OSBC 8-K
Old Second Bancorp Inc (OSBC)
I
United States
Securities And Exchange Commission
Washington, D.C. 20549
FORM
Current Report
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Item 2.02 Results of Operations and Financial Condition
On April 27, 2022, Old Second Bancorp, Inc. (the “Company’s”) issued a press release announcing its financial results for the first quarter ended March 31, 2022. A copy of the Company’s press release is attached as Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
99.1 Press release dated April 27, 2022
2
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
OLD SECOND BANCORP, INC. | ||
Dated: April 27, 2022 | By: | /s/ Bradley S. Adams |
Bradley S. Adams | ||
Executive Vice President and | ||
Chief Financial Officer | ||
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| | |
(NASDAQ:OSBC) | Exhibit 99.1 | |
| | |
Contact: | Bradley S. Adams | For Immediate Release |
| Chief Financial Officer | April 27, 2022 |
| (630) 906-5484 | |
Old Second Bancorp, Inc. Reports First Quarter 2022 Net Income of $12.0 Million,
or $0.27 per Diluted Share
AURORA, IL, April 27, 2022 – Old Second Bancorp, Inc. (the “Company,” “Old Second,” “we,” “us,” and “our”) (NASDAQ: OSBC), the parent company of Old Second National Bank (the “Bank”), today announced financial results for the first quarter of 2022. Our net income was $12.0 million, or $0.27 per diluted share, for the first quarter of 2022, compared to a net loss of $9.1 million, or $0.26 per diluted share, for the fourth quarter of 2021, and net income of $11.9 million, or $0.40 per diluted share, for the first quarter of 2021. Adjusted net income, a non-GAAP financial measure that excludes $5.6 million of pre-tax acquisition-related costs related to our acquisition of West Suburban Bancorp, Inc. (“West Suburban”) on December 1, 2021, was $16.1 million, or $0.36 per diluted share, for the first quarter of 2022. See the discussion entitled “Non-GAAP Presentations” below and the tables beginning on page 17 that provide a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent.
The increase in net income in the first quarter of 2022 was primarily due to net interest and dividend income of $41.2 million, which increased $12.6 million from the fourth quarter of 2021, and increased $17.7 million from the first quarter of 2021, as a full quarter of West Suburban loan and securities income, net of interest expense on acquired deposits, was included in the first quarter of 2022. In addition, the first quarter of 2022 also included a $3.0 million pre-tax mark to market gain on mortgage servicing rights (“MSRs”), primarily due to the increase in market interest rates in early 2022. This compares to a $1.5 million pre-tax gain on MSRs in the fourth quarter of 2021, and a $1.1 million pre-tax gain on MSRs in the first quarter of 2021.
Operating Results
1
| ● | Noninterest income was $13.5 million for the first quarter of 2022, an increase of $2.8 million, or 26.5%, compared to $10.7 million for the fourth quarter of 2021, and an increase of $2.2 million, or 19.4%, compared to $11.3 million for the first quarter of 2021. Growth in wealth management, service charges on deposits, and card related income resulted primarily from the West Suburban acquisition and resultant additional fee income. In addition, increases of $1.5 million and $1.9 million were reflected in the mark to market gain on MSRs in the first quarter of 2022, compared to the fourth quarter of 2021 and the first quarter of 2021, respectively. |
| ● | Noninterest expense was $38.3 million for the first quarter of 2022, a decrease of $247,000, or 0.6%, compared to $38.5 million for the fourth quarter of 2021, and an increase of $16.5 million, or 76.1%, from $21.7 million for the first quarter of 2021. The year over year increase was due to $5.6 million of acquisition-related costs in the first quarter of 2022, primarily within computer and data processing, consulting fees and other expense. In addition, growth in salaries and employee benefits and occupancy, furniture and equipment expenses were recorded in the first quarter of 2022, primarily stemming from the additional employees and branches due to the West Suburban acquisition. |
| ● | We had a provision for income tax expense of $4.4 million for the first quarter of 2022, compared to an income tax benefit of $2.5 million for the fourth quarter of 2021, and a provision for income tax expense of $4.2 million for the first quarter of 2021. The increase in tax expense for the first quarter of 2022 was due to an increase in pre-tax income, compared to a pre-tax loss for the linked quarter. |
| ● | On April 19, 2022, our Board of Directors declared a cash dividend of $0.05 per share payable on May 9, 2022, to stockholders of record as of April 29, 2022. |
President and Chief Executive Officer Jim Eccher said “We are pleased to begin the year with solid overall core results and are encouraged about the trends and momentum in our businesses with robust lending pipelines and improving levels of activity within our customer base. We are making solid progress on the integration of West Suburban and continue to believe the combination will deliver value to our stockholders with significant improvements in core profitability as redundancies are eliminated.
“Looking forward, I am optimistic on loan growth trends in the near term and extremely excited on what we believe we can do over the intermediate term. Loan originations were very strong in the first quarter with balance sheet growth mitigated by Paycheck Protection Program loan forgiveness and paydowns in acquired loan participations. We expect these pressures to lessen in coming quarters, and combined with the prospect of higher rates, offer the potential for expanding margins and strong earnings growth in the near term. We are excited for the future and believe we have the resources and momentum to focus on growth and building a better Old Second for our stockholders and communities.”
COVID-19 Update
We continued to face branch disruptions due to labor shortages and COVID-19-related closures in the first quarter of 2022. We assess customer needs daily, and announce any temporary branch closures internally for staff as well as with signage for customers. In early 2022, due to the acquisition, we conducted a branch review to determine which of our branches were either lower volume facilities or overlapped with newly acquired branches. As a result, we sold one branch and further branch closures are in process. We have notified all required regulatory agencies of any final branch closure determinations.
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Capital Ratios
| Minimum Capital | | Well Capitalized | | | | | | | | | | ||
| Adequacy with | | Under Prompt | | | | | | | | | | ||
| Capital Conservation | | Corrective Action | | March 31, | | December 31, | | March 31, | |||||
| Buffer, if applicable1 | | Provisions2 | | 2022 | | 2021 | | 2021 | |||||
The Company | | | | | | | | | | | | | | |
Common equity tier 1 capital ratio | 7.00 | % | | N/A | | | 9.73 | % | | 9.46 | % | | 12.43 | % |
Total risk-based capital ratio | 10.50 | % | | N/A | | | 12.85 | % | | 12.55 | % | | 14.73 | % |
Tier 1 risk-based capital ratio | 8.50 | % | | N/A | | | 10.33 | % | | 10.06 | % | | 13.53 | % |
Tier 1 leverage ratio | 4.00 | % | | N/A | | | 7.00 | % | | 7.81 | % | | 10.02 | % |
| | | | | | | | | | | | | | |
The Bank | | | | | | | | | | | | | | |
Common equity tier 1 capital ratio | 7.00 | % | | 6.50 | % | | 12.74 | % | | 12.41 | % | | 14.59 | % |
Total risk-based capital ratio | 10.50 | % | | 10.00 | % | | 13.83 | % | | 13.46 | % | | 15.80 | % |
Tier 1 risk-based capital ratio | 8.50 | % | | 8.00 | % | | 12.74 | % | | 12.41 | % | | 14.59 | % |
Tier 1 leverage ratio | 4.00 | % | | 5.00 | % | | 8.61 | % | | 9.58 | % | | 10.78 | % |
1 Amounts are shown inclusive of a capital conservation buffer of 2.50%.
2 The prompt corrective action provisions are only applicable at the Bank level.
The ratios shown above exceed levels required to be considered “well capitalized.”
