Old Second Bancorp, Inc. · NASDAQ:OSBC
Old Second Bancorp — Shareholder Meeting (May 2012)
44 slides from Old Second Bancorp's shareholder meeting presentation, May 15, 2012
Slide 1: 2012 Annual Meeting
1 2012 Annual Meeting
Slide 2: Call to Order
CALL TO ORDER 2
Slide 3: Presenters
William Skoglund Chairman President & CEO, OSBC James Eccher Chief Operating Officer, OSBC President & CEO, OSNB Doug Cheatham Executive VP & Chief Financial Officer Presenters 3
Slide 4: Bancorp Board Members
Bancorp Board Members William Skoglund Doug Cheatham James Eccher Edward Bonifas Barry Finn William Kane John Ladowicz William Meyer Gerald Palmer James Schmitz 4
Slide 5: Quorum Represented / Notice of Meeting
Quorum Represented/ Notice of Meeting Inspectors of Election Paul Mosquera Edward Bonifas 5
Slide 6: Appointed Proxies for Management
Appointed Proxies for Management William Meyer James Schmitz Gerald Palmer 6
Slide 7: Minutes: 2011 Annual Meeting
Minutes: 2011 Annual Meeting 7
Slide 8: Election of Directors
Election of Directors Doug Cheatham James Eccher Gerald Palmer James Schmitz 8
Slide 9: Non-Binding Advisory Proposal on Executive Compensation
Non-Binding Advisory Proposal on Old Second’s Executive Compensation 9
Slide 10: Ratification/Approval of Plante & Moran, PLLC
Ratification/Approval of Plante & Moran, PLLC 10
Slide 11: Forward-looking statements
Forward-looking statements In addition to historical information, this presentation contains forward-looking statements, which are subject to certain risks and uncertainties. Forward-looking statements include information concerning possible or assumed future results of Old Second’s operations. Forw
Slide 12: Performance Summary
12 Performance Summary (Dollars in Thousands, Except Per Share Data) 2011 2010 2009 Assets $1,941,418 $2,123,921 $2,596,657 Loans $1,368,985 $1,690,129 $2,062,826 Deposits $1,740,781 $1,908,528 $2,206,277 Provision for loan losses $8,887 $89,668 $96,715 Net interest margin 3.54% 3.64% 3.47% Net loss
Slide 13: Net Interest Margin
13 Net Interest Margin See non-GAAP disclosures contained in the appendix. 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012
Slide 14: Employee Costs
14 Employee Costs 618 492 0 100 200 300 400 500 600 700 2008 2011 Number of Employees (FTE) (Fourth Quarter Average) $44.5 $34.0 $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 2008 2011 Millions Salaries and Benefits
Slide 15: 2011 Core Earnings
15 2011 Core Earnings (Pre-tax, Pre-Credit Costs) (In Thousands) Net income ($6,498) Provision for loan losses $8,887 Other real estate owned expenses, net of income $19,410 Legal fees (primarily credit related) $4,118 Core earnings $25,917
Slide 16: Capital Ratios Old Second Bancorp, Inc.
