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 September 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 92 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 October 27, 1995.
There is one exhibit 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>
September 30, December 31,
1995 1994
--------- ---------
<S> <C> <C>
ASSETS
------
Cash and Due from Banks, Non-
Interest Bearing $46,533 $43,201
Interest Bearing Deposits With Banks 400 400
Federal Funds Sold 42,770 35,150
------- -------
Total Cash and Cash Equivalents 89,703 78,751
Available for Sale Securities 262,817 239,147
Held to Maturity Securities 7,012
------- -------
Total Investment Securities 262,817 246,159
Loans 385,953 357,019
Less:Allowance For Possible Loan Losses 5,473 5,753
Unearned Income 578 605
------- -------
Loans, Net 379,902 350,661
Bank Premises and Equipment, Net 14,117 14,303
Other Assets 14,882 18,322
------- -------
TOTAL ASSETS $761,421 $708,196
======= =======
LIABILITIES
-----------
Deposits:
Demand $ 93,687 $111,044
Savings 279,437 270,037
Time 296,464 250,805
------- -------
Total Deposits 669,588 631,886
Securities Sold Under Agreements
to Repurchase 6,854 6,791
Other Short-Term Borrowings 4,736 2,786
Note Payable 40 80
Other Liabilities 6,374 5,052
------- -------
Total Liabilities 687,592 646,595
------- -------
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 57,285 51,859
Net Unrealized Gain (Loss) on Investments 1,167 (5,635)
------- -------
Total Stockholders' Equity 73,829 61,601
------- -------
TOTAL LIABILITIES&STOCKHOLDERS' EQUITY $761,421 $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
September 30,
------------------
1995 1994
------ ------
<S> <C> <C>
INTEREST INCOME:
---------------
Interest and Fees on Loans $8,625 $7,370
Interest and Dividends on
Investment Securities:
Taxable 3,112 3,110
Exempt From Federal Income Tax 1,052 911
Interest on Federal Funds Sold 648 290
Interest on Interest Bear. Dep. 5 8
------ ------
Total Interest Income 13,442 11,689
------ ------
INTEREST EXPENSE:
----------------
Savings Deposits 1,998 1,821
Time Deposits 4,266 2,780
Securities Sold Under Agreements
To Repurchase 61 18
Other Short-Term Borrowings 54 23
Note Payable 1 2
------ ------
Total Interest Expense 6,380 4,644
------ ------
Net Interest Income 7,062 7,045
Provision for Possible
Loan Losses 20 5
------ ------
Net Interest Income After
Provision for Possible Loan Losses 7,042 7,040
OTHER INCOME:
------------
Trust Fees 789 729
Service Charges on Deposit Accounts 624 648
Other Income 380 262
Securities Gains 0 4
------ ------
Total Other Income 1,793 1,643
------ ------
OTHER EXPENSES:
--------------
Salaries and Employee Benefits 3,007 2,876
Net Occupancy of Bank Premises 475 386
Furniture and Equipment 505 435
FDIC Insurance (36) 334
Marketing 248 202
Stationery and Supplies 204 165
Goodwill Amortization 129 129
Other 1,088 1,052
------ ------
Total Other Expenses 5,620 5,579
------ ------
Income Before Income Taxes 3,215 3,104
Income Tax Expense 924 895
------ ------
Net Income $2,291 $2,209
====== ======
Per Share Amounts:
-----------------
Net Income $0.97 $0.94
Dividends Declared 0.20 0.20
Average Shares Outstanding 2,350,165 2,350,165
(TABLE CONTINUED)
Nine Months Ended
September 30,
----------------
1995 1994
------ ------
<S> <C> <C>
INTEREST INCOME:
---------------
Interest and Fees on Loans $25,281 $21,108
Interest and Dividends on
Investment Securities:
Taxable 9,141 8,623
Exempt From Federal Income Tax 3,015 2,768
Interest on Federal Funds Sold 1,520 817
Interest on Interest Bear. Dep. 16 31
------ ------
Total Interest Income 38,973 33,347
------ ------
INTEREST EXPENSE:
----------------
Savings Deposits 5,739 5,158
Time Deposits 11,659 8,072
Securities Sold Under Agreements
To Repurchase 90 35
Other Short-Term Borrowings 152 85
Notes Payable 3 45
------ ------
Total Interest Expense 17,643 13,395
------ ------
Net Interest Income 21,330 19,952
Provision for Possible
Loan Losses 79 167
------ ------
Net Interest Income After
Provision for Possible Loan Losses 21,251 19,785
OTHER INCOME:
------------
Trust Fees 2,383 2,139
