UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant To Section 13 Or 15(d)
Of The Securities Exchange Act Of 1934
For the quarterly period ended June 30, 1995
Commission file No. 0-10537
Old Second Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Delaware 36-3143493
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
37 South River Street, Aurora, Illinois 60507
(Address of principal executive offices) (Zip Code)
(708) 892-0202
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes [X] No[ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of the latest practicable
date.
2,350,165 shares of no par value common stock are outstanding
as of August 8, 1995.
There are no exhibits with this Form 10-Q.
Page 1 of 11 Pages
<PAGE>
<TABLE>
Part I - Financial Information
Item 1 - Financial Statements
OLD SECOND BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE DATA)
<CAPTION>
June 30, December 31,
1995 1994
--------- ---------
<S> <C> <C>
ASSETS
------
Cash and Due from Banks, Non-
Interest Bearing $31,839 $43,201
Interest Bearing Deposits With Banks 600 400
Federal Funds Sold 61,700 35,150
------- -------
Total Cash and Cash Equivalents 94,139 78,751
Available for Sale Securities 258,155 239,147
Held to Maturity Securities 7,012
------- -------
Total Investment Securities 258,155 246,159
Loans 380,657 357,019
Less:Allowance For Possible Loan Losses 5,833 5,753
Unearned Income 617 605
------- -------
Loans, Net 374,207 350,661
Bank Premises and Equipment, Net 14,015 14,303
Other Assets 14,485 18,322
------- -------
TOTAL ASSETS $755,001 $708,196
======= =======
LIABILITIES
-----------
Deposits:
Demand $ 96,795 $111,044
Savings 270,619 270,037
Time 293,261 250,805
------- -------
Total Deposits 660,675 631,886
Securities Sold Under Agreements
to Repurchase 11,210 6,791
Other Short-Term Borrowings 5,712 2,786
Note Payable 40 80
Other Liabilities 5,782 5,052
------- -------
Total Liabilities 683,419 646,595
------- -------
STOCKHOLDERS' EQUITY
--------------------
Preferred Stock, no par value, 300,000 shares
authorized, none issued
Common Stock, no par value
shares authorized: 3,500,000
shares issued: 2,350,165 15,377 15,377
Retained Earnings 55,463 51,859
Net Unrealized Gain (Loss) on Investments 742 (5,635)
------- -------
Total Stockholders' Equity 71,582 61,601
------- -------
TOTAL LIABILITIES&STOCKHOLDERS' EQUITY $755,001 $708,196
======= =======
<FN>
See accompanying notes.
Page 2
</TABLE>
<PAGE>
<TABLE>
OLD SECOND BANCORP, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<CAPTION>
Three Months Ended
June 30,
------------------
1995 1994
------ ------
<S> <C> <C>
INTEREST INCOME:
---------------
Interest and Fees on Loans $8,470 $6,995
Interest and Dividends on
Investment Securities:
Taxable 3,035 2,823
Exempt From Federal Income Tax 1,007 934
Interest on Federal Funds Sold 550 253
Interest on Interest Bear. Dep. 5 8
------ ------
Total Interest Income 13,067 11,013
------ ------
INTEREST EXPENSE:
----------------
Savings Deposits 1,922 1,665
Time Deposits 3,994 2,648
Securities Sold Under Agreements
To Repurchase 19 9
Other Short-Term Borrowings 39 30
Note Payable 1 2
------ ------
Total Interest Expense 5,975 4,354
------ ------
Net Interest Income 7,092 6,659
Provision for Possible
Loan Losses 19 61
------ ------
Net Interest Income After
Provision for Possible Loan Losses 7,073 6,598
OTHER INCOME:
------------
Trust Fees 855 728
Service Charges on Deposit Accounts 625 636
Other Income 312 374
------ ------
Total Other Income 1,792 1,738
------ ------
OTHER EXPENSES:
--------------
Salaries and Employee Benefits 3,053 2,985
Net Occupancy of Bank Premises 360 419
Furniture and Equipment 461 503
FDIC Insurance 349 325
Marketing 154 205
Stationery and Supplies 179 129
Goodwill Amortization 129 129
Other 967 1,035
------ ------
Total Other Expenses 5,652 5,730
------ ------
Income Before Income Taxes 3,213 2,606
Income Tax Expense 881 727
------ ------
Net Income $2,332 $1,879
====== ======
Per Share Amounts:
-----------------
Net Income $0.99 $0.80
Dividends Declared 0.20 0.20
Average Shares Outstanding 2,350,165 2,350,165