16 Capital Ratios Old Second Bancorp, Inc. 12/31/08 12/31/09 12/31/10 12/31/11 Total risk based capital 10.76% 13.26% 11.46% 12.38% Tier 1 risk-based capital 7.66% 9.96% 6.09% 6.21% Leverage capital 6.50% 8.48% 4.74% 4.98% Tangible capital 4.33% 7.36% 3.70% 3.58% Tangible common equity 4.33% 4.69% 0
Slide 17: Capital Ratios Old Second National Bank
17 Capital Ratios Old Second National Bank 12/31/08 12/31/09 12/31/10 12/31/11 Total risk based capital 11.54% 11.57% 11.63% 12.97% Tier 1 risk-based capital 10.29% 10.30% 10.34% 11.70% Leverage capital 8.72% 8.89% 8.10% 9.34% Tangible capital 8.70% 9.66% 8.65% 9.18% See non-GAAP disclosures contain
Slide 18: Liquidity
18 Liquidity Old Second National Bank as of March 31, 2012 (in millions) Total Availability Used or Pledged Unused Capacity Overnight funds $ 37.5 $ - $ 37.5 Federal Home Loan Bank of Chicago 45.5 18.1 27.4 Federal Potential Reserve Secured Borrowing 180.5 - 180.5 Securities Portfolio 372.0 56.1 315
Slide 19: Holding Company Liquidity
19 Holding Company Liquidity as of March 31, 2012 Currently no common stock dividend Trust Preferred Dividend Deferral: Up to 20 quarters (2015) No payments, but expense is accrued in financial statements TARP No deadline to repay No payments, but expense is accrued in financial statements Rate incr
Slide 20: Cycle to Date Charge-Offs
21 Cycle to Date Charge-Offs $116,070 $31,103 $54,666 $6,221 $2,480 2008-2011 (in thousands) Construction Residential RE Commercial RE Commercial Other Total $210,540 3% 1% 26% 15% 55%
Slide 21: Nonperforming/Charge-Offs
22 Nonperforming/Charge-Offs Total Non-Performing Loans 2011 Charge-Offs 2010 2011 Real Estate-Construction $33,807 24.3% $39,321 $10,430 Real Estate Residential Investor $15,268 11.0% $8,798 $4,841 Owner Occupied $20,253 14.6% $3,286 $4,282 Revolving & Junior Liens $2,841 2.0% $1,132 $1,106 Real Es
Slide 22: Other Real Estate Owned Balances
Other Real Estate Owned Balances $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 $ Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 $41,774,194 $58,692,967 $77,446,032 $93,289,494 $101,833,719 $101,680,051
Slide 23: Old Second Bancorp statistics March 31, 2012
Old Second Bancorp statistics March 31, 2012 (amounts in thousands) Construction loans 400000 350000 300000 250000 200000 150000 100000 50000 373,703 60,285 2008 December 2009 March 2009 June 2009 September 2009 December 2010 March 2010 June 2010 September 2010 December 2011 March 2011 June 2011 Sep
Slide 24: Old Second Bancorp statistics: Total classified assets
Old Second Bancorp statistics March 31, 2012 (amounts in thousands) Total classified assets (Total Problem, OREO, and TDR) 500000 450000 400000 350000 300000 250000 2008 December 2009 March 2009 June 2009 September 2009 December 2010 March 2010 June 2010 September 2010 December 2011 March 2011 June
Slide 25: Commercial Real Estate Composition
26 Commercial Real Estate Composition As of December 31, 2011 % of CRE Portfolio % NPL 30-89 days past due Owner Occupied 51% 9% 0.28% Non-Owner Occupied 40% 7% 0.17% Retail Properties 9% 27% 0.0% Average Loan Size is approximately $200,000 Less than 4% of it is located in areas outside of NE Illino
Slide 26: Wealth Management Highlights 2011
27 Wealth Management Highlights 2011 Approximately $1 billion under management Pre-Tax income up 7% over last two years Pre-Tax gross profit margin remains high at 49% One of the largest Wealth Management groups in Western Suburbs of Chicago
Slide 27: Residential Banking Highlights 2011
28 Residential Banking Highlights 2011 Mortgage Banking Income of $6.2 million Closed $235 million in first mortgages Increased Market Share in Kane County from 3.31% to 4.48% ranked #3 Increased Market Share in Kendall County from 2.97% to 3.43% ranked #4 Grew Servicing Portfolio from $427 million
Slide 28: Retail Banking Highlights 2011
29 6,500 new retail checking accounts and 1,000 new business checking accounts Household retention of 94% Core deposits up 7% Debit card income growth of 8% Mobile banking users increased by 300% Retail Banking Highlights 2011
Slide 29: Deposits 2011 vs 2010
30 2010 $1,908,528 Deposits 2011 $1,740,781 Difference: 2011 from 2010 (in millions) % Change Noninterest Bearing $ 31.1 9.4% Savings/NOW/MMA (20.8) -2.7% CDs (149.9) -19.6% Brokered CDs (28.2) -96.8% Net (167.8) -8.8% 42% 17% 41% 35% 21% 44% Noninterest Bearing Savings/NOW/MMA CDs Noninterest Beari
