07/21/2021 | Press release | Distributed by Public on 07/21/2021 15:31
AURORA, IL / ACCESSWIRE / July 21, 2021 / Old Second Bancorp, Inc. (the 'Company,' 'we,' 'us,' and 'our') (NASDAQ:OSBC), the parent company of Old Second National Bank (the 'Bank'), today announced financial results for the second quarter of 2021. Our net income was $8.8 million, or $0.30 per diluted share, for the second quarter of 2021, compared to net income of $11.9 million, or $0.40 per diluted share, for the first quarter of 2021, and net income of $9.2 million, or $0.31 per diluted share, for the second quarter of 2020. Net income for the second quarter of 2021 reflected a $3.5 million pre-tax release of provision for credit losses, compared to a $3.0 million pre-tax release in the first quarter of 2021, and a $2.1 million pre-tax provision expense in the second quarter of 2020. Mortgage banking income totaled $1.6 million in the second quarter of 2021, compared to $5.7 million in the first quarter of 2021, and $5.1 million in the second quarter of 2020. Mortgage servicing rights experienced a mark to market loss of $1.0 million during the second quarter of 2021, compared to a $1.1 million gain in the prior quarter and a $445,000 loss in the second quarter of 2020. Net gain on sales of mortgage loans totaled $1.9 million in the second quarter of 2021, compared to $3.7 million in the first quarter of 2021, and $4.6 million in the second quarter of 2020, as mortgage origination and refinancing volumes declined in the current period.
President and Chief Executive Officer Jim Eccher said 'An improving economy and conservative positioning resulted in solid bottom line earnings and a continued return of excess capital to our stockholders through the recent increase in the common dividend and continued share repurchases. While challenges remain, our credit quality metrics and expectations have continued to improve as the Chicago area moves towards a more normalized environment. Loan demand continued to remain soft in the second quarter with utilization rates remaining low and customers using excess liquidity to pay down existing debt. The end result was a somewhat disappointing $21.9 million linked quarter decline in loans and leases held for investment, exclusive of PPP loan activity. Deposit inflows remain robust and resulted in a further increase in excess liquidity as evidenced by a $140.0 million increase in average cash on the balance sheet during the quarter. We continue to deploy a portion of the excess liquidity on our balance sheet in short duration securities with yields far below the aggregate portfolio yield. The combination of these factors largely resulted in a 39 basis point sequential quarter decline in our net interest margin but a far more modest sequential decline in net interest income. Looking forward, I am more optimistic on loan growth for the remainder of the year and believe reported margin trends are more symptomatic of the profound increase in liquidity on our balance sheet rather than any fundamental change in our business. I believe Old Second remains conservatively positioned to meet these challenges, as our expenses remain well-controlled, our business is well diversified, customer activity is increasing and our underwriting has remained disciplined and consistent. I would like to thank our employees for their continued hard work in delivering a solid quarter while delivering exceptional customer service as we move towards a more normal routine.'
COVID-19 Update
Capital Ratios
Minimum Capital Adequacy with Capital Conservation Buffer, if applicable1 | Well Capitalized Under Prompt Corrective Action Provisions2 |
June 30, 2021 |
March 31, 2021 |
June 30, 2020 |
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The Company
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Common equity tier 1 capital ratio
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7.00 | % | N/A | 12.72 | % | 12.43 | % | 11.31 | % | |
Total risk-based capital ratio
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10.50 | % | N/A | 17.60 | % | 14.73 | % | 13.63 | % | |
Tier 1 risk-based capital ratio
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8.50 | % | N/A | 13.83 | % | 13.53 | % | 12.39 | % | |
Tier 1 leverage ratio
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4.00 | % | N/A | 9.68 | % | 10.02 | % | 10.06 | % | |
The Bank
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Common equity tier 1 capital ratio
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7.00 | % | 6.50 | % | 15.23 | % | 14.59 | % | 13.46 | % |
Total risk-based capital ratio
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10.50 | % | 10.00 | % | 16.33 | % | 15.80 | % | 14.71 | % |
Tier 1 risk-based capital ratio
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8.50 | % | 8.00 | % | 15.23 | % | 14.59 | % | 13.46 | % |
Tier 1 leverage ratio
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4.00 | % | 5.00 | % | 10.63 | % | 10.78 | % | 10.86 | % |
1Amounts are shown inclusive of a capital conservation buffer of 2.50%. Under the Federal Reserve's Small Bank Holding Company Policy Statement, the Company is not currently subject to the minimum capital adequacy and capital conservation buffer capital requirements at the holding company level, unless otherwise advised by the Federal Reserve (such capital requirements are applicable only at the Bank level). Although the minimum regulatory capital requirements are not applicable to the Company, we calculate these ratios for our own planning and monitoring purposes.
