8-K - OSBC - Equibles

United States

Securities And Exchange Commission Washington, D.C. 20549

FORM 8-K

Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 22, 2020

(Exact name of registrant as specified in its charter)


Delaware	000-10537	36-3143493
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

37 South River Street Aurora, Illinois 60507(Address of principal executive offices) (Zip code)

(630) 892-0202(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

◻	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
◻	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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◻	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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◻	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 under the Securities Act (17 CFR 230.405) or Rule 12b-2 under the Exchange Act (17 CFR 240.12b-2).

Emerging growth company ◻

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Securities registered pursuant to Section 12(b) of the Act:

<br><br>
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	OSBC	The Nasdaq Stock Market

Item 2.02 Results of Operations and Financial Condition

On July 22, 2020, Old Second Bancorp, Inc. (the “Company’s”) issued a press release announcing its financial results for the second quarter ended June 30, 2020, along with certain other financial information. Copies of the Company’s press release and presentation are attached as Exhibit 99.1 and 99.2, respectively.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

99.1 Press release dated July 22, 2020

99.2 Presentation for Old Second Bancorp, Inc. Earnings Call

SIGNATURES

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: July 22, 2020	By:	/s/ Bradley S. Adams
		Bradley S. Adams
		Executive Vice President
		and Chief Financial Officer

Old Second Bancorp, Inc



(NASDAQ:OSBC)		Exhibit 99.1

Contact:	Bradley S. Adams	For Immediate Release
	Chief Financial Officer	July 22, 2020
	(630) 906-5484

Old Second Reports Second Quarter Net Income of $9.2 million, or $0.31 per Diluted Share

AURORA, IL, July 22, 2020 – Old Second Bancorp, Inc. (the “Company,” “we,” “us,” and “our”) (NASDAQ: OSBC), the parent company of Old Second National Bank (the “Bank”), today announced financial results for the second quarter of 2020. Our net income was $9.2 million, or $0.31 per diluted share, for the second quarter of 2020, compared to net income of $275,000, or $0.01 per diluted share, for the first quarter of 2020, and net income of $9.3 million, or $0.31 per diluted share, for the second quarter of 2019. Net income for the second quarter of 2020 includes a ($0.05) per diluted share impact of additional provisions for credit losses for loans and unfunded commitments due to changes in economic conditions and market interest rates related to the COVID-19 pandemic.

Operating Results

●Second quarter 2020 net income was $9.2 million, reflecting an increase in earnings of $9.0 million from the first quarter of 2020, and a decrease in earnings of $40,000 from the second quarter of 2019. We recorded a provision for credit losses of $2.1 million in the second quarter of 2020, compared to $8.0 million in the first quarter of 2020, both due to the assessment of potential credit losses related to the COVID-19 pandemic under the new current expected credit losses accounting standard (“CECL”). Also contributing to the increase in net income in the second quarter of 2020 compared to the prior quarter was growth in net gain on sales of mortgage loans of $2.4 million due to the reduction of interest rates, a reduction of $1.7 million of mark to market losses on MSRs, and the recognition of $635,000 in deferred issuance costs due to the redemption of our 7.80% cumulative trust preferred securities issued by Old Second Capital Trust I and related junior subordinated debentures, resulting in $32.6 million of debt retirement, in the first quarter of 2020.

●Net interest and dividend income was $22.7 million for the second quarter of 2020, a decrease of $49,000, or 0.2%, from the first quarter of 2020, and a decrease of $2.0 million, or 8.3%, from the second quarter of 2019. Net interest and dividend income in the year over year period was negatively impacted by interest rate reductions related to COVID-19, which more than offset increases in interest income due to loan growth in the same period. The recognition of $635,000 in deferred issuance costs due to the redemption of trust preferred securities issued by Old Second Capital Trust I and related junior subordinated debentures also reduced net interest and dividend income in the first quarter of 2020.

●Provision for credit losses was $2.1 million for the second quarter of 2020, consisting of $1.4 million related to loans and $734,000 related to unfunded commitments, compared to a provision for credit losses of $8.0 million for the first quarter of 2020, consisting of $5.5 million related to loans and $2.5 million related to unfunded commitments, and a provision for loan losses of $450,000 in the second quarter of 2019. We adopted the new CECL accounting standard effective January 1, 2020, which measures the allowance based on management’s best estimate of lifetime expected credit losses inherent in our lending activities, resulting in a $5.9 million allowance related to loans and a $1.7 million allowance related to unfunded commitments in the first quarter of 2020. Provision expense in 2020 was impacted by both the adoption of the new CECL methodology and the expected impact, as of June 30, 2020, of the COVID-19 pandemic on future losses.

●Noninterest income was $10.7 million for the second quarter of 2020, an increase of $4.4 million, or 69.2%, compared to $6.3 million for the first quarter of 2020, and an increase of $2.6 million, or 31.3%, compared to $8.1 million for the second quarter of 2019. The increase compared to the linked quarter and year over year quarter was primarily due to growth in net gains on sales of mortgage loans, due to an increase in volumes of originations and renewals in the lower interest rate environment. In addition, mark to market losses on MSRs 1

totaled $445,000 in the second quarter of 2020, compared to losses of $2.1 million in the first quarter of 2020, and losses of $1.1 million in the second quarter of 2019.

●	Noninterest expense was $18.9 million for the second quarter of 2020, a decrease of $2.1 million, or 10.0%, compared to $21.0 million for the first quarter of 2020, and a decrease of $1.2 million, or 6.1%, from $20.1 million for the second quarter of 2019. The decrease compared to the linked quarter and the year over year quarter was primarily attributable to decreases in salaries and employee benefits, computer and data processing, advertising, and other real estate owned expenses.
●	The provision for income taxes expense was $3.1 million for the second quarter of 2020, compared to a net benefit of $281,000 for the first quarter of 2020, and $3.0 million of provision expense for the second quarter of 2019. The increase in tax expense for the linked quarter was due to an increase of $12.4 million in pretax income compared to the first quarter of 2020.
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●	During the second quarter of 2020, we repurchased 145,932 shares of our common stock at a weighted average price of $6.97 per share pursuant to our stock repurchase program.
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●	On July 21, 2020, our Board of Directors declared a cash dividend of $0.01 per share payable on August 10, 2020, to stockholders of record as of July 31, 2020.
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COVID-19 Operational Update

During this unprecedented time, the health and safety of our customers and employees remain our top priority.

●	We established client assistance programs, including offering commercial, consumer, and mortgage loan payment deferrals for certain clients. We also suspended late fees for consumer loans through June 30, 2020, and, although consumer late fees have been reinstated, we will continue to re-evaluate late fee assessments based on the ongoing COVID-19 pandemic.
●	We paused new foreclosure and repossession actions through June 30, 2020, and will continue to re-evaluate based on the borrower’s financial status and capability of repayment.
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●	We are participating in the Coronavirus Aid, Relief and Economic Security Act (“CARES” Act). As of June 30, 2020, we had processed 669 loan applications for the SBA Paycheck Protection Program (“PPP loans”), representing a total of $133.9 million. We remain ready to continue to fund eligible client requests through the remaining time period approved by Congress.
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President and Chief Executive Officer Jim Eccher said “I want to thank our employees for their dedication and hard work under extremely difficult circumstances over the past several months. Their efforts to promote the safe operation of the Bank while continuing to meet the financial needs of our communities has been nothing short of extraordinary. Old Second remains committed to providing the resources to allow for the safest experience possible for our customers and employees while we continue to work with our customers who have been directly impacted by the pandemic.”

Eccher continued, “The credit environment remains uncertain given the economic damage resulting from the pandemic. Recent economic data and decisive government action provide some basis for optimism but significant uncertainty remains regarding the ultimate impact of the pandemic on the local, national and global economies. I believe Old Second is well positioned to capitalize upon opportunities with substantial capital flexibility and strong liquidity. Bottom line results this quarter were strong in the context of the economy and significantly lower interest rates across all maturities. Old Second earned $9.2 million despite adding an additional $2.1 million to the loss reserve for loans and unfunded commitments during the quarter. Deposit growth was excellent and spread income trends held up well despite a decline in the margin resulting from our participation in the Paycheck Protection Program and a large increase in liquidity.”

Capital Ratios


	Minimum Capital		Well Capitalized
	Adequacy with		Under Prompt
	Capital Conservation		Corrective Action		June 30,		March 31,		June 30,
	Buffer, if applicable^1^		Provisions^2^		2020		2020		2019
The Company
Common equity tier 1 capital ratio	7.00	%	N/A		11.31	%	10.85	%	10.26	%
Total risk-based capital ratio	10.50	%	N/A		13.63	%	13.09	%	13.70	%
Tier 1 risk-based capital ratio	8.50	%	N/A		12.39	%	11.93	%	12.83	%
Tier 1 leverage ratio	4.00	%	N/A		10.06	%	10.57	%	10.85	%

The Bank
Common equity tier 1 capital ratio	7.00	%	6.50	%	13.46	%	12.89	%	13.96	%
Total risk-based capital ratio	10.50	%	10.00	%	14.71	%	14.07	%	14.83	%
Tier 1 risk-based capital ratio	8.50	%	8.00	%	13.46	%	12.89	%	13.96	%
Tier 1 leverage ratio	4.00	%	5.00	%	10.86	%	11.36	%	11.96	%

^1^ Amounts are shown inclusive of a capital conservation buffer of 2.50%. Under the Federal Reserve’s Small Bank Holding Company Policy Statement, the Company is not subject to the minimum capital adequacy and capital conservation buffer capital requirements at the holding company level, unless otherwise advised by the Federal Reserve (such capital requirements are applicable only at the Bank level). Although the minimum regulatory capital requirements are not applicable to the Company, we calculate these ratios for our own planning and monitoring purposes.