(TABLE CONTINUED)
Six Months Ended
June 30,
----------------
1995 1994
------ ------
<S> <C> <C>
INTEREST INCOME:
---------------
Interest and Fees on Loans $16,656 $13,738
Interest and Dividends on
Investment Securities:
Taxable 6,029 5,513
Exempt From Federal Income Tax 1,963 1,857
Interest on Federal Funds Sold 872 527
Interest on Interest Bear. Dep. 11 23
------ ------
Total Interest Income 25,531 21,658
------ ------
INTEREST EXPENSE:
----------------
Savings Deposits 3,741 3,337
Time Deposits 7,393 5,292
Securities Sold Under Agreements
To Repurchase 29 17
Other Short-Term Borrowings 98 62
Notes Payable 2 43
------ ------
Total Interest Expense 11,263 8,751
------ ------
Net Interest Income 14,268 12,907
Provision for Possible
Loan Losses 59 162
------ ------
Net Interest Income After
Provision for Possible Loan Losses 14,209 12,745
OTHER INCOME:
------------
Trust Fees 1,594 1,410
Service Charges on Deposit Accounts 1,221 1,207
Other Income 581 811
------ ------
Total Other Income 3,396 3,428
------ ------
OTHER EXPENSES:
--------------
Salaries and Employee Benefits 6,094 5,920
Net Occupancy of Bank Premises 746 803
Furniture and Equipment 935 1,048
FDIC Insurance 697 651
Marketing 336 413
Stationery and Supplies 323 306
Goodwill Amortization 258 258
Other 2,012 2,081
------ ------
Total Other Expenses 11,401 11,480
------ ------
Income Before Income Taxes 6,204 4,693
Income Tax Expense 1,743 1,210
------ ------
Net Income $4,461 $3,483
====== ======
Per Share Amounts:
-----------------
Net Income $1.90 $1.48
Dividends Declared 0.40 0.40
Average Shares Outstanding 2,350,165 2,350,165
<FN>
See accompanying notes.
Page 3
</TABLE>
<PAGE>
<TABLE>
OLD SECOND BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<CAPTION>
For the Six Months
Ended June 30,
1995 1994
----- -----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
-------------------------------------
Interest Received $25,885 $21,962
Interest Paid (10,713) (8,986)
Paid to Suppliers and Employees (11,334) (10,923)
Trust Fees Received 1,594 1,410
Income Taxes Paid (1,640) (665)
Service Charges Received on Deposit
Accounts 1,221 1,207
(Increase) Decrease Mortgages Held
for Resale (484) 5,981
Other Income Received 581 811
------ ------
Net Cash Provided By Operating Activities 5,110 10,797
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
-------------------------------------
Net Increase in Loans (23,121) (14,165)
Purchases of Available for Sale
Securities (18,839) (30,432)
Proceeds from Maturities of Available
for Sale Securities 16,858 16,469
Purchases of Held to Maturity Securities (2,441)
Proceeds from Maturities of Held to
Maturity Securities 2,315
Capital Expenditures (341) (699)
Other, Net 705 133
------ ------
Net Cash Used in Investing Activities (24,738) (28,820)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
-------------------------------------
Net Increase in Deposits 28,789 10,640
Increase Other Short-term Borrowings 7,345 2,366
Decrease in Notes Payable (40) (3,128)
Dividends Paid (1,071) (857)
Other, Net (7) (403)
------ ------
Net Cash Provided by Financing Activities 35,016 8,618
------ ------
Net Increase (Decrease) in Cash
& Cash Equivalents 15,388 (9,405)
Cash & Cash Equivalents
at Beginning of Period 78,751 68,519
------ ------
Cash & Cash Equivalents at End of Period $94,139 $59,114
====== ======
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net Income $4,461 $3,483
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation 629 657
Provision for Possible Loan Losses 59 162
Increase in Taxes Payable 101 590
Provision (Benefit)
for Deferred Income Taxes 2 (45)
Increase in Interest Receivable (41) (285)
Increase(Decrease) in Interest Payable 550 (235)
Net Premium Amortization 396 589
Goodwill Amortization 258 258
(Increase) Decrease Mortgages Held
for Resale (484) 5,981
Decrease in Accrued Expenses (401) (260)
Increase in Prepaid Expenses (420) (98)
--- -----
Total Adjustments 649 7,314
--- -----
Net Cash Provided by
Operating Activities $5,110 $10,797
===== ======
<FN>
See accompanying notes.