2 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
Non-GAAP Presentations
Management has disclosed in this earnings release certain non-GAAP financial measures to evaluate and measure our performance, including the presentation of net interest income and net interest margin on a fully taxable equivalent basis, our efficiency ratio calculations and core net interest margin on a taxable equivalent basis. The net interest margin fully taxable equivalent is calculated by dividing net interest income on a tax equivalent basis by average earning assets for the period.
We consider the use of select non-GAAP financial measures and ratios to be useful for financial and operational decision making and useful in evaluating period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenditures or assets that we believe are not indicative of our primary business operating results or by presenting certain metrics on a fully taxable equivalent basis. We believe these measures provide investors with information regarding balance sheet profitability, and we believe that management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, analyzing and comparing past, present and future periods.
These non-GAAP financial measures should not be considered as a substitute for GAAP financial measures, and we strongly encourage investors to review the GAAP financial measures included in this earnings release and not to place undue reliance upon any single financial measure. In addition, because non-GAAP financial measures are not standardized, it may not be possible to compare the non-GAAP financial measures presented in this earnings release with other companies' non-GAAP financial measures having the same or similar names.
Forward-Looking Statements
This earnings release and statements by our management may contain forward-looking statements within the Private Securities Litigation Reform Act of 1995. Forward looking statements can be identified by words such as 'anticipate,' 'expect,' 'intend,' 'believe,' 'may,' 'likely,' 'will,' 'forecast,' 'project,' or other statements that indicate future periods. Examples of forward-looking statements include, but are not limited to, statements regarding the economic outlook, our expectations regarding future loan growth, trends in our net interest margin, the adequacy of our allowance and our belief that we are conservatively positioned, as well as statements regarding asset quality trends and the anticipated timing of our receipt of funds for PPP loan forgiveness. Such forward-looking statements are subject to risks, uncertainties, and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements, (1) the strength of the United States economy in general and the strength of the local economies in which we conduct our operations may be different than expected, including, but not limited to, due to the negative impacts and disruptions resulting from the global coronavirus, ('COVID-19') pandemic, on the economies and communities we serve, which has had and may continue to have an adverse impact on our business, operations and performance, and could continue to have a negative impact on our credit portfolio, share price, borrowers, and on the economy as a whole, both domestically and globally; (2) the rate of delinquencies and amounts of charge-offs, the level of allowance for credit loss, the rates of loan growth, or adverse changes in asset quality in our loan portfolio, which may result in increased credit risk-related losses and expenses; (3) changes in legislation, regulation, policies, or administrative practices, whether by judicial, governmental, or legislative action, including, but not limited to, the Coronavirus Aid, Relief, and Economic Security Act, or the 'CARES Act'; (4) risks related to future acquisitions, if any, including execution and integration risks; (5) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) could have a negative impact on us; and (5) changes in interest rates, which may affect our net income, prepayment penalty income, mortgage banking income, and other future cash flows, or the market value of our assets, including our investment securities. Additional risks and uncertainties are contained in the 'Risk Factors' and forward-looking statements disclosure in our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. The inclusion of this forward-looking information should not be construed as a representation by us or any person that future events, plans, or expectations contemplated by us will be achieved. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.
Conference Call
We will host a call on Thursday, July 22, 2021, at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) to discuss our second quarter 2021 financial results. Investors may listen to our call via telephone by dialing 877-407-9124. 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 call will be available until 11:00 a.m. Eastern Time (10:00 a.m. Central Time) on July 29, 2021, by dialing 877-481-4010, using Conference ID: 42068.
Contact:
Bradley S. Adams
Chief Financial Officer
(630) 906-5484
SOURCE: Old Second Bancorp Inc.