Old Second Bancorp(US:OSBC)2021-11-05 17:40Dividends and Mergers - The Company declared a cash dividend of $0.05 per share, totaling $1.4 million, payable on November 8, 2021[34]. - The proposed merger with West Suburban Bancorp, Inc. is expected to close in December 2021, with West Suburban shareholders receiving 42.413 shares of Company common stock and $271.15 in cash for each share owned[36]. - Post-merger, the Company's stockholders are expected to hold approximately 64% of the issued and outstanding shares, while West Suburban's shareholders will hold approximately 36%[37]. Securities and Investments - As of September 30, 2021, the total securities available-for-sale amounted to $715.188 million, with gross unrealized gains of $21.205 million and gross unrealized losses of $1.717 million[43]. - The amortized cost of securities available-for-sale was $695.700 million as of September 30, 2021, with a weighted average yield of 1.88%[45]. - The Company's investments included $154.5 million in asset-backed securities backed by student loans under the Federal Family Education Loan program, with a guarantee from the U.S. Department of Education at not less than 97%[46]. - The investment portfolio serves both liquidity needs and income objectives, with adjustments made based on loan demand and interest income goals[38]. - Securities valued at $353.2 million were pledged to secure deposits and borrowings, an increase from $335.8 million at year-end 2020[50]. - The total fair value of securities available-for-sale was $715,188,000 as of September 30, 2021, compared to $496,178,000 on December 31, 2020[124][126]. Loans and Credit Losses - Total loans amounted to $1.87 billion as of September 30, 2021, a decrease from $2.03 billion at December 31, 2020, reflecting a reduction of approximately 8.2%[51]. - The allowance for credit losses on loans was $26.9 million as of September 30, 2021, down from $33.9 million at the end of 2020, indicating a decrease of about 20.5%[51]. - The Company had no credit losses recognized for the third quarter of 2021, as no credit quality deterioration was noted[47]. - The total past due loans amounted to $14.316 million, with 90 days or greater past due loans at $10.240 million, representing a total loan portfolio of $1.867 billion[60]. - Nonaccrual loans increased to $27.520 million as of September 30, 2021, compared to $22.280 million as of December 31, 2020[62]. - The total release of credit losses for the first nine months of 2021 amounted to $8.0 million, which included a $7.2 million reserve release on loans and an $813,000 release of expense in the provision for credit losses on unfunded commitments[151]. Financial Performance - Net income for the third quarter of 2021 was $8.4 million, or $0.29 per diluted share, compared to $10.3 million, or $0.34 per diluted share, for the same period in 2020[161]. - For the nine months ended September 30, 2021, net income was $29.1 million, or $0.99 per diluted share, compared to $19.8 million, or $0.65 per diluted share, for the same period in 2020[170]. - The effective tax rate for Q3 2021 was 25.8%, down from 26.3% in Q2 2021[215]. - Noninterest income decreased to $9.3 million in the third quarter of 2021 from $11.7 million in the same quarter of 2020, primarily due to a $3.4 million decrease in residential mortgage banking revenue[161]. Capital and Regulatory Compliance - The Bank's Tier 1 capital leverage ratio was 10.83% as of September 30, 2021, an increase of 9 basis points from December 31, 2020, exceeding the 8.00% objective[102]. - The total capital ratio was 16.69% as of September 30, 2021, an increase of 168 basis points from December 31, 2020, well above the 12.00% objective[102]. - The Company has repurchased a total of 1,485,307 shares under the stock repurchase program since its inception, with 9,519 shares remaining available for repurchase as of September 30, 2021[109]. - The Company is expected to no longer be considered a "small bank holding company" in March 2022 due to total assets exceeding $3.0 billion as of June 30, 2021[104]. Asset Management and Economic Risks - The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily through the management of its assets and liabilities[127]. - The quality of the loan portfolio is influenced by the economic health of the communities served, with real estate lending comprising 73.4% of the portfolio as of September 30, 2021[222]. - The COVID-19 pandemic has not significantly impacted the overall health of the real estate industry in the Company’s markets, which have shown relative stability over the past three years[151]. Noninterest Expenses - Total noninterest expense for Q3 2021 was $22,129 million, an increase of $1,863 million, or 9.2%, compared to Q3 2020[204]. - Salaries and employee benefits increased by $378,000 in Q3 2021 compared to Q3 2020, with officer incentive compensation rising by $244,000[208]. - Legal fees increased by $286,000 in Q3 2021, primarily due to merger-related costs[209]. - Other expenses increased by $994,000 for the nine months ended September 30, 2021, primarily due to management and consulting fees related to the pending merger[213].