Old Second Bancorp, Inc. · NASDAQ:OSBC
Old Second Bancorp — Debt Investor Presentation (April 2021)
45 slides from Old Second Bancorp's debt investor presentation, Apr 8, 2021
Slide 1: Fixed Income Investor Presentation
Old Second Bancorp, Inc. Fixed Income Investor Presentation March 2021 James Eccher President & CEO Bradley Adams Chief Financial Officer Old Second
Slide 2: Forward-Looking Statements
Forward-Looking Statements Old Second CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS ‘Some of the statements in this presentation are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act. Forward-looking statements can be identified by words such as:
Slide 3: Forward-Looking Statements (continued)
Forward-Looking Statements (continued) Old Second our ability to use technology to provide products and services that will satisfy customer demands and create efficiencies in operations; adverse effects on our information technology systems resulting from system failures, human error or cyberattack:
Slide 4: Preliminary Term Sheet
Preliminary Term Sheet ota second Issuer: Old Second Bancorp, Inc. (NASDAQ: OSBC) Security Offered: Holding Company Fixed-to-Floating Rate Subordinated Debt Due 2031 Expected Ratings”): BBB- (Kroll Bond Rating Agency) Format: Reg. D Term: 10 Years Call Date: 5 Years General corporate purposes, which
Slide 5: Corporate Profile
Corporate Profile Old Second Financial Highlights as of 12/31/20 Company Overview $398 Million Market Capitalization 2! 2D ROA $3.0 Billion Total Assets $2.0 Billion Gross loans HF $2.5 Billion 2020 NCOs/ Avg. Loan: Total Deposits 12/31/2020 Loan Composition (Bank) ota in hosonds cap Bs a tence mom
Slide 6: Core Values and Strategic Focus
Core Values and Strategic Focus Old Second Core Values = Strong credit culture - Well diversified loan portfolio In-depth knowledge of our customers and markets - Underwriting discipline = — Low cost, stable and mature core funding base = Expense control = Risk management and regulatory compliance —
Slide 7: Focus on Quality Loan Growth
Focus on Quality Loan Growth = Total loan growth of 5.4% in 2020 compared to 2019 * Commercial loan growth of 22.3% in 2020 compared to 5.9% in 2019. 2020 growth primarily due to PPP loans of $2200 $136.7 million issued in 2020 $2,000 = Lease financing receivables growth of $1,800 18.2% in 2020; lea
Slide 8: Loan Portfolio Composition (December 31, 2020)
Loan Portfolio Composition (December 31, 2020) Old Second Geography" Balance Outstanding (000's) $2,034,851 ) OES Total Commitment (00's) $2,475,204 a Spree Average Loan Commitment $325,078 wi Number of Active Payment Deferrals Modifications a i Payment Modification Rate (% of Total Commitment) 1.40
Slide 9: Footprint Demographics
Footprint Demographics O14 Second + Aurora, ILis the second largest city in Illinois, outside of Counties of Operation Chicago county Rank Branches Deposits __Mkt. Share + Deposit market share leader in Aurora Community; #2 in fare S Es 1,459,253 Sol Kendall County and #3 in Kane County Kendall 2 4
Slide 10: Payment Modifications Continued
Payment Modifications Continued Old Second 2020 Payment Relief Trends ($000's) 12/31/20 Modifications as a % of Gross Loans vs. Peers $250,000 ; EE 2x FRIOD ENE 3.6 $150,000 $100,000 860,000 so Frat ttecifoston siveati | S2i7s67 431 “Loans paid off are excluded from Resumed Payment totals ie 2021 Sc
Slide 11: Allowance for Credit Losses — Coverage Ratios
Allowance for Credit Losses — Coverage Ratios Old Second ACL Adequacy * Despite minimal losses in the recent years from loan charge-offs (net of recoveries), the adoption of CECL and the impact of the COVID pandemic resulted in an meaningful increase in the Allowance for Credit Losses (ACL) in 2020
Slide 12: Stable Credit