^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 $20.2 million at June 30, 2020, compared to $21.8 million at March 31, 2020, and $12.7 million at June 30, 2019. Credit metrics continue to be relatively stable regarding nonperforming loan levels, and management is carefully monitoring loans considered to be in a classified status. Nonperforming loans, as a percent of total loans were 1.0% at June 30, 2020, compared to 1.1% at March 31, 2020, and 0.7% at June 30, 2019. Our adoption of CECL on January 1, 2020, resulted in a change in the accounting for purchased credit impaired (“PCI”) loans, which are now considered purchased credit deteriorated (“PCD”) loans under CECL. Prior to January 1, 2020, past due and nonaccrual loan excluded PCI loans, even if contractually past due or if we did not expect to receive payment in full, as we were accreting interest income over the expected life of the loans. PCD loans acquired in our acquisition of ABC Bank totaled $11.1 million, net of purchase accounting adjustments, at June 30, 2020. PCD loans that meet the definition of nonperforming are now included in nonperforming disclosures.
●	OREO assets totaled $5.1 million at June 30, 2020, compared to $5.0 million at March 31, 2020, and $5.7 million at June 30, 2019. We recorded write-downs of $60,000 in the second quarter of 2020, compared to $158,000 in the first quarter of 2020 and $196,000 in the second quarter of 2019. Nonperforming assets, as a percent of total loans plus OREO, were 1.2% at June 30, 2020, 1.4% at March 31, 2020, and 1.0% June 30, 2019.
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●	Total loans were $2.05 billion at June 30, 2020, reflecting an increase of $95.1 million compared to March 31, 2020, and an increase of $149.4 million compared to June 30, 2019. Growth in the year over year period was due primarily to an increase in our commercial portfolio stemming from PPP loan originations of $133.9 million, as well as organic growth in our leases and real estate-commercial portfolios. Average loans (including loans held-for-sale) for the second quarter of 2020 were $2.05 billion, reflecting an increase of $106.8 million from the first quarter of 2020 and an increase of $154.8 million from the second quarter of 2019.
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●	Available-for-sale securities totaled $447.4 million at June 30, 2020, compared to $449.7 million at March 31, 2020, and $492.1 million at June 30, 2019. Total securities available-for-sale decreased $2.3 million from the linked quarter due to maturities and paydowns of $19.4 million, purchases of $6.7 million and unrealized mark to market gains of $11.0 million. A decline of $44.6 million was realized in the year over year quarter due primarily to security maturities and paydowns recorded in the third quarter of 2019 and first quarter of 2020.
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Net Interest Income


Analysis of Average Balances,
Tax Equivalent Income / Expense and Rates
(Dollars in thousands - unaudited)

	Quarters Ended
	June 30, 2020						March 31, 2020						June 30, 2019
	Average			Income /		Rate	Average			Income /		Rate	Average			Income /		Rate
	Balance			Expense		%	Balance			Expense		%	Balance			Expense		%
Assets
Interest earning deposits with financial institutions	$	153,532		$	42	0.11	$	27,989		$	75	1.08	$	19,053		$	111	2.34
Securities:
Taxable		247,868			1,694	2.75		273,429			2,163	3.18		229,263			2,223	3.89
Non-taxable (TE)^1^		204,840			1,767	3.47		202,289			1,842	3.66		290,743			2,710	3.74
Total securities (TE)^1^		452,708			3,461	3.07		475,718			4,005	3.39		520,006			4,933	3.80
Dividends from FHLBC and FRBC		9,917			123	4.99		9,917			125	5.07		11,317			156	5.53
Loans and loans held-for-sale^1, 2^		2,052,060			22,460	4.40		1,945,383			23,636	4.89		1,897,324			24,958	5.28
Total interest earning assets		2,668,217			26,086	3.93		2,459,007			27,841	4.55		2,447,700			30,158	4.94
Cash and due from banks		30,594			-	-		32,549			-	-		33,618			-	-
Allowance for credit losses on loans		(30,747)			-	-		(23,507)			-	-		(19,435)			-	-
Other noninterest bearing assets		187,305			-	-		172,712			-	-		174,075			-	-
Total assets	$	2,855,369					$	2,640,761					$	2,635,958

Liabilities and Stockholders' Equity
NOW accounts	$	457,772		$	129	0.11	$	422,065		$	233	0.22	$	442,430		$	373	0.34
Money market accounts		279,873			85	0.12		280,828			236	0.34		288,698			262	0.36
Savings accounts		359,358			171	0.19		322,618			166	0.21		313,822			124	0.16
Time deposits		439,735			1,442	1.32		448,763			1,766	1.58		422,975			1,641	1.56
Interest bearing deposits		1,536,738			1,827	0.48		1,474,274			2,401	0.66		1,467,925			2,400	0.66
Securities sold under repurchase agreements		45,882			23	0.20		47,825			116	0.98		44,184			147	1.33
Other short-term borrowings		8,396			34	1.63		23,069			109	1.90		93,369			574	2.47
Junior subordinated debentures		25,773			283	4.42		47,200			1,364	11.62		57,704			931	6.47
Senior notes		44,310			673	6.11		44,284			673	6.11		44,196			672	6.10
Notes payable and other borrowings		26,551			165	2.50		14,762			130	3.54		13,101			107	3.28
Total interest bearing liabilities		1,687,650			3,005	0.72		1,651,414			4,793	1.17		1,720,479			4,831	1.13
Noninterest bearing deposits		854,324			-	-		676,755			-	-		645,580			-	-
Other liabilities		39,613			-	-		28,490			-	-		19,586			-	-
Stockholders' equity		273,782			-	-		284,102			-	-		250,313			-	-
Total liabilities and stockholders' equity	$	2,855,369					$	2,640,761					$	2,635,958
Net interest income (GAAP)				$	22,707					$	22,658					$	24,754
Net interest margin (GAAP)						3.42						3.71						4.06

Net interest income (TE)^1^				$	23,081					$	23,048					$	25,327
Net interest margin (TE)^1^						3.48						3.77						4.15
Core net interest margin (TE - excluding PPP loans)^1^						3.51						N/A						N/A
Interest bearing liabilities to earning assets		63.25	%					67.16	%					70.29	%

^1^ Tax equivalent (TE) basis is calculated using a marginal tax rate of 21% in 2020 and 2019. See the discussion entitled “Non-GAAP Presentations” below and the table on page 17 that provides a reconciliation of each non-GAAP measure 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 $718,000 for the second quarter of 2020, $294,000 for the first quarter of 2020, and $184,000 for the second quarter of 2019. Nonaccrual loans are included in the above stated average balances.

Net interest income (TE) was $23.1 million for the second quarter of 2020, which reflects a decrease of $33,000 compared to the first quarter of 2020, and a decrease of $2.2 million compared to the second quarter of 2019. The tax equivalent adjustment for the second quarter of 2020 was $374,000, compared to $390,000 for the first quarter of 2020, and $572,000 for the second quarter of 2019. Average interest earning assets increased $209.2 million to $2.67 billion for the second quarter of 2020, compared to the first quarter of 2020, primarily due to PPP loan growth. Average interest earning assets increased $220.5 million in the second quarter of 2020, compared to the second quarter of 2019. Average loans, including loans held-for-sale, increased $106.8 million for the second quarter of 2020, compared to the first quarter of 2020, and increased $154.7 million compared to the second quarter of 2019. Growth in volumes of earning assets for the second quarter of 2020, compared to the first quarter of 2020 and the second quarter of 2019, was more than offset 4

by a decline in yields. The yield on average earning assets decreased 62 basis points in the second quarter of 2020, compared to the first quarter of 2020, and decreased 101 basis points compared to the second quarter of 2019, primarily due to the lowering of interest rates by the Federal Reserve in the first quarter of 2020 in response to the COVID-19 pandemic, $133.9 million of PPP loans issued at 1.00% in the second quarter of 2020, and interest rate reductions in the second half of 2019.

Total securities income was $3.5 million in the second quarter of 2020, a decrease of $544,000 compared to the first quarter of 2020, and a decrease of $1.5 million compared to the second quarter of 2019, due primarily to reductions in yields and volumes. Security sales and paydowns in the second quarter of 2020 totaled $19.4 million, which were partially offset by a $6.7 million purchase of a tax anticipation warrant. Our overall yield on tax equivalent municipal securities was 3.47% for the second quarter of 2020, compared to 3.66% for the first quarter of 2020, and 3.74% for the second quarter of 2019. Taxable security yields also declined in the second quarter of 2020, resulting in a decrease to the overall tax equivalent yield for the total securities portfolio of 32 basis points from March 31, 2020, and 73 basis points from June 30, 2019.

Average interest bearing liabilities increased $36.2 million in the second quarter of 2020, compared to the first quarter of 2020, driven by a $62.5 million increase in average interest bearing deposits, and partially offset by a $14.7 million decrease in average short-term borrowings and a $21.4 million decrease in average junior subordinated debentures. Average interest bearing liabilities decreased $32.8 million in the second quarter of 2020, compared to the second quarter of 2019, primarily driven by an $85.0 million decrease in other short-term borrowings, and a $31.9 million decrease in junior subordinated debentures, partially offset by a $68.8 million increase in interest bearing deposits. The cost of interest bearing liabilities for the second quarter of 2020 decreased by 45 basis points from the first quarter of 2020, and decreased 41 basis points from the second quarter of 2019. Growth in our average noninterest bearing demand deposits of $208.7 million in the year over year quarter has assisted us in controlling our cost of funds stemming from average interest bearing deposits, which totaled 0.48% for the second quarter of 2020, and 0.66% for both the first quarter of 2020 and the second quarter of 2019.