Service Charges on Deposit Accounts 1,845 1,855
Other Income 961 1,073
Securities Gains 0 4
------ ------
Total Other Income 5,189 5,071
------ ------
OTHER EXPENSES:
--------------
Salaries and Employee Benefits 9,101 8,796
Net Occupancy of Bank Premises 1,221 1,189
Furniture and Equipment 1,440 1,483
FDIC Insurance 661 985
Marketing 584 615
Stationery and Supplies 527 471
Goodwill Amortization 387 387
Other 3,100 3,133
------ ------
Total Other Expenses 17,021 17,059
------ ------
Income Before Income Taxes 9,419 7,797
Income Tax Expense 2,667 2,105
------ ------
Net Income $6,752 $5,692
====== ======
Per Share Amounts:
-----------------
Net Income $2.87 $2.42
Dividends Declared 0.60 0.60
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 Nine Months
Ended September 30,
1995 1994
----- -----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
-------------------------------------
Interest Received $38,728 $33,170
Interest Paid (16,956) (13,497)
Paid to Suppliers and Employees (16,297) (16,327)
Trust Fees Received 2,383 2,139
Income Taxes Paid (2,595) (2,358)
Service Charges Received on Deposit
Accounts 1,845 1,855
(Increase) Decrease Mortgages Held
for Resale (1,368) 6,195
Other Income Received 961 1,073
------ ------
Net Cash Provided By Operating Activities 6,701 12,250
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
-------------------------------------
Net Increase in Loans (27,952) (18,812)
Purchases of Available for Sale
Securities (33,409) (40,840)
Proceeds from Maturities of Available
for Sale Securities 27,383 24,173
Purchases of Held to Maturity Securities (2,441)
Proceeds from Maturities of Held to
Maturity Securities 2,425
Capital Expenditures (775) (912)
Other, Net 789 109
------ ------
Net Cash Used in Investing Activities (33,964) (36,298)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
-------------------------------------
Net Increase in Deposits 37,702 30,249
Increase (Decrease) in Other Short-term
Borrowings 2,013 (3,111)
Decrease in Notes Payable (40) (3,088)
Dividends Paid (1,500) (1,285)
Other, Net 40 (412)
------ ------
Net Cash Provided by Financing Activities 38,215 22,353
------ ------
Net Increase (Decrease) in Cash
& Cash Equivalents 89,703 (1,695)
Cash & Cash Equivalents
at Beginning of Period 78,751 68,519
------ ------
Cash & Cash Equivalents at End of Period $10,952 $66,824
====== ======
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net Income $6,752 $5,692
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation 961 963
Provision for Possible Loan Losses 79 167
Increase (Decrease) in Taxes Payable 142 (208)
Benefit for Deferred Income Taxes (70) (45)
Increase in Interest Receivable (723) (888)
Increase(Decrease) in Interest Payable 688 (101)
Net Premium Amortization 477 711
Goodwill Amortization 387 387
(Increase) Decrease Mortgages Held
for Resale (1,368) 6,195
Decrease in Accrued Expenses (347) (208)
Increase in Prepaid Expenses (277) (411)
Securities Gains (4)
--- -----
Total Adjustments (51) 6,558
--- -----
Net Cash Provided by
Operating Activities $6,701 $12,250
===== ======
<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 nine months ended September 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 nine months ended September 30, 1995 and 1994, prior
to restatement are as follows:
<TABLE>
Three Months Ended September 30,
1995 1994
(In thousands) ----- -----
<S> <C> <C>
Old Second
Net Interest Income $6,643 $6,623
Net Income 2,247 2,127
Sugar Grove
Net Interest Income 419 422
Net Income 44 82
Combined
Net Interest Income 7,062 7,045
Net Income 2,291 2,209
(TABLE CONTINUED)
Nine Months Ended September 30,
1995 1994
(In thousands) ----- -----
Old Second
Net Interest Income $19,944 $18,723
Net Income 6,436 5,507
Sugar Grove
Net Interest Income 1,386 1,229
Net Income 316 185
Combined
Net Interest Income 21,330 19,952
Net Income 6,752 5,692
</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 September 30, 1995 of $761,421,000 were up 7.5% from
the 1994 year-end total of $708,196,000. Total Investment
Securities increased $16,658,000 (6.8%). 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 $29,241,000
(8.3%).