Asset Quality & Earning Assets
| ● | Nonperforming loans totaled $38.0 million at March 31, 2022, $44.7 million at December 31, 2021, and $21.2 million at March 31, 2021. Nonperforming loans with a total net book value of $23.8 million were acquired with our acquisition of West Suburban in December 2021. Credit metrics reflected increases in nonperforming loans due to the acquisition in the fourth quarter of 2021, and management is carefully monitoring loans considered to be in a classified status. Nonperforming loans, as a percent of total loans were 1.1% at March 31, 2022, 1.3% at December 31, 2021, and 1.1% at March 31, 2021. |
| ● | OREO assets totaled $2.4 million at March 31, 2022 and December 31, 2021, and $2.2 million at March 31, 2021. In the first quarter of 2022 we transferred one property to OREO from loans with a total net book value of $87,000, and we sold one property with a total net book value of $69,000. Nonperforming assets, as a percent of total loans plus OREO, were 1.2% at March 31, 2022, compared to 1.4% at December 31, 2021, and 1.2% at March 31, 2021. |
| ● | Total loans were $3.40 billion at March 31, 2022, reflecting a decrease of $19.6 million compared to December 31, 2021, and an increase of $1.44 billion compared to March 31, 2021. The decrease from the linked quarter was due to Paycheck Protection Program (“PPP”) loan paydowns as well as other loan paydowns, net of originations, in the first quarter of 2022. Increases in the year over year quarter were due to the acquisition of $1.50 billion of loans in the West Suburban acquisition. Average loans (including loans held-for-sale) for the first quarter of 2022 totaled $3.41 billion, reflecting an increase of $1.01 billion from the fourth quarter of 2021 and an increase of $1.39 billion from the first quarter of 2021. |
| ● | Available-for-sale securities totaled $1.82 billion at March 31, 2022, compared to $1.69 billion at December 31, 2021, and $593.3 million at March 31, 2021. Total securities available-for-sale increased a net $124.0 million from the linked quarter due to purchases of $266.3 million during the quarter, with no sales in the first quarter of 2022. The growth in the year over year period is due to our acquisition of West Suburban in the fourth quarter of 2021. The unrealized mark to market loss on securities totaled $49.4 million as of March 31, 2022, compared to unrealized mark to market gains on securities of $15.5 million as of December 31, 2021 and $19.4 million at March 31, 2021, due to market interest rate fluctuations as well as changes year over year in the composition of the securities portfolio. |
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Net Interest Income
Analysis of Average Balances, | |||||||||||||||||||||||
Tax Equivalent Income / Expense and Rates | |||||||||||||||||||||||
(Dollars in thousands - unaudited) | |||||||||||||||||||||||
| |||||||||||||||||||||||
| Quarters Ended | ||||||||||||||||||||||
| March 31, 2022 | | December 31, 2021 | | March 31, 2021 | ||||||||||||||||||
| Average | | Income / | | Rate | | Average | | Income / | | Rate | | Average | | Income / | | Rate | ||||||
| Balance | | Expense | | % | | Balance | | Expense | | % | | Balance | | Expense | | % | ||||||
Assets | | | | | | | | | | | | | | | | | | | | | | | |
Interest earning deposits with financial institutions | $ | 635,302 | | $ | 269 | | 0.17 | | $ | 587,721 | | $ | 224 | | 0.15 | | $ | 359,576 | | $ | 92 | | 0.10 |
Securities: | | | | | | | | | | | | | | | | | | | | | | | |
Taxable | | 1,611,748 | | | 5,047 | | 1.27 | | | 842,576 | | | 2,817 | | 1.33 | | | 340,873 | | | 1,615 | | 1.92 |
Non-taxable (TE)1 | | 195,240 | | | 1,814 | | 3.77 | | | 189,697 | | | 1,674 | | 3.50 | | | 191,357 | | | 1,655 | | 3.51 |
Total securities (TE)1 | | 1,806,988 | | | 6,861 | | 1.54 | | | 1,032,273 | | | 4,491 | | 1.73 | | | 532,230 | | | 3,270 | | 2.49 |
Dividends from FHLBC and FRBC | | 16,066 | | | 153 | | 3.86 | | | 11,042 | | | 114 | | 4.10 | | | 9,917 | | | 115 | | 4.70 |
Loans and loans held-for-sale1, 2 | | 3,405,421 | | | 36,448 | | 4.34 | | | 2,393,017 | | | 26,368 | | 4.37 | | | 2,014,773 | | | 22,266 | | 4.48 |
Total interest earning assets | | 5,863,777 | | | 43,731 | | 3.02 | | | 4,024,053 | | | 31,197 | | 3.08 | | | 2,916,496 | | | 25,743 | | 3.58 |
Cash and due from banks | | 42,941 | | | - | | - | | | 34,225 | | | - | | - | | | 28,461 | | | - | | - |
Allowance for credit losses on loans | | (44,341) | | | - | | - | | | (34,567) | | | - | | - | | | (34,540) | | | - | | - |
Other noninterest bearing assets | | 373,423 | | | - | | - | | | 287,762 | | | - | | - | | | 187,488 | | | - | | - |
Total assets | $ | 6,235,800 | | | | | | | $ | 4,311,473 | | | | | | | $ | 3,097,905 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Liabilities and Stockholders' Equity | | | | | | | | | | | | | | | | | | | | | | | |
NOW accounts | $ | 610,797 | | $ | 89 | | 0.06 | | $ | 567,971 | | $ | 85 | | 0.06 | | $ | 495,384 | | $ | 95 | | 0.08 |
Money market accounts | | 1,098,913 | | | 170 | | 0.06 | | | 611,632 | | | 142 | | 0.09 | | | 329,050 | | | 77 | | 0.09 |
Savings accounts | | 1,845,656 | | | 138 | | 0.03 | | | 918,835 | | | 68 | | 0.03 | | | 412,743 | | | 69 | | 0.07 |
Time deposits | | 495,452 | | | 277 | | 0.23 | | | 370,919 | | | 271 | | 0.29 | | | 399,310 | | | 500 | | 0.51 |
Interest bearing deposits | | 4,050,818 | | | 674 | | 0.07 | | | 2,469,357 | | | 566 | | 0.09 | | | 1,636,487 | | | 741 | | 0.18 |
Securities sold under repurchase agreements | | 39,204 | | | 11 | | 0.11 | | | 47,571 | | | 15 | | 0.13 | | | 82,475 | | | 31 | | 0.15 |
Junior subordinated debentures | | 25,773 | | | 280 | | 4.41 | | | 25,773 | | | 283 | | 4.36 | | | 25,773 | | | 280 | | 4.41 |
Subordinated debentures | | 59,222 | | | 546 | | 3.74 | | | 59,201 | | | 546 | | 3.66 | | | - | | | - | | - |
Senior notes | | 44,494 | | | 485 | | 4.42 | | | 44,468 | | | 673 | | 6.00 | | | 44,389 | | | 673 | | 6.15 |
Notes payable and other borrowings | | 19,009 | | | 103 | | 2.20 | | | 20,090 | | | 107 | | 2.11 | | | 23,330 | | | 123 | | 2.14 |
Total interest bearing liabilities | | 4,238,520 | | | 2,099 | | 0.20 | | | 2,666,460 | | | 2,190 | | 0.33 | | | 1,812,454 | | | 1,848 | | 0.41 |
Noninterest bearing deposits | | 1,437,881 | | | - | | - | | | 1,193,387 | | | - | | - | | | 937,039 | | | - | | - |
Other liabilities | | 60,601 | | | - | | - | | | 68,314 | | | - | | - | | | 37,801 | | | - | | - |
Stockholders' equity | | 498,798 | | | - | | - | | | 383,312 | | | - | | - | | | 310,611 | | | - | | - |
Total liabilities and stockholders' equity | $ | 6,235,800 | | | | | | | $ | 4,311,473 | | | | | | | $ | 3,097,905 | | | | | |
Net interest income (GAAP) | | | | $ | 41,236 | | | | | | | $ | 28,649 | | | | | | | $ | 23,543 | | |
Net interest margin (GAAP) | | | | | | | 2.85 | | | | | | | | 2.82 | | | | | | | | 3.27 |
| | | | | | | | | | | | | | | | | | | | | | | |
Net interest income (TE)1 | | | | $ | 41,632 | | | | | | | $ | 29,007 | | | | | | | $ | 23,895 | | |
Net interest margin (TE)1 | | | | | | | 2.88 | | | | | | | | 2.86 | | | | | | | | 3.32 |
Interest bearing liabilities to earning assets | | 72.28 | % | | | | | | | 66.26 | % | | | | | | | 62.14 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
1 Tax equivalent (TE) basis is calculated using a marginal tax rate of 21% in 2022 and 2021. See the discussion entitled “Non-GAAP Presentations” below and the tables beginning on page 17 that provides a reconciliation of each non-GAAP measures to the most comparable GAAP equivalent.
2 Interest income from loans is shown on a tax equivalent basis, which is a non-GAAP financial measure as discussed in the table on page 17, and includes fees of $1.1 million, $1.5 million and $1.3 million for the first quarter of 2022, the fourth quarter of 2021, and the first quarter of 2021, respectively. Nonaccrual loans are included in the above stated average balances.
Net interest income (TE) was $41.6 million for the first quarter of 2022, which reflects an increase of $12.6 million compared to the fourth quarter of 2021, and an increase of $17.7 million compared to the first quarter of 2021. The tax equivalent adjustment for the first quarter of 2022 was $396,000, compared to $358,000 for the fourth quarter of 2021, and $352,000 for the first quarter of 2021. Average interest earning assets increased $1.84 billion to $5.86 billion for the first quarter of 2022, compared to the fourth quarter of 2021, and increased $2.95 billion in the first quarter of 2022, compared to the first quarter of 2021; both of these increases were primarily due to the West Suburban acquisition, as well as growth in interest earning deposits with financial institutions, taxable securities available-for-sale, and loans outside of the merger. Average loans, including loans held-for-sale, increased $1.01 billion for the first quarter of 2022, compared to the fourth quarter of 2021, and increased $1.39 billion compared to the first quarter of 2021. The yield on loans for the first quarter of 2022 decreased three basis points compared to the fourth quarter of 2021, and decreased 14 basis points compared to the first quarter of 2021, primarily because the yield on acquired loans is lower.
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Growth in the average balance of securities for the first quarter of 2022, compared to the fourth quarter of 2021 and the first quarter of 2021, offset the decline in yields resulting in a $2.4 million increase in interest income (TE) on securities in the first quarter of 2022, compared to the fourth quarter of 2021, and a $3.6 million increase from the first quarter of 2021. The average yield on total securities available-for-sale declined 95 basis points year over year. We acquired $1.07 billion of securities with our acquisition of West Suburban in December 2021, and securities activity in the first quarter 2022 consisted of $266.3 million of purchases, partially offset by $75.7 million of paydowns, calls and maturities. No security sales occurred in the first quarter of 2022. Our overall yield on tax equivalent municipal securities was 3.77% for the first quarter of 2022, compared to 3.50% for the fourth quarter of 2021 and 3.51% for the first quarter of 2021.
The yield on average earning assets decreased six basis points in the first quarter of 2022, compared to the fourth quarter of 2021, and decreased 56 basis points compared to the first quarter of 2021, primarily due to lower yielding loans in the first quarter of 2022, in addition to a higher amount of earning assets held in interest bearing deposits with financial institutions, which had an average yield of 17 basis points in the first quarter of 2022.
