Old Second Bancorp, Inc. · NASDAQ:OSBC
Old Second Bancorp — Shareholder Meeting (May 2015)
40 slides from Old Second Bancorp's shareholder meeting presentation, May 20, 2015
Slide 1: Old Second Bancorp, Inc. Annual Meeting 2015
Old Second Bancorp, Inc. ANNUAL MEETING 2015 NASDAQ: OSBC
Slide 2: Call to Order
Old Second Call to Order
Slide 3: Presenters
William Skoglund Chairman wskoglund@oldsecond.com 630-906-5483 James Eccher President & CEO, OSBC President & CEO, OSNB jeccher@oldsecond.com 630-966-2433 Doug Cheatham Executive VP & Chief Financial Officer dcheatham@oldsecond.com 630-906-5484 NASDAQ: OSBC May 19, 2015 Presenters
Slide 4: Board of Directors
Board of Directors William Skoglund Doug Cheatham James Eccher Edward Bonifas Barry Finn William Kane John Ladowicz Gerald Palmer Duane Suits
Slide 5: Appointed Proxies for Management
Appointed Proxies for Management William Kane Gerald Palmer
Slide 6: Quorum Represented / Notice of Meeting / Inspectors of Election
Quorum Represented/ Notice of Meeting Inspectors of Election Pamela Heller Edward Bonifas
Slide 7: Minutes 2014 Annual Meeting
Minutes 2014 Annual Meeting
Slide 8: Election of Directors
Election of Directors Doug Cheatham James Eccher Gerald Palmer Barry Finn
Slide 9: Non-Binding Advisory Proposal on Executive Compensation
Non-Binding Advisory Proposal on Old Second’s Executive Compensation
Slide 10: Ratification/Approval of Plante & Moran, PLLC
Ratification/Approval of Plante & Moran, PLLC
Slide 11: 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. Forward-looking statements gene
Slide 12: 2014 Goals: How did we perform?
2014 Goals How did we perform?
Slide 13: 2014 Goals
2014 Goals Accelerate core profitability. Stay focused on credit remediation. Strengthen balance sheet. Generate moderate loan growth. Increase noninterest income. Improve efficiency ratio.
Slide 14: Goal #1: Accelerate core profitability
Goal #1 Accelerate core profitability
Slide 15: Core Earnings Improvement
Revenue Drivers Maintain loan growth & NIM momentum Fee income streams Expense Reduction Drivers Reduced FDIC insurance expense Bank insurance premiums Legacy credit costs OREO maintenance expense and reduced valuation adjustments Branch rationalization Balance sheet growth, cost of funds improvemen
Slide 16: Goal #2: Stay focused on credit remediation
Goal #2 Stay focused on credit remediation
Slide 17: Nonperforming Asset Trends
Nonperforming Asset Trends Source: Company filings. Nonperforming loans include nonaccrual loans, loans 90+ days past due and still accruing and accruing TDRs. Nonperforming Loans by Type (1) Other Real Estate Owned $228.9 $138.9 $82.6 $39.8 $27.1 $23.4 $0.0 $50.0 $100.0 $150.0 $200.0 $250.0 2010 20
Slide 18: Goal #3: Strengthen balance sheet
Goal #3 Strengthen balance sheet
Slide 19: Recent Balance Sheet Trends
Capital levels and continued credit improvement allow for a return to consistent loan growth and the opportunity for continued TARP repurchases Source: Company filings. Note: Net Loans includes loans held for sale. Recent Balance Sheet Trends 14.33% 14.03% 14.47% 15.16% 15.19% 17.66% 17.56% 17.68% 1
Slide 20: Goal #4: Generate moderate loan growth
Goal #4 Generate moderate loan growth
Slide 21: Loan Growth Returning
2014 capital raise provided catalyst for return to organic loan growth C&I and CRE balances grew approximately 26% and 7%, respectively in 2014 Q1 2015 reflected year over year loan growth of 3.5% Source: Company filings. Excludes loans held for sale. (1) Includes: Consumer, Overdraft, Lease Financi
Slide 22: Goal #5: Increase noninterest income
Goal #5 Increase noninterest income
Slide 23: Diverse Revenue Streams
Source: Company filings. Note: Fee revenue equals total noninterest income less securities gains/losses, increase in cash surrender value of BOLI, death benefit realized on BOLI and litigation and other non-recurring income. Total revenue equals fee revenue plus net interest income. Diverse Revenue
Slide 24: Goal #6: Improve efficiency ratio
Goal #6 Improve efficiency ratio
Slide 25: Goal #6 Result: Efficiency Ratio
Goal #6 Result Efficiency Ratio The efficiency ratio is calculated as net interest expenses excluding core deposit intangible amortization and OREO expenses divided by the sum of net interest income on a fully tax equivalent basis, total noninterest income less net gains and losses on securities, an
Slide 26: Performance Summary
