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 March 31, 1996 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 91 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 May 9, 1996. There are no exhibits with this Form 10-Q. Page 1 of 9 Pages
<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> March 31, December 31, 1996 1995 --------- --------- <S> <C> <C> ASSETS ------ Cash and Due from Banks, Non- Interest Bearing $ 34,816 $ 42,047 Interest Bearing Deposits With Banks 400 400 Federal Funds Sold 43,025 42,800 ------- ------- Total Cash and Cash Equivalents 78,241 85,247 Available for Sale Securities 253,234 253,899 Loans 394,587 399,505 Less:Allowance For Possible Loan Losses 5,876 5,676 Unearned Income 486 502 ------- ------- Loans, Net 388,225 393,327 Bank Premises and Equipment, Net 14,672 14,602 Other Assets 14,258 13,655 ------- ------- TOTAL ASSETS $748,630 $760,730 ======= ======= LIABILITIES ----------- Deposits: Demand $ 94,407 $100,169 Savings 271,258 271,769 Time 293,044 297,353 ------- ------- Total Deposits 658,709 669,291 Securities Sold Under Agreements to Repurchase 3,337 6,554 Other Short-Term Borrowings 3,673 2,585 Note Payable 40 40 Other Liabilities 6,987 6,842 ------- ------- Total Liabilities 672,746 685,312 ------- ------- STOCKHOLDERS' EQUITY -------------------- Preferred Stock, no par value, 300,000 shares authorized, none issued Common Stock, no par value shares authorized: at 3/31/96 6,000,000 at 3/31/95 3,500,000 shares issued: 2,350,165 15,377 15,377 Retained Earnings 60,544 58,533 Net Unrealized Gain (Loss) on Investments (37) 1,508 ------- ------- Total Stockholders' Equity 75,884 75,418 ------- ------- TOTAL LIABILITIES&STOCKHOLDERS' EQUITY $748,630 $760,730 ======= ======= <FN> See accompanying notes. </TABLE> Page 2
<TABLE> OLD SECOND BANCORP, INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA) <CAPTION> Three Months Ended March 31, ------------------ 1996 1995 ------ ------ <S> <C> <C> INTEREST INCOME: --------- Loans $ 8,977 $ 8,186 Investment Securities: Taxable 3,017 2,994 Exempt From Federal Income Tax 953 956 Federal Funds Sold 538 322 Interest Bearing Deposits 5 6 ------ ------ Total Interest Income 13,490 12,464 ------ ------ INTEREST EXPENSE: ---------------- Savings Deposits 1,819 1,819 Time Deposits 4,221 3,399 Securities Sold Under Agreements To Repurchase 44 10 Other Short-Term Borrowings 22 59 Note Payable 1 1 ------ ------ Total Interest Expense 6,107 5,288 ------ ------ Net Interest Income 7,383 7,176 Provision for Possible Loan Losses 139 40 ------ ------ Net Interest Income After Provision for Possible Loan Losses 7,244 7,136 OTHER INCOME: ------------ Trust Fees 976 739 Service Charges on Deposit Accounts 638 596 Other Income 345 269 ------ ------ Total Other Income 1,959 1,604 ------ ------ OTHER EXPENSES: -------------- Salaries and Employee Benefits 3,087 3,041 Net Occupancy of Bank Premises 400 386 Furniture and Equipment 604 474 FDIC Insurance 6 348 Marketing 236 182 Stationery and Supplies 195 144 Goodwill Amortization 129 129 Other 934 1,045 ------ ------ Total Other Expenses 5,591 5,749 ------ ------ Income Before Income Taxes 3,612 2,991 Income Tax Expense 1,132 862 ------ ------ Net Income $2,480 $2,129 ====== ====== Per Share Amounts: ----------------- Net Income $1.06 $0.91 Dividends Declared 0.20 0.20 Average Shares Outstanding 2,350,165 2,350,165 <FN> See accompanying notes. </TABLE> Page 3
<TABLE> OLD SECOND BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS) <CAPTION> For the Three Months Ended March 31, 1996 1995 ----- ----- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: ------------------------------------- Interest Received $13,788 $12,602 Interest Paid (6,318) (5,101) Paid to Suppliers and Employees (5,652) (5,910) Trust Fees Received 976 739 Income Taxes Paid 0 37 Service Charges Received on Deposit Accounts 638 596 Increase in Mortgages Held for Resale (2,363) (404) Other Income Received 345 269 ------ ------ Net Cash Provided By Operating Activities 1,414 2,828 ------ ------ CASH FLOWS FROM INVESTING ACTIVITIES: ------------------------------------- Net (Increase) Decrease in Loans 7,326 (10,581) Purchases of Available for Sale Securities (15,836) (7,564) Proceeds from Maturities of Available for Sale Securities 14,020 11,630 Purchases of Held to Maturity Securities (2,000) Proceeds from Maturities of Held to Maturity Securities 534 Capital Expenditures (382) (146) Other, Net 24 876 ------ ------ Net Cash Provided by (Used in) 5,152 (7,251) Investing Activities ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES: ------------------------------------- Net Decrease in Deposits (10,582) (12,916) Decrease in Other Short-term Borrowings (2,129) (5,846) Decrease in Notes Payable 0 (40) Dividends Paid (823) (643) Other, Net (38) (23) ------ ------ Net Cash Used in Financing Activities (13,572) (19,468) ------ ------ Net Decrease in Cash & Cash Equivalents (7,006) (23,891) Cash & Cash Equivalents at Beginning of Period 85,247 78,751 ------ ------ Cash & Cash Equivalents at End of Period$78,241 $54,860 ====== ====== RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net Income $2,480 $2,129 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 312 316 Provision for Possible Loan Losses 139 40 Increase in Taxes Payable 1,132 899 (Increase)Decrease in Interest Receivable 343 (94) Increase(Decrease) in Interest Payable (211) 188 Net Premium Amortization or (Discount Accretion) (45) 228 Goodwill Amortization 129 129 Increase in Mortgages Held for Resale (2,363) (404) Decrease in Accrued Expenses (452) (214) Increase in Prepaid Expenses (50) (389) ----- ----- Total Adjustments (1,066) 699 ----- ----- Net Cash Provided by Operating Activities $1,414 $2,828 ===== ===== <FN> See accompanying notes. </TABLE> Page 4