Average interest bearing liabilities increased $1.57 billion in the first quarter of 2022, compared to the fourth quarter of 2021, driven by a $1.58 billion increase in interest bearing deposits. Average interest bearing liabilities increased $2.43 billion in the first quarter of 2022, compared to the first quarter of 2021, primarily driven by a $2.41 billion increase in interest bearing deposits and a $59.2 million increase in subordinated debentures. Both the linked quarter and year over year quarter increases in interest bearing deposits were primarily due to the West Suburban acquisition, as well as continued deposit growth of our legacy customers. The cost of interest bearing liabilities for the first quarter of 2022 decreased 13 basis points from the fourth quarter of 2021, and decreased 21 basis points from the first quarter of 2021. Growth in our average noninterest bearing demand deposits of $244.5 million from the linked quarter, and $500.8 million in the year over year period has assisted us in controlling our cost of funds stemming from average interest bearing deposits and borrowings; cost of funds, which includes the impact of noninterest bearing deposits, totaled 0.15% for the first quarter of 2022, 0.23% for the fourth quarter of 2021, and 0.27% for the first quarter of 2021. The cost of interest bearing liabilities totaled 0.20% for the first quarter of 2022, 0.33% for the fourth quarter of 2021, and 0.41% for the first quarter of 2021.
In the second quarter of 2021, we entered into Subordinated Note Purchase Agreements with certain qualified institutional buyers pursuant to which we sold and issued $60.0 million in aggregate principal amount of our 3.50% Fixed-to-Floating Rate Subordinated Notes due April 15, 2031 (the “Notes”). The Notes bear interest at a fixed annual rate of 3.50% through April 14, 2026, payable semi-annually in arrears. From April 15, 2026 forward, the interest rate on the Notes will generally reset quarterly to a rate equal to Three-Month Term SOFR (as defined by the Note) plus 273 basis points, payable quarterly in arrears. The Notes have a stated maturity of April 15, 2031, and are redeemable, in whole are in part, on April 15, 2026, or any interest payment date thereafter, and at any time upon the occurrence of certain events.
Our net interest margin (GAAP) increased three basis points to 2.85% for the first quarter of 2022, compared to 2.82% for the fourth quarter of 2021, but decreased 42 basis points compared to 3.27% for the first quarter of 2021. Our net interest margin (TE) increased two basis points to 2.88% for the first quarter of 2022, compared to 2.86% for the fourth quarter of 2021, but decreased 44 basis points compared to 3.32% for the first quarter of 2021. The reductions year over year were due primarily to the lower level of market interest rates over the majority of the past twelve months, the related rate resets on loans and securities during the past year, and the increase in liquidity on the balance sheet. See the discussion entitled “Non-GAAP Presentations” and the tables beginning on page 17 that provide a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent.
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Noninterest Income
| | | | | | | | | | | 1st Quarter 2022 | | ||
Noninterest Income | | Three Months Ended | | Percent Change From | | |||||||||
(Dollars in thousands) | | March 31, | | December 31, | | March 31, | | December 31, | | March 31, | | |||
|
| 2022 |
| 2021 |
| 2021 |
| 2021 |
| 2021 |
| |||
Wealth management | | $ | 2,698 | | $ | 2,422 | | $ | 2,151 | | 11.4 | | 25.4 | |
Service charges on deposits | | | 2,090 | | | 1,624 | | | 1,195 | | 28.7 | | 74.9 | |
Residential mortgage banking revenue | | | | | | | | | | | | | | |
Secondary mortgage fees | | | 139 | | | 210 | | | 322 | | (33.8) | | (56.8) | |
MSRs mark to market gain (loss) | | | 2,978 | | | 1,463 | | | 1,113 | | 103.6 | | 167.6 | |
Mortgage servicing income | | | 518 | | | 534 | | | 567 | | (3.0) | | (8.6) | |
Net gain on sales of mortgage loans | | | 1,495 | | | 1,498 | | | 3,721 | | (0.2) | | (59.8) | |
Total residential mortgage banking revenue | | | 5,130 | | | 3,705 | | | 5,723 | | 38.5 | | (10.4) | |
Securities (losses) gains, net | | | - | | | (14) | | | - | | N/M | | N/M | |
Change in cash surrender value of BOLI | | | 124 | | | 227 | | | 334 | | (45.4) | | (62.9) | |
Card related income | | | 2,550 | | | 1,967 | | | 1,447 | | 29.6 | | 76.2 | |
Other income | | | 901 | | | 740 | | | 450 | | 21.8 | | 100.2 | |
Total noninterest income | | $ | 13,493 | | $ | 10,671 | | $ | 11,300 | | 26.4 | | 19.4 | |
N/M - Not meaningful.
Noninterest income increased $2.8 million, or 26.4%, in the first quarter of 2022, compared to the fourth quarter of 2021, and increased $2.2 million, or 19.4%, compared to the first quarter of 2021. The increase from the linked quarter was primarily driven by a $1.4 million increase in residential mortgage banking revenue, attributable to a $1.5 million increase in mark to market gain on MSRs stemming from market interest rate changes, partially offset by a $71,000 decrease in secondary mortgage fees in the first quarter of 2022, compared to the fourth quarter of 2021. In addition, we had increases in wealth management fees of $276,000, service charges on deposit accounts of $466,000, and card related income of $583,000 in the first quarter of 2022, as compared to the linked quarter, due to the inclusion of a full quarter of West Suburban noninterest income in 2022. These increases were partially offset by a decrease in the cash surrender value of BOLI of $103,000 in the first quarter of 2022, compared to the fourth quarter of 2021.
The increase in noninterest income in the first quarter of 2022, compared to the first quarter of 2021, is primarily due to a $1.1 million increase in card related income, stemming from the inclusion of a full quarter of West Suburban card-related activity, partially offset by a $593,000 decrease in residential mortgage banking revenue, due to a decrease in mortgage origination volumes in the first quarter of 2022. Also contributing to the increase in noninterest income in the first quarter of 2022, compared to the first quarter of 2021, were increases in wealth management fees of $547,000, service charges on deposits of $895,000, and other income of $451,000, primarily due to the inclusion of a full quarter of West Suburban activity. Partially offsetting these increases to noninterest income in the year over year period was a decrease in the cash surrender value of BOLI of $210,000.
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Noninterest Expense
| | | | | | | | | | | 1st Quarter 2022 | | ||
Noninterest Expense | | Three Months Ended | | Percent Change From | | |||||||||
(Dollars in thousands) | | March 31, | | December 31, | | March 31, | | December 31, | | March 31, | | |||
|
| 2022 |
| 2021 |
| 2021 |
| 2021 |
| 2021 |
| |||
Salaries | | $ | 15,598 | | $ | 14,164 | | $ | 9,216 | | 10.1 | | 69.2 | |
Officers incentive | | | 994 | | | 1,293 | | | 1,653 | | (23.1) | | (39.9) | |
Benefits and other | | | 3,375 | | | 2,868 | | | 2,637 | | 17.7 | | 28.0 | |
Total salaries and employee benefits | | | 19,967 | | | 18,325 | | | 13,506 | | 9.0 | | 47.8 | |
Occupancy, furniture and equipment expense | | | 3,733 | | | 6,395 | | | 2,467 | | (41.6) | | 51.3 | |
Computer and data processing | | | 6,228 | | | 3,859 | | | 1,298 | | 61.4 | | 379.8 | |
FDIC insurance | | | 410 | | | 371 | | | 201 | | 10.5 | | 104.0 | |
General bank insurance | | | 315 | | | 360 | | | 276 | | (12.5) | | 14.1 | |
Amortization of core deposit intangible asset | | | 665 | | | 296 | | | 120 | | 124.7 | | 454.2 | |
Advertising expense | | | 182 | | | 81 | | | 60 | | 124.7 | | 203.3 | |
Card related expense | | | 534 | | | 657 | | | 593 | | (18.7) | | (9.9) | |
Legal fees | | | 294 | | | 460 | | | 55 | | (36.1) | | 434.5 | |
Consulting & management fees | | | 605 | | | 4,091 | | | 416 | | (85.2) | | 45.4 | |
Other real estate owned expense, net | | | (12) | | | 29 | | | 36 | | (141.4) | | (133.3) | |
Other expense | | | 5,365 | | | 3,609 | | | 2,710 | | 48.7 | | 98.0 | |
Total noninterest expense | | $ | 38,286 | | $ | 38,533 | | $ | 21,738 | | (0.6) | | 76.1 | |
Efficiency ratio (GAAP)1 | | | 72.72 | % | | 100.89 | % | | 63.98 | % | | | | |
Adjusted efficiency ratio (non-GAAP)2 | | | 61.38 | % | | 66.45 | % | | 63.16 | % | | | | |
1 The efficiency ratio shown in the table above is a GAAP financial measure calculated as noninterest expense, excluding amortization of core deposits and OREO expenses, divided by the sum of net interest income and total noninterest income less net gains or losses on securities and mark to market gains or losses on MSRs.
2 The adjusted efficiency ratio shown in the table above is a non-GAAP financial measure calculated as noninterest expense, excluding amortization of core deposits, OREO expenses, and acquisition-related costs, divided by the sum of net interest income on a fully tax equivalent basis, total noninterest income less net gains or losses on securities and mark to market gains or losses on MSRs, and includes a tax equivalent adjustment on the change in cash surrender value of BOLI. See the discussion entitled “Non-GAAP Presentations” below and the table on page 18 that provides a reconciliation of this non-GAAP financial measure to the most comparable GAAP equivalent.
