Old Second Bancorp, Inc. · NASDAQ:OSBC
Old Second Bancorp — Shareholder Meeting (April 2010)
46 slides from Old Second Bancorp's shareholder meeting presentation, Apr 20, 2010
Slide 1: 2010 Annual Meeting
1 2010 Annual Meeting
Slide 2: Call to Order
CALL TO ORDER
Slide 3: Presenters
William B. Skoglund J. Douglas Cheatham Chairman, Chief Financial Officer President & CEO James L. Eccher Stewart Beach Chief Operating Officer Exec. VP Wealth Management President & CEO Presenters
Slide 4: Bancorp Board Members
Bancorp Board Members William B. Skoglund J. Douglas Cheatham James L. Eccher Edward Bonifas Marvin Fagel Barry Finn William Kane John Ladowicz William Meyer Gerald Palmer James Schmitz D. Chet McKee (Senior Director)
Slide 5: Appointed Proxies for Management
Appointed Proxies for Management James Benson Barry Finn Townsend L. Way, Jr.
Slide 6: Quorum Represented / Notice of Meeting / Inspectors of Election
Quorum Represented/ Notice of Meeting Inspectors of Election Robin Hodgson June Courtney Edward Bonifas
Slide 7: Minutes: 2009 Annual Meeting
Minutes: 2009 Annual Meeting
Slide 8: Proposal to Increase Authorized Shares
Proposal to Increase Authorized Shares
Slide 9: Election of Directors
Election of Directors Edward Bonifas William Meyer William B. Skoglund
Slide 10: Non-Binding Advisory Proposal on Executive Compensation
Non-Binding Advisory Proposal on Old Second’s Executive Compensation
Slide 11: Ratification/Approval of Plante & Moran, PLLC
Ratification/Approval of Plante & Moran, PLLC
Slide 12: Real Gross Domestic Product
GDP: Actual numbers from Bloomberg as of 4Q 2009 (prelim.); estimates from Blue Chip as of 2/2010. . Green = Actual; Blue = Blue Chip Consensus 13 2.8 2.9 3.0 3.5 4.1 1.7 3.1 2.1 5.4 1.4 0.1 3.0 1.2 3.2 3.6 2.1 -0.7 1.5 -2.7 -5.4 -6.4 -0.7 2.2 5.9 2.8 2.8 2.8 3.0 -8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0
Slide 13: Collapse in Residential Construction
Collapse in residential construction 14 Source: Stratages
Slide 14: Still a Housing Supply Problem
The current ratio* of 131/112 = 1.17 still appears too high by historical standards, but an improvement from last year. 112 Million Households 131 Million Homes 1.12 Houses/HH Still a Housing Supply Problem 15 Source: Stratages U.S. Housing Stock vs Total Households 80.0 90.0 100.0 110.0 120.0 130.0
Slide 15: Kane County Statistics
Kane County Statistics Source RealtyTrac.com. 10/30/08 10/26/09 3/30/10 Pre-Foreclosure 2,392 3,129 3,008 Auction 1,926 2,642 2,497 Bank-Owned 976 1,250 2,256 17
Slide 16: Will County Statistics
Will County Statistics Source RealtyTrac.com. 10/30/08 10/26/09 3/30/10 Pre-Foreclosure 4,010 4,419 5,428 Auction 1,049 1,149 880 Bank-Owned 1,654 2,393 2,768 18
Slide 17: Kendall County Statistics
Kendall County Statistics Source RealtyTrac.com. 10/30/08 10/26/09 3/30/10 Pre-Foreclosure 220 615 1,335 Auction 58 15 206 Bank-Owned 235 595 776 19
Slide 18: Labor Market
LABOR MARKET 300 " 200 100 1218112008 | «6/30/2007-«*12/81/2007@ys02008 «12/81/2008 -«6/S0/2009 «12/31/2009 fm CHANGE IN NON-FARM PAYROLLS -'000 (LEFT AXIS) — UNEMPLOYMENT RATE - % (RIGHT AXIS) Bloomberg as of 3/2010. @otd second PS
Slide 19: Things Looking Better but Head Winds Remain
Things looking better but Head Winds Remain Head Winds High unemployment Housing prices still weak and values declining Government deficits Potential higher taxes Uncertain government regulation Commercial Real Estate vacancy levels high Mortgage rates increasing Tail Winds Jobs are being created Re
Slide 20: 2009 Operating Strategies
22 2009 Operating Strategies Reduce Expenses ($1 million per month goal was achieved, excluding OREO and FDIC increases.) Staff reduction in excess of 10% Branch closings: 4 in 2009 and 3 in early 2010 Eliminated planned 2009 profit sharing Reduced 401(k) Company match Eliminated management bonuses
Slide 21: 2009 Performance
23 2009 Performance 2009 2008 Assets $2,596,657 $2,984,605 Loans $2,062,826 $2,271,114 Securities available for sale $229,330 $405,577 Borrowing $117,250 $371,190 Deposits $2,206,277 $2,387,128 Net (loss) income ($65,588) $11,824 Diluted (loss) earnings per share ($5.04) $0.86 Net interest margin 3.
