noninterest expense in the third quarter of 2018 compared to the third quarter of 2017 was primarily due to increases in salaries and employee benefits, occupancy, furniture and equipment expenses, computer and data processing expense, and amortization of core deposit intangibles related to our acquisition of ABC Bank, partially offset by net gains on OREO sales in the third quarter of 2018. The year over year increase in noninterest expense was partially offset by net gains on OREO sales in the third quarter of 2018 as well as a decrease in OREO related operating costs due to a decline in OREO assets in 2018.

• On October 16, 2018, the Company's Board of Directors declared a cash dividend of $0.01 per share payable on November 5, 2018, to stockholders of record as of October 26, 2018.

Capital Ratios

				September 30,			June 30,			September 30,
	Well-Capitalized 1			2018			2018			2017
The Company
Common equity tier 1 capital ratio	N/A			9.12	%		8.49	%		8.88	%
Total risk-based capital ratio	N/A			12.57	%		11.87	%		12.46	%
Tier 1 risk-based capital ratio	N/A			11.67	%		10.99	%		11.54	%
Tier 1 leverage ratio	N/A			9.72	%		9.37	%		9.69	%
The Bank
Common equity tier 1 capital ratio	6.50	%		13.26	%		12.62	%		12.67	%
Total risk-based capital ratio	10.00	%		14.16	%		13.51	%		13.52	%
Tier 1 risk-based capital ratio	8.00	%		13.26	%		12.62	%		12.67	%
Tier 1 leverage ratio	5.00	%		11.05	%		10.75	%		10.63	%

1Represents ratios required to be considered well capitalized under prompt corrective action provisions. The prompt corrective action provisions are only applicable at the bank level.

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

Asset Quality & Earning Assets

• Nonperforming loans totaled $11.8 million at September 30, 2018, compared to $11.9 million at June 30, 2018, and $16.3 million at September 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% at both September 30, 2018, and June 30, 2018, and 1.0% at September 30, 2017. Purchase credit impaired ("PCI") loans from the Company's acquisition of ABC Bank totaled $10.9 million, net of purchase accounting adjustments, at September 30, 2018.
• OREO assets totaled $7.0 million at September 30, 2018, compared to $8.9 million at June 30, 2018, and $9.0 million at September 30, 2017. Net gains on the sale of OREO totaled $612,000 in the third quarter of 2018, and valuation writedowns totaled $119,000. Net gains on the sale of OREO totaled $24,000 in the second quarter of 2018, and valuation writedowns totaled $254,000. Nonperforming assets as a percent of total loans plus OREO decreased to 1.0% as of September 30, 2018, as compared to 1.1% as of June 30, 2018 and 1.6% as of September 30, 2017.
• Total loans were $1.83 billion at September 30, 2018, reflecting a decrease of $14.2 million compared to June 30, 2018, but an increase of $240.8 million from September 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 third quarter of 2018 were $1.84 billion, reflecting an increase of $33.5 million from quarterly average loans for the second quarter of 2018, and an increase of $289.1 million from quarterly average loans for the third quarter of 2017.
• Available-for-sale securities totaled $542.3 million at September 30, 2018, compared to $543.6 million at June 30, 2018, and $533.5 million at September 30, 2017. Pretax net gains of $13,000 on the sale of securities were realized in the third quarter of 2018, compared to pretax net security gains of $312,000 in the second quarter of 2018 and pretax net security gains of $102,000 in the third 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, October 25, 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 November 1, 2018, by dialing 877-481-4010, using Conference ID: 37653.

CONTACT:

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

SOURCE: Old Second Bancorp, Inc.

View source version on accesswire.com:
https://www.accesswire.com/526110/Old-Second-Reports-Third-Quarter-2018-Net-Income-of-96-Million