Noninterest expense for the first quarter of 2022 decreased $247,000, or 0.6%, compared to the fourth quarter of 2021, and increased $16.5 million, or 76.1%, compared to the first quarter of 2021. The linked quarter decrease was primarily attributable to $5.6 million of West Suburban acquisition-related costs for the first quarter of 2022, compared to $12.8 million for the fourth quarter of 2021. These acquisition-related costs included a $2.4 million increase in computer and data processing expense in the first quarter of 2022, primarily due to acquisition-related core system conversion costs, and a $1.8 million increase in other expense due to ancillary teller and mobile banking systems conversion costs, compared to the linked quarter. Amortization of core deposits also increased $369,000 in the first quarter of 2022, compared to the prior quarter, as a full quarter of amortization on the newly acquired West Suburban deposits was recorded. These increases were offset by a $2.7 million decrease in occupancy, furniture and equipment expense, due to fixed asset writedowns in the fourth quarter of 2021, a $3.5 million decrease in consulting and management fees due to acquisition-related costs paid in late 2021, and a $166,000 decrease in legal fees due to costs incurred upon closing of the West Suburban acquisition. Of the $31.0 million in projected acquisition-related costs announced when we entered into the merger agreement with West Suburban in July 2021, $30.7 million in total has been expensed cumulatively to date by the Company or West Suburban as of March 31, 2022. Additional acquisition-related expenses are anticipated to be recorded in the second quarter of 2022, as we complete our data and systems conversions.
The year over year increase in noninterest expense is primarily attributable to a $6.5 million increase in salaries and employee benefits, a $1.3 million increase in occupancy, furniture and equipment, a $4.9 million increase in computer and data processing expense, and a $2.7 million increase in other expense. Officer incentive compensation decreased $659,000 in the first quarter of 2022, compared to the first quarter of 2021, as incentive accruals in 2021 were at a higher rate than the current year. Employee benefits expense increased $738,000 in the first quarter of 2022, compared to the first quarter of 2021, due to increases stemming from additional employees from our acquisition of West Suburban and increases in employee insurance costs as more employees returned to more routine medical appointments, many of which were on hold during the COVID-19 pandemic in 2020 and part of 2021. The increase in
7
occupancy, furniture and equipment expense year over year was due to the addition of 34 West Suburban branches in late 2021. The increase in computer and data processing expense was primarily due to core system conversion costs of $3.2 million, relating to the West Suburban acquisition. Finally, the increase in other expense was due primarily to growth in net teller banking and bill paying fees of $1.2 million, which was due to acquisition-related costs in the first quarter of 2022.
Earning Assets
| | | | | | | | | | | March 31, 2022 | | ||
Loans | | As of | | Percent Change From | | |||||||||
(dollars in thousands) | | March 31, | | December 31, | | March 31, | | December 31, | | March 31, | | |||
|
| 2022 |
| 2021 |
| 2021 |
| 2021 |
| 2021 |
| |||
Commercial | | $ | 695,545 | | $ | 771,474 | | $ | 392,380 | | (9.8) | | 77.3 | |
Leases | | | 211,132 | | | 176,031 | | | 138,240 | | 19.9 | | 52.7 | |
Commercial real estate - Investor | | | 965,767 | | | 957,389 | | | 567,475 | | 0.9 | | 70.2 | |
Commercial real estate - Owner occupied | | | 655,792 | | | 574,384 | | | 326,857 | | 14.2 | | 100.6 | |
Construction | | | 165,558 | | | 206,132 | | | 93,745 | | (19.7) | | 76.6 | |
Residential real estate - Investor | | | 62,846 | | | 63,399 | | | 52,176 | | (0.9) | | 20.5 | |
Residential real estate - Owner occupied | | | 203,118 | | | 213,248 | | | 107,303 | | (4.8) | | 89.3 | |
Multifamily | | | 298,686 | | | 309,164 | | | 178,258 | | (3.4) | | 67.6 | |
HELOC | | | 110,688 | | | 115,664 | | | 75,604 | | (4.3) | | 46.4 | |
HELOC - Purchased | | | 9,553 | | | 10,626 | | | 17,078 | | (10.1) | | (44.1) | |
Other1 | | | 23,685 | | | 24,437 | | | 10,509 | | (3.1) | | 125.4 | |
Total loans | | $ | 3,402,370 | | $ | 3,421,948 | | $ | 1,959,625 | | (0.6) | | 73.6 | |
1 Other class includes consumer and overdrafts.
Total loans decreased by $19.6 million at March 31, 2022, compared to December 31, 2021, and increased $1.44 billion for the year over year period. Loan growth of $1.50 billion in the year over year period was driven by the acquisition of West Suburban, which was reduced by loan payoffs, net of originations, during the same period. During the first quarter of 2022, $27.2 million of PPP loans were forgiven or paid off. As required by ASU 2016-13, per adoption of the Current Expected Credit Losses accounting standard (“CECL”), the balance (or amortized cost basis) of PCD loans acquired in our acquisitions are carried on a gross basis (rather than net of the associated credit loss estimate), and the expected credit losses for PCD loans are estimated and separately recognized as part of the allowance for credit losses.
| | | | | | | | | | | March 31, 2022 | ||
Securities | | As of | | Percent Change From | |||||||||
(dollars in thousands) | | March 31, | | December 31, | | March 31, | | December 31, | | March 31, | |||
|
| 2022 |
| 2021 |
| 2021 |
| 2021 |
| 2021 | |||
Securities available-for-sale, at fair value | | | | | | | | | | | | | |
U.S. Treasury | | $ | 220,563 | | $ | 202,339 | | $ | 4,102 | | 9.0 | | 5,277.0 |
U.S. government agencies | | | 59,036 | | | 61,888 | | | 6,361 | | (4.6) | | 828.1 |
U.S. government agency mortgage-backed | | | 153,148 | | | 172,302 | | | 70,602 | | (11.1) | | 116.9 |
States and political subdivisions | | | 236,408 | | | 256,465 | | | 242,146 | | (7.8) | | (2.4) |
Corporate bonds | | | 9,683 | | | 9,887 | | | 34,843 | | (2.1) | | (72.2) |
Collateralized mortgage obligations | | | 696,513 | | | 672,967 | | | 74,936 | | 3.5 | | 829.5 |
Asset-backed securities | | | 274,941 | | | 236,877 | | | 130,368 | | 16.1 | | 110.9 |
Collateralized loan obligations | | | 166,158 | | | 79,763 | | | 29,922 | | 108.3 | | 455.3 |
Total securities available-for-sale | | $ | 1,816,450 | | $ | 1,692,488 | | $ | 593,280 | | 7.3 | | 206.2 |
| | | | | | | | | | | | | |
Our securities portfolio totaled $1.82 billion as of March 31, 2022, an increase of $124.0 million from $1.69 billion as of December 31, 2021, and an increase of $1.22 billion from $593.3 million as of March 31, 2021. The increase in the portfolio during the first quarter of 2022, compared to the prior quarter, was driven by purchases of $266.3 million, primarily of U.S. government treasuries, collateralized mortgage obligations, and asset-backed securities, less paydowns, calls and maturities of $75.7 million, to continue to position our portfolio into higher credit quality, shorter duration issuances. The increase in the securities portfolio in the year over year period was primarily due to $1.07 billion of securities acquired in our acquisition of West Suburban, as well as $1.04 billion of purchases in the last twelve months, less $605.6 million of sales in that same period, to utilize our excess cash on hand. We recorded no security sales in the first quarter of 2022 and 2021, compared to $570.5 million of sales in the fourth quarter of 2021.
8
Asset Quality
| | | | | | | | | | | March 31, 2022 | ||
Nonperforming assets | | As of | | Percent Change From | |||||||||
(dollars in thousands) | | March 31, | | December 31, | | March 31, | | December 31, | | March 31, | |||
|
| 2022 |
| 2021 |
| 2021 |
| 2021 | | 2021 | |||
Nonaccrual loans | | $ | 35,973 | | $ | 41,531 | | $ | 20,379 | | (13.4) | | 76.5 |
Performing troubled debt restructured loans accruing interest | |
| 1,242 | |
| 25 | |
| 290 | | N/M | | 328.3 |
Loans past due 90 days or more and still accruing interest | |
| 743 | |
| 3,110 | |
| 513 | | (76.1) | | 44.8 |
Total nonperforming loans | |
| 37,958 | |
| 44,666 | |
| 21,182 | | (15.0) | | 79.2 |
Other real estate owned | |
| 2,374 | |
| 2,356 | |
| 2,163 | | 0.8 | | 9.8 |
Total nonperforming assets | | $ | 40,332 | | $ | 47,022 | | $ | 23,345 | | (14.2) | | 72.8 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
30-89 days past due loans and still accruing interest | | $ | 20,835 | | $ | 10,745 | | $ | 13,506 | | | | |
Nonaccrual loans to total loans | | | 1.1 | % | | 1.2 | % | | 1.0 | % | | | |
Nonperforming loans to total loans | | | 1.1 | % | | 1.3 | % | | 1.1 | % | | | |
Nonperforming assets to total loans plus OREO | | | 1.2 | % | | 1.4 | % | | 1.2 | % | | | |
Purchased credit-deteriorated loans to total loans | | | 2.7 | % | | 3.1 | % | | 0.5 | % | | | |
| | | | | | | | | | | | | |
Allowance for credit losses | | $ | 44,308 | | $ | 44,281 | | $ | 30,967 | | | | |
Allowance for credit losses to total loans | | | 1.3 | % | | 1.3 | % | | 1.6 | % | | | |
Allowance for credit losses to nonaccrual loans | | | 123.2 | % | | 106.6 | % | | 152.0 | % | | | |
Nonperforming loans consist of nonaccrual loans, performing troubled debt restructured loans accruing interest and loans 90 days or more past due and still accruing interest. PCD loans acquired in our acquisitions of West Suburban and ABC Bank totaled $93.1 million, net of purchase accounting adjustments, at March 31, 2022. PCD loans that meet the definition of nonperforming loans are included in our nonperforming disclosures. Nonperforming loans to total loans was 1.1% for the first quarter of 2022, 1.3% for the fourth quarter of 2021, and 1.1% for the first quarter of 2021. Nonperforming assets to total loans plus OREO was 1.2% for the first quarter of 2022, 1.4% for the fourth quarter of 2021, and 1.2% for the first quarter of 2021. Our allowance for credit losses to total loans was 1.3% as of March 31, 2022 and December 31, 2021 and 1.6% as of March 31, 2021.