For the second quarter of 2020, average other short-term borrowings, which consisted solely of FHLBC advances, totaled $8.4 million, compared to $23.1 million for the first quarter of 2020, and $93.4 million for the second quarter of 2019. Average rates paid on short-term FHLBC advances decreased from 2.47% in the second quarter of 2019 to 1.90% in the first quarter of 2020, and to 1.63% in the second quarter of 2020, reflecting the falling interest rate environment. In March 2020, we redeemed our trust preferred securities issued by Old Second Capital Trust I and related junior subordinated debentures, which resulted in a payment of $33.0 million, including accrued interest. The redemption was funded with cash on hand and a $20.0 million term note issued at one month Libor plus 1.75%, with principal and interest payable over the next three years, included within notes payable and other borrowings. Due to the redemption, we recognized the remaining unamortized deferred issuance costs of $635,000 recorded on the junior subordinated debentures in March 2020, increasing our cost of funds by 15 basis points for the first quarter of 2020.

Our net interest margin (TE) decreased 29 basis points to 3.48% for the second quarter of 2020, compared to 3.77% for the first quarter of 2020, and decreased 67 basis points compared to 4.15% for the second quarter of 2019. Our core net interest margin (TE), a non-GAAP financial measure that excludes the impact of our PPP loans, was 3.51% for the second quarter of 2020, compared to 3.77% and 4.15% for the first quarter of 2020 and second quarter of 2019, respectively. The reductions were due primarily to falling interest rates and the redemption of our junior subordinated debentures late in the first quarter of 2020, noted above. See the discussion entitled “Non-GAAP Presentations” in the table on page 17 that provides a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent. 5

Noninterest Income


										2nd Quarter 2020
Noninterest Income	Three Months Ended									Percent Change From
(Dollars in thousands)	June 30,			March 31,			June 30,			March 31,		June 30,
	2020		****	2020		****	2019		****	2020	****	2019
Trust income	$	1,664		$	1,532		$	1,739		8.6		(4.3)
Service charges on deposits		1,120			1,726			1,959		(35.1)		(42.8)
Residential mortgage banking revenue
Secondary mortgage fees		505			270			203		87.0		148.8
Mortgage servicing rights mark to market loss		(445)			(2,134)			(1,137)		79.1		60.9
Mortgage servicing income		458			468			491		(2.1)		(6.7)
Net gain on sales of mortgage loans		4,631			2,246			1,163		106.2		298.2
Total residential mortgage banking revenue		5,149			850			720		505.8		615.1
Securities (losses) gains, net		-			(24)			986		100.0		(100.0)
Change in cash surrender value of BOLI		532			(49)			320		N/M		66.3
Death benefit realized on BOLI		59			-			-		N/M		N/M
Card related income		1,311			1,287			1,552		1.9		(15.5)
Other income		860			1,000			867		(14.0)		(0.8)
Total noninterest income	$	10,695		$	6,322		$	8,143		69.2		31.3

N/M - Not meaningful.

Noninterest income increased $4.4 million, or 69.2%, in the second quarter of 2020, compared to the first quarter of 2020, and increased $2.6 million, or 31.3%, compared to the second quarter of 2019. These increases were primarily driven by $4.6 million in net gain on sales of mortgage loans and a reduction in the mark to market losses on MSRs in the second quarter of 2020, compared to both the prior quarter and year over year quarter. The cash surrender value of BOLI increased in the second quarter of 2020 by $581,000 compared to the first quarter of 2020, and increased $212,000 compared to the second quarter of 2019.

The noted increases were partially offset by a reduction in service charges on deposits, as overdraft and bounce fees declined due to a decrease in customer transactional activity as a result of the COVID-19 pandemic, resulting in a decrease of $606,000 in the second quarter of 2020, compared to the linked quarter, and a decrease of $839,000 year over year. The year over year increase in noninterest income was also offset by a $986,000 decrease in securities gains, net, and a $241,000 decrease in card related income. 6

Noninterest Expense


										2nd Quarter 2020
Noninterest Expense	Three Months Ended									Percent Change From
(Dollars in thousands)	June 30,			March 31,			June 30,			March 31,		June 30,
	2020		****	2020		****	2019		****	2020	****	2019
Salaries	$	8,588		$	9,761		$	9,004		(12.0)		(4.6)
Officers incentive		968			958			893		1.0		8.4
Benefits and other		1,786			2,199			1,690		(18.8)		5.7
Total salaries and employee benefits		11,342			12,918			11,587		(12.2)		(2.1)
Occupancy, furniture and equipment expense		1,935			2,301			1,925		(15.9)		0.5
Computer and data processing		1,247			1,335			1,524		(6.6)		(18.2)
FDIC insurance		155			57			116		171.9		33.6
General bank insurance		237			246			236		(3.7)		0.4
Amortization of core deposit intangible asset		124			128			121		(3.1)		2.5
Advertising expense		57			109			381		(47.7)		(85.0)
Card related expense		514			532			474		(3.4)		8.4
Legal fees		176			131			243		34.4		(27.6)
Other real estate owned expense, net		143			237			248		(39.7)		(42.3)
Other expense		2,966			3,008			3,271		(1.4)		(9.3)
Total noninterest expense	$	18,896		$	21,002		$	20,126		(10.0)		(6.1)
Efficiency ratio (GAAP)^1^		55.13	%		66.28	%		59.78	%
Adjusted efficiency ratio (non-GAAP)^2^		54.28	%		65.48	%		58.62	%

^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 any BOLI death benefit recorded, 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 and OREO expenses, 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 17 that provides a reconciliation of each non-GAAP financial measure to the most comparable GAAP equivalent.

Noninterest expense for the second quarter of 2020 decreased $2.1 million, or 10.0%, compared to the first quarter of 2020, and decreased $1.2 million, or 6.1%, compared to the second quarter of 2019. The linked quarter decrease is primarily attributable to a $1.6 million decrease in salaries and employee benefits stemming from an increase in deferrals of new loan origination costs related to PPP loans, a $366,000 decrease in occupancy, furniture and equipment expense, a $98,000 decrease in other real estate owned expense primarily due to valuation write-downs on properties in the first quarter of 2020, and a $52,000 reduction in advertising expense. These reductions were partially offset by an increase of $98,000 in FDIC insurance and $45,000 in legal fees.

The year over year decrease in noninterest expense is primarily attributable to a $245,000 decrease in salaries and employee benefits, a $277,000 decrease in computer and data processing expense, a $324,000 decrease in advertising expense, a $105,000 decrease in other real estate owned expense due to property valuation write-downs, and a $305,000 decrease in other expense. The decrease in other expense was mainly attributable to reductions in consulting and management fees and other marketing expenses. Partially offsetting the year over year decreases was a $39,000 increase in FDIC insurance and a $40,000 increase in card related expense. 7

Earning Assets


							June 30, 2020
Loans	As of						Percent Change From
(dollars in thousands)	June 30,		March 31,		June 30,		March 31,		June 30,
	2020		2020		2019		2020	****	2019
Commercial	$	441,642	$	364,626	$	337,848	21.1		30.7
Leases		133,293		126,237		98,379	5.6		35.5
Commercial real estate - Investor		525,714		503,905		476,906	4.3		10.2
Commercial real estate - Owner occupied		343,982		349,595		348,185	(1.6)		(1.2)
Construction		83,939		78,159		93,079	7.4		(9.8)
Residential real estate - Investor		69,421		69,429		68,990	(0.0)		0.6
Residential real estate - Owner occupied		126,303		129,982		132,793	(2.8)		(4.9)
Multifamily		197,521		195,297		191,764	1.1		3.0
HELOC		89,170		93,165		96,821	(4.3)		(7.9)
HELOC - Purchased		26,467		30,880		31,852	(14.3)		(16.9)
Other^1^		14,884		15,929		13,533	(6.6)		10.0
Total loans, excluding deferred loan costs and PCI		2,052,336		1,957,204		1,890,150	4.9		8.6
Net deferred loan costs		-		-		1,959	-		(100.0)
Total loans, excluding PCI^2^		2,052,336		1,957,204		1,892,109	4.9		8.5
PCI loans, net of purchase accounting adjustments		-		-		10,834	-		(100.0)
Total loans	$	2,052,336	$	1,957,204	$	1,902,943	4.9		7.9

^1^Other class includes consumer and overdrafts.

^2^As a result of our adoption of the new CECL accounting standard effective January 1, 2020, loans formerly referred to as PCI loans are considered PCD loans under CECL for all periods presented after December 31, 2019, and are included in the amounts above based on loan type.

Total loans increased by $95.1 million at June 30, 2020, compared to March 31, 2020, and increased $149.4 million for the year over year period. Growth in the year over year period was primarily due to PPP loan originations of $133.9 million, recorded within commercial loans, as well as organic growth in our commercial, leases and commercial real estate-investor loan portfolios. As required by CECL, the balance (or amortized cost basis) of PCD loans 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. Accordingly, at January 1, 2020, $2.5 million of purchase accounting adjustments related to PCD loans were reclassified to the allowance for credit losses from loans, resulting in an increase to total PCD loans.


										June 30, 2020
Securities		As of								Percent Change From
(dollars in thousands)		June 30,			March 31,			June 30,		March 31,		June 30,
	****	2020		****	2020		****	2019		2020	****	2019
Securities available-for-sale, at fair value
U.S. Treasury		$	4,147		$	4,152		$	4,025	(0.1)		3.0
U.S. government agencies			7,276			7,723			9,812	(5.8)		(25.8)
U.S. government agency mortgage-backed			16,779			17,255			16,999	(2.8)		(1.3)
States and political subdivisions			250,364			255,095			251,295	(1.9)		(0.4)
Collateralized mortgage obligations			56,113			53,403			64,867	5.1		(13.5)
Asset-backed securities			80,026			77,727			82,725	3.0		(3.3)
Collateralized loan obligations			32,731			34,339			62,357	(4.7)		(47.5)
Total securities available-for-sale		$	447,436		$	449,694		$	492,080	(0.5)		(9.1)

Our securities portfolio totaled $447.4 million as of June 30, 2020, a decrease of $2.3 million from $449.7 million as of March 31, 2020, and a decrease of $44.6 million from June 30, 2019. The decrease in the portfolio during the second quarter of 2020 was due to $19.4 million of security maturities and paydowns, partially offset by unrealized mark to market gains of $11.0 million, as well as a $6.7 million tax anticipation warrant purchase. No security sales were recorded in the second quarter of 2020; $24,000 of net security losses were recorded in the first quarter of 2019, and $986,000 of net security gains were recorded in the second quarter of 2019.

