Old Second Bancorp, Inc. · NASDAQ:OSBC
Old Second Bancorp — Merger or Acquisition (November 2007)
24 slides from Old Second Bancorp's merger presentation, Nov 6, 2007
Slide 1: Old Second Bancorp, Inc. 136th Anniversary
—_ aa =e. Old Second Bancorp, Inc. 136th Anniversary NASDAQ: OSBC
Slide 2: Presenters: Bill Skoglund and Doug Cheatham
Bill Skoglund Doug Cheatham Chairman, President & CEO EVP, Chief Financial Officer Old Second Bancorp, Inc. Old Second Bancorp, Inc. 630-906-5483 630-906-5484
Slide 3: Forward-looking Statements and Non-GAAP Disclosures
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 4: Transaction Overview
Transaction Overview Acquisition price: $86,000,000 Consideration: 50% OSBC stock / 50% cash Floating exchange ratio: Based on 30-day average(1) of OSBC stock price 3 days prior to close. OSBC stock price collared between $27.50 and $32.25 Heritage shares outstanding: 8,323 (no options outstanding)
Slide 5: Transaction Overview: Structure, Board and Management
Transaction Overview Structure: Heritage Bank will be merged into Old Second Bank Board of Directors: John Ladowicz, Chairman and Chief Executive Officer of Heritage, will join the OSBC board Management: Patrick Roe, President and Chief Operating Officer of Heritage, will join Old Second as SVP - Re
Slide 6: Transaction Rationale
Transaction Rationale Provides franchise expansion into desirable, higher growth markets Platform to grow in markets south of Chicago and help fill in our footprint surrounding Chicago Substantial cost saving opportunities Opportunity to provide Heritage customers with wealth management services, an
Slide 7: Heritage Bank
Heritage Bank Highly profitable and rapidly growing community bank with a long history (50th Anniversary in 2008) $342 million total assets $279 million total loans $301 million total deposits Excellent asset quality Attractive cost of funds and strong net interest margin Strong and experienced mana
Slide 8: Heritage Bank branch photo
Heritage’ Bank Bra a5iat \ E tian PRA Et
Slide 9: Heritage Branch Network
Heritage Branch Network The Heritage branch network includes Frankfort, New Lenox and Chicago Heights. Population Growth(1) Frankfort: 62.91% growth from 2000 to 2006 New Lenox: 35.27% growth from 2000 to 2006 Chicago Heights: (.05)% growth from 2000 to 2006 Heritage Branch Network Growth 2000 – 200
Slide 10: Estimated Population Growth
Estimated Population Growth Source: NIPC and U.S. Census Bureau 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 Frankfort New Lenox Chicago Heights 2000 Census 2006 - Est. 2030 - Est.
Slide 11: Financial Highlights: Heritage Bank growth
Financial Highlights Assets and loans have grown at a compound annual growth rate of 12.6% and 16.8%, respectively, since 2003. Total deposits and core deposits have grown at a compound annual growth rate of 13.7% and 9.3%, respectively, since 2003. Note: Data is bank level. Heritage Bank 156 186 22
Slide 12: Financial Highlights: Heritage Bank metrics
Note: Data is bank level and C-Corp adjusted. Financial Highlights Heritage Bank 2003 2004 2005 2006 YTD 9/30/07 Net income ($000s) 2,669 $ 2,681 $ 3,254 $ 3,691 $ 2,855 $ ROAA 1.31% 1.18% 1.23% 1.25% 1.16% ROAE 15.30% 14.10% 15.40% 15.50% 14.23% NIM 4.34% 4.28% 4.43% 4.42% 4.17% Efficiency ratio 59
Slide 13: Pro Forma Impact
Pro Forma Impact
Slide 14: Combined Branch Map
Combined Branch Map OSBC Heritage
Slide 15: Pro Forma Loan Composition
Pro Forma Loan Composition September 30, 2007 Loans ($000s) OSBC Heritage Pro Forma 1-4 Family 371,948 $ 48,022 $ 419,970 $ Home Equity 116,071 24,017 140,088 Multifamily 124,625 5,503 130,128 Construction & Development 400,446 77,207 477,653 Commercial RE 632,235 67,890 700,125 Agricultural 64,055
Slide 16: Pro Forma Deposit Composition
Pro Forma Deposit Composition September 30, 2007 Deposits ($000s) OSBC Heritage Pro Forma Demand deposits 283,429 $ 58,476 $ 341,905 $ Other transaction accounts 95,480 45,294 140,774 MMDA & Savings 816,840 78,177 895,017 Retail CD's 590,129 63,036 653,165 Jumbo CD's 412,872 55,634 468,506 ------ --
Slide 17: Transaction Pricing
Transaction Pricing Pricing Multiples: Price / LTM EPS earnings: 23.8x Price / book value: 280.3% Price / tangible book value: 329.6% Premium / core deposits: 25.1% Pricing is similar to comparable acquisitions involving sellers that are S-corps located in the Chicago MSA. Source: SNL Financial Note
Slide 18: Summary
Summary Merger consistent with Old Second’s relationship banking strategy Entering desirable high growth markets with outstanding locations Proven management team Heritage is a profitable and high growth bank Significant tax benefit due to 338 (h)(10) election Opportunity to expand wealth management
Slide 19: Old Second Bancorp
Old Second Bancorp
Slide 20: Financial Highlights
Financial Highlights Note: Year-to-date data as of September 30, 2007. (dollars in millions, except per share data) 2001 YTD 2007 Change Assets $1,333 $2,632 97.4% Loans $927 $1,889 103.7% Deposits $1,091 $2,196 101.3% Net income 1 $17.2 $23.4 35.9% Fully diluted EPS 1 $1.11 $1.83 64.6% NPAs / Asset
Slide 21: Credit Quality
Credit Quality Note: Year-to-date data as of September 30, 2007. Excellent, stable, predictable credit quality Historically, low net charge-offs Low level of non-performing loans to total loans Allowance vs. Non-performing Loans 1.37% 1.02% 1.42% 0.89% 0.91% 1.31% 0.92% 0.22% 0.17% 0.09% 0.30% 0.34%
Slide 22: Deposit Market Share
Deposit Market Share Note: Data as of June 30, 2007. Source: SNL Financial Kane, IL Rank Institution (ST) Branches Deposits in Market ($000s) Market Share (%) 1 Old Second Bancorp Inc. (IL) 19 1,470,600 17.27 2 BMO Financial Group 14 809,363 9.50 3 National City Corp. (OH) 15 773,064 9.08 4 Fifth Th
Slide 23: Performance
Performance Note: Year-to-date data as of September 30, 2007 is annualized. $1.11 $1.35 $1.56 $1.94 $2.03 $1.75 $1.83 15.7% 15.3% 19.1% 20.9% 14.4% 15.8% 17.7% $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 2001 2002 2003 2004 2005 2006 YTD 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Diluted EPS ROAE
Slide 24: Questions
Questions Thank you for participating.
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