The following table shows classified loans by segment, which include nonaccrual loans, performing troubled debt restructurings, PCD loans if the risk rating so indicates, and all other loans considered substandard, for the following periods.
| | | | | | | | | | | March 31, 2022 | | ||
Classified loans | | As of | | Percent Change From | | |||||||||
(dollars in thousands) | | March 31, | | December 31, | | March 31, | | December 31, | | March 31, | | |||
|
| 2022 |
| 2021 |
| 2021 |
| 2021 |
| 2021 | | |||
Commercial | | $ | 29,267 | | $ | 32,712 | | $ | 2,397 | | (10.5) | | N/M | |
Leases | | | 2,641 | | | 3,754 | | | 3,147 | | (29.6) | | (16.1) | |
Commercial real estate - Investor | | | 8,809 | | | 10,667 | | | 5,130 | | (17.4) | | 71.7 | |
Commercial real estate - Owner occupied | | | 13,259 | | | 15,429 | | | 8,652 | | (14.1) | | 53.2 | |
Construction | | | 3,186 | | | 2,104 | | | 5,366 | | 51.4 | | (40.6) | |
Residential real estate - Investor | | | 1,729 | | | 1,265 | | | 1,435 | | 36.7 | | 20.5 | |
Residential real estate - Owner occupied | | | 4,739 | | | 5,099 | | | 4,148 | | (7.1) | | 14.2 | |
Multifamily | | | 1,369 | | | 2,278 | | | 7,846 | | (39.9) | | (82.6) | |
HELOC | | | 1,434 | | | 1,243 | | | 1,303 | | 15.4 | | 10.1 | |
HELOC - Purchased | | | 173 | | | 180 | | | - | | (3.9) | | - | |
Other1 | | | 2 | | | 10 | | | 402 | | (80.0) | | (99.5) | |
Total classified loans | | $ | 66,608 | | $ | 74,741 | | $ | 39,826 | | (10.9) | | 67.2 | |
1 Other class includes consumer and overdrafts.
N/M - Not meaningful.
Increases in classified loans noted for the first quarter of 2022 and the fourth quarter of 2021, compared to the first quarter of 2021, were driven by our acquisition of West Suburban and the resultant increase in total loans.
9
Allowance for Credit Losses on Loans and Unfunded Commitments
At March 31, 2022, our allowance for credit losses (“ACL”) on loans totaled $44.3 million, and our ACL on unfunded commitments, included in other liabilities, totaled $5.7 million. In the first quarter of 2022, we recorded provision expense of $320,000 based on our assessment of nonperforming loan metrics and trends and estimated future credit losses. We recorded net charge-offs of $293,000 in the first quarter of 2022, which reduced the ACL. In the fourth quarter of 2021, due to our acquisition of West Suburban, a Day One purchase accounting credit mark of $12.1 million and a Day Two provision of $12.3 million related to the future estimated lifetime credit losses on non-PCD loans was recorded to the ACL. These increases to the ACL were partially offset by $4.7 million of net charge-offs recorded during the fourth quarter of 2021, and a release of the ACL on legacy bank loans of $2.3 million based on updates to our loss forecasts. In the first quarter of 2021, a $3.0 million release of provision expense was recorded due to revised expectations of future credit losses after one year of the COVID-19 pandemic. Our ACL on loans to total loans was 1.3% as of March 31, 2022 and December 31, 2021, compared to 1.6% as of March 31, 2021.
The decrease in our ACL on unfunded commitments at March 31, 2022, compared to December 31, 2021, was driven by a $320,000 reversal of provision expense in the first quarter of 2022 due to adjustments in our funding rate assumptions based on our analysis of the last 12 months of utilization, and accretion of $223,000 of the original $1.7 million Day One purchase accounting credit mark recorded in the fourth quarter of 2021 stemming from our acquisition of West Suburban, which will be accreted over the life of the commitments. The ACL on unfunded commitments totaled $5.7 million as of March 31, 2022, $6.2 million as of December 31, 2021, and $3.5 million as of March 31, 2021.
Net Charge-off Summary
Loan Charge-offs, net of recoveries | Quarters Ended | |||||||||||||
(dollars in thousands) | March 31, | | % of | | December 31, | | % of | | March 31, | | % of | |||
| 2022 | | Total 2 | | 2021 | | Total 2 | | 2021 | | Total 2 | |||
Commercial | $ | - | | - | | $ | 441 | | 9.3 | | $ | (18) | | 3.1 |
Leases | | - | | - | | | 37 | | 0.8 | | | - | | - |
Commercial real estate - Investor | | 214 | | 73.0 | | | 2,603 | | 55.1 | | | (20) | | 3.4 |
Commercial real estate - Owner occupied | | 113 | | 38.6 | | | 1,748 | | 37.0 | | | (205) | | 35.2 |
Construction | | - | | - | | | - | | - | | | - | | - |
Residential real estate - Investor | | (10) | | (3.4) | | | (8) | | (0.2) | | | (266) | | 45.7 |
Residential real estate - Owner occupied | | (83) | | (28.3) | | | (30) | | (0.6) | | | (49) | | 8.4 |
Multifamily | | - | | - | | | - | | - | | | - | | - |
HELOC | | (36) | | (12.3) | | | (105) | | (2.2) | | | (12) | | 2.1 |
HELOC - Purchased | | - | | - | | | - | | - | | | - | | - |
Other 1 | | 95 | | 32.4 | | | 38 | | 0.8 | | | (12) | | 2.1 |
Net charge-offs / (recoveries) | $ | 293 | | 100.0 | | $ | 4,724 | | 100.0 | | $ | (582) | | 100.0 |
| | | | | | | | | | | | | | |
1 Other class includes consumer and overdrafts.
2 Represents the percentage of net charge-offs attributable to each category of loans.
Gross charge-offs for the first quarter of 2022 were $514,000, compared to $5.2 million for the fourth quarter of 2021, due to two larger credits, and $42,000 for the first quarter of 2021. Gross recoveries were $221,000 for the first quarter of 2022, compared to $497,000 for the fourth quarter of 2021, and $624,000 for the first quarter of 2021. Continued recoveries are indicative of the ongoing aggressive efforts by management to effectively manage and resolve prior charge-offs.
Deposits
Total deposits were $5.54 billion at March 31, 2022, an increase of $78.5 million compared to December 31, 2021, primarily due to growth in our demand deposits of $33.7 million and savings, NOW and money market accounts of $71.1 million, partially offset by a decrease in time deposits of $26.3 million. Total deposits increased $2.89 billion in the year over year period, driven primarily by the $2.69 billion of deposits acquired with our West Suburban acquisition in December 2021.
Borrowings
As of March 31, 2022, December 31, 2021 and March 31, 2021, we had no other short-term borrowings, primarily due to the growth in deposits and resultant decline of our need for short-term funding.
10
We were indebted on senior notes totaling $44.5 million, net of deferred issuance costs, as of March 31, 2022. We were also indebted on $25.8 million of junior subordinated debentures, net of deferred issuance costs, which is related to the trust preferred securities issued by our statutory trust subsidiary, Old Second Capital Trust II. Subordinated debt totaled $59.2 million as of March 31, 2022, consisting of $60.0 million in principal issued on April 6, 2021, net of debt issuance cost of $800,000. Notes payable and other borrowings totaled $18.0 million as of March 31, 2022, and is comprised of $12.0 million outstanding on a $20.0 million term note we originated to facilitate the March 2020 redemption of our trust preferred securities and related junior subordinated debentures issued by Old Second Capital Trust I, and a $6.0 million long-term FHLBC advance acquired in our ABC Bank acquisition that matures on February 2, 2026.
Non-GAAP Presentations
Management has disclosed in this earnings release certain non-GAAP financial measures to evaluate and measure our performance, including the presentation of adjusted net income, net interest income and net interest margin on a fully taxable equivalent basis, and our efficiency ratio calculations on a taxable equivalent basis. The net interest margin fully taxable equivalent is calculated by dividing net interest income on a tax equivalent basis by average earning assets for the period. Consistent with industry practice, management has disclosed the efficiency ratio including and excluding certain items, which is discussed in the noninterest expense presentation on page 7.
We consider the use of select non-GAAP financial measures and ratios to be useful for financial and operational decision making and useful in evaluating period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenditures or assets that we believe are not indicative of our primary business operating results or by presenting certain metrics on a fully taxable equivalent basis. We believe these measures provide investors with information regarding balance sheet profitability, and we believe that management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, analyzing and comparing past, present and future periods.