Stable Credit Old Second Nonperforming Loans by Type “) Other Real Estate Owned 25.0 : $16 $20.0 i $14 $15.0 $10.0 $12 $50 $10 $0.0 2016 2017 2018 2019 2020 «$8 = Commercial, including leases m Real Estate Commercial ‘= Real Estate Construction Real Estate Residential $6 Nonperforming Loans / Loans
Slide 13: Core Earnings Stability
Core Earnings Stability Old Second = Balance sheet growth, cost of funds improvement and stability in noninterest expense helped drive improved core earnings over the last four years Revenue Drivers * Focus on quality loan growth Income Statement Trends © Festncomestreams * Maintain our core deposit
Slide 14: Fee Income Diversification
Fee Income Diversification Pit aecond Total Fee Revenues; $30M $28M $29M $29M $36M % of Total Revenues: 31.7% 27.5% 24.2% 23.1% 28.3% 100% 90% 30% 31% % 30% 33% 33% 70% or 28% 23% 20% 18% 50% + 40% + 4 ie 22% 23% 30% 19% ul i 18% 20% “ oo 0% + + + 2016 2017 2018 2019 2020 ™ Service Charges Wealth Ma
Slide 15: Focus on Operating Leverage
Focus on Operating Leverage Old Second 68% 66% 64% 62% 60% 58% 56% 54% 52% 50% a Focused on initiatives that grow core revenues at a rate faster than operating expenses Resulting discipline expected to accelerate earnings growth and capture economies of scale as we grow Net interest income and net i
Slide 16: Core Deposits = Long-term Strength
Core Deposits = Long-term Strength Old Second = We believe our long-term customer relationship focus drives our strong core deposit base = Our strong market position provided us with pricing power with a cost of deposits of 28 bps for the year ended December 31, 2020 = This reflects a shift in depos
Slide 17: Ample Sources of Liquidity
Ample Sources of Liquidity Old Second = We believe our low loan to deposit ratio from our strong deposit base demonstrates our ample liquidity and reflects our advantageous core deposit trends and noninterest bearing deposit growth. Loan to deposit ratio as of December 31, 2020 was 80.2% of 49 bps f
Slide 18: Consolidated Capital Ratio Trends
Consolidated Capital Ratio Trends Leverage Ratio (%) Total Risk-based Capital Ratio (%) 14.00% 20m 7a3E% 12.00% a - 10.00% a, 12.00% pons 10.00% 600% 2.00% 4.00% AON 2.00% 2.00% 0.00% T 0.00% Old Second Q4 a1 G2 a3 04 a1 G2 G3 a4 Qi a2 a3 a4 aI A203 a4 16 17 17 17 17 18 18 18 18 19 19 19 19 20 20 20
Slide 19: Appendix 1: Supplemental Financial Data
Appendix 1: Supplemental Financial Data Old Second Old Second Bancorp, Inc. Supplemental Financial Data As of December 31, 2020
Slide 20: Interest Coverage Analysis
Interest Coverage Analysis Old Second Invesmentinsubsiiares S sszs2 $0 sszy0s Sasa] $—aozae7 Sas Cconsolestas eav'ty zispst 27st 307087 307087 307087 Double leverage rato 330% fad 58] 20% @) fe interest coverage camings Income rom continuing operations before taxes sss so saasy so arans| so asses an
Slide 21: Historical Financial Highlights
Historical Financial Highlights Old Second st Financial Highlights ———————_______ 2016 2017 2018 2019 2020 Total Assets ($000) 2,251,188 2,383,429 2,676,003 2,635,545 3,040,837 Total Net Loans ($000) 1,462,651 1,600,161 1,878,021 1,911,023 2,000,996 Total Deposits ($000) 1,866,785 1,922,925 2,116,67
Slide 22: Bank Capital Ratio Trends
Bank Capital Ratio Trends Leverage Ratio (%) 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% + a Total Risk-based Capital Ratio (%) Q4 Q1 G2 G3 24 1 Q2 G3 a4 QI A2.A3 a4 a1 a2.03 04 16 17 17 17 17 18 18 18 18 19 19 19 19 20 20 20 20 Actual Ratio =mmBoard-Established Guidelines Tier 1 Risk-based C
Slide 23: Equity and Risk Based Capital Measures
Equity and Risk Based Capital Measures Old Second 2016 2017 2018 2019 2020 (Sin thousands, except per share data) Tier 1 capital Total equity before non-CECL adjustments and deductions $175,210 $ 200,350 $229,080 $ 277,864 $ 312,741 Tier 1 adjustments Trust preferred securities allowed 47,997 56,625
Slide 24: Equity and Risk Based Capital Measures