Asset Quality


										June 30, 2020
Nonperforming assets	As of									Percent Change From
(dollars in thousands)	June 30,			March 31,			June 30,			March 31,	June 30,
	2020		****	2020		****	2019		****	2020	2019
Nonaccrual loans	$	18,343		$	19,497		$	11,089		(5.9)	65.4
Performing troubled debt restructured loans accruing interest		978			934			1,570		4.7	(37.7)
Loans past due 90 days or more and still accruing interest		840			1,406			-		(40.3)	N/M
Total nonperforming loans		20,161			21,837			12,659		(7.7)	59.3
Other real estate owned		5,082			5,049			5,668		0.7	(10.3)
Total nonperforming assets	$	25,243		$	26,886		$	18,327		(6.1)	37.7

PCD loans, net of purchase accounting adjustments^1^	$	11,096		$	10,999		$	10,834		0.9	2.4


30-89 days past due loans and still accruing interest	$	11,330		$	17,738		$	8,888
Nonaccrual loans to total loans		0.9	%		1.0	%		0.6	%
Nonperforming loans to total loans		1.0	%		1.1	%		0.7	%
Nonperforming assets to total loans plus OREO		1.2	%		1.4	%		1.0	%
Purchased credit-deteriorated loans to total loans		0.5	%		0.6	%		0.6	%

Allowance for credit losses	$	31,273		$	30,045		$	19,372
Allowance for credit losses to total loans		1.5	%		1.5	%		1.0	%
Allowance for credit losses to nonaccrual loans		170.5	%		154.1	%		174.7	%

N/M - Not meaningful.

^1^ In 2020, due to the adoption of CECL, PCD loans are included in total nonperforming assets, if their risk rating at period end so indicates. For 2019 periods presented, PCI loans are not included within total nonperforming assets as these loans had an accretable yield.

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. We historically excluded PCI loans meeting nonperforming criteria from our nonperforming disclosures as long as their cash flows and the timing of such cash flows continued to be estimable and probable of collection. As a result of CECL implementation on January 1, 2020, PCI loans became PCD loans. PCD loans that meet the definition of nonperforming are now included in our nonperforming disclosures. Nonperforming loans to total loans was 1.0% for the second quarter of 2020, 1.1% for the first quarter of 2020, and 0.7% for the second quarter of 2019. Nonperforming assets to total loans plus OREO remained relatively stable and ended at 1.2% for the second quarter of 2020, compared to 1.4% for the first quarter of 2020, and 1.0% for the second quarter of 2019, as our loan portfolio grew year over year, and we continued OREO liquidations and recorded write-downs. Our allowance for credit losses to total loans was 1.5% as of both June 30, 2020 and March 31, 2020, and 1.0% as of June 30, 2019.

The following table shows classified assets by segment for the following periods.


										June 30, 2020
Classified loans		As of								Percent Change From
(dollars in thousands)		June 30,			March 31,			June 30,		March 31,		June 30,
	****	2020		****	2020		****	2019		2020	****	2019
Commercial		$	8,627		$	11,260		$	7,704	(23.4)		12.0
Leases			254			264			125	(3.8)		103.2
Commercial real estate - Investor			5,445			6,073			8,791	(10.3)		(38.1)
Commercial real estate - Owner occupied			9,432			10,504			11,605	(10.2)		(18.7)
Construction			2,318			2,414			273	(4.0)		749.1
Residential real estate - Investor			1,454			1,452			1,029	0.1		41.3
Residential real estate - Owner occupied			4,270			4,568			3,773	(6.5)		13.2
Multifamily			5,562			5,374			493	3.5		N/M
HELOC			1,690			1,628			1,894	3.8		(10.8)
HELOC - Purchased			113			114			184	(0.9)		(38.6)
Other^1^			353			349			24	1.1		N/M
Total classified loans, excluding PCI loans^2^			39,518			44,000			35,895	(10.2)		10.1
PCI loans, net of purchase accounting adjustments			-			-			10,834	N/M		(100.0)
Total classified loans		$	39,518		$	44,000		$	46,729	(10.2)		(15.4)

N/M - Not meaningful.

^1^Other class includes consumer and overdrafts.

^2^ For purposes of this table, for the three months ended June 30, 2019, classified loan amounts excluded $10.8 million of PCD loans, net of purchase accounting adjustments, formerly purchased credit impaired loans, even if contractually past due or if we did not expect to receive payment in full, as we were accreting interest income over the expected life of the loans.

Classified loans include nonaccrual, performing troubled debt restructurings, PCD loans (formerly PCI loans, as applicable), and all other loans considered substandard. Classified loans totaled $39.5 million as of June 30, 2020, a decrease of $4.5 million, or 10.2%, from the prior linked quarter, and a decrease of $7.2 million, or 15.4%, from the second quarter of 2019. All PCD loans stem from our acquisition of ABC Bank in 2018.

Allowance for Credit Losses on Loans and Unfunded Commitments

At June 30, 2020, our allowance for credit losses (“ACL”) on loans totaled $31.3 million, and our ACL on unfunded commitments, included in other liabilities, totaled $5.0 million. This increased ACL from year-end 2019 was driven by the $8.0 million of provision expense in the first quarter of 2020, and by the adoption of CECL on January 1, 2020, in which we recognized an increase in our ACL on outstanding loans of $5.9 million and an increase in our ACL on unfunded commitments of $1.7 million as a cumulative effect adjustment from change in accounting policies. During the second quarter of 2020, we recorded $1.4 million of ACL related to loans, and $734,000 of additional ACL related to unfunded commitments. The growth in the ACL for unfunded commitments in the second quarter of 2020, compared to the prior quarter, was primarily related to commercial unfunded commitments, with an increase in the funding rate assumptions based on our analysis of the last 12 months of utilization. The total increase in the ACL during 2020 reflects forecasted credit deterioration due to the COVID-19 pandemic and the resultant recession. Our ACL on loans to total loans was 1.5% as of both June 30, 2020 and March 31, 2020, compared to 1.0% at both December 31, 2019 and June 30, 2019. The ACL on unfunded commitments totaled $5.0 million as of June 30, 2020, compared to $4.2 million as of March 31, 2020.

Net Charge-off Summary


Loan Charge-offs, net of recoveries	Quarters Ended
(dollars in thousands)	June 30,		% of	March 31,		% of	June 30,		% of
	2020		Total ^2^	2020		Total^2^	2019		Total ^2^
Commercial	$	(2)	(1.2)	$	85	7.6	$	61	15.5
Leases		-	-		-	-		-	-
Commercial real estate - Investor		(14)	(8.4)		(8)	(0.7)		(12)	(3.0)
Commercial real estate - Owner occupied		292	174.9		1,108	98.8		42	10.7
Construction		-	-		-	-		(1)	(0.3)
Residential real estate - Investor		(2)	(1.2)		(20)	(1.8)		(3)	(0.8)
Residential real estate - Owner occupied		(66)	(39.5)		(23)	(2.0)		(11)	(2.8)
Multifamily		-	-		-	-		-	-
HELOC		(53)	(31.7)		(58)	(5.2)		38	9.6
HELOC - Purchased		-	-		-	-		229	58.20
Other^1^		12	7.1		38	3.4		51	12.9
Net charge-offs / (recoveries)	$	167	100.0	$	1,122	100.0	$	394	100.0

N/M - Not meaningful.

^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 second quarter of 2020 were $406,000, compared to $1.4 million for the first quarter of 2020, and $474,000 for the second quarter of 2019. Gross recoveries were $239,000 for the second quarter of 2020, compared to $279,000 for the first quarter of 2020 and $80,000 for the second quarter of 2019. Continued recoveries are indicative of the ongoing aggressive efforts by management to effectively manage and resolve prior charge-offs.

Deposits

Total deposits were $2.45 billion at June 30, 2020, an increase of $255.7 million compared to March 31, 2020, resulting from net increases in demand deposits of $188.0 million, savings, NOW and money market accounts of $89.7 million, partially offset by a decrease in time deposits of $22.1 million. Total deposits increased $373.5 million in the year over year period driven primarily by growth in demand deposits of $257.7 million, and savings, NOW and money market accounts of $109.7 million.

Borrowings

As of June 30, 2020, we had $8.3 million in other short-term borrowings compared to $6.4 million as of March 31, 2020, and $87.1 million as of June 30, 2019. Due to growth in deposits, our need for short-term funding in 2020 has declined year over year.

We are indebted on senior notes totaling $44.3 million, net of deferred issuance costs, as of June 30, 2020. We are 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. On March 2, 2020, we redeemed the trust preferred securities issued by Old Second Capital Trust I and related junior subordinated debentures, which resulted in a decrease in junior subordinated debentures of $32.0 million. Notes payable and other borrowings totaled $25.5 million as of June 30, 2020, and is comprised of $19.0 million outstanding on a $20.0 million term note we originated to facilitate the redemption of our trust preferred securities issued by Old Second Capital Trust I and related junior subordinated debentures, and $6.5 million of a 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 net interest income and net interest margin on a fully taxable equivalent basis, our efficiency ratio calculations and core net interest margin 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. Management believes this measure provides investors with information regarding balance sheet profitability. 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. Our core net interest margin on a taxable equivalent basis excludes the impact of our PPP loans. These non-GAAP financial 11

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 on page 17 provide a reconciliation of each non-GAAP financial measure to the most comparable GAAP equivalent.