Page 4
</TABLE>
<PAGE>
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies followed in the preparation of interim
financial statements are consistent with those used in the
preparation of annual financial information. The interim
financial statements reflect all adjustments, which are normal
and recurring in nature, necessary in the opinion of management
to a fair statement of results for the interim periods presented.
Results for the six months ended June 30, 1995 are not
necessarily indicative of the results that may be expected for
the year ended December 31, 1995.
NOTE 2 - ACCOUNTING FOR IMPAIRMENT OF A LOAN
Effective January 1, 1995, the Corporation prospectively adopted
Financial Accounting Standards Number 114 "Accounting by
Creditors for Impairment of a Loan". Adoption of this standard
had no material effect on the Corporation's financial position or
results of operation.
NOTE 3 - BUSINESS COMBINATIONS
On June 30, 1995 Old Second issued 208,000 shares of common stock
to acquire 100% of the outstanding common stock of Bank of Sugar
Grove. The acquisition of Bank of Sugar Grove was accounted for
as a pooling-of-interests; accordingly, the financial statements
have been restated for all periods presented to include the
accounts and results of operation of Bank of Sugar Grove.
Operating results of Old Second and Bank of Sugar Grove for the
three months and six months ended June 30, 1995 and 1994, prior
to restatement are as follows:
<TABLE>
Three Months Ended June 30,
1995 1994
(In thousands) ----- -----
<S> <C> <C>
Old Second
Net Interest Income $6,609 $6,261
Net Income 2,190 1,857
Sugar Grove
Net Interest Income 483 398
Net Income 142 22
Combined
Net Interest Income 7,092 6,659
Net Income 2,332 1,879
(TABLE CONTINUED)
Six Months Ended June 30,
1995 1994
(In thousands) ----- -----
Old Second
Net Interest Income $13,301 $12,100
Net Income 4,189 3,380
Sugar Grove
Net Interest Income 967 807
Net Income 272 103
Combined
Net Interest Income 14,268 12,907
Net Income 4,461 3,483
</TABLE>
Page 5
<PAGE>
NOTE 4 - INVESTMENT SECURITIES
On June 30, 1995, Sugar Groves' Held to Maturity Securities were
transferred to Available for Sale Securities to conform with Old
Second's investment classifications. In accordance with Statement
of Financial Accounting Standard Number 115 "Accounting for Certain
Investments in Debt and Equity Securities", Held to Maturity
Securities were previously reported at amortized cost. At June 30,
1995 the amortized cost was $10,645,000 with a fair value of
$10,815,000. Available for Sale Securities are reported at fair
value with net unrealized gains and losses reported as a separate
component of Stockholders' Equity. Since this transaction resulted
in no cash inflows or outflows during the period, it has not been
disclosed on the face of the Statement of Cash Flows.
Page 6
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 2
OLD SECOND BANCORP, INC. AND SUBSIDIARIES
MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion analyzes the consolidated financial
condition and results of operations of Old Second Bancorp, Inc.
and its subsidiaries.
FINANCIAL CONDITION
Total Assets at June 30, 1995 of $755,001,000 were up 6.6% from
the 1994 year-end total of $708,196,000. Total Investment
Securities increased $11,996,000 (4.9%). To conform with Old
Second's investment classifications, Sugar Groves' held to
maturity securities were transferred to the available for sale
classification on June 30, 1995. Net Loans increased $23,546,000
(6.7%), primarily in commercial and real estate.
Total Deposits of $660,675,000 were up 4.6% from the 1994
year-end total of $631,886,000. Time Deposits increased
$42,456,000 (16.9%) as depositors appeared to be taking advantage
of higher rates on Certificates of Deposit. Securities Sold Under
Agreements to Repurchase and Other Short-Term Borrowings
increased $4,419,000 and $2,926,000, respectively, from 1994
year-end. The increase in deposits and short-term borrowings
provided funds for the increase in investments and loan activity
as well as an increase in Federal Funds Sold.
