AURORA, IL / ACCESSWIRE / January 25, 2017 / Old Second Bancorp, Inc. (the "Company" or "Old Second") (NASDAQ: OSBC), parent company of Old Second National Bank (the "Bank"), today announced financial results for the fourth quarter of 2016 and the year ended December 31, 2016. The Company reported net income of $5.0 million for the fourth quarter of 2016, compared to net income of $3.8 million in the fourth quarter of 2015. The Company's net income available to common stockholders was $5.0 million, or $0.17 per diluted share, for the fourth quarter of 2016, as compared to $3.8 million, or $0.13 per diluted share, in the fourth quarter of 2015. For the year ended December 31, 2016, net income available to common stockholders was $15.7 million, or $0.53 per diluted share, as compared to $13.5 million, or $0.46 per diluted share, for the year ended December 31, 2015.

Operating Results

  • On January 17, 2017, the Company's Board of Directors declared a cash dividend of 1 cent per share, payable on February 6, 2017, to stockholders of record as of January 27, 2017.
  • Fourth quarter 2016 net income available to common stockholders was $5.0 million, reflecting an increase of $1.2 million, or 30.9%, from the fourth quarter of 2015 and an increase of $1.5 million, or 43.4%, from the third quarter of 2016.
  • Net interest and dividend income totaled $17.5 million for the fourth quarter of 2016 and reflects an increase of $2.8 million, or 18.7%, over the fourth quarter of 2015. Net interest and dividend income for the fourth quarter of 2016 reflected an increase of $2.2 million, or 14.1%, from the $15.3 million recorded in the third quarter of 2016. Net interest income was favorably impacted in the fourth quarter of 2016, primarily due to the Company's acquisition of the Chicago branch of Talmer Bank and Trust, which closed on October 28, 2016. The Talmer branch purchase resulted in an increase to the loan portfolio of approximately $221.0 million, and purchase accounting accretion income realized in the fourth quarter totaled $604,000.
  • Provision for loan and lease losses expense of $750,000 was recorded in the fourth quarter of 2016; no provision or release of loan loss reserves was recorded in the fourth quarter of 2015 or the third quarter of 2016. This fourth quarter provision was the only provision recorded in 2016, and compares to a provision release of $4.4 million during 2015.
  • Noninterest income was $8.4 million for the fourth quarter of 2016, which reflects growth of $1.0 million, or 13.8%, over the fourth quarter of 2015, primarily due to increases in residential mortgage banking income. Noninterest income for the fourth quarter of 2016 was $1.8 million, or 27.8%, in excess of the third quarter of 2016, primarily due to net losses on security sales incurred in the third quarter in anticipation of the funding requirements for the Company's acquisition of the Talmer branch.
  • Noninterest expense of $17.2 million for the fourth quarter of 2016 increased $1.1 million, or 6.9%, from the fourth quarter of 2015, driven by the costs incurred related to the Talmer branch acquisition, such as increases in compensation costs due to the addition of 14 employees, facilities costs associated with the new branch, and acquisition related costs, primarily in the form of legal fees. Noninterest expense was $633,000, or 3.8%, higher in the fourth quarter of 2016 as compared to the third quarter of 2016.
  • The Company completed a debt retirement and simultaneous senior debt offering in the fourth quarter of 2016. Subordinated debt of $45.0 million and $500,000 of senior debt outstanding were paid off with the proceeds of a $45.0 million senior notes issuance and cash on hand. The senior notes mature in ten years, and terms include interest payable semiannually at 5.75% for five years. Beginning December 2021, the senior debt will pay interest at a floating rate, with interest payable quarterly at three month LIBOR plus 385 basis points.
  • Excluding the Talmer branch acquisition, which occurred in October 2016, as discussed above, fourth quarter net income available to common stockholders was $4.6 million, or $0.16 per diluted share. For the year ended December 31, 2016, net income available to common stockholders, excluding the effect of the Talmer acquisition, was $17.0 million, or $0.57 per diluted share.
Capital Ratios

December 31,

September 30,

December 31,

2016

2016

2015

The Bank's common equity tier 1 capital ratio

12.55

%

15.22

%

14.10

%

The Company's common equity tier 1 capital ratio

8.77

%

10.68

%

10.55

%

The Bank's total capital ratio

13.47

%

16.24

%

15.23

%

The Company's total capital ratio

12.30

%

15.42

%

15.56

%

The Company's tier 1 leverage ratio

8.90

%

9.32

%

8.69

%

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

Asset Quality & Earning Assets

  • Nonperforming loans ended at $16.0 million at December 31, 2016, compared to $14.6 million at December 31, 2015, and $17.4 million at September 30, 2016. 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 decreased to 1.1% as of December 31, 2016, from 1.4% as of September 30, 2016, and 1.3% as of December 31, 2015.
  • OREO assets decreased in the fourth quarter to end at $11.9 million on December 31, 2016, compared to $19.1 million at December 31, 2015, and $14.1 million at September 30, 2016. Valuation writedowns continued in the fourth quarter of 2016 with a quarterly expense of $265,000 compared to $251,000 in the fourth quarter of 2015 and $365,000 in the third quarter of 2016. Nonperforming assets as a percent of total loans plus OREO decreased to 1.9% as of December 31, 2016, as compared to 2.6% as of September 30, 2016, and 2.9% as of December 31, 2015.
  • Total loans at December 31, 2016, were $1.48 billion, reflecting an increase of $345.1 million when compared to December 31, 2015; this growth was driven primarily by the $221.0 million acquired with the Talmer branch purchase, and an additional legacy portfolio growth of $124.1 million, primarily in the commercial and industrial loan portfolio. Average loans (including loans held-for-sale) for the fourth quarter of 2016 were $1.39 billion, reflecting an increase of $250.2 million from the fourth quarter of 2015 and an increase of $199.0 million when compared to the third quarter of 2016.
  • As of December 31, 2016, available-for-sale securities at fair value totaled $531.8 million, as compared to $531.1 million at September 30, 2016. The securities portfolio changed significantly during 2016, as all securities were moved to an available for sale status in the second quarter of 2016, which allowed the sale of investments to acquire funds used for the Talmer branch acquisition in the fourth quarter of 2016. Net losses of $2.2 million pretax on the sale of securities were realized for the full year 2016 to prepare for the branch acquisition; however, the Talmer loans acquired are anticipated to enhance net interest margin in the next year.

Non-GAAP Presentations:

Management has historically disclosed certain non-GAAP ratios to evaluate and measure the Company's performance, including a net interest margin calculation. 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 report may contain forward-looking statements. Forward-looking statements are identifiable by the inclusion of such qualifications as expects, intends, believes, may, likely, or other indications that the particular statements are not based upon facts, but rather are based upon the Company's beliefs as of the date of this release. Actual events and results may differ significantly from those described in such forward-looking statements, due to changes in the economy, interest rates, or other factors. Additionally, all statements in this document, 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. For additional information concerning the Company and its business, including other factors that could materially affect the Company's financial results or cause actual results to differ substantially from those discussed or implied in forward-looking statements contained in this release, please review our filings with the Securities and Exchange Commission.

Conference Call

The Company will also host an earnings call on Thursday, January 26, 2017, 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 February 2, 2017, by dialing 877-481-4010, using Conference ID: 10190.

CONTACT:

J. Douglas Cheatham
Chief Financial Officer
(630) 906-5484

SOURCE: Old Second Bancorp, Inc.