These non-GAAP financial measures should not be considered as a substitute for GAAP financial measures, and we strongly encourage investors to review the GAAP financial measures included in this earnings release and not to place undue reliance upon any single financial measure. In addition, because non-GAAP financial measures are not standardized, it may not be possible to compare the non-GAAP financial measures presented in this earnings release with other companies’ non-GAAP financial measures having the same or similar names. The tables beginning on page 17 provide a reconciliation of each non-GAAP financial measure to the most comparable GAAP equivalent.
Cautionary Note Regarding Forward-Looking Statements
This earnings release and statements by our management may contain forward-looking statements within the Private Securities Litigation Reform Act of 1995. Forward looking statements can be identified by words such as “anticipate,” “expect,” “intend,” “believe,” “may,” “likely,” “will,” “forecast,” “project,” “looking forward,” “optimistic,” “potential,” “progress,” “prospect,” “trend,” “momentum” or other statements that indicate future periods. Examples of forward-looking statements include, but are not limited to, statements regarding the economic outlook, our expectations related to loan growth, pipelines and customer activity, statements regarding our expectations with respect to our recent merger with West Suburban, and statements regarding the potential for expanded margins and future growth. Such forward-looking statements are subject to risks, uncertainties, and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements, (1) the strength of the United States economy in general and the strength of the local economies in which we conduct our operations may be different than expected, including, but not limited to, due to the negative impacts and disruptions resulting from the COVID-19 pandemic on the economies and communities we serve, which has had and may continue to have an adverse impact on our business, operations and performance, and could continue to have a negative impact on our credit portfolio, share price, borrowers, and on the economy as a whole, both domestically and globally; (2) the rate of delinquencies and amounts of charge-offs, the level of allowance for credit loss, the rates of loan growth, or adverse changes in asset quality in our loan portfolio, which may result in increased credit risk-related losses and expenses; (3) changes in legislation, regulation, policies, or administrative practices, whether by judicial, governmental, or legislative action; (4) risks related to future acquisitions, if any, including execution and integration risks; (5) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) could have a negative impact on us; (6) changes in interest rates, which may affect our net income, prepayment penalty income, mortgage banking income, and other future cash flows, or the market value of our assets, including our investment securities; (7) with respect to the merger with West Suburban,
11
the possibility that the anticipated benefits of the transaction, including anticipated cost savings and strategic gains, are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of other unexpected factors or events; and (8) the adverse effects of events beyond our control that may have a destabilizing effect on financial markets and the economy, such as epidemics and pandemics, war or terrorist activities, essential utility outages, deterioration in the global economy, instability in the credit markets, disruptions in our customers’ supply chains or disruption in transportation. Additional risks and uncertainties are contained in the “Risk Factors” and forward-looking statements disclosure in our most recent Annual Report on Form 10-K, and Quarterly Reports on Form 10-Q. The inclusion of this forward-looking information should not be construed as a representation by us or any person that future events, plans, or expectations contemplated by us will be achieved. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.
Conference Call
We will host a call on Thursday, April 28, 2022, at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) to discuss our first quarter 2022 financial results. Investors may listen to our call via telephone by dialing 888-506-0062, using Entry Code 793282. Investors should call into the dial-in number set forth above at least 10 minutes prior to the scheduled start of the call.
A replay of the call will be available until 11:00 a.m. Eastern Time (10:00 a.m. Central Time) on May 5, 2022, by dialing 877-481-4010, using Conference ID: 45154.
12
Old Second Bancorp, Inc. and Subsidiaries
(In thousands)
| | (unaudited) | | | | |
| | March 31, | | December 31, | ||
|
| 2022 |
| 2021 | ||
Assets | | | | | | |
Cash and due from banks | | $ | 41,511 | | $ | 38,565 |
Interest earning deposits with financial institutions | | | 593,166 | | | 713,542 |
Cash and cash equivalents | | | 634,677 | | | 752,107 |
Securities available-for-sale, at fair value | | | 1,816,450 | | | 1,692,488 |
Federal Home Loan Bank Chicago ("FHLBC") and Federal Reserve Bank Chicago ("FRBC") stock | | | 21,974 | | | 13,257 |
Loans held-for-sale | | | 8,075 | | | 4,737 |
Loans | | | 3,402,370 | | | 3,421,948 |
Less: allowance for credit losses on loans | | | 44,308 | | | 44,281 |
Net loans | | | 3,358,062 | | | 3,377,667 |
Premises and equipment, net | | | 86,156 | | | 88,005 |
Other real estate owned | | | 2,374 | | | 2,356 |
Mortgage servicing rights, at fair value | | | 10,376 | | | 7,097 |
Goodwill | | | 86,332 | | | 86,332 |
Core deposit intangible | | | 15,639 | | | 16,304 |
Bank-owned life insurance ("BOLI") | | | 105,424 | | | 105,300 |
Deferred tax assets, net | | | 22,628 | | | 6,100 |
Other assets | | | 55,579 | | | 60,439 |
Total assets | | $ | 6,223,746 | | $ | 6,212,189 |
| | | | | | |
Liabilities | | | | | | |
Deposits: | | | | | | |
Noninterest bearing demand | | $ | 1,461,712 | | $ | 1,428,055 |
Interest bearing: | | | | | | |
Savings, NOW, and money market | | | 3,605,457 | | | 3,534,367 |
Time | | | 477,556 | | | 503,810 |
Total deposits | | | 5,544,725 | | | 5,466,232 |
Securities sold under repurchase agreements | | | 33,521 | | | 50,337 |
Junior subordinated debentures | | | 25,773 | | | 25,773 |
Subordinated debentures | | | 59,233 | | | 59,212 |
Senior notes | | | 44,506 | | | 44,480 |
Notes payable and other borrowings | | | 17,992 | | | 19,074 |
Other liabilities | | | 31,678 | | | 45,054 |
Total liabilities | | | 5,757,428 | | | 5,710,162 |
| | | | | | |
Stockholders’ Equity | | | | | | |
Common stock | | | 44,705 | | | 44,705 |
Additional paid-in capital | | | 203,190 | | | 202,443 |
Retained earnings | | | 261,807 | | | 252,011 |
Accumulated other comprehensive (loss) income | | | (37,484) | | | 8,768 |
Treasury stock | | | (5,900) | | | (5,900) |
Total stockholders’ equity | | | 466,318 | | | 502,027 |
Total liabilities and stockholders’ equity | | $ | 6,223,746 | | $ | 6,212,189 |
| | | | | | |
13
Old Second Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income
(In thousands, except share data)
| | (unaudited) | | ||||
| | Three Months Ended March 31, | | ||||
|
| 2022 |
| 2021 |
| ||
Interest and dividend income | | | | | | | |
Loans, including fees | | $ | 36,376 | | $ | 22,207 | |
Loans held-for-sale | | | 57 | | | 55 | |
Securities: | | | | | | | |
Taxable | | | 5,047 | | | 1,615 | |
Tax exempt | | | 1,433 | | | 1,307 | |
Dividends from FHLBC and FRBC stock | | | 153 | | | 115 | |
Interest bearing deposits with financial institutions | | | 269 | | | 92 | |
Total interest and dividend income | | | 43,335 | | | 25,391 | |
Interest expense | | | | | | | |
Savings, NOW, and money market deposits | | | 397 | | | 241 | |
Time deposits | | | 277 | | | 500 | |
Securities sold under repurchase agreements | | | 11 | | | 31 | |
Junior subordinated debentures | | | 280 | | | 280 | |
Subordinated debentures | | | 546 | | | - | |