Total Stockholders' Equity of $71,582,000 was up $9,981,000
(16.2%) from the 1994 year-end total of $61,601,000. The
increase was due to additional Retained Earnings of $3,604,000
and the change in the Net Unrealized Gain (Loss) on Investments
which resulted in an increase of $6,377,000.
Page 7
<PAGE>
RESULTS OF OPERATIONS
Operating results include net income for Old Second Bancorp, Inc.
and its subsidiaries for the six months ended June 30, 1995 and
1994.
Net Interest Income for the three months ended June 30, 1995 of
$7,092,000 was up $433,000 (6.5%) over the like period of 1994.
Net Interest Income for the six months of $14,268,000 was up
$1,361,000 (10.5%) over the first six months of 1994. The
increase in Net Interest Income was attributable mainly to
volume.
Total Interest Income for the three and six months of 1995 was
higher than 1994 by $2,054,000 (18.7%) and $3,873,000 (17.9%),
respectively. Total Interest Expense for the three and six months
ended June 30, 1995 increased $1,621,000 (37.2%) and $2,512,000
(28.7%), respectively, from the same period in 1994.
Total Other Income for the three months ending June 30, 1995 of
$1,792,000 was up $54,000 (3.1%) from the same period a year ago.
Trust Fees increased $127,000 (17.4%) for the quarter. For the
six months, Total Other Income decreased $32,000 from the like
time period in 1994, due primarily to lower loan origination fees
from Mortgages Held for Resale, offset by an increase of $184,000
in Trust Fees.
Total Other Expenses for the three and six months of 1995
remained substantially the same as the like periods in 1994. For
the six months, Net Occupancy and Furniture and Equipment
decreased $57,000 (7.1%) and $113,000 (10.8%), respectively, from
the same period in 1994, while Salaries and Employee Benefits
increased $174,000.
LIQUIDITY
Liquidity is generally defined as the ability to meet cash flow
requirements. For a bank, meeting cash flow requirements means
having funds available to satisfy customer credit needs as well
as having funds available to meet depositor withdrawal requests.
For the Corporation, liquidity means having funds available to
pay cash dividends, debt service and operating expenses. Liquid
assets consist primarily of non-interest bearing and interest
bearing deposits, overnight federal funds sold and unpledged
investment securities. The Consolidated Statements of Cash Flows
included with the financial statements herein set forth the cash
flows from operating, investing and financing activities for the
various time periods.
Page 8
<PAGE>
Net cash provided by operating activities was $5,110,000 and
$10,797,000 for the six months ended June 30, 1995 and 1994,
respectively. The decrease in cash flows from operating
activities was primarily attributable to increased activity in
Mortgages Held for Resale for the six months in 1995 as compared
to the same period in 1994.
Net cash used in investing activities was $24,738,000 and
$28,820,000 for the six months ended June 30, 1995 and 1994,
respectively. The primary components of cash flows from investing
activities are funding and repayment of customer loans and
purchases and sales of investment securities. The decrease in
cash flows from investing activities was primarily attributable
to the net increase in loans offset by lower investment securities
purchase activity.
Cash flows from financing activities are primarily attributable
to changes in deposit levels, short-term borrowings and notes
payable, and the payment of dividends to stockholders.
For the six months, net cash of $35,016,000 and $8,618,000 was
provided by financing activities for 1995 and 1994, respectively.
An increase in deposits generated cash inflows of $28,789,000 and
$10,640,000 for the first six months of 1995 and 1994,
respectively. Short-Term Borrowings resulted in cash inflows of
$7,345,000 and $2,366,000 for the six months ended June 30, 1995
and 1994, respectively.
Page 9
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Information contained in Item 5 of Bancorp's Form 8-K Current
Report dated July 17, 1995 regarding issuance of common stock for
the acquisition of Bank of Sugar Grove is incorporated by reference
in this Form 10-Q.
Page 10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
OLD SECOND BANCORP, INC.
/s/ R J CARLSON
By: R.J. Carlson,
President, Chief Financial Officer,
Secretary and Director
Date: 8/15/95
OLD SECOND BANCORP, INC.
37 SOUTH RIVER STREET
AURORA ILLINOIS 60507
Page 11