Slide 22: Net Noninterest Expenses
24 Net Noninterest Expenses Net noninterest expenses equals noninterest expenses minus noninterest income. Excludes goodwill impairment charge in the second quarter of 2009.
Slide 23: Capital Ratios
25 Capital Ratios Source: Company reports and SNL Securities. Peer Group: Midwest banks between $1 billion and $10 billion with positive common equity. See disclosures contained in the appendix.
Slide 24: Price to Tangible Book Value by Tangible Common Equity Ratio
Source: Company reports and SNL Securities. Peer Group: Midwest banks between $1 billion and $10 billion with positive common equity. See Non-GAAP disclosures contained in the appendix. 26 Tangible Common Equity 78.8% 85.9% 88.8% 148.1% 78.4% Less than 4% 4% to 6% 6% to 8% 8% or more Price to Tangib
Slide 25: Liquidity
27 Liquidity Total Availability Used or Pledged Unused Capacity Federal Home Loan Bank of Chicago $203,861 $ 26,204 $177,657 Federal Reserve Secured Borrowing 281,850 0 281,850 Federal Funds Line 25,000 0 25,000 Securities Portfolio 196,325 129,186 67,139 Total $707,036 $165,390 $541,646 Primary fun
Slide 26: Core Earnings Ratios
Source: Company reports and SNL Securities. Peer Group: Midwest banks between $1 billion and $10 billion with positive common equity. See Non-GAAP disclosures contained in the appendix. 28 Core Earnings Ratios Net Interest Margin (%) (tax equivalent) Efficiency Ratio (%) Net Operating Expense to Ave
Slide 27: Core Earnings - Continued
Source: Company reports and SNL Securities. Peer Group: Midwest banks between $1 billion and $10 billion with positive common equity. See Non-GAAP disclosures contained in the appendix. 29 Core Earnings - Continued 1.60 1.46 1.32 1.66 1.80 1.29 1.49 1.39 1.32 1.14 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4
Slide 28: Loan Portfolio Mix
30 Loan Portfolio Mix (In Millions) 2009 2008 Commercial & Industrial $ 207 $ 243 Real Estate - Commercial 925 929 Real Estate - Construction 274 373 Real Estate - Residential 642 701 Other 15 25 $ 2,063 $ 2,271 Commercial & Industrial 10% RE Commercial 45% RE Construction 13% RE Residential 31% Oth
Slide 29: Non-Performing Loans/Charge-Offs
31 Non-Performing/Charge-Offs (in millions) Total Non-Performing Loans 2009 Charge-Offs 2009 2008 Real Estate-Construction $94,770 50% $60,173 $6,146 Real Estate Residential Investor $26,396 13.9% $3,520 $932 Owner Occupied $23,481 12.4% $1,546 $70 Revolving & Junior Liens $1,488 0.8% $1,172 $418 Re
Slide 30: Construction & Development Composition
32 Construction & Development Composition % of C&D Portfolio % of Segment NPL Homebuilder Lots & Spec/Model Homes 35.2% 54.5% Land Only 21.1% 26.5% Speculative Commercial Lots & Buildings 32.0% 12.7% Other Construction 11.7% 5.7% % of portfolio in C&D is 13%, down from a peak of 22% in early 2008. M
Slide 31: Focused on Reducing Exposure to Land Development and Construction Loans
33 O2 Focused On Reducing Exposure to Land Development and Construction Loans As of December 31, 2009 Residential Construction 40% Commercial Construction 37% Land Hold Development 23% Construction Categories 2008 Dollars 2009 Dollars % of Residential Construction (In Millions) (In Millions) Inc/Dec
Slide 32: Commercial Real Estate Composition
34 Commercial Real Estate Composition % of CRE Portfolio % of Segment NPL 30-89 Owner Occupied 49% 3% 0.64% Non-Owner Occupied 37% 4% 0.95% Strip Malls 14% 11% 0.0% Average Loan Size is approximately $700,000. All loans over $5MM comprises 17.5% of the total. Less than 4% of it is located in areas o
Slide 33: Composition of Non-Performing Loans Relative to Portfolio
35 Composition of Non-Performing Loans Relative to their Share of Total Portfolio Category % of NPL Sub-Segment Sub-Segment % of Portfolio C&D 50% Homebuilder 55% 5% Land 27% 3% Comm’l Spec 17% 2% Other C&D 1% 3% Residential 26% Consumer 1sts 47% 10% 1-4 Investor 29% 6% Multi-Family 24% 7% CRE 21% S