Slide 30: Deposit Market Share
31 Deposit Market Share KANE COUNTY 2011 Rank Institution 2011 Total Deposits in Markets ($000) 2011 Total Market Share (%) 1 Old Second 1,225,102 14.42 2 JP Morgan Chase 1,002,918 11.80 3 Harris (BMO Financial) 927,224 10.91 4 Fifth Third 649,049 7.64 6 Union National Bank & Trust Co. of Elgin 414,
Slide 31: All Households Length of Relationship
32 All Households Length of Relationship 53% 19% 15% 8% 5% 2011 All Households Less than 1 yr 1-2 yrs 3-5 yrs 6-9 yrs 10+ yrs Less than 1 Yr 1-2 Yrs 3-5 Yrs 6-9 Yrs 10+ Yrs 0 5000 10000 15000 20000 25000 30000
Slide 32: 2011 Review Main Goals
33 2011 Review 4 Main Goals Increase capital Maintain liquidity Reduce problem loans/nonperforming assets Return to profitability
Slide 33: Goal #1: Increase Capital
Goal #1: Increase Capital 34 12/31/09 12/31/10 12/31/11 Required Total risk based capital 11.57% 11.63% 12.97% 11.25% Leverage capital 8.89% 8.10% 9.34% 8.75% See non-GAAP disclosures contained in the appendix. Old Second National Bank Capital Ratios
Slide 34: Goal #1: Increase Capital Ratios
35 Capital Ratios Old Second Bancorp, Inc. 12/31/08 12/31/09 12/31/10 12/31/11 Total risk based capital 10.76% 13.26% 11.46% 12.38% Tier 1 risk-based capital 7.66% 9.96% 6.09% 6.21% Leverage capital 6.50% 8.48% 4.74% 4.98% Tangible capital 4.33% 7.36% 3.70% 3.58% Tangible common equity 4.33% 4.69% 0
Slide 35: Goal #2: Maintain Liquidity
36 Liquidity Old Second National Bank as of March 31, 2012 (in millions) Total Availability Used or Pledged Unused Capacity Overnight funds $ 37.5 $ - $ 37.5 Federal Home Loan Bank of Chicago 45.5 18.1 27.4 Federal Potential Reserve Secured Borrowing 180.5 - 180.5 Securities Portfolio 372.0 56.1 315
Slide 36: Goal #2: Holding Company Liquidity
37 Holding Company Liquidity as of March 31, 2012 Currently no common stock dividend Trust Preferred Dividend Deferral: Up to 20 quarters (2015) No payments, but expense is accrued in financial statements TARP No deadline to repay No payments, but expense is accrued in financial statements Rate incr
Slide 37: Goal #4: Return to profitability
39 Goal #4: Return to profitability 2009 2010 2011 Net loss available to common shareholders $(70) $(113) $(11) Bank – nominal profit Bancorp (in millions)
Slide 38: Goal #4: 2011 expenses need to be reduced
40 2011 expenses need to be reduced Other real estate owned $24.0 million Provision for loan losses $8.9 million Bank insurance $3.3 million Legal $4.1 million TOTAL $40.3 million Watch expenses; Grow fee income; Sources like mortgage, wealth management, and other potential fee income; Grow loans; W
Slide 39: Summary Goals 2012, more of same
41 Regulatory capital at bank above required amounts Bancorp tangible common needs improvement Bank liquidity improved - Bancorp liquidity adequate for now Improving credit metrics - Good reduction - especially problem loans - Still a lot of work to do Need to move to consistent profitability at bot
Slide 40: Summary
42 Core business still profitable Need loan growth Strong deposit base – still #1 market share in Kane & Kendall counties Trends moving in right direction, which gives us time to continue to improve Stable & experienced staff Loyal core deposit franchise Community banking still a strong strategy for
Slide 41: 2012 Annual Meeting
43 2012 Annual Meeting
Slide 42: Appendix: Non-GAAP Disclosures
44 Appendix: Non-GAAP Disclosures This presentation contains certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (GAAP). These measures include net interest margin on a fully tax equivalent basis;
Slide 43: Appendix: Non-GAAP Disclosures
45 Appendix: Non-GAAP Disclosures The following table presents a reconciliation of Old Second Bancorp, Inc. stockholders equity to tangible stockholders equity (in thousands): Tangible common equity December 31, 2008 December 31, 2009 December 31, 2010 December 31, 2011 Total stockholder's equity as
Slide 44: Appendix: Non-GAAP Disclosures
46 Appendix: Non-GAAP Disclosures The following table reconciles net interest margin on a fully tax equivalent basis to net interest margin for the periods presented, assuming a 35% federal tax rate. Net interest margin % Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 201