Total Deposits of $669,588,000 were up 6.0% from the 1994
year-end total of $631,886,000. Time Deposits increased
$45,659,000 (18.2%) as depositors appeared to be taking advantage
of higher rates on Certificates of Deposit. Other Short-Term Borrowings
increased $1,950,000 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 $73,829,000 was up $12,228,000
from the 1994 year-end total of $61,601,000. The increase was
due to additional Retained Earnings of $5,426,000 and the change in
the Net Unrealized Gain (Loss) on Investments which resulted in
an increase of $6,802,000.
Page 7
<PAGE>
RESULTS OF OPERATIONS
Operating results include net income for Old Second Bancorp, Inc.
and its subsidiaries for the nine months ended September 30, 1995 and 1994.
Net Interest Income for the three months ended September 30, 1995 of
$7,062,000 was up $17,000 over the like period of 1994. Net
Interest Income for the quarter in 1994 included an adjustment to
discount accretion on investments that resulted in $172,000 additional
interest income. Net Interest Income for the nine months of $21,330,000
was up $1,378,000 (6.9%) over the first nine months of 1994. The
increase in Net Interest Income was attributable mainly to
volume.
Total Interest Income for the three and nine months of 1995 was
higher than 1994 by $1,753,000 (15.0%) and $5,626,000 (16.9%),
respectively. Total Interest Expense for the three and nine months
ended September 30, 1995 increased $1,736,000 (37.4%) and $4,248,000
(31.7%), respectively, from the same period in 1994.
Total Other Income for the three months ending September 30, 1995 of
$1,793,000 was up $150,000 (9.1%) from the same period a year ago.
Other Income increased $118,000 (45.0%) and Trust Fees increased
$60,000 (8.2%) for the quarter. For the nine months, Total Other Income
increased $118,000 from the like time period in 1994, due primarily to
an increase in Trust Fees.
Total Other Expenses for the three and nine months of 1995
remained substantially the same as the like periods in 1994. For
the quarter and nine months, Salaries and Employee Benefits
increased $131,000 and $305,000, respectively. Federal Deposit
Insurance decreased $370,000 and $324,000 for the quarter and nine
months, respectively, due primarily to a refund of $387,000
in September 1995.
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 $6,701,000 and
$12,250,000 for the nine months ended September 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 nine months in 1995 as compared
to the same period in 1994.
Net cash used in investing activities was $33,964,000 and
$36,298,000 for the nine months ended September 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 net increase
in loans offset by lower investment securities purchase activity
in 1995 generated lower cash outflows than the same period in 1994.
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 nine months, net cash of $38,215,000 and $22,353,000 was
provided by financing activities for 1995 and 1994, respectively.
An increase in deposits generated cash inflows of $37,702,000 and
$30,249,000 for the first nine months of 1995 and 1994,
respectively. Short-Term Borrowings resulted in cash outflows of
$2,013,000 for the nine months ended September 30, 1995 and cash inflows
of $3,111,000 for the same period in 1994.
Page 9
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
Exhibit 27. Financial Data Schedule
B. 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: 11/15/95
OLD SECOND BANCORP, INC.
37 SOUTH RIVER STREET
AURORA ILLINOIS 60507
Page 11
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 46533
<INT-BEARING-DEPOSITS> 400
<FED-FUNDS-SOLD> 42770
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 262817
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 385375
<ALLOWANCE> 5473
<TOTAL-ASSETS> 761421
<DEPOSITS> 669588
<SHORT-TERM> 11630
<LIABILITIES-OTHER> 6374
<LONG-TERM> 0
<COMMON> 15377
0
0
<OTHER-SE> 58452
<TOTAL-LIABILITIES-AND-EQUITY> 761421
<INTEREST-LOAN> 25281
<INTEREST-INVEST> 12156
<INTEREST-OTHER> 1536
<INTEREST-TOTAL> 38973
<INTEREST-DEPOSIT> 17398
<INTEREST-EXPENSE> 17643
<INTEREST-INCOME-NET> 21330
<LOAN-LOSSES> 79
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 17021
<INCOME-PRETAX> 9419
<INCOME-PRE-EXTRAORDINARY> 6752
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6752
<EPS-PRIMARY> 2.87
<EPS-DILUTED> 2.87
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