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 “anticipated,” “expects,” “intends,” “believes,” “may,” “likely,” “will” or other statements that indicate future periods. Examples of forward-looking statements include, but are not limited to, statements regarding the economic outlook and our belief that we are well-positioned to capitalize on opportunities with substantial capital flexibility and strong liquidity. 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 recent outbreak of the novel coronavirus, or COVID-19, on the economies and communities we serve, which may have an adverse impact on the our business, operations and performance, and could 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, including, but not limited to, the Coronavirus Aid, Relief, and Economic Security Act, or the “CARES Act”; (4) 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; and (5) 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. 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 an earnings call on Thursday, July 23, 2020, at 11:00 a.m. Eastern Time (10:00 a.m. Central Time). Investors may listen to our earnings call via telephone by dialing 844-369-8770. 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 earnings call will be available until 11:00 a.m. Eastern Time (10:00 a.m. Central Time) on July 30, 2020, by dialing 877-481-4010, using Conference ID: 35557. 12

Old Second Bancorp, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands)


		(unaudited)
		June 30,		December 31,
	****	2020		2019
Assets
Cash and due from banks		$	32,424	$	34,096
Interest earning deposits with financial institutions			225,065		16,536
Cash and cash equivalents			257,489		50,632
Securities available-for-sale, at fair value			447,436		484,648
Federal Home Loan Bank Chicago ("FHLBC") and Federal Reserve Bank Chicago ("FRBC") stock			9,917		9,917
Loans held-for-sale			9,416		3,061
Loans			2,052,336		1,930,812
Less: allowance for credit losses on loans			31,273		19,789
Net loans			2,021,063		1,911,023
Premises and equipment, net			44,536		44,354
Other real estate owned			5,082		5,004
Mortgage servicing rights, net			4,479		5,935
Goodwill and core deposit intangible			21,023		21,275
Bank-owned life insurance ("BOLI")			61,763		61,763
Deferred tax assets, net			13,242		11,459
Other assets			36,990		26,474
Total assets		$	2,932,436	$	2,635,545

Liabilities
Deposits:
Noninterest bearing demand		$	890,636	$	669,795
Interest bearing:
Savings, NOW, and money market			1,133,283		1,015,285
Time			427,398		441,669
Total deposits			2,451,317		2,126,749
Securities sold under repurchase agreements			52,088		48,693
Other short-term borrowings			8,250		48,500
Junior subordinated debentures			25,773		57,734
Senior notes			44,323		44,270
Notes payable and other borrowings			25,541		6,673
Other liabilities			42,628		25,062
Total liabilities			2,649,920		2,357,681

Stockholders’ Equity
Common stock			34,957		34,854
Additional paid-in capital			121,437		120,657
Retained earnings			218,856		213,723
Accumulated other comprehensive income			6,422		4,562
Treasury stock			(99,156)		(95,932)
Total stockholders’ equity			282,516		277,864
Total liabilities and stockholders’ equity		$	2,932,436	$	2,635,545

Old Second Bancorp, Inc. and Subsidiaries

Consolidated Statements of Income

(In thousands, except share data)


			(unaudited)					(unaudited)
		Three Months Ended June 30,						Six Months Ended June 30,
	****	2020		****	2019		****	2020		****	2019		****
Interest and dividend income
Loans, including fees		$	22,347		$	24,924		$	45,944		$	49,023
Loans held-for-sale			110			31			146			53
Securities:
Taxable			1,694			2,223			3,857			4,637
Tax exempt			1,396			2,141			2,851			4,239
Dividends from FHLBC and FRBC stock			123			156			248			305
Interest bearing deposits with financial institutions			42			111			117			225
Total interest and dividend income			25,712			29,586			53,163			58,482
Interest expense
Savings, NOW, and money market deposits			385			759			1,020			1,530
Time deposits			1,442			1,641			3,208			3,259
Securities sold under repurchase agreements			23			147			139			296
Other short-term borrowings			34			575			143			1,182
Junior subordinated debentures			283			931			1,647			1,858
Senior notes			673			672			1,346			1,344
Notes payable and other borrowings			165			107			295			223
Total interest expense			3,005			4,832			7,798			9,692
Net interest and dividend income			22,707			24,754			45,365			48,790
Provision for credit losses			2,129			450			10,113			900
Net interest and dividend income after provision for credit losses			20,578			24,304			35,252			47,890
Noninterest income
Trust income			1,664			1,739			3,196			3,225
Service charges on deposits			1,120			1,959			2,846			3,821
Secondary mortgage fees			505			203			775			339
Mortgage servicing rights mark to market loss			(445)			(1,137)			(2,579)			(1,956)
Mortgage servicing income			458			491			926			948
Net gain on sales of mortgage loans			4,631			1,163			6,877			1,925
Securities gains (losses) , net			-			986			(24)			1,013
Change in cash surrender value of BOLI			532			320			483			778
Death benefit realized on BOLI			59			-			59			-
Card related income			1,311			1,552			2,598			2,837
Other income			860			867			1,860			1,695
Total noninterest income			10,695			8,143			17,017			14,625
Noninterest expense
Salaries and employee benefits			11,342			11,587			24,260			23,199
Occupancy, furniture and equipment			1,935			1,925			4,236			3,914
Computer and data processing			1,247			1,524			2,582			2,856
FDIC insurance			155			116			212			290
General bank insurance			237			236			483			486
Amortization of core deposit intangible			124			121			252			253
Advertising expense			57			381			166			615
Card related expense			514			474			1,046			829
Legal fees			176			243			307			369
Other real estate expense, net			143			248			380			298
Other expense			2,966			3,271			5,974			6,211
Total noninterest expense			18,896			20,126			39,898			39,320
Income before income taxes			12,377			12,321			12,371			23,195
Provision for income taxes			3,139			3,043			2,858			5,449
Net income		$	9,238		$	9,278		$	9,513		$	17,746

Basic earnings per share		$	0.31		$	0.31		$	0.32		$	0.59
Diluted earnings per share			0.31			0.31			0.31			0.58
Dividends declared per share			0.01			0.01			0.02			0.02


Ending common shares outstanding	29,589,341	29,896,529	29,589,341	29,896,529
Weighted-average basic shares outstanding	29,637,567	29,896,231	29,783,665	29,871,081
Weighted-average diluted shares outstanding	30,194,007	30,389,892	30,342,306	30,366,889

Old Second Bancorp, Inc. and Subsidiaries

Quarterly Consolidated Average Balance

(In thousands, unaudited)


			2019											2020
Assets	****	1st Qtr		****	2nd Qtr		****	3rd Qtr		****	4th Qtr		****	1st Qtr		****	2nd Qtr		****
Cash and due from banks		$	33,749		$	33,618		$	34,315		$	34,417		$	32,549		$	30,594
Interest earning deposits with financial institutions			18,842			19,053			21,425			27,720			27,989			153,532
Cash and cash equivalents			52,591			52,671			55,740			62,137			60,538			184,126

Securities available-for-sale, at fair value			513,491			520,006			494,050			485,802			475,718			452,708
FHLBC and FRBC stock			11,463			11,317			10,398			9,763			9,917			9,917
Loans held-for-sale			1,853			2,870			4,462			3,441			3,623			13,978
Loans			1,893,659			1,894,454			1,890,992			1,899,849			1,941,760			2,038,082
Less: allowance for credit losses on loans			19,235			19,435			19,452			20,063			23,507			30,747
Net loans			1,874,424			1,875,019			1,871,540			1,879,786			1,918,253			2,007,335

Premises and equipment, net			42,270			42,271			42,754			43,614			44,613			44,658
Other real estate owned			6,779			6,012			5,427			4,961			5,127			5,040
Mortgage servicing rights, net			7,334			6,551			5,578			5,447			5,053			4,451
Goodwill and core deposit intangible			21,747			21,618			21,476			21,337			21,208			21,084
Bank-owned life insurance ("BOLI")			61,661			62,124			62,445			62,259			61,873			61,790
Deferred tax assets, net			20,878			16,458			13,750			12,738			9,682			13,511
Other assets			21,098			19,041			20,820			22,893			25,156			36,771
Total other assets			181,767			174,075			172,250			173,249			172,712			187,305
Total assets		$	2,635,589		$	2,635,958		$	2,608,440		$	2,614,178		$	2,640,761		$	2,855,369

Liabilities
Deposits:
Noninterest bearing demand		$	625,423		$	645,580		$	651,863		$	678,136		$	676,755		$	854,324
Interest bearing:
Savings, NOW, and money market			1,055,563			1,044,950			1,011,717			1,010,948			1,025,511			1,097,003
Time			445,076			422,975			420,429			437,236			448,763			439,735
Total deposits			2,126,062			2,113,505			2,084,009			2,126,320			2,151,029			2,391,062

Securities sold under repurchase agreements			45,157			44,184			40,342			45,146			47,825			45,882
Other short-term borrowings			98,328			93,369			75,310			28,772			23,069			8,396
Junior subordinated debentures			57,692			57,704			57,716			57,728			47,200			25,773
Senior Notes			44,171			44,196			44,222			44,258			44,284			44,310
Notes payable and other borrowings			15,273			13,101			10,973			8,768			14,762			26,551
Other liabilities			13,750			19,586			30,329			28,026			28,490			39,613
Total liabilities			2,400,433			2,385,645			2,342,901			2,339,018			2,356,659			2,581,587

