Old Second Bancorp, Inc. · NASDAQ:OSBC
Old Second Bancorp — IPO Roadshow (December 2016)
37 slides from Old Second Bancorp's IPO roadshow presentation, Dec 12, 2016
Slide 1: Forward-Looking Statements
Forward-Looking Statements. This presentation contains forward-looking statements, which are subject to certain risks and uncertainties, including, without limitation, information regarding the future business performance of Old Second Bancorp, Inc. (the “Company,” “Old Second” or “OSBC”), its plans
Slide 2: Offering Summary
Offering Summary *A rating is not a recommendation to buy, sell or hold securities. Rating may be subject to revision or withdrawal at any time by the assigning rating organization. Each rating agency has its own methodology for assigning ratings and, accordingly, each rating should be evaluated ind
Slide 3: Capital Position
Capital Position 4 OSBC September 30, 2016 ActualPro Forma Tangible Common / Tangible Assets Common Equity Tier 1 Ratio Leverage Ratio Tier I Risk Based Ratio Total Risk Based Ratio 8.12%8.12% 10.68%10.68% 9.32%9.32% 13.25%13.25% 15.42%14.80% Double Leverage Ratio 131.8%131.8% Pro Forma Capital Rati
Slide 4: Senior Management
Senior Management Years at OSBC Years in Industry James Eccher President & Chief Executive Officer Chief Executive Officer and President, Old Second Bancorp, Inc. (2015-present), President and Chief Executive Officer, Old Second National Bank (2003-present), Executive Vice President and Chief Operat
Slide 5: Senior Management
Senior Management Old Second Years at Years in OSBC Industry James Eccher President & Chief Executive Officer ae 26 _ Chief Executive Officer and President, Old Second Bancorp, Inc. (2015-present), President and Chief Executive Officer, Old Second National Bank (2003-present), Executive Vice Preside
Slide 6: Corporate Profile
Corporate Profile Company Overview Established in 1871 and headquartered in Aurora, IL Deposit market share leader in Aurora Community; #2 in Kendall County and #2 in Kane County Staff average years of service of 10.7 years. 43% over 10 years More than 60% of deposit relationships have been with the
Slide 7: Premier Chicago MSA Deposit Franchise
Premier Chicago MSA Deposit Franchise More than 60% of deposit customers have been with Old Second for more than 10 years Strong local market position provides pricing power Cost of deposits of less than 25 bps Cost of Deposits 0.57% 0.60% All Deposit Households – Length of Relationship 0.50% Less t
Slide 8: Footprint Demographics
Footprint Demographics Counties of Operation(1) Aurora, IL is the second largest city in Illinois Strong demographics and household income metrics, with unemployment rates below average for the Chicago MSA Market growth expected to continue to outpace local averages County Rank Branches Deposits Mkt
Slide 9: Recent Achievements
Recent Achievements Acquisition of Chicago branch of Talmer Bancorp in October 2016 Acquired veteran lending team with extensive Chicagoland banking experience Received Investment grade senior debt rating at the Holding Company level Improved efficiency and expense control Sustained improvement in d
Slide 10: Branch Acquisition Rationale
Branch Acquisition Rationale Acquisition of approximately $49 million in attractive, low cost core deposits and a loan portfolio of nearly $224 million Leverages capital base Acquisition of lending team in addition to earning assets anticipated to drive future organic loan growth Strong anticipated
Slide 11: Business Strategy
Business Strategy • Generate organic loan growth • Improve efficiency • Accelerate growth in core profitability • Increase fee income • Remain focused on credit remediation • Position company for entry into new markets and strategic acquisition opportunities 12
Slide 12: Investment Highlights
Investment Highlights Premier Chicago MSA Deposit Franchise • • • • Singular focus on core deposits More than 75% non-time deposits Cost of deposits less than 25bps Long-term core deposit customer base Balance Sheet Strength with Improving Performance Metrics • • • Strong liquidity profile Above wel
