Old Second Bancorp, Inc. · NASDAQ:OSBC
Old Second Bancorp — Shareholder Meeting (May 2011)
42 slides from Old Second Bancorp's shareholder meeting presentation, May 17, 2011
Slide 1: 2011 Annual Meeting
1 2011 Annual Meeting
Slide 2: Call to Order
CALL TO ORDER 2
Slide 3: Presenters
William B. Skoglund Chairman President & CEO, OSBC James L. Eccher Chief Operating Officer President & CEO, OSNB J. Douglas Cheatham Executive VP & Chief Financial Officer Presenters 3
Slide 4: Bancorp Board Members
Bancorp Board Members William B. Skoglund J. Douglas Cheatham James L. Eccher Edward Bonifas Barry Finn William Kane John Ladowicz William Meyer Gerald Palmer James Schmitz Marvin Fagel – retiring. 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: 2010 Annual Meeting
Minutes: 2010 Annual Meeting 7
Slide 8: Election of Directors
Election of Directors Barry Finn William Kane John Ladowicz 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: Recap of 2010 Operating Strategies
12 Recap of 2010 Operating Strategies Manage business for return to growth & profitability. Trends improve. Not yet ready to grow. Moving towards stabilization. Aggressively decrease nonperforming loans. Nonperforming loans down 21% from the peak. Actively manage balance sheet & capital. Increased b
Slide 13: Recap of 2010 Operating Strategies - Continued
13 Recap of 2010 Operating Strategies - Continued Continue to diversify loan portfolio. Construction reduced from 13% to 8% of loans during 2010. Drive core deposit growth & retention through relationship building. 7.3% growth in noninterest bearing checking balances in 2010. Continue to maintain a
Slide 14: 2010 Performance
14 2010 Performance (Dollars in Thousands, Except Per Share Data) Q1 2011 2010 2009 Assets $2,115,406 $2,123,921 $2,596,657 Loans $1,601,761 $1,690,129 $2,062,826 Deposits $1,902,349 $1,908,528 $2,206,277 Provision for loan losses $4,000 $89,668 $96,715 Net interest margin 3.42% 3.64% 3.47% Net inco
Slide 15: Noninterest Expenses
15 Noninterest Expenses * Excludes goodwill impairment. $ - $20 $40 $60 $80 $100 $120 2008 2009* 2010 Millions Noninterest Expenses Excluding OREO
Slide 16: Controlling Expenses
16 Controlling Expenses $11.6 $8.9 $0 $2 $4 $6 $8 $10 $12 Q1 2008 Q1 2011 Millions Salaries and Benefits Full-time Equivalent Number of Employees 700 600 500 400 300 200 100 0 Q1 2008 Q1 2011 630 505
Slide 17: Net Interest Margin
17 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 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011
Slide 18: Capital Ratios
Capital Ratios Old Second Bancorp, Inc. 18 12/31/08 12/31/09 12/31/10 3/31/11 Total risk based capital 10.76% 13.26% 11.46% 11.65% Tier 1 risk-based capital 7.66% 9.96% 6.09% 6.04% Leverage capital 6.50% 8.48% 4.74% 4.88% Tangible capital 4.33% 7.36% 3.70% 3.55% Tangible common equity 4.33% 4.69% 0.
Slide 19: Capital Preservation Plan
Capital Preservation Plan Old Second National Bank Regulatory Ratios 19 12/31/08 12/31/09 12/31/10 3/31/11 Total risk based capital 11.54% 11.57% 11.63% 11.97% Tier 1 risk-based capital 10.29% 10.30% 10.34% 10.68% Leverage capital 8.72% 8.89% 8.10% 8.64% Tangible capital 8.47% 9.66% 8.65% 8.63% See
Slide 20: Liquidity as of March 31, 2011
20 Liquidity as of March 31, 2011 (In Thousands) Total Availability Used or Pledged Unused Capacity Overnight funds $134,527 $ 0 $134,527 Federal Home Loan Bank of Chicago 60,050 14,836 45,214 Federal Reserve Secured Borrowing 222,433 0 222,433 Securities Portfolio 156,325 71,218 85,107 Total $573,3
Slide 21: Rate of Change in Nonperforming Assets
21 Rate of Change in Nonperforming Assets (Change in NPAs Plus Charge-offs) - $40 - $20 $0 $20 $40 $60 $80 $100 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Millions Quarterly Two Quarter Moving Average
Slide 22: Loan Portfolio Mix
22 Loan Portfolio Mix (In Millions) 2009 2010 Commercial & Industrial $ 207 $ 174 Real Estate - Commercial 925 821 Real Estate - Construction 274 129 Real Estate - Residential 642 558 Other 15 8 $ 2,063 $ 1,690 Commercial & Industrial 10% RE Commercial 45% RE Construction 13% RE Residential 31% Othe
Slide 23: Nonperforming/Charge-Offs
23 Nonperforming/Charge-Offs Total Non-Performing Loans 2010 Charge-Offs 2010 2009 Real Estate-Construction $68,012 29.7% $39,321 $60,173 Real Estate Residential Investor $22,207 9.7% $8,798 $3,520 Owner Occupied $25,484 11.1% $3,286 $1,546 Revolving & Junior Liens $1,558 0.7% $1,132 $1,172 Real Est
Slide 24: Construction & Development Total Portfolio/Nonperforming/Charge-Offs