(Dollars in Thousands, Except Per Share Data) 2014 2013 2012 2011 Assets $2,061,787 $2,004,034 $2,045,799 $1,941,418 Loans $1,159,332 $1,101,256 $1,150,050 $1,368,985 Deposits $1,685,055 $1,682,128 $1,717,219 $1,740,781 (Release) provision for loan losses ($3,300) ($8,550) $6,284 $8,887 Net interest
Slide 27: Net Interest Margin
Source: Company filings. Note: AEA = “Average Earning Assets” Net Interest Margin 3.18% 3.07% 3.25% 3.13% 3.13% 3.04% 3.26% 3.35% 3.26% 4.00% 3.87% 4.03% 3.86% 3.84% 3.70% 3.82% 3.86% 3.77% 0.82% 0.81% 0.78% 0.73% 0.71% 0.66% 0.56% 0.52% 0.50% 0.00% 2.00% 4.00% 6.00% Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2
Slide 28: Continued Success in Controlling Noninterest Expense
Continued Success in Controlling Noninterest Expense Source: Company filings. Note: OREO expense (net) equals OREO expense less lease revenue from OREO and net gain on sale of OREO. $69 $63 Q1 15 annualized $98 $93 $90 $83 $74 $18 $17 $74 $73 $72 $72 $67 $17 $16 $0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $
Slide 29: Capital Ratios
Ratio December 31, 2013 December 31, 2014 March 31, 2015 Common equity tier 1 N/A N/A 9.46% Tier 1 capital 10.65% 14.44% 13.68% Total capital 15.16% 17.68% 17.30% Tier 1 leverage ratio 6.96% 9.93% 9.82% Capital Ratios All ratios calculated in conformity with regulations in effect at period date stat
Slide 30: Loan Portfolio Mix
(Dollars in Thousands) December 2014 CRE: Owner occupied $ 301,980 26.0% CRE: Non-owner occupied 284,492 24.5% Construction 44,795 3.9% Residential 1-4 family owner occupied 116,106 10.0% Residential 1-4 family non-owner occupied 59,714 5.2% HELOCs 115,943 10.0% Multi-family 78,107 6.7% C&I 119,086
Slide 31: Deposits
12/31/2010 $1,908,528 12/31/2014 $1,685,055 Difference: 12/31/2010 to 12/31/2014 (in millions) % Change Noninterest Bearing $69.6 21.0% Savings/NOW/MMA $83.0 10.6% CDs ($376.1) (47.3%) Net ($223.5) (11.7%) Deposits Non Interest Bearing Savings/NOW/MMA CDs 17% 41% 42% 24% 51% 25%
Slide 32: Classified Asset Trends
Source: Company filings. Classified loans are defined as loans rated substandard or worse, which closely reflects our regulator’s definition. Bank subsidiary level. Classified Asset Trends Classified Loans by Loan Type (1) Classified Assets/Tier 1 Capital + Reserves (2) 132% 27% 0% 20% 40% 60% 80% 1
Slide 33: Significant Credit Cost Improvement
Source: Company filings. Note: OREO expense (net) equals OREO expense less lease revenue from OREO and net gain on sale of OREO. Significant Credit Cost Improvement Provision & OREO Expense Net Charge-offs $77.9 $33.2 $19.7 $2.8 $2.3 $0.5 ($10.0) $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 $80.0
Slide 34: NPL Coverage Trends
NPL Coverage Trends Source: Company filings. Nonperforming loans include nonaccrual loans, loans 90+ days past due and still accruing and accruing TDRs. Allowance for Loan Losses & Nonperforming Loans (1) $212.2 $126.8 $77.5 $38.9 $26.9 $23.0 $15.6 $11.8 $5.0 $0.8 $0.2 $0.3 $1.0 $0.3 $0.1 $0.1 Nonac
Slide 35: Commercial Loan Originations
Commercial Loan Originations Balance sheet stability allows renewed focus on new loan relationship generation Hired 8 new lenders in the past 2 years to bolster new business generation efforts Recently hired a very experienced Chief Credit Officer Source: Management. Total Commercial Loan Originatio
Slide 36: Cost of Deposits
Cost of Deposits Long term customer relationship focus drives strong core deposit base Strong local market position provides pricing power Cost of deposits of less than 25 bps Source: Company filings. Deposit Composition Trends Cost of Deposits 2.40% 1.67% 1.08% 0.89% 0.57% 0.45% 0.31% 0.23% 0.00% 0
Slide 37: Strong Long Term Customer Relationships
As of 3/15. Source: Management. Strong Long Term Customer Relationships All Deposit and Loan Households – Length of Relationship 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 Less than 1 Yr 1-2 Yrs 3-5 Yrs 6-9 Yrs 10+ Yrs 6.0% 8.5% 9.4% 16.0% 60.1% Less than 1 yr 1-2 yrs 3-5 yrs 6-9 yrs 10+ yrs
Slide 38: 2015 Objectives
2015 Objectives Generate moderate loan growth Improve efficiency Accelerate core profitability improvement Increase fee income streams Continue TARP repurchase transactions Remain focused on credit remediation
Slide 39: Investment Highlights
Right size community banking franchise Strong market share in premier Chicagoland markets Attractive, long-term core deposit franchise Strong, profitable Wealth Management Group with >$1 billion in assets under management Greatly improved credit metrics Increased loan production and continued loan g
Slide 40: Thank you for your attendance
Thank you for your attendance