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Old Second Bancorp Inc. (OSBC) filed Quarterly Report for the period ended 2011-09-30.
Old Second Bancorp Inc. has a market cap of $17.6 million; its shares were traded at around $1.26 with and P/S ratio of 0.1.
This is the annual revenues and earnings per share of OSBC over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of OSBC.
Highlight of Business Operations:
Net interest income decreased $11.5 million, from $60.5 million in the first nine months of 2010, to $48.9 million in the first nine months of 2011. Average earning assets decreased $396.9 million, or 17.7%, to $1.84 billion from the first nine months of 2010 to the first nine months of 2011, as management continued to emphasize asset quality and new loan originations continued to be limited. The $375.8 million decrease in year to date average loans and loans held-for-sale was primarily due to the general lack of demand from qualified borrowers in the Bank’s market area, charge-off activity, maturities and payments on performing loans. To utilize available liquid funds, management also increased securities available for salein the third quarter. At the same time, management reduced deposits that had previously provided asset funding by emphasizing relationship banking rather than single service customers. As a result, average interest bearing liabilities decreased $367.4 million, or 18.8%, during the same period. The net interest margin (tax-equivalent basis), expressed as a percentage of average earning assets, decreased from 3.67% in the first nine months of 2010 to 3.57% in the first nine months of 2011. The average tax-equivalent yield on earning assets decreased from 4.90% in the first nine months of 2010 to 4.70%, or 20 basis points, in the first nine months of 2011. During the first nine months of 2011, the tax equivalent yield on earning assets was enhanced by collection of previously reversed or unrecognized interest on loans that returned to performing status during the period. The tax equivalent yield on earning assets during the first nine months of 2011 would have been 4.63% without this benefit. At the same time, however, the cost of funds on interest bearing liabilities decreased from 1.49% to 1.39%, or 10 basis points, helping to offset the decrease in yield. The decrease in average earning assets in 2011 was the main cause of decreased net interest income.
Nonperforming 1-4 family owner occupied residential mortgages to consumers totaled $18.6 million, or 13.3% of the nonperforming loan total as of September 30, 2011. This segment totaled $25.5 million in nonperforming loans at December 31, 2010, compared to $27.1 million at September 30, 2010. While Kendall, Kane and Will counties experienced high rates of foreclosure in both 2011 and 2010, the Bank has experienced relatively stable or somewhat improved nonperforming totals. The majority of all loans originated today are sold on the secondary market. Of the nonperforming loans in this category, $6.2 million, or 33.2%, are to homeowners enrolled in the Bank’s foreclosure avoidance program and are classified as restructured at September 30, 2011. The typical concessions granted in these cases were small and temporary rate reductions and a reduced monthly payment with the expectation that these borrowers resume normal performance on their obligations when their earnings situation improves. The usual profile of these borrowers includes a decrease in household income resulting from a change or loss of employment. The remaining nonperforming loans in the 1-4 family residential category are in nonaccrual status and most cases are in various stages of foreclosure. The Bank did not offer subprime mortgage products to its customers. Management believes that deterioration in the segment relates primarily to the high rate of unemployment in our market areas offset by some reductions from loans moved to OREO or upgraded as borrowers become once again employed. In addition, a significant portion of these nonperforming loans were supported by private mortgage insurance, and, at September 30, 2011, management estimated that a specific allocation of $486,000 was adequate loss coverage following the $1.7 million of charge-offs that occurred during the quarter. However, there can be no guarantee that actual losses in this category will not exceed such amount. At September 30, 2011, there were no loans that were greater than 90 days past due and were still accruing interest in this portfolio class. Additionally, at September 30, 2011, loans 30 to 89
Noninterest income decreased $6.2 million, or 42.1%, to $8.5 million during the third quarter of 2011 compared to $14.7 million during the same period in 2010. For the first nine months of 2011, noninterest income decreased by $7.0 million, or 20.6%, to $26.8 million compared to $33.8 million for the same period in 2010. Trust income decreased by $89,000, or 5.1%, and by $99,000, or 1.9%, for the third quarter and first nine months of 2011, respectively. Service charge income from deposit accounts decreased for both the quarter and year on reduced levels of transactions subject to service charges. Total mortgage banking income in the third quarter of 2011, including net gain on sales of mortgage loans, secondary market fees, and servicing income, was $1.3 million, a decrease of $2.2 million, or 63.9%, from the third quarter of 2010. Mortgage banking income for the first nine months of the year also decreased by $2.7 million, or 39.2%, from the 2010 level, reflecting lower demand for mortgage loans.
Realized losses on securities totaled $63,000 in the third quarter on a called security and gains of $588,000 in the first nine months of 2011 as compared to gains of $620,000 in the third quarter and $2.4 million in the first nine months of 2010. Bank owned life insurance (“BOLI”) income decreased $286,000, or 55.1% and $80,000, or 6.6% in the third quarter and first nine months of 2011, respectively, over the same periods in 2010, as the rates of return decreased on the underlying insurance investments. A death benefit of $938,000 was also realized in the third quarter of 2010. Debit card interchange income increased for both the third quarter and first nine months of 2011 as the volume of consumer card activity continued to increase over 2010. Lease revenue received from OREO properties, which partially offsets OREO expenses included in noninterest expense, increased $631,000 and $1.1 million in the third quarter and first nine months of 2011, respectively, compared to the same periods in 2010, as the number of properties that generated rental income increased. Net gains on disposition of OREO properties increased by $98,000, to $297,000 in the third quarter of 2011, and by $236,000, to $933,000 in the third quarter and first nine months of 2011, respectively, on more favorable sale market conditions. Additionally, in September 2010, the Illinois Supreme Court issued an opinion that resulted in $2.6 million of non-recurring noninterest income. Other noninterest income decreased $46,000, or 3.9%, for the third quarter and increased by $244,000, or 6.4%, for the first nine months of 2011.
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