Stockholders' equity
Common stock			34,775			34,825			34,825			34,845			34,900			34,957
Additional paid-in capital			119,051			119,381			120,076			120,517			120,829			121,253
Retained earnings			180,398			188,453			199,228			209,942			215,467			216,183
Accumulated other comprehensive (loss) income			(3,102)			3,705			7,417			5,806			9,131			219
Treasury stock			(95,966)			(96,051)			(96,007)			(95,950)			(96,225)			(98,830)
Total stockholders' equity			235,156			250,313			265,539			275,160			284,102			273,782
Total liabilities and stockholders' equity		$	2,635,589		$	2,635,958		$	2,608,440		$	2,614,178		$	2,640,761		$	2,855,369

Total Earning Assets		$	2,439,308		$	2,447,700		$	2,421,327		$	2,426,575		$	2,459,007		$	2,668,217
Total Interest Bearing Liabilities			1,761,260			1,720,479			1,660,709			1,632,856			1,651,414			1,687,650

Old Second Bancorp, Inc. and Subsidiaries

Quarterly Consolidated Statements of Income

(In thousands, except per share data, unaudited)



	2019												2020
	1st Qtr		****	2nd Qtr		****	3rd Qtr		****	4th Qtr		****	1st Qtr		****	2nd Qtr
Interest and Dividend Income
Loans, including fees	$	24,099		$	24,924		$	25,109		$	23,587		$	23,597		$	22,347
Loans held-for-sale		22			31			47			33			36			110
Securities:
Taxable		2,414			2,223			2,296			2,323			2,163			1,694
Tax exempt		2,098			2,141			1,719			1,467			1,455			1,396
Dividends from FHLB and FRBC stock		149			156			154			143			125			123
Interest bearing deposits with financial institutions		114			111			119			115			75			42
Total interest and dividend income		28,896			29,586			29,444			27,668			27,451			25,712
Interest Expense
Savings, NOW, and money market deposits		771			759			724			706			635			385
Time deposits		1,618			1,641			1,672			1,805			1,766			1,442
Securities sold under repurchase agreements		149			147			135			146			116			23
Other short-term borrowings		607			575			429			144			109			34
Junior subordinated debentures		927			931			933			933			1,364			283
Senior notes		672			672			682			673			673			673
Notes payable and other borrowings		116			107			89			72			130			165
Total interest expense		4,860			4,832			4,664			4,479			4,793			3,005
Net interest and dividend income		24,036			24,754			24,780			23,189			22,658			22,707
Provision for credit losses		450			450			550			150			7,984			2,129
Net interest and dividend income after provision for credit losses		23,586			24,304			24,230			23,039			14,674			20,578
Noninterest Income
Trust income		1,486			1,739			1,730			1,700			1,532			1,664
Service charges on deposits		1,862			1,959			2,020			1,874			1,726			1,120
Secondary mortgage fees		136			203			282			151			270			505
Mortgage servicing rights mark to market (loss) gain		(819)			(1,137)			(946)			240			(2,134)			(445)
Mortgage servicing income		457			491			460			473			468			458
Net gain on sales of mortgage loans		762			1,163			2,074			1,113			2,246			4,631
Securities gains (losses), net		27			986			3,463			35			(24)			-
Change in cash surrender value of BOLI		458			320			267			370			(49)			532
Death benefit realized on BOLI		-			-			-			872			-			59
Card related income		1,285			1,552			1,595			1,428			1,287			1,311
Other income		828			867			988			986			1,000			860
Total noninterest income		6,482			8,143			11,933			9,242			6,322			10,695
Noninterest Expense
Salaries and employee benefits		11,612			11,587			12,062			11,608			12,918			11,342
Occupancy, furniture and equipment		1,989			1,925			2,235			2,140			2,301			1,935
Computer and data processing		1,332			1,524			1,490			1,285			1,335			1,247
FDIC insurance		174			116			(114)			-			57			155
General bank insurance		250			236			270			246			246			237
Amortization of core deposit intangible		132			121			157			129			128			124
Advertising expense		234			381			360			250			109			57
Card related expense		355			474			531			596			532			514
Legal fees		126			243			111			195			131			176
Other real estate expense, net		50			248			26			99			237			143
Other expense		2,940			3,271			2,826			3,280			3,008			2,966
Total noninterest expense		19,194			20,126			19,954			19,828			21,002			18,896
Income (loss) before income taxes		10,874			12,321			16,209			12,453			(6)			12,377
Provision for (benefit from) income taxes		2,406			3,043			4,036			2,917			(281)			3,139
Net income	$	8,468		$	9,278		$	12,173		$	9,536		$	275		$	9,238

Basic earnings per share	$	0.28		$	0.31		$	0.41		$	0.32		$	0.01		$	0.31
Diluted earnings per share		0.28			0.31			0.40			0.31			0.01			0.31
Dividends paid per share		0.01			0.01			0.01			0.01			0.01			0.01

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
	June 30,			March 31,			June 30,
	2020		****	2020			2019
Net Interest Margin
Interest income (GAAP)	$	25,712		$	27,451		$	29,586
Taxable-equivalent adjustment:
Loans		3			3			3
Securities		371			387			569
Interest income (TE)		26,086			27,841			30,158
Interest expense (GAAP)		3,005			4,793			4,832
Net interest income (TE)	$	23,081		$	23,048		$	25,326
Paycheck Protection Program ("PPP") loan - interest and fee income		603			NA			NA
Net interest income (TE) - excluding PPP loans	$	22,478			NA			NA
Net interest income (GAAP)	$	22,707		$	22,658		$	24,754
Average interest earning assets	$	2,668,217		$	2,459,007		$	2,447,700
Average PPP loans	$	90,447			N/A			N/A
Average interest earning assets, excluding PPP loans	$	2,577,770			N/A			N/A
Net interest margin (GAAP)		3.42	%		3.71	%		4.06	%
Net interest margin (TE)		3.48	%		3.77	%		4.15	%
Core net interest margin (TE - excluding PPP loans)		3.51	%		N/A			N/A


	GAAP									Non-GAAP
		Three Months Ended									Three Months Ended
	June 30,			March 31,			June 30,			June 30,			March 31,			June 30,
	2020			2020			2019			2020			2020			2019
Efficiency Ratio / Adjusted Efficiency Ratio
(Dollars in thousands)

Noninterest expense	$	18,896		$	21,002		$	20,126		$	18,896		$	21,002		$	20,126
Less amortization of core deposit		124			128			121			124			128			121
Less other real estate expense, net		143			237			248			143			237			248
Noninterest expense less adjustments	$	18,629		$	20,637		$	19,757		$	18,629		$	20,637		$	19,757

Net interest income	$	22,707		$	22,658		$	24,754		$	22,707		$	22,658		$	24,754
Taxable-equivalent adjustment:
Loans		N/A			N/A			N/A			3			3			3
Securities		N/A			N/A			N/A			371			387			569
Net interest income including adjustments		22,707			22,658			24,754			23,081			23,048			25,326
Noninterest income		10,695			6,322			8,143			10,695			6,322			8,143
Less death benefit related to BOLI		59			-			-			59			-			-
Less securities (losses) gains, net		-			(24)			986			-			(24)			986
Less MSRs mark to market (loss) gain		(445)			(2,134)			(1,137)			(445)			(2,134)			(1,137)
Taxable-equivalent adjustment:
Change in cash surrender value of BOLI		N/A			N/A			N/A			157			(13)			85
Noninterest income (less) / including adjustments		11,081			8,480			8,294			11,238			8,467			8,379

Net interest income including adjustments plus noninterest income (less) / including adjustments	$	33,788		$	31,138		$	33,048		$	34,319		$	31,515		$	33,705
Efficiency ratio / Adjusted efficiency ratio		55.13	%		66.28	%		59.78	%		54.28	%		65.48	%		58.62	%

Exhibit 99.2


	Old Second Bancorp, Inc. Loan Portfolio Disclosures As of June 30, 2020

Loan Portfolio Composition Loan Portfolio Characteristics Balance Outstanding (000’s) $2,052,336 Total Commitment (000’s) $2,539,355 Average Loan Commitment $352,024 Number of Payment Deferrals /Modifications 449 Payment Modification Rate (% of Total Commitment)* 9.03% Loan Portfolio Characteristics • Lending focused on full relationship, small and middle market businesses • Well diversified by industry with minimal exposure to high risk industries • Repayment analysis based on primary operating cash flow, supported by secondary and tertiary repayment sources • Full global cash flow and sensitivity analysis performed on all relationships over $1 million in exposure • Dedicated Leasing, C&I, CRE, Healthcare and Professional Service lending teams Commercial & Industrial 28% Construction 6% CRE Investor 21% CRE Owner- Occupied Farm Land 13% 1% Residential Investor 3% Residential Owner-Occupied 5% HELOC 10% Leasing 5% Multifamily 8% Loan Type IL 81% CA 2% NY 2% WI 4% MI 2% MA 1% Other States 8% Geography* *Based on primary property collateral if available, otherwise borrower address. *Excludes $133.89 million in PPP loans

Commercial and Industrial (includes Leasing) Commercial and Industrial Portfolio Characteristics Balance Outstanding (000’s) $574,935 Total Commitment (000’s) $838,075 Average Loan Commitment $351,247 Number of Payment Deferrals /Modifications 164 Payment Modification Rate (% of Total Commitment)* 6.16%* Weighted Average Seasoning 3.50 years Commercial and Industrial Portfolio Characteristics • Lending focused on full relationship, small and middle market businesses • Well diversified by industry with limited exposure to Accommodation and Food Services and Entertainment industries • Repayment analysis based on primary operating cash flow, supported by secondary and tertiary repayment sources • Full global cash flow and sensitivity analysis performed on all relationships over $1 million in exposure • Dedicated Leasing, C&I, Healthcare and Professional Service lending teams • Modest exposure to syndicated or leveraged loans DuPage County (IL) 11% Kane County (IL) 26% Kendall County (IL) 2% Cook County (IL) 23% Will County (IL) 7% IL Other 2% CA 2% MA 3% MI 3% NY 6% TX 2% WI 2% Other States 11% Geography* *Based on primary property collateral if available, otherwise borrower address. Accomodation and Food Services 2% Agriculture 3% Health Care 8% Information and Finance 13% Manufacturing 18% Administration and Support 2% Construction 15% Other Services 2% Professional Services 6% Rental and Leasing 7% Retail Trade 4% Transportation and Warehousing 6% Wholesale Trade 13% Industry *Excludes $133.89 million in PPP loans

