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, 1997 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. 2,937,484 shares of no par value common stock are outstanding as of May 9, 1997. There are no exhibits with this Form 10-Q. Page 1 of 11 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, 1997 1996 <S> --------- --------- ASSETS <C> <C> ------ Cash and Due from Banks $ 27,890 $ 38,298 Interest Bearing Deposits with Banks 200 200 Federal Funds Sold 35,400 40,175 ------- ------- Total Cash and Cash Equivalents 63,490 78,673 Available for Sale Securities 253,143 276,607 Loans 461,801 446,382 Less:Allowance For Possible Loan Losses 6,600 6,403 Unearned Income 384 390 ------- ------- Loans, Net 454,817 439,589 Bank Premises and Equipment, Net 15,423 15,477 Other Assets 18,078 17,455 ------- ------- TOTAL ASSETS $804,951 $827,801 ======= ======= LIABILITIES ----------- Deposits: Demand $101,386 $111,512 Savings 280,113 294,505 Time 326,848 326,635 ------- ------- Total Deposits 708,347 732,652 Securities Sold Under Agreements to Repurchase 2,617 1,838 Other Short-term Borrowings 3,807 4,401 Note Payable 0 20 Other Liabilities 7,706 7,531 ------- ------- Total Liabilities 722,477 746,442 ------- ------- STOCKHOLDERS' EQUITY -------------------- Preferred Stock, no par value, 300,000 shares authorized, none issued Common Stock, no par value shares authorized: 6,000,000 shares issued: 2,937,484 15,377 15,377 Retained Earnings 67,455 65,628 Net Unrealized Gain (Loss) on Investments (358) 354 ------- ------- Total Stockholders' Equity 82,474 81,359 ------- ------- TOTAL LIABILITIES&STOCKHOLDERS' EQUITY $804,951 $827,801 ======= ======= <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, ------------------ 1997 1996 <S> ------ ------ INTEREST INCOME: <C> <C> --------- Loans $ 9,919 $ 8,977 Investment Securities: Taxable 3,215 3,017 Exempt From Federal Income Tax 815 953 Federal Funds Sold 418 538 Interest Bearing Deposits 5 5 ------ ------ Total Interest Income 14,372 13,490 ------ ------ INTEREST EXPENSE: ---------------- Savings Deposits 1,830 1,819 Time Deposits 4,599 4,221 Other Borrowings 74 67 ------ ------ Total Interest Expense 6,503 6,107 ------ ------ Net Interest Income 7,869 7,383 Provision for Possible Loan Losses 195 139 ------ ------ Net Interest Income After Provision for Possible Loan Losses 7,674 7,244 OTHER INCOME: ------------ Trust Fees 1,019 976 Service Charges on Deposit Accounts 696 638 Other Income 290 345 ------ ------ Total Other Income 2,005 1,959 ------ ------ OTHER EXPENSES: -------------- Salaries and Employee Benefits 3,427 3,087 Net Occupancy of Bank Premises 423 400 Furniture and Equipment 692 604 FDIC Insurance 18 6 Marketing 201 236 Stationery and Supplies 189 195 Amortization of Intangible Assets 169 129 Other 1,090 934 ------ ------ Total Other Expenses 6,209 5,591 ------ ------ Income Before Income Taxes 3,470 3,612 Income Tax Expense 1,055 1,132 ------ ------ Net Income $2,415 $2,480 ====== ====== Per Share Amounts: ----------------- Net Income $ .82 $0.84 Dividends Declared 0.20 0.16 Average Shares Outstanding 2,937,484 2,937,706 <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, 1997 1996 <S> ----- ----- CASH FLOWS FROM OPERATING ACTIVITIES: <C> <C> ------------------------------------- Interest Received $14,231 $13,788 Interest Paid (6,595) (6,318) Paid to Suppliers and Employees (6,472) (5,652) Trust Fees Received 1,019 976 Income Taxes Paid (160) 0 Service Charges Received on Deposit Accounts 696 638 Other Income Received 290 345 ------ ------ Net Cash Provided By Operating Activities 3,009 3,777 ------ ------ CASH FLOWS FROM INVESTING ACTIVITIES: ------------------------------------- Net (Increase) Decrease in Loans (15,423) 4,963 Purchases of Available for Sale Securities (13,468) (15,836) Proceeds from Maturities of Available for Sale Securities 35,717 14,020 Capital Expenditures (354) (382) Other, Net 396 24 ------ ------ Net Cash Provided by Investing Activities 6,868 2,789 ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES: ------------------------------------- Net Decrease in Deposits (24,305) (10,582) Net Increase (Decrease) in Other Short-term Borrowings 185 (2,129) Decrease in Note Payable (20) 0 Dividends Paid (881) (823) Other, Net (39) (38) ------ ------ Net Cash Used in Financing Activities (25,060) (13,572) ------ ------ Net Decrease in Cash & Cash Equivalents (15,183) (7,006) Cash & Cash Equivalents at Beginning of Period 78,673 85,247 ------ ------ Cash & Cash Equivalents at End of Period$63,490 $78,241 ====== ====== RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net Income $2,415 $2,480 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 408 312 Provision for Possible Loan Losses 195 139 Increase in Taxes Payable 