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 three months ended March 31, 1996 are not necessarily indicative of the results that may be expected for the year ended December 31, 1996. NOTE 2 - ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF Effective January 1, 1996, the Corporation adopted Financial Accounting Standards Number 121 "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of". Adoption of this standard did not have a material effect on the Corporation's financial position or results of operations. NOTE 3 - ACCOUNTING FOR STOCK BASED COMPENSATION As of January 1, 1996, the Corporation adopted Financial Accounting Standards Number 123 "Accounting for Stock Based Compensation", which applies to the Corporation's Long-Term Incentive Plan. Adoption of this standard did not have any effect on the Corporation's financial position or results of operations because the Corporation has elected to adopt only the disclosure requirements of the standard and will continue to account for stock based compensation as it has in the past under the provision of Accounting Principles Board Opinion No. 25. Page 5
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 March 31, 1996 of $748,630,000 were down 1.6% from the 1995 year-end total of $760,730,000. Net Loans were down $5,102,000 (1.3%). Total Deposits of $658,709,000 were down 1.6% from the 1995 year-end total of $669,291,000. Time Deposits decreased $4,309,000 (1.5%) and Demand Deposits are down $5,762,000 (5.8%). Securities Sold Under Agreements to Repurchase decreased $3,217,000 while Other Short-Term Borrowings were up $1,088,000. Total Stockholders' Equity of $75,884,000 increased by $466,000 from the 1995 year-end total of $75,418,000. The increase resulted from additional retained earnings of $2,011,000 offset by a decline of $1,545,000 in the Net Unrealized Gain (Loss) on Investments. RESULTS OF OPERATIONS Operating results include net income for Old Second Bancorp, Inc. and its subsidiaries for the three months ended March 31, 1996 and 1995. Net Interest Income for the three months ended March 31, 1996 of $7,383,000 was up $207,000 (2.9%) over the like period of 1995. Total Interest Income for the three months of $13,490,000 was higher than 1995 by $1,026,000 (8.2%). Total Interest Expense of $6,107,000 for the three months increased $819,000 (15.9%) from the same period in 1995. Total Other Income for the three months ending March 31, 1996 of $1,959,000 was up $355,000 (22.1%) from the same period a year ago. Trust Fees increased $237,000 (32.1%) for the quarter. Service Charges on Deposit Accounts increased $42,000 (7.1%). Other Income increased $76,000 (28.3%) from the like time period in 1995. Total Other Expenses for the three months of 1996 decreased $158,000 (2.7%) from the same period in 1995. Salaries and Employee Benefits were up $46,000 (1.5%). Furniture and Equipment, Marketing and Stationary and Supplies increased $130,000, $54,000 and $51,000, respectively. FDIC expense decreased $342,000 (98.3%) due to the rate reduction on insurance premiums and Other Expenses were down $111,000 from the same period in 1995. Page 6
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. Net cash provided by operating activities was $1,414,000 and $2,828,000 for the three months ended March 31, 1996 and 1995, respectively. The decrease in cash flows from operating activities was primarily attributable to increased activity in Mortgages Held for Resale for the three months in 1996 as compared to the same period in 1995. Net cash provided by investing activities was $5,152,000 for the three months in 1996; in 1995 net cash used in investing activities totaled $7,251,000. The primary components of cash flows from investing activities are funding and repayment of customer loans and purchases and sales of investment securities. The increase in cash flows from investing activities was primarily attributable to the net decrease in loans partially offset by increased investment securities purchase activity. Cash flows from financing activities are primarily attributable to changes in deposit levels, short-term borrowings and the payment of dividends to stockholders. For the three months, net cash of $13,572,000 and $19,468,000 was used in financing activities for 1996 and 1995, respectively. A decrease in deposits generated cash outflows of $10,582,000 and $12,916,000 for the three months of 1996 and 1995, respectively. Short-Term Borrowings resulted in cash outflows of $2,129,000 and $5,846,000 for the three months ended March 31, 1996 and 1995, respectively. Page 7
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 No reports on Form 8-K have been filed during the quarter because of the absence of conditions under which they are required. Page 8
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, Chief Operating Officer, Secretary and Director Date: 05/15/96 OLD SECOND BANCORP, INC. 37 SOUTH RIVER STREET AURORA ILLINOIS 60507 Page 9