Senior notes | | | 485 | | | 673 | |
Notes payable and other borrowings | | | 103 | | | 123 | |
Total interest expense | | | 2,099 | | | 1,848 | |
Net interest and dividend income | | | 41,236 | | | 23,543 | |
Release of credit losses | | | - | | | (3,000) | |
Net interest and dividend income after release of credit losses | | | 41,236 | | | 26,543 | |
Noninterest income | | | | | | | |
Wealth management | | | 2,698 | | | 2,151 | |
Service charges on deposits | | | 2,090 | | | 1,195 | |
Secondary mortgage fees | | | 139 | | | 322 | |
Mortgage servicing rights mark to market gain | | | 2,978 | | | 1,113 | |
Mortgage servicing income | | | 518 | | | 567 | |
Net gain on sales of mortgage loans | | | 1,495 | | | 3,721 | |
Change in cash surrender value of BOLI | | | 124 | | | 334 | |
Card related income | | | 2,550 | | | 1,447 | |
Other income | | | 901 | | | 450 | |
Total noninterest income | | | 13,493 | | | 11,300 | |
Noninterest expense | | | | | | | |
Salaries and employee benefits | | | 19,967 | | | 13,506 | |
Occupancy, furniture and equipment | | | 3,733 | | | 2,467 | |
Computer and data processing | | | 6,228 | | | 1,298 | |
FDIC insurance | | | 410 | | | 201 | |
General bank insurance | | | 315 | | | 276 | |
Amortization of core deposit intangible | | | 665 | | | 120 | |
Advertising expense | | | 182 | | | 60 | |
Card related expense | | | 534 | | | 593 | |
Legal fees | | | 294 | | | 55 | |
Consulting & management fees | | | 605 | | | 416 | |
Other real estate expense, net | | | (12) | | | 36 | |
Other expense | | | 5,365 | | | 2,710 | |
Total noninterest expense | | | 38,286 | | | 21,738 | |
Income before income taxes | | | 16,443 | | | 16,105 | |
Provision for income taxes | | | 4,423 | | | 4,226 | |
Net income | | $ | 12,020 | | $ | 11,879 | |
| | | | | | | |
Basic earnings per share | | $ | 0.27 | | $ | 0.41 | |
Diluted earnings per share | | | 0.27 | | | 0.40 | |
Dividends declared per share | | | 0.05 | | | 0.01 | |
Ending common shares outstanding | | 44,461,045 | | 29,018,637 | |
Weighted-average basic shares outstanding | | 44,461,045 | | 29,225,775 | |
Weighted-average diluted shares outstanding | | 45,161,715 | | 29,784,757 | |
14
Old Second Bancorp, Inc. and Subsidiaries
Quarterly Consolidated Average Balance
(In thousands, unaudited)
| | | 2021 | | 2022 | |||||||||||
Assets |
| 1st Qtr |
| 2nd Qtr |
| 3rd Qtr |
| 4th Qtr |
| 1st Qtr | | |||||
Cash and due from banks | | $ | 28,461 | | $ | 29,985 | | $ | 29,760 | | $ | 34,225 | | $ | 42,941 | |
Interest earning deposits with financial institutions | | | 359,576 | | | 499,555 | | | 523,561 | | | 587,721 | | | 635,302 | |
Cash and cash equivalents | | | 388,037 | | | 529,540 | | | 553,321 | | | 621,946 | | | 678,243 | |
| | | | | | | | | | | | | | | | |
Securities available-for-sale, at fair value | | | 532,230 | | | 614,066 | | | 663,450 | | | 1,032,273 | | | 1,806,988 | |
FHLBC and FRBC stock | | | 9,917 | | | 9,917 | | | 9,917 | | | 11,042 | | | 16,066 | |
Loans held-for-sale | | | 8,616 | | | 4,860 | | | 4,908 | | | 4,271 | | | 6,707 | |
Loans | | | 2,006,157 | | | 1,926,105 | | | 1,884,788 | | | 2,388,746 | | | 3,398,714 | |
Less: allowance for credit losses on loans | | | 34,540 | | | 31,024 | | | 28,639 | | | 34,567 | | | 44,341 | |
Net loans | | | 1,971,617 | | | 1,895,081 | | | 1,856,149 | | | 2,354,179 | | | 3,354,373 | |
| | | | | | | | | | | | | | | | |
Premises and equipment, net | | | 45,378 | | | 44,847 | | | 44,451 | | | 59,796 | | | 87,564 | |
Other real estate owned | | | 2,213 | | | 2,053 | | | 1,930 | | | 1,954 | | | 1,950 | |
Mortgage servicing rights, at fair value | | | 4,814 | | | 5,499 | | | 5,020 | | | 5,555 | | | 8,218 | |
Goodwill | | | 18,604 | | | 18,604 | | | 18,604 | | | 19,340 | | | 86,332 | |
Core deposit intangible | | | 2,115 | | | 1,998 | | | 1,883 | | | 6,747 | | | 15,977 | |
Bank-owned life insurance ("BOLI") | | | 63,259 | | | 63,633 | | | 64,008 | | | 78,217 | | | 105,396 | |
Deferred tax assets, net | | | 8,228 | | | 7,782 | | | 6,487 | | | 9,273 | | | 10,689 | |
Other assets | | | 42,877 | | | 40,952 | | | 43,032 | | | 106,880 | | | 57,297 | |
Total other assets | | | 187,488 | | | 185,368 | | | 185,415 | | | 287,762 | | | 373,423 | |
Total assets | | $ | 3,097,905 | | $ | 3,238,832 | | $ | 3,273,160 | | $ | 4,311,473 | | $ | 6,235,800 | |
| | | | | | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | | | | | |
Deposits: | | | | | | | | | | | | | | | | |
Noninterest bearing demand | | $ | 937,039 | | $ | 1,012,163 | | $ | 1,029,705 | | $ | 1,193,387 | | $ | 1,437,881 | |
Interest bearing: | | | | | | | | | | | | | | | | |
Savings, NOW, and money market | | | 1,237,177 | | | 1,301,444 | | | 1,341,536 | | | 2,098,438 | | | 3,555,366 | |
Time | | | 399,310 | | | 359,635 | | | 331,482 | | | 370,919 | | | 495,452 | |
Total deposits | | | 2,573,526 | | | 2,673,242 | | | 2,702,723 | | | 3,662,744 | | | 5,488,699 | |
| | | | | | | | | | | | | | | | |
Securities sold under repurchase agreements | | | 82,475 | | | 67,737 | | | 46,339 | | | 47,571 | | | 39,204 | |
Other short-term borrowings | | | - | | | 1 | | | - | | | - | | | - | |
Junior subordinated debentures | | | 25,773 | | | 25,773 | | | 25,773 | | | 25,773 | | | 25,773 | |
Subordinated debentures | | | - | | | 56,081 | | | 59,180 | | | 59,201 | | | 59,222 | |
Senior notes | | | 44,389 | | | 44,415 | | | 44,441 | | | 44,468 | | | 44,494 | |
Notes payable and other borrowings | | | 23,330 | | | 22,250 | | | 21,171 | | | 20,090 | | | 19,009 | |
Other liabilities | | | 37,801 | | | 36,553 | | | 53,370 | | | 68,314 | | | 60,601 | |
Total liabilities | | | 2,787,294 | | | 2,926,052 | | | 2,952,997 | | | 3,928,161 | | | 5,737,002 | |
| | | | | | | | | | | | | | | | |
Stockholders' equity | | | | | | | | | | | | | | | | |
Common stock | | | 34,957 | | | 34,957 | | | 34,958 | | | 38,248 | | | 44,705 | |
Additional paid-in capital | | | 121,578 | | | 120,359 | | | 120,857 | | | 148,528 | | | 202,828 | |
Retained earnings | | | 242,201 | | | 251,134 | | | 258,944 | | | 260,181 | | | 260,239 | |
Accumulated other comprehensive income (loss) | | | 14,496 | | | 13,971 | | | 14,965 | | | 10,986 | | | (3,074) | |
Treasury stock | | | (102,621) | | | (107,641) | | | (109,561) | | | (74,631) | | | (5,900) | |
Total stockholders' equity | | | 310,611 | | | 312,780 | | | 320,163 | | | 383,312 | | | 498,798 | |
Total liabilities and stockholders' equity | | $ | 3,097,905 | | $ | 3,238,832 | | $ | 3,273,160 | | $ | 4,311,473 | | $ | 6,235,800 | |
| | | | | | | | | | | | | | | | |
Total Earning Assets | | $ | 2,916,496 | | $ | 3,054,503 | | $ | 3,086,624 | | $ | 4,024,053 | | $ | 5,863,777 | |
Total Interest Bearing Liabilities | | | 1,812,454 | | | 1,877,336 | | | 1,869,922 | | | 2,666,461 | | | 4,238,520 | |
15
Old Second Bancorp, Inc. and Subsidiaries
Quarterly Consolidated Statements of Income
(In thousands, except per share data, unaudited)
| | | | | | | | | | | | | | | | |
| | 2021 | | 2022 | | |||||||||||
|
| 1st Qtr |
| 2nd Qtr |
| 3rd Qtr |
| 4th Qtr |
| 1st Qtr |
| |||||
Interest and Dividend Income | | | | | | | | | | | | | | | | |
Loans, including fees | | $ | 22,207 | | $ | 20,815 | | $ | 21,315 | | $ | 26,328 | | $ | 36,376 | |
Loans held-for-sale | | | 55 | | | 38 | | | 39 | | | 33 | | | 57 | |
Securities: | | | | | | | | | | | | | | | | |
Taxable | | | 1,615 | | | 1,832 | | | 1,835 | | | 2,817 | | | 5,047 | |
Tax exempt | | | 1,307 | | | 1,259 | | | 1,285 | | | 1,323 | | | 1,433 | |
Dividends from FHLB and FRBC stock | | | 115 | | | 113 | | | 114 | | | 114 | | | 153 | |
Interest bearing deposits with financial institutions | | | 92 | | | 137 | | | 203 | | | 224 | | | 269 | |
Total interest and dividend income | | | 25,391 | | | 24,194 | | | 24,791 | | | 30,839 | | | 43,335 | |
Interest Expense | | | | | | | | | | | | | | | | |
Savings, NOW, and money market deposits | | | 241 | | | 217 | | | 209 | | | 294 | | | 397 | |
Time deposits | | | 500 | | | 409 | | | 330 | | | 271 | | | 277 | |
Securities sold under repurchase agreements | | | 31 | | | 21 | | | 15 | | | 15 | | | 11 | |