895 1,132 Increase in Interest Receivable (201) 343 Decrease in Interest Payable (91) (211) Net Premium Amortization (Discount Accretion) 59 (45) Amortization of Intangible Assets 169 129 Decrease in Accrued Expenses (675) (452) (Increase)Decrease in Prepaid Expenses (165) (50) ----- ----- Total Adjustments (594) (1,297) ----- ----- Net Cash Provided by Operating Activities $3,009 $3,777 ===== ===== <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, 1997 are not necessarily indicative of the results that may be expected for the year ended December 31, 1997. NOTE 2 - ACCOUNTING FOR EARNING PER SHARE In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (SFAS) No. 128 "Earnings Per Share" which prescribes the calculation of earnings per share for both interim and annual financial statements. Adoption of this standard is required for periods ending after December 15, 1997 and is not expected to have a material effect on the Corporation's earnings per share computation. 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, 1997 of $804,951,000 were down 2.8% from the 1996 year-end total of $827,801,000. Total investment securities of $253,143,000 were down $23,464,000 (8.5%) whereas net loans of $454,817,000 were up $15,228,000 (3.5%). Total deposits of $708,347,000 were down 3.3% from the 1996 year-end total of $732,652,000 and includes declines of $10,126,000 in demand and $14,392,000 in savings deposits. Total stockholders' equity of $82,474,000 increased by $1,115,000 from the 1996 year-end total of $81,359,000. The increase resulted from additional retained earnings of $1,827,000 offset by a decline of $712,000 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, 1997 and 1996. Net interest income for the three months ended March 31, 1997 of $7,869,000 was up $486,000 (6.6%) over the like period of 1996. Total interest income for the three months of $14,372,000 was higher than 1996 by $882,000 (6.5%). Total interest expense of $6,503,000 for the three months increased $396,000 (6.4%) from the same period in 1996. Total other income for the three months ending March 31, 1997 of $2,005,000 was up $46,000 (2.35%) from the same period a year ago. Trust fees increased $43,000 (4.4%) for the quarter compared to 1996 while service charges on deposit accounts increased $58,000 (9.09%). Other income decreased $55,000 (15.9%) from the like time period in 1996 primarily due to a decline in secondary mortgage fees which were higher in 1996 as customers took advantage of declining interest rates. Total other expenses for the three months of 1997 increased $618,000 (11.0%) from the same period in 1996 due primarily to additional costs of establishing new locations and the costs related to the pending acquisition of Maple Park Bancshares. Salaries and employee benefits were up $340,000 (11.0%). Furniture and equipment increased $88,000 (14.5%), while marketing and stationery and supplies decreased $35,000 (14.8%) and $6,000 (3.1%), respectively. FDIC insurance expense increased $12,000 and other expenses were up $156,000 (16.7%) from the same period in 1996. 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
Net cash provided by operating activities was $3,009,000 and $3,777,000 for the three months ended March 31, 1997 and 1996, respectively. Net cash provided by investing activities was $6,868,000 for the three months in 1997; in 1996 net cash provided in investing activities totaled $2,789,000. 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 offset by increased investment securities purchase and proceeds 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 three months, net cash of $25,060,000 and $13,572,000 was used in financing activities for 1997 and 1996, respectively. A decrease in deposits generated cash outflows of $24,305,000 and $10,582,000 for the three months of 1997 and 1996, respectively. Page 9
PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders A. The annual meeting of stockholders of Old Second Bancorp, Inc. was held on March 11, 1997. B. The following matters were voted upon at this annual meeting and the results of such votes are provided below: Ratification and approval of the selection of Ernst & Young LLP as the Corporation's independent auditors for the year of 1997. For 2,505,698 Against 4,992 Abstentions 5,092 The election of three directors to serve for a term of three years each. Ronald Carlson For 2,493,183 Against 10,500 Abstentions 12,099 Gary McCarter For 2,497,587 Against 6,096 Abstentions 12,099 D. Chet McKee For 2,489,570 Against 13,953 Abstentions 12,259 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. 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: 05/14/97 Page 11 OLD SECOND BANCORP, INC. 37 SOUTH RIVER STREET AURORA ILLINOIS 60507 Page 11