CRE Owner-Occupied CRE Owner-Occupied Portfolio Characteristics Balance Outstanding (000’s) $343,982 Total Commitment (000’s) $357,453 Average Loan Commitment $549,928 Number of Payment Deferrals /Modifications 72 Payment Modification Rate (% of Total Commitment) 15.97% Weighted Average Seasoning 6.13 years Commercial and Industrial Portfolio Characteristics • Lending focused on full relationship, small and middle market businesses • Well diversified by industry with limited exposure to the Accommodation and Food Service and Entertainment industries • Repayment analysis based on primary operating cash flow, supported by secondary and tertiary repayment sources • Full global cash flow and sensitivity analysis performed on all relationships over $1 million in exposure • Dedicated C&I, Healthcare and Professional Service lending teams DuPage County (IL) 14% Kane County (IL) 28% Kendall County (IL) 5% Cook County (IL) 32% Will County (IL) 17% IL Other 2% Out of State 2% Geography* *Based on primary property collateral if available, otherwise borrower address. Accomodation and Food Services 3% Agriculture 3% Entertainment 7% Education 3% Health Care 9% Information and Finance 1% Manufacturing 10% Administration and Support 1% Construction 4% Other Services 23% Professional Services 4% Rental and Leasing 9% Retail Trade 18% Transportation and Warehousing 1% Wholesale Trade 3% Industry

CRE Investor (includes Multifamily) CRE Investor Portfolio Characteristics Balance Outstanding (000’s) $723,235 Total Commitment (000’s) $735,069 Average Loan Commitment $1,287,336 Number of Payment Deferrals /Modifications 56 Payment Modification Rate (% of Total Commitment) 11.22% Weighted Average Seasoning 4.41 years CRE Investor Portfolio Characteristics • Lending focused on full relationship and strong sponsorship • Well diversified by property type with limited exposure to high-risk real estate sectors (Hotel, Restaurant, Recreational and “Big Box” Retail) • Repayment analysis based on strong net operating income, supported by secondary and tertiary repayment sources • Full global cash flow and sensitivity analysis performed on all relationships over $1 million in exposure • Secured by seasoned properties with stabilized cash flow • Dedicated CRE and Healthcare lending teams Hotel 2% Industrial 13% Medical Office 2% Mini Storage 2% Mixed-Use 3% Office 16% Restaurant 2% Retail 15% Senior Housing 14% Multifamily 27% National Drugstore Chain 4% CRE Type DuPage County (IL) 12% Kane County (IL) 8% Cook County (IL) 47% Will County (IL) 7% IL Other 5% WI 8% MI 3% OH 2% CA 2% Other States 6% Geography* *Based on primary property collateral if available, otherwise borrower address.

CRE Non-Owner Occupied (excludes Multifamily) CRE Non-Owner Occupied Portfolio Characteristics Balance Outstanding (000’s) $525,714 Total Commitment (000’s) $535,551 Average Loan Commitment $1,525,785 Number of Payment Deferrals /Modifications 40 Payment Modification Rate (% of Total Commitment) 13.84% Weighted Average Seasoning 4.34 years CRE Non-Owner Occupied Portfolio Characteristics • Lending focused on full relationship and strong sponsorship with full recourse • Well diversified by property type with limited exposure to high-risk real estate sectors (Hotels, Restaurants, Recreational, “Big Box” Retail) • Repayment analysis based on strong net operating income, supported by secondary and tertiary repayment sources • Full global cash flow and sensitivity analysis performed on all relationships over $1 million in exposure • Secured by seasoned properties with stabilized cash flow • Dedicated CRE and Healthcare lending teams DuPage County (IL) 16% Kane County (IL) 9% Cook County (IL) 38% Will County (IL) 8% IL Other 5% CA 3% CT 2% IN 2% MI 3% OH 3% WI 7% Other States 4% Geography* *Based on primary property collateral if available, otherwise borrower address. Hotel 3% Industrial 24% Medical Office 4% Mini Storage 4% Mixed-Use 5% Office 29% Restaurant 3% Retail 27% CRE Type

CRE Non-Owner Occupied Retail CRE Non-Owner Occupied Retail Portfolio Characteristics Balance Outstanding (000’s) $109,284 Total Commitment (000’s) $110,536 Average Loan Commitment $1,300,425 Number of Payment Deferrals /Modifications 15 Payment Modification Rate (% of Total Commitment) 33.89% Weighted Average Seasoning 6.46 years CRE Non-Owner Occupied Retail Portfolio Characteristics • Lending focused on full relationship and strong sponsorship with full recourse • Limited exposure to “Big Box” Retail • Repayment based on strong net operating income, supported by secondary and tertiary repayment sources • Full global cash flow and sensitivity analysis performed on all relationships over $1 million in exposure • Secured by seasoned properties with stabilized cash flow • Dedicated CRE lending head Retail Strip, No Anchor 31% Retail "Big Box" 14% Retail "Mid Box" 5% Retail, Anchored 19% Retail "Small Box" 31% Retail Type DuPage County (IL) 14% Kane County (IL) 16% Cook County (IL) 35% Will County (IL) 9% IL Other 9% WI 14% GA 3% Geography* *Based on primary property collateral if available, otherwise borrower address.

CRE Non-Owner Occupied Office CRE Non-Owner Occupied Office Portfolio Characteristics Balance Outstanding (000’s) $114,953 Total Commitment (000’s) $118,127 Average Loan Commitment $1,618,172 Number of Payment Deferrals /Modifications 7 Payment Modification Rate (% of Total Commitment) 11.03% Weighted Average Seasoning 4.04 years CRE Non-Owner Occupied Office Portfolio Characteristics • Lending focused on full relationship and strong sponsorship with full recourse • No exposure to downtown high-rise Office • Repayment based on strong net operating income, supported by secondary and tertiary repayment sources • Full global cash flow and sensitivity analysis performed on all relationships over $1 million in exposure • Secured by seasoned properties with stabilized cash flow • Dedicated CRE lending head > 50,000 SF 49% 5,000 - 50,000 SF 4% < 5,000 SF 47% Office Property Size DuPage County (IL) 15% Kane County (IL) 9% Cook County (IL) 57% Will County (IL) 15% IL Other 2% Other States 2% Geography* *Based on primary property collateral if available, otherwise borrower address.

Multifamily Multifamily Portfolio Characteristics Balance Outstanding (000’s) $197,521 Total Commitment (000’s) $199,519 Average Loan Commitment $906,902 Number of Payment Deferrals /Modifications 16 Payment Modification Rate (% of Total Commitment) 4.34% Weighted Average Seasoning 4.60 years Multifamily Portfolio Characteristics • Lending focused on full relationship and strong sponsorship • No exposure to downtown high-rise Multifamily • Repayment analysis based on strong net operating income, supported by secondary and tertiary repayment sources • Full global cash flow and sensitivity analysis performed on all relationships over $1 million in exposure • Dedicated CRE head • 88% of multifamily loans are secured by real estate in Illinois • Limited non-recourse lending reflects stabilized properties with consistently strong operating results DuPage County (IL) 2% Kane County (IL) 7% Cook County (IL) 72% DeKalb County (IL) 3% IL Other 4% WI 11% Other States 1% Geography* *Based on primary property collateral if available, otherwise borrower address.

Construction and Land Development C&D Portfolio Characteristics Balance Outstanding (000’s) $83,939 Total Commitment (000’s) $155,968 Average Loan Commitment $1,624,662 Number of Payment Deferrals /Modifications 2 Payment Modification Rate (% of Total Commitment 1.47% Weighted Average Seasoning 1.60 years C&D Portfolio Characteristics • Lending focused on strong sponsorship with full recourse • Well diversified by property type with limited exposure to high-risk real estate (i.e. Hotel, Recreational, “Big Box” Retail, large scale land development) • Minimum of 25% hard equity required on all projects • Full global cash flow and sensitivity analysis performed on all relationships over $1 million in exposure • Internal funding controls to monitor projects with consistent site inspection Industrial 1% Land 10% Mixed-Use 14% Multifamily 15% Office 7% Recreational 1% Residential 17% Retail 22% Owner-Occupied 13% Property Type DuPage County (IL) 21% Kane County (IL) 5% Cook County (IL) 39% Lake County (IL) 5% Will County (IL) 5% IL Other 3% WI 10% MN 3% IN 9% Geography* *Based on primary property collateral if available, otherwise borrower address.