Junior subordinated debentures | | | 280 | | | 284 | | | 286 | | | 283 | | | 280 | |
Subordinated debentures | | | - | | | 517 | | | 547 | | | 546 | | | 546 | |
Senior notes | | | 673 | | | 673 | | | 673 | | | 673 | | | 485 | |
Notes payable and other borrowings | | | 123 | | | 119 | | | 113 | | | 108 | | | 103 | |
Total interest expense | | | 1,848 | | | 2,240 | | | 2,173 | | | 2,190 | | | 2,099 | |
Net interest and dividend income | | | 23,543 | | | 21,954 | | | 22,618 | | | 28,649 | | | 41,236 | |
(Release of) provision for credit losses | | | (3,000) | | | (3,500) | | | (1,500) | | | 12,326 | | | - | |
Net interest and dividend income after (release of) provision for credit losses | | | 26,543 | | | 25,454 | | | 24,118 | | | 16,323 | | | 41,236 | |
Noninterest Income | | | | | | | | | | | | | | | | |
Wealth management | | | 2,151 | | | 2,389 | | | 2,372 | | | 2,421 | | | 2,698 | |
Service charges on deposits | | | 1,195 | | | 1,221 | | | 1,368 | | | 1,624 | | | 2,090 | |
Secondary mortgage fees | | | 322 | | | 272 | | | 240 | | | 210 | | | 139 | |
Mortgage servicing rights mark to market gain (loss) | | | 1,113 | | | (1,033) | | | (282) | | | 1,463 | | | 2,978 | |
Mortgage servicing income | | | 567 | | | 507 | | | 572 | | | 534 | | | 518 | |
Net gain on sales of mortgage loans | | | 3,721 | | | 1,895 | | | 2,186 | | | 1,498 | | | 1,495 | |
Securities gains (losses), net | | | - | | | 2 | | | 244 | | | (14) | | | - | |
Change in cash surrender value of BOLI | | | 334 | | | 423 | | | 406 | | | 227 | | | 124 | |
Card related income | | | 1,447 | | | 1,666 | | | 1,624 | | | 1,579 | | | 2,550 | |
Other income | | | 450 | | | 577 | | | 610 | | | 1,129 | | | 901 | |
Total noninterest income | | | 11,300 | | | 7,919 | | | 9,340 | | | 10,671 | | | 13,493 | |
Noninterest Expense | | | | | | | | | | | | | | | | |
Salaries and employee benefits | | | 13,506 | | | 12,896 | | | 12,964 | | | 18,325 | | | 19,967 | |
Occupancy, furniture and equipment | | | 2,467 | | | 2,303 | | | 2,418 | | | 6,395 | | | 3,733 | |
Computer and data processing | | | 1,298 | | | 1,304 | | | 1,477 | | | 3,859 | | | 6,228 | |
FDIC insurance | | | 201 | | | 192 | | | 211 | | | 371 | | | 410 | |
General bank insurance | | | 276 | | | 277 | | | 301 | | | 360 | | | 315 | |
Amortization of core deposit intangible | | | 120 | | | 115 | | | 113 | | | 296 | | | 665 | |
Advertising expense | | | 60 | | | 95 | | | 107 | | | 81 | | | 182 | |
Card related expense | | | 593 | | | 626 | | | 662 | | | 657 | | | 534 | |
Legal fees | | | 55 | | | 135 | | | 455 | | | 460 | | | 294 | |
Consulting & management fees | | | 417 | | | 250 | | | 247 | | | 4,091 | | | 605 | |
Other real estate expense, net | | | 36 | | | 77 | | | 25 | | | 29 | | | (12) | |
Other expense | | | 2,709 | | | 3,131 | | | 3,149 | | | 3,609 | | | 5,365 | |
Total noninterest expense | | | 21,738 | | | 21,401 | | | 22,129 | | | 38,533 | | | 38,286 | |
Income (loss) before income taxes | | | 16,105 | | | 11,972 | | | 11,329 | | | (11,539) | | | 16,443 | |
Provision for (benefit from) income taxes | | | 4,226 | | | 3,152 | | | 2,917 | | | (2,472) | | | 4,423 | |
Net income (loss) | | $ | 11,879 | | $ | 8,820 | | $ | 8,412 | | $ | (9,067) | | $ | 12,020 | |
| | | | | | | | | | | | | | | | |
Basic earnings per share (GAAP) | | $ | 0.41 | | $ | 0.30 | | $ | 0.30 | | $ | (0.27) | | $ | 0.27 | |
Diluted earnings per share (GAAP) | | | 0.40 | | | 0.30 | | | 0.29 | | | (0.26) | | | 0.27 | |
Dividends paid per share | | | 0.01 | | | 0.05 | | | 0.05 | | | 0.05 | | | 0.05 | |
16
Reconciliation of Non-GAAP Financial Measures
The tables below provide a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure for the periods indicated. Dollar amounts below in thousands:
| | Quarters Ended | | |||||||
| | March 31, | | December 31, | | March 31, | | |||
|
| 2022 |
| 2021 | | 2021 | | |||
Net Income | | | | | | | | | | |
Income (loss) before income taxes (GAAP) | | $ | 16,443 | | $ | (11,539) | | $ | 11,879 | |
Pre-tax income adjustments: | | | | | | | | | | |
Provision for credit losses - Day Two | | | - | | | 14,625 | | | - | |
Merger-related costs | | | 5,604 | | | 12,765 | | | - | |
Adjusted net income before taxes | | | 22,047 | | | 15,851 | | | 11,879 | |
Taxes on adjusted net income | | | 5,930 | | | 3,396 | | | - | |
Adjusted net income (non-GAAP) | | $ | 16,117 | | $ | 12,455 | | $ | 11,879 | |
| | | | | | | | | | |
Basic earnings per share (GAAP) | | $ | 0.27 | | $ | (0.27) | | $ | 0.41 | |
Diluted earnings per share (GAAP) | | | 0.27 | | | (0.26) | | | 0.40 | |
Basic earnings per share including adjusting items (non-GAAP) | | | 0.36 | | | 0.37 | | | 0.41 | |
Diluted earnings per share including adjusting items (non-GAAP) | | | 0.36 | | | 0.36 | | | 0.40 | |
| | Quarters Ended | | |||||||
| | March 31, | | December 31, | | March 31, | | |||
|
| 2022 |
| 2021 | | 2021 | | |||
Net Interest Margin | | | | | | | | | | |
Interest income (GAAP) | | $ | 43,335 | | $ | 30,839 | | $ | 25,391 | |
Taxable-equivalent adjustment: | | | | | | | | | | |
Loans | | | 15 | | | 7 | | | 4 | |
Securities | | | 381 | | | 351 | | | 348 | |
Interest income (TE) | | | 43,731 | | | 31,197 | | | 25,743 | |
Interest expense (GAAP) | | | 2,099 | | | 2,190 | | | 1,848 | |
Net interest income (TE) | | $ | 41,632 | | $ | 29,007 | | $ | 23,895 | |
Net interest income (GAAP) | | $ | 41,236 | | $ | 28,649 | | $ | 23,543 | |
Average interest earning assets | | $ | 5,863,777 | | $ | 4,024,053 | | $ | 2,916,496 | |
Net interest margin (GAAP) | | | 2.85 | % | | 2.82 | % | | 3.27 | % |
Net interest margin (TE) | | | 2.88 | % | | 2.86 | % | | 3.32 | % |
17
| | GAAP | | Non-GAAP | | ||||||||||||||
| | | Three Months Ended | | | Three Months Ended | | ||||||||||||
| | March 31, | | December 31, | | March 31, | | March 31, | | December 31, | | March 31, | | ||||||
| | 2022 | | 2021 | | 2021 | | 2022 | | 2021 | | 2021 | | ||||||
Efficiency Ratio / Adjusted Efficiency Ratio | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Noninterest expense | | $ | 38,286 | | $ | 38,533 | | $ | 21,738 | | $ | 38,286 | | $ | 38,533 | | $ | 21,738 | |
Less amortization of core deposit | | | 665 | | | 296 | | | 120 | | | 665 | | | 296 | | | 120 | |
Less other real estate expense, net | | | (12) | | | 29 | | | 36 | | | (12) | | | 29 | | | 36 | |
Less merger related costs | | | N/A | | | N/A | | | N/A | | | 5,604 | | | 12,766 | | | - | |
Noninterest expense less adjustments | | $ | 37,633 | | $ | 38,208 | | $ | 21,582 | | $ | 32,029 | | $ | 25,442 | | $ | 21,582 | |
| | | | | | | | | | | | | | | | | | | |
Net interest income | | $ | 41,236 | | $ | 28,649 | | $ | 23,543 | | $ | 41,236 | | $ | 28,649 | | $ | 23,543 | |
Taxable-equivalent adjustment: | | | | | | | | | | | | | | | | | | | |
Loans | | | N/A | | | N/A | | | N/A | | | 15 | | | 7 | | | 4 | |
Securities | | | N/A | | | N/A | | | N/A | | | 381 | | | 351 | | | 348 | |
Net interest income including adjustments | | | 41,236 | | | 28,649 | | | 23,543 | | | 41,632 | | | 29,007 | | | 23,895 | |
Noninterest income | | | 13,493 | | | 10,671 | | | 11,300 | | | 13,493 | | | 10,671 | | | 11,300 | |
Less securities losses, net | | | - | | | (14) | | | - | | | - | | | (14) | | | - | |
Less MSRs mark to market gain | | | 2,978 | | | 1,463 | | | 1,113 | | | 2,978 | | | 1,463 | | | 1,113 | |
Taxable-equivalent adjustment: | | | | | | | | | | | | | | | | | | | |
Change in cash surrender value of BOLI | | | N/A | | | N/A | | | N/A | | | 33 | | | 61 | | | 89 | |
Noninterest income (less) / including adjustments | | | 10,515 | | | 9,222 | | | 10,187 | | | 10,548 | | | 9,283 | | | 10,276 | |
| | | | | | | | | | | | | | | | | | | |
Net interest income including adjustments plus noninterest income (less) / including adjustments | | $ | 51,751 | | $ | 37,871 | | $ | 33,730 | | $ | 52,180 | | $ | 38,290 | | $ | 34,171 | |
Efficiency ratio / Adjusted efficiency ratio | | | 72.72 | % | | 100.89 | % | | 63.98 | % | | 61.38 | % | | 66.45 | % | | 63.16 | % |
18