Equity and Risk Based Capital Measures Old Second 2016 2017 2018 2019 2020 (S in thousands, except per share dats) Tier 1 common eq Tangible common equity S 166,449 $ 191537 $ 207,908 $ 256,589 $ 286,306 Tier 1 adjustments: Cumulative other comprehensive loss 8,762 (1.479) 4,079 (4,562) (14,762) Oth
Slide 25: Appendix 2: Non-GAAP Reconciliations
Appendix 2: Non-GAAP Reconciliations Old Second Old Second Bancorp, Inc. Non-GAAP Reconciliations As of December 31, 2020
Slide 26: Appendix 2: Non-GAAP Financial Measures
Appendix 2: Non-GAAP Financial Measures Old second ‘Net Interest Margin Tax Equivalent Non-GAAP Reconciliation 2016 2017 200 Interest income (GAAP) CES) 3 87505 3 3 logis ‘Taxabb-equnalent adjusment. Loans 8 20 2 Securities 43 3.198 1455 Interest income - (TE) Bo 30,793 105,682 Interest expense (GAA
Slide 27: Appendix 2: Non-GAAP Financial Measures
Appendix 2: Non-GAAP Financial Measures Old Second Fee Income Non-GAAP Reconciliation Noninterest income (GAAP) Less Increase inBOLICSV Death benefit recorded on BOLI Securities (losses) gains, net Total fee revere (Non-GAAP) Noninterest Expense, Exclu Noninterest expense (GAAP) Less OREO operating
Slide 28: Appendix 2: Non-GAAP Financial Measures
Appendix 2: Non-GAAP Financial Measures Efficiency Rat Non-GAAP Reconciliation Liss MSR marcto mast oss) “Taableagovalant after Tras neath sterner vibe of BOLL ‘Noninst income (ls) imo astments ‘Nera nome ncaling tment ps soeitaret mone (as) cdg ansmnts Eien fo! Aiustad fen rio 28 27 S @ue Ss TM S$
Slide 29: Appendix 2: Non-GAAP Financial Measures
Appendix 2: Non-GAAP Financial Measures Old Second Nonperforming Loans to Total Loans, Payment Modification Rate and ACL to TotalLoans Non-GAAP Reconciliations For the Years Ended we 28 00 Nonpaeening Lous 3 8 5 8 ise Total Leas (GAAP 3 5 5 Ss wsi0g2 ‘Nonparbening Leas 224 of Toa Loas (GAAP) OmmK To
Slide 30: Appendix 2: Non-GAAP Financial Measures
Appendix 2: Non-GAAP Financial Measures Old Second Tangible Common Equity Non-GAAP Reconciliation Years Ended 2016 2017 2018 2019 2020 Total equity S$ 175210 $ 200350 $ 29,081 $ 277,864 $ 307,087 Less: Preferred equity - - Goodwill and intangible assets “”” 8,761 8813 21,814 21,215 20,781 Tangble co
Slide 31: Appendix 3: Loan Portfolio Disclosures
Appendix 3: Loan Portfolio Disclosures Old Second Old Second Bancorp, Inc. Loan Portfolio Disclosures As of December 31, 2020
Slide 32: Allowance for Credit Losses (under CECL)
Allowance for Credit Losses (under CECL) Old Second Key methodology assumptions + year economic forecast utilized, assuming recessionary conditions reverting to long-term historical loss rates + Key economic inputs include GDP and civilian unemployment + Loss rates driven by portfolio risk character
Slide 33: Key Performance Ratios
Key Performance Ratios Old Second Credit Quality - Overviev + Loan quality has remained strong over the last severalyears enteringinto the current economic environments a result of conservative underwriting and experiencedlendingteams. + Relationship managers continue to work with Borrowers requesti
Slide 34: CRE Owner-Occupied (December 31, 2020)
CRE Owner-Occupied (December 31, 2020) Old Second Balance Outstanding (000's) $333,070 Total Commitment(000's) $345:336 Average Loan Commitment $563.364 Numberotactve Payment Deferral Modifications 14 Payment Modification Rate (% of Total Commitment) 273% Weighted Average Seasoning 643 years Geograp
Slide 35: Investor CRE (December 31, 2020)
Investor CRE (December 31, 2020) Old Second Balance Outstanding (000's) $582,042 * Lending focused on full elationship and strong sponsorship with fullrecourse . + Well diversified by property type with limited exposureto high-riskreal estate Total Commitment (00's), $597,231 sectors (Hotels, Restau
Slide 36: Investor CRE — Retail
© Old Second Balance Outstanding (000's) $149,201 + Lending focused on ful relationship and strong sponsorship with full recourse + Limited exposure to “Big