Old Second Bancorp(US:OSBC)2022-08-08 19:01Acquisition and Merger - The Company completed the acquisition of West Suburban Bancorp, Inc. on December 1, 2021, acquiring $2.94 billion in assets, $1.50 billion in loans, and $2.69 billion in deposits[37]. - The total merger consideration for the acquisition was $295.2 million, consisting of 15.7 million shares of common stock and $100.7 million in cash[39]. - Goodwill of $67.7 million was recorded from the acquisition, reflecting expected synergies and operational efficiencies[40]. - The Company recorded expenses related to the West Suburban acquisition totaling $3.3 million for the three months ended June 30, 2022, and $8.9 million for the six months ended June 30, 2022[43]. - The merger with West Suburban Bancorp, completed on December 1, 2021, involved total cash and stock consideration of approximately $295.2 million[153]. Financial Performance - For the three months ended June 30, 2022, net income was $12.247 million, resulting in basic earnings per share of $0.28, compared to $8.820 million and $0.30 for the same period in 2021[102]. - Net income for Q2 2022 was $12.2 million, or $0.27 per diluted share, compared to $8.8 million, or $0.30 per diluted share in Q2 2021, primarily due to the acquisition of West Suburban[164]. - Adjusted net income for Q2 2022 was $13.8 million, excluding merger-related costs, compared to $8.8 million in Q2 2021[166]. - Net interest and dividend income increased to $45.3 million in Q2 2022 from $22.0 million in Q2 2021, driven by the West Suburban acquisition[174]. - Noninterest income rose to $9.2 million in Q2 2022, a 16.3% increase from $7.9 million in Q2 2021, attributed to service charges and card-related income[167]. - Total noninterest income for the six months ended June 30, 2022, was $22,674, an increase of 18.0% compared to the same period in 2021[207]. Loan Portfolio and Credit Quality - The company reported a total loan portfolio of $3,625.1 million as of June 30, 2022, an increase from $3,420.8 million at December 31, 2021, representing a growth of approximately 6%[63]. - The allowance for credit losses on loans was $45.4 million as of June 30, 2022, compared to $44.3 million at December 31, 2021, indicating a slight increase in provisions[63]. - The company’s commercial real estate loans increased to $1,704.6 million as of June 30, 2022, from $1,531.8 million at December 31, 2021, reflecting a growth of approximately 11.3%[63]. - The total amount of loans classified as special mention, substandard, or doubtful is reviewed quarterly, indicating a proactive approach to credit risk management[72][73][74]. - The company’s credit quality indicators suggest a focus on loans with outstanding balances greater than $50,000, excluding homogeneous loans[72]. Securities and Investments - As of June 30, 2022, total securities available-for-sale amounted to $1,824.2 million, with a fair value of $1,734.4 million, reflecting unrealized losses of $90.8 million[52]. - The weighted average yield of total securities available-for-sale was 2.00% as of June 30, 2022[54]. - The fair value of U.S. Treasury securities was $214.8 million, with unrealized losses of $8.9 million as of June 30, 2022[52]. - The company experienced net realized losses of $33,000 on securities for the three months ended June 30, 2022[58]. - The total unrealized losses on securities available-for-sale were $90.8 million as of June 30, 2022, with 476 securities in an unrealized loss position[57]. Deposits and Borrowings - Total deposits amounted to $5,342,855 million as of June 30, 2022, a decrease from $5,466,232 million at December 31, 2021, representing a decline of 2.3%[86]. - Total borrowings decreased to $178,159 million as of June 30, 2022, from $198,876 million at December 31, 2021, indicating a reduction of 10.4%[87]. - The company had $44.5 million of senior notes outstanding as of June 30, 2022, with interest payable at a floating rate starting December 31, 2021[89]. Capital and Regulatory Compliance - The Bank's Tier 1 capital leverage ratio was 8.94% as of June 30, 2022, a decrease of 64 basis points from December 31, 2021, but still above the 8.00% objective[104]. - The Bank's total capital ratio was 13.25% at June 30, 2022, a decrease of 21 basis points from December 31, 2021, yet above the required 12.00%[104]. - The Company’s common equity tier 1 capital to risk-weighted assets ratio was 9.35% as of June 30, 2022, exceeding the minimum requirement of 7.00%[107]. - The Company exceeded the minimum thresholds to be considered "well capitalized" under current regulatory defined capital ratios as of June 30, 2022[106]. Noninterest Expenses - Noninterest expense increased by $15.8 million, or 74.0%, to $37.2 million in Q2 2022, mainly due to higher salaries and acquisition-related costs[167]. - Total noninterest expense for Q2 2022 was $37,249, a decrease of 2.6% from Q1 2022 but an increase of 74.1% from Q2 2021[211]. - Salaries and employee benefits increased by $8.4 million year-over-year in Q2 2022, primarily due to the acquisition of West Suburban[212]. - Computer and data processing expenses surged by $7.7 million, or 294.9%, mainly due to costs associated with operating multiple systems prior to conversion[218]. Interest Income and Margin - The yield on average loans increased to 4.37% in Q2 2022, compared to 4.34% in Q1 2022 and 4.33% in Q2 2021[183]. - Net interest margin (GAAP) increased by 31 basis points to 3.16% in Q2 2022, compared to 2.85% in Q1 2022, and increased by 28 basis points from 2.88% in Q2 2021[187]. - Net interest income (GAAP) for the second quarter of 2022 was $45,264, compared to $41,232 in the first quarter of 2022, reflecting a growth of 4.9%[197]. Tax and Efficiency Ratios - The effective tax rate was 26.6% in the second quarter of 2022, compared to 26.3% in the second quarter of 2021[221]. - The efficiency ratio (GAAP) improved to 67.07% in Q2 2022 from 72.70% in Q1 2022[209]. - The efficiency ratio (GAAP) improved to 69.81% for the six months ended June 30, 2022, compared to 66.21% for the same period in 2021[215].