Slide 13: Investment Highlights
estment Highlights Old Second Premier Chicago MSA Deposit Franchise ‘+ Singular focus on core deposits ‘* More than 75% non-time deposits * Cost of deposits less than 25bps + Long-term core deposit customer base Balance Sheet Strength with Improving Performance Metrics «Strong liquidity profile * Ab
Slide 14: Performance Summary
Performance Summary 2015 Pre-tax income improvement of 53% over 2014 driven by both margin and expense control 2016 YTD results impacted by loss on sale of securities of $2.0mm in order to fund the Talmer branch acquisition Balance Sheet Total Assets Net Loans Total Deposits Tangible Common Equity L
Slide 15: Loan Portfolio Mix
Loan Portfolio Mix Loan Mix 9/30/16 R.E. Construction, 2% Consumer & Other, 1% Commercial, 17% CRE: Non-Owner Occupied, 26% HELOCs, 8% CRE: Owner Occupied & Other, 25% R.E. Residential, 14% Multi Family, 7% Proforma with Branch Acquisition R.E. Construction, 4% Consumer & Other, 1% Commercial, 18% C
Slide 16: Loan Growth Returning
Loan Growth Returning Gross Loan Trends $1,400.0 C&I balances grew approximately 10% in 2015 and 30% for year to date 2016 CRE balances remained steady over the past few years, at approximately 52% of gross loans CRE concentration ratio(2) at Old Second National Bank of 176% as of 9/30/2016 $1,200.0
Slide 17: Commercial Origination Momentum
Commercial Origination Momentum $250 Balance sheet stability allows renewed focus loan relationship generation on $200 $150 Experienced Chief Credit Officer with extensive banking background Hired experienced Chicago lending team with Talmer branch acquisition $100 $50 $0 2012 2013 2014 2015 YTD Q3
Slide 18: Deposits
Deposits 12/31/2010 $1,908,528 9/30/2016 $1,777,382 17% 22% 27% 42% 41% 51% Noninterest Bearing Savings/NOW/MMA Certificates of Deposit 19 Source: Company documents. Difference: 12/31/2010 to 9/30/2016 (in millions) % Change Noninterest Bearing $142.7 43.1% Savings/NOW/MMA $122.0 15.6% Certificates
Slide 19: Securities Portfolio
Securities Portfolio U.S. Government Agencies Mortgage-Backed 8.2% U.S. Government Agencies States and Political Subdivisions • $531 million (100% AFS), or 25.1% of assets Weighted Avg. Yield: 2.55% Weighted Avg. Life: 7.30 years Effective Duration: 2.28 years As of September 30, 2016, approximately
Slide 20: Net Interest Margin
Net Interest Margin 5.00% 3.91% 4.00% 3.78% 3.70% 3.70% 3.23% 3.21% 3.17% 3.13% 3.00% 2.00% 1.00% 0.00% 2012Y 2013Y 2014Y 2015Y Q3 2016 YTD Annualized Net Interest Margin Yield on Average Earning Assets Cost of Funds/AEA Source: Company documents. Note: AEA = “Average Earning Assets”. 21 4.32% 3.42%
Slide 21: Diverse Revenue Streams
Diverse Revenue Streams Total Fee Revenues: % of Total Revenues: $29MM 33.2% $29MM 31.1% $34MM 36.4% $31MM 36.0% $26MM 31.5% $21MM 31.6% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2011 2012 2013 Wealth Management 2014 2015 Mortgage 2016 YTD Other Service Charges Source: Company documents. Note: Fee
Slide 22: Earnings Improvement
Earnings Improvement Balance sheet growth, cost of funds improvement and improvement in noninterest expense helped drive core earnings Revenue Drivers $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 Talmer branch acquisition Maintain loan growth & NIM momentum Fee income streams $74 $68 $56 Expense Redu
Slide 23: Credit Risk Management
Credit Risk Management 25 Credit Risk Controls and Experienced Staff • For collateral commercial loans, business line approval authority is limited to a maximum of $2 million • Concentration managed within Board-approved limits (percentage of capital plus allowance) •CRE portfolio is well-diversifie
Slide 24: Nonperforming Asset Trends
Nonperforming Asset Trends Nonperforming Loans by Type (1) Other Real Estate Owned $100.0 $80 $70 $60 $50 $40 $30 $20 $10 $0 $80.0 $60.0 $40.0 $14.6 $17.4 $20.0 $0.0 2012 Commercial 2013 2014 2015 Q3 2016 2012 2013 2014 2015 2016Q1 2016Q2 2016Q3 Real Estate Commercial Real Estate Residential Real Es