24 Construction & Development Total Portfolio/Nonperforming/Charge-Offs
Slide 25: Commercial Real Estate Total Portfolio/Nonperforming/Charge-Offs
26 Commercial Real Estate Total Portfolio/Nonperforming/Charge-Offs
Slide 26: Commercial Real Estate Composition
27 Commercial Real Estate Composition % of CRE Portfolio % of Segment NPL 30-89 Owner Occupied 50% 12% 0.26% Non-Owner Occupied 37% 13% 0.18% Strip Malls 13% 25% 0.0% Average Loan Size is approximately $700,000. Less than 4% of it is located in areas outside of NE Illinois. Primarily comprised of ty
Slide 27: Other Real Estate Owned Balances
28 Other Real Estate Owned Balances
Slide 28: Other Real Estate Owned
Other Real Estate Owned '$25,000,000.00 $20,000,000.00 $15,000,000.00 $10,000,000.00 wAdations $5,000,000.00 dpe sooo lal [| | ~$5,000,000.00 -$10,000,000.00 ene eee eee ee eee tee eee a Pence eae fo Mp ee | a a ae er en ee a ee a tak = < = cs a < & ° z 3 & é = @o1a Second 29
Slide 29: Deposits
30 Deposits 2009 $2,206,277 14% 41% 42% 17% 45% 41% Difference: 2010 from 2009 (in millions) % Change Noninterest Bearing 22.5 7.3% Savings/NOW/MMA (211.4) -21.3% CDs (108.9) -12.0% Net (297.7) -13.5% 2010 $1,908,528 Non Interest Bearing Savings/NOW/MMA CDs
Slide 30: Length of Relationship
31 50% 5% 11% 16% 18% All Households Length of Relationship
Slide 31: Deposit Market Share
Deposit Market Share Source: FDIC SOD thru 6/30/09 Report 10/15/09 32 KANE COUNTY 2009 Rank Institution 2010 Total Deposits in Markets ($000) 2010 Total Market Share (%) 1 Old Second 1,337,101 15.11 2 BMO Financial 986,721 11.15 3 JP Morgan 921,220 9.46 4 PNC Financial 661,399 7.47 KENDALL COUNTY 20
Slide 32: Retail Banking Highlights 2010
33 A record 7,500 new checking accounts opened in 2010. Household retention of 93% in 2010 and 97% at 3/31/2011. Noninterest bearing checking balances up 7.3% in 2010. Retail Banking Highlights 2010
Slide 33: Residential Banking and Wealth Management Highlights 2010
34 Residential Banking Highlights 2010 Strong noninterest revenue of $11 million. Closed $360 million in first mortgages. 4th in market share in Kane County and Kendall County. Wealth Management Highlights 2010 Total Wealth Management assets of $1.2 billion. Pre-tax allocated income of $3.9 million.
Slide 34: Main Goals for 2011
35 4 Main Goals for 2011 Increase capital Reduce nonperforming assets Maintain liquidity Return to profitability
Slide 35: Capital Preservation Plan
Capital Preservation Plan Old Second National Bank Regulatory Ratios 36 12/31/08 12/31/09 12/31/10 3/31/11 Total risk based capital 11.54% 11.57% 11.63% 11.97% Tier 1 risk-based capital 10.29% 10.30% 10.34% 10.68% Leverage capital 8.72% 8.89% 8.10% 8.64% Tangible capital 8.47% 9.66% 8.65% 8.63% See
Slide 36: Failed Banks' Capital
Failed Banks’ Capital 37 Average Failed Bank Tier 1 Leverage 1.26% Total Capital 2.57%
Slide 37: Nonperforming Assets
38 Nonperforming Assets 3/31/11 12/31/10 9/30/10 6/30/10 12/31/09 Nonperforming loans 193 229 228 243 190 OREO 85 76 55 47 40 Other 1 3 2 2 1 Total NPAs 279 308 285 292 231 Loan loss reserve 73 76 68 81 65 % NPLs 38% 33% 30% 33% 34% (in millions)
Slide 38: Liquidity as of March 31, 2011
39 Liquidity as of March 31, 2011 (In Thousands) Total Availability Used or Pledged Unused Capacity Overnight funds $134,527 $ 0 $134,527 Federal Home Loan Bank of Chicago 60,050 14,836 45,214 Federal Reserve Secured Borrowing 222,433 0 222,433 Securities Portfolio 156,325 71,218 85,107 Total $573,3
Slide 39: Summary
40 Leading deposit market share in Kane and Kendall Counties. Strong Wealth Management Group with >$1 Billion in assets. Profitable Residential Banking division. Improving credit metrics. Good liquidity and solid capital position. Stable and experienced employee group. Loyal core deposit franchise –
Slide 40: Appendix: Non-GAAP Disclosures
41 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 41: Appendix: Non-GAAP Disclosures
42 Appendix: Non-GAAP Disclosures Tangible common equity December 31, 2009 March 31, 2010 June 30, 2010 September 30, 2010 December 31, 2010 March 31, 2011 Total stockholder's equity as reported $ 197,208 $ 187,740 $ 163,526 $ 161,569 $ 83,958 $ 80,186 Less: preferred stock 69,039 69,254 69,473 69,6
Slide 42: Appendix: Non-GAAP Disclosures
43 Appendix: Non-GAAP Disclosures Three Months Ended As of and for the Year Ended March 31, December 31, 2011 2010 2009 (dollars in thousands) (unaudited) Core earnings Pre-tax earnings (3,120) $ (66,781) $ (111,161) Excluding impact of: Other real estate owned 4,560 24,027 7,549 Provision for loan