Payment Modifications Payment Modifications Balance Outstanding (000’s) $216,381 Total Commitment (000’s) $217,188 Average Loan Commitment $483,715 Number of Payment Deferrals /Modifications 449 Payment Modification Rate (% of Total Commitment) 9.03%* Payment Modifications • Adopted regulatory and accounting guidance to establish COVID-19 modification program for retail and commercial borrowers in March • Approximately one third of all payment modifications are interest only, while two thirds are full payment deferral or require a modest payment that would otherwise not cover interest • 85% of payment modifications are for a term of 90 days or less, the remainder are for 120 days or 180 days Payment Deferral Interest Only 55% 32% Payment Modification 13% Modification Type *Five CRE Non-Owner Occupied Retail loans totaling $17.98 million requested payment deferral, but have been making full payments. Excluding these borrowers would reduce the Payment Modification Rate to 8.28% and reduce the % of CRE Non-Owner Occupied payment modifications from 34% to 28% of total modifications. Commercial & Industrial 20% CRE Owner-Occupied 26% CRE Non-Owner Occupied 34% Multifamily 4% Construction 1% HELOC 3% 1-4 Family Closed- End 12% Modifications by Loan Type

Payment Modifications Continued • Processed first COVID payment modification in late March and a total of 449 COVID payment modifications through June 30, 2020. • The payment modification requests has abated since the end of May with a total of 42 modifications in progress through June 30, 2020. • Less than 40% of Commercial (C&I, CRE Owner-Occupied, CRE Investor) payment modifications are expected to be extended to 6 months based on early indications from borrowers currently in payment modification arrangements. March April May June % of Total Portfolio 0.09% 4.26% 7.24% 9.03% Construction $- $- $2,599,983 $2,599,983 C&I and Leasing $2,031,669 $23,559,117 $30,403,990 $43,368,509 CRE Owner-Occ. $- $32,729,791 $46,889,418 $57,072,438 CRE Non-Owner $- $24,354,261 $61,894,016 $74,102,754 Multifamily $- $2,805,085 $6,660,132 $8,651,255 Residential and Consumer $- $20,620,675 $28,385,785 $31,392,682 $- $50,000,000 $100,000,000 $150,000,000 $200,000,000 $250,000,000 Payment Modification Trends

Payment Modifications Continued Loan Portfolio Total Portfolio Commitment (000’s) % of Total Commitment (000’s) Total Commitment Deferred (000’s) % of Total Portfolio Deferred Weighted LTV CRE-secured Deferred Loans Commercial & Industrial (inc. Leasing) $704,183* 28.22% $43,369 6.16% NA Construction Industry $123,129 4.85% $7,963 6.47% NA Transportation Industry $50,887 2.00% $10,320 20.28% NA Bars & Restaurants $12,316 0.49% $3,759 30.52% NA Day Care Providers $4,119 0.16% $1,775 43.09% NA Real Estate & Leasing $60,615 2.39% $5,000 8.25% NA CRE Owner-Occupied $357,453 14.08% $57,072 15.97% 64% Religious Organizations $60,892 2.40% $18,171 29.84% 67% Day Care Providers $4,446 0.18% $4,446 100.00% 74% Gas Stations $18,988 0.75% $5,575 29.36% 60% Performing Arts Theatre $4,492 0.18% $4,492 100.00% 74% Bars & Restaurants $10,750 0.42% $4,794 44.60% 65% Recreation $17,028 0.67% $2,727 16.01% 26% CRE Non-Owner Occupied $535,551 21.09% $74,103 13.84%** 58% Retail $110,284 4.37% $37,463 33.89%** 59% Hotel $13,224 0.52% $13,224 100.00% 48% Restaurant $12,612 0.50% $1,658 13.15% 36% Office $118,127 4.65% $13,028 11.03% 66% Multifamily $199,519 7.86% $8,651 4.34% 58% • Payment modifications are intended to assist borrowers impacted by COVID-19. As such, businesses most impacted by social distancing guidelines and government shutdown have requested and have been granted payment modification to date (see below). • All loan modifications listed below qualify for temporary suspension of TDR requirements per Section 4013 of the CARES Act. *Excludes $133.89 million in PPP loans. **Excluding five loans that had requested payment deferral, but have continued to make full payment, the CRE Non-Owner Occupied rate would be reduced from 13.84% to 10.50% and the CRE NOO Retail rate would be reduced from 33.89% to 17.66%.

SBA Payment Protection Program Loans Accomodation and Food Services 6% Entertainment 1% Education 4% Health Care 15% Information and Finance 1% Manufacturing 16% Administration and Support 4% Construction Other Services 13% 5% Professional Services 9% Rental and Leasing 4% Retail Trade 11% Transportation and Warehousing 4% Wholesale Trade 7% Industry April May June Loans Booked 267 630 669 Volume ($) $96,260,916 $131,122,702 $133,892,302 $- $20,000,000 $40,000,000 $60,000,000 $80,000,000 $100,000,000 $120,000,000 $140,000,000 $160,000,000 PPP Funding YTD SBA PPP Loans Balance Outstanding (000’s) $133,892 Total Commitment (000’s) $133,892 Average Loan Commitment $200,138 Number of Loans over $2 million 6 Number of Loans under $150,000 454 SBA PPP Loans • Largest loan funded was $4.89 million, with the balance of loans over $2 million totaling $20.55 million or 15.35% of total loans funded • Balance of loans under $150,000 totaling $23.35 million or 17.44% of total loans funded • Continuing to accept PPP applications, albeit at very low dollar amounts

Allowance for Credit Losses (under CECL) ACL Pool Outstanding Pooled Unguaranteed Loan Balance (000’s) ALLL Balance (000s) 12/31/2019 ACL Pooled Balance (000’s) 6/30/2020 Unfunded Commitment Reserve (000’s) 6/30/2020 Commercial & Industrial* $305,903 $2,842 (0.88%) $2,274 (0.74%) $985 Construction $82,024 $507 (0.73%) $3,498 (4.27%) $3,063 CRE Owner-Occupied $334,688 $2,539 (0.86%) $2,261 (0.68%) $33 CRE Investor $521,973 $5,554 (1.27% $7,599 (1.46%) $0 Leasing $132,009 $1,070 (0.90%) $1,939 (1.47%) $0 Multifamily $195,174 $1,248 (0.82%) $3,036 (1.56%) $9 Residential Owner-Occupied $121,494 $1,198 (0.94%) $3,055 (2.51%) $46 Residential Investor $67,719 $519 (0.84%) $2,207 (3.26%) $65 HELOC $112,927 $1,122 (0.94%) $2,399 (2.12%) $761 Consumer $1,196 $73 (0.57%) $18 (1.48%) $3 Total (includes reserves for individually analyzed loans and unallocated) $1,875,488 $19,789 (1.02%) $31,274 (1.63%*) $4,966 Key methodology assumptions • 1 year economic forecast utilized, assuming recessionary conditions reverting to long-term historical loss rates • Key economic inputs include GDP and civilian unemployment • Loss rates driven by portfolio risk characteristics, average remaining loan life, risk-grading and modeling methodology • Loss-rate models utilizing static pool and migration methodologies for material Residential and Commercial pools, WARM methodology utilized for pools with limited loss data • Loan risk migration accounts for initial payment modification totals and are lower than anticipated through 6/30/2020 and ACL assumptions used in previous periods • Methodology refinements within the HELOC and Consumer pools have resulted in lower reserve levels compared to previous periods Economic Scenario • Unemployment rate between 8.00% and 12.00% for the next twelve months, 6.25% to 10.00% for the life of loans • Real GDP growth rate between -5.00 and 2.00% over the next twelve months • Does not assume a return to business shutdowns as a result of a second wave and assumes additional government stimulus *Excludes $133.89 million in PPP loans

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements in this presentation are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act. Forward-looking statements can be identified by words such as: "expect," “opportunity,” "anticipate," “focus,” "intend," "plan," "seek," "believe," "may," "should," "will," “projected” and similar references to future periods. Pro forma financial information is not a guarantee of future results and is presented for informational purposes only. Forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors (“risk factors”) that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements. All forward-looking statements speak only as of the date of this presentation. We do not undertake any duty to update any forward-looking statement made herein. Risk factors include, without limitation:

●	the impact of the recent outbreak of the novel coronavirus, or COVID-19, on our business, including the impact of the actions taken by governmental authorities to try and contain the virus or address the impact of the virus on the U.S. economy (including, without limitation, the Coronavirus Aid, Relief and Economic Security Act, or the CARES Act), and the resulting effect of these items on our operations, liquidity and capital position, and on the financial condition of our borrowers and other customers;
●	negative economic conditions that adversely affect the economy, real estate values, the job market and other factors nationally and in our market area, in each case that may affect our liquidity and the performance of our loan portfolio;
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●	the financial success and viability of the borrowers of our commercial loans;
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●	changes in U.S. monetary policy, the level and volatility of interest rates, the capital markets and other market conditions that may affect, among other things, our liquidity and the value of our assets and liabilities;
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●	ability to use technology to provide products and services that will satisfy customer demands and create efficiencies in operations;
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●	adverse effects on our information technology systems resulting from failures, human error or cyberattacks;
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●	adverse effects of failures by our vendors to provide agreed upon services in the manner and at the cost agreed, particularly our information technology vendors and those vendors performing a service on the Company’s behalf;
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●	the impact of any claims or legal actions, including any effect on our reputation;
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●	losses incurred in connection with repurchases and indemnification payments related to mortgages;
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●	the soundness of other financial institutions and other counter-party risk;
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●	changes in accounting standards, rules and interpretations and the impact on our financial statements;
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●	changes to our key methodology assumptions underlying the determination of our allowance for credit losses;
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●	our ability to receive dividends from our subsidiaries;
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●	a decrease in our regulatory capital ratios;
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●	risks associated with actual or potential litigation or investigations by customers, regulatory agencies or others;
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●	legislative or regulatory changes, particularly changes in regulation of financial services companies;
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●	negative changes in our capital position;
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●	the adverse effects of events such as outbreaks of contagious disease, war or terrorist activities, or essential utility outages, including deterioration in the global economy, instability in credit markets and disruptions in our customers’ supply chains and transportation; and
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●	changes in trade policy and any related tariffs.
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These and other factors are representative of risk factors that may emerge and could cause a difference between an ultimate actual outcome and a forward-looking statement. See Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2019 and Quarterly Reports on Form 10-Q, or disclosed in other documents filed or furnished by us to the SEC after the date of the Annual Report, for a description of additional risk factors that may affect actual outcomes. 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.