Slide 25: Nonperforming Asset Trends
Nonperforming Asset Trends ota Second Nonperforming Loans by Type Other Real Estate Owned 100.0 o $82.6 $39.8 5 $400 oa 2 8 2 ee $0.0 2012-2013, 2014S 20153 2016 Commercial mReal Estate Commercial 2012 2013 2014 2015 201601201602201603 = Real Estate Construction mReal Estate Residential = Other Nona
Slide 26: Conclusions
Conclusions • Premier Chicago MSA Deposit Franchise • Balance Sheet Strength with Improving Performance Metrics • Talmer Branch Acquisition Accelerates Organic Momentum • Experienced Management Team and Board • Significantly Improved Credit Metrics 28
Slide 27: Conclusions
Conclusions Ola Second * Premier Chicago MSA Deposit Franchise * Balance Sheet Strength with Improving Performance Metrics * Talmer Branch Acquisition Accelerates Organic Momentum * Experienced Management Team and Board * Significantly Improved Credit Metrics
Slide 28: Consolidated Capital
Consolidated Capital Leverage Ratio (%) Ratio Trends Total Risk-based Capital Ratio (%) 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 20.00% 15.00% 6.96% 10.00% 5.00% 0.00% 2012 2013 2014 2015 2015Q3 2016Q3 2012 2013 2014 2015 2015Q3 2016Q3 Tangible Common Equity / Tangible Assets (%)(1) Tier 1 Risk-b
Slide 29: Current Holding Company Debt
Current Holding Company Debt Security Maturity Rate Amount Senior Debt Subordinated Debt Old Second Capital Trust I Old Second Capital Trust II 3/31/2018 3/31/2018 6/30/2033 4/17/2037 3ML + 90 3ML + 150 7.80% 6.766%(1) $ 500 45,000 31,625 25,000 Total Holding Company Debt $ 102,125 $45 million of su
Slide 30: Holding Company Liquidity
Holding Company Liquidity Interest - Investments $ 0.1 Holding Company Overhead Trust Preferred Interest $ 2.0 4.3 Tax Benefit from Parent 2.8 Total Sources of Liquidity $ 3.0 Subordinated Debt Interest 0.9 Total Uses of Liquidity (Current) $ 7.2 Net Cash Outflow $ (4.2) Beginning Unencumbered Cash
Slide 31: Interest Coverage
Interest Coverage (A) (B) (C) (D) (A / C) (B / D) Source: Company documents and management. (1) Assumes $45mm of senior debt is raised with an interest rate of 5.75% and assumes $45 million of existing subordinated debt and $500 thousand of existing term debt is redeemed. 33 Dollars in Thousands Yea
Slide 32: Nonperforming Loans
Nonperforming Loans Commercial Real Estate Commercial Real Estate Construction Real Estate Residential Other $0.8 $47.6 $9.9 $24.3 $0.0 $0.0 $21.0 $2.7 $16.0 $0.0 $1.5 $13.7 $0.6 $11.3 $0.0 $0.1 $4.3 $0.1 $10.1 $0.0 $0.6 $7.3 $0.1 $9.4 $0.0 Total Nonperforming Loans (1) $82.6 $39.8 $27.1 $14.6 $17.4
Slide 33: Nonperforming Loans
Nonperforming Loans 01d second Dollars in mail Year Ended Quarter Ended Nonperforming Loan Type 2012 2013, 2014 2015, 201603 Commercial $0.8 $0.0 $15 $0.1 $0.6 Real Estate Commercial $47.6 $21.0 $13.7 43 $73 Real Estate Construction $9.9 $2.7 $0.6 $0.1 so. Real Estate Residential $24.3 $16.0 $13 $10
Slide 34: Non-GAAP Financial Measures
Non-GAAP Financial Measures As of December 31, As of September 30, 2012 2013 2014 2015 2015 2016 ($ in thousands, except per share data) Tangible assets Total assets Less: Intangible assets Tangible assets $ 2,044,821 $ 2,003,104 $ 2,060,905 $ 2,077,028 $ 2,048,748 $ 2,112,751 3,276 1,177 - - - - $
Slide 35: Non-GAAP Financial Measures
Non-GAAP Financial Measures As of December 31, As of September 30, 2012 2013 2014 2015 2015 2016 Net Income a fter ta xes a nd before extra ordia nry items Les s : Noninteres t Income Net Income a ttributa ble to Noncontrolling Interes t Ga in (los s ) on s ecurities s Net ga in (los s ) on dis pos
Slide 36: Non-GAAP Financial Measures
Non-GAAP ($ in tho usands, except per share data) Financial Measures A s o f D e c e m be r 3 1, A s o f S e pt e m be r 3 0 , 2 0 12 2 0 13 2 0 14 2 0 15 2 0 15 2 0 16 T ie r 1 c o m m o n e quit y $ (2,593) $ 73,573 $ 146,832 $ 155,929 $ 153,643 $ 171,627 Tangible co mmo n equity Tier 1adjustments
Slide 37: Non-GAAP Financial Measures
Non-GAAP Financial Measures Old Second