Slide 34: Construction & Development Problem Loan Charge-Offs
36 Construction & Development Problems Loan Charge-Offs (in millions) 2009 2008 Real Estate Construction $ 60.2 $ 6.1 Residential Real Estate 6.2 1.4 Real Estate Commercial 4.2 1.4 Commercial & Industrial 3.5 0.1 Other 0.9 0.4 Total $ 75.0 $ 9.4
Slide 35: Core Earnings
Source: Company reports and SNL Securities. Peer Group: Midwest banks between $1 billion and $10 billion with positive common equity. See Non-GAAP disclosures contained in the appendix. 37 Core Earnings 1.60 1.46 1.32 1.66 1.80 1.29 1.49 1.39 1.32 1.14 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Pre-Tax
Slide 36: Controlling Expenses
38 Controlling Expenses Source: Company reports including regulatory filings. 500 520 540 560 580 600 620 640 2008 2009 Full Time Employees 37 38 39 40 41 42 43 44 45 2008 2009 Total Salary Expense (in millions)
Slide 37: Residential Banking and Wealth Management Highlights
39 Residential Banking Highlights 2009 Record income of $11.8 million and 62% over 2008. Closed record $482 million in first mortgages. 26% over 2008. Sold $113 million in mortgages to FNMA. Climbed to 4th in market share in Kane County and 3rd in Kendall and DeKalb Counties. Wealth Management Highl
Slide 38: Deposits
40 Deposits 2009 $2,206,277 14% 39% 48% 13% 45% 41% Difference: 2009 from 2008 (in millions) % Change Non Interest Bearing (10) -3.1% Savings/NOW/MMA 66 7.1% CDs (237) -20.8% Net (181) -7.6% 2008 $2,387,128
Slide 39: All Households Length of Relationship
All Households Length of Relationship 10+ es 6-9 Yrs 35S 12)s [ xaos Less Than 1 Yr ° 5,000 10,000 15,000 20,000 25,000 2009 All Households mLess than 1 yr m1-2yrs 3-5 yrs ™6-9yrs m= 10+ yrs 30,000
Slide 40: Deposit Market Share
Deposit Market Share Source: FDIC SOD thru 6/30/09 Report 10/15/09 42 KANE COUNTY 2009 Rank Institution 2009 Total Deposits in Markets ($000) 2009 Total Market Share (%) 1 Old Second 1,487,113 16.84 2 BMO Financial 865,087 9.80 3 JP Morgan 835,095 9.46 4 PNC Financial 784,342 8.88 KENDALL COUNTY 200
Slide 41: Capital
43 Capital 2009 2008 Tier 1 leverage ratio 8.48% 6.50% Tier 1 capital to risk weighted assets 9.96% 7.66% Total Capital to risk weighted assets 13.26% 10.76% See disclosures contained in the appendix.
Slide 42: Regulatory Capital
44 Regulatory Capital (in millions) Old Second Bancorp Actual at year-end Minimum req’d for Capital Adequacy Purposes Excess Capital Above Min. Amount Ratio Amount Ratio 2009 Total capital to risk weighted assets $ 294,761 13.26% $ 177,835 8.00% +116,926 Tier 1 capital to risk weighted assets 221,52
Slide 43: Operating Strategies
45 Operating Strategies Manage business for return to growth & profitability. Aggressively decrease non-performing loans. Actively manage balance sheet & capital. Maintain cost controls. Continue to diversify loan portfolio. Drive core deposit growth & retention through relationship building. Contin
Slide 44: Appendix: Non-GAAP Disclosures
46 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 45: Reconciliation of Tangible Common Equity and Net Interest Margin
47 The following table presents a reconciliation of total stockholders equity to tangible stockholders equity (in thousands): Tangible common equity Dec 31, 2008 March 31, 2009 June 30, 2009 Sep 30, 2009 Dec 31, 2009 Total stockholder's equity as reported $ 193,096 $ 265,041 $ 207,261 $ 210,815 $ 19
Slide 46: Annualized Net Non-Interest Expense to Average Assets Calculation
48 Annualized net non-interest expense to average assets calculation Dec 31, 2008 March 31, 2009 June 30, 2009 Sep 30, 2009 Dec 31, 2009 Operating expense $ 20,410 $ 21,277 $ 80,853 $ 20,238 $ 22,262 Less: other real estate expense 74 844 3,328 1,862 2,801 Less: core deposit intangible amortization
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