AURORA, IL / ACCESSWIRE / January 27, 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 fourth quarter of 2020. Our net income was $8.0 million, or $0.27 per diluted share, for the fourth quarter of 2020, compared to net income of $10.3 million, or $0.34 per diluted share, for the third quarter of 2020, and net income of $9.5 million, or $0.31 per diluted share, for the fourth quarter of 2019. Net income for the fourth quarter of 2020 reflects a decrease in noninterest income year over year primarily due to an increase in mark to market losses on mortgage servicing rights ("MSRs"), a reduction in service charges on deposits stemming from a decline in customer spending during the COVID-19 pandemic, a decrease in the death benefit realized on BOLI, as a death claim of $872,000 was received in the prior year period which was not repeated in the current period, and an increase in noninterest expense of $1.4 million, primarily driven by growth in salaries and employee benefits expense. Partially offsetting this reduction to fourth quarter net income year over year was an increase in net interest income due to loan fees recorded on forgiven SBA Paycheck Protection Program ("PPP") loans and a decrease in interest expense on deposits due to market interest rate reductions. In addition, growth in mortgage banking income due to an increase in mortgage originations and refinances stemming from the low interest rate environment contributed a positive $1.0 million pretax, or $0.03 per diluted share.
Operating Results
COVID-19 Operational Update
During this unprecedented time, the health and safety of our customers and employees remains our top priority.
President and Chief Executive Officer Jim Eccher said "I'm proud of the year Old Second had in 2020 amid the many challenges of the pandemic. We posted solid financial results, grew loans and deposits, delivered positive operating leverage, and significantly strengthened our capital position. Despite this performance, net income declined as we built substantial reserves to address the possibility of losses based on probability weighted economic scenarios and stresses created by the pandemic. These losses may or may not occur at the severity levels our models predict. Regardless, I believe Old Second is conservatively positioned to meet challenges as they occur. Expenses are well controlled, our businesses are well diversified and underwriting has remained disciplined and consistent. I would like to thank our employees for their continued hard work in delivering a solid year and in meeting the needs of our customers and communities during these challenging times."
Capital Ratios
Minimum Capital Adequacy with Capital Conservation Buffer, if applicable1 | Well Capitalized Under Prompt Corrective Action Provisions2 | December 31, 2020 | September 30, 2020 | December 31, 2019 | ||||||||||||||||
The Company | ||||||||||||||||||||
Common equity tier 1 capital ratio | 7.00 | % | N/A | 11.94 | % | 11.97 | % | 11.14 | % | |||||||||||
Total risk-based capital ratio | 10.50 | % | N/A | 14.26 | % | 14.33 | % | 14.53 | % | |||||||||||
Tier 1 risk-based capital ratio | 8.50 | % | N/A | 13.01 | % | 13.08 | % | 13.65 | % | |||||||||||
Tier 1 leverage ratio | 4.00 | % | N/A | 10.21 | % | 10.07 | % | 11.93 | % | |||||||||||
The Bank | ||||||||||||||||||||
Common equity tier 1 capital ratio | 7.00 | % | 6.50 | % | 13.75 | % | 14.24 | % | 14.35 | % | ||||||||||
Total risk-based capital ratio | 10.50 | % | 10.00 | % | 15.00 | % | 15.49 | % | 15.23 | % | ||||||||||
Tier 1 risk-based capital ratio | 8.50 | % | 8.00 | % | 13.75 | % | 14.24 | % | 14.35 | % | ||||||||||
Tier 1 leverage ratio | 4.00 | % | 5.00 | % | 10.74 | % | 10.90 | % | 12.50 | % |
1 Amounts 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 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.
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. The tables on page 16 provide a reconciliation of each non-GAAP financial measure to the most comparable GAAP equivalent.
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" or other statements that indicate future periods. Examples of forward-looking statements include, but are not limited to, statements regarding the economic outlook, the adequacy of our allowance and our belief that we are conservatively positioned to meet challenges as they occur. 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) 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 an earnings call on Thursday, January 28, 2021, at 11:00 a.m. Eastern Time (10:00 a.m. Central Time). Investors may listen to our earnings 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 earnings call will be available until 11:00 a.m. Eastern Time (10:00 a.m. Central Time) on February 4, 2021, by dialing 877-481-4010, using Conference ID: 39135.
Contact Information
Bradley S. Adams
Chief Financial Officer
(630) 906-5484
SOURCE: Old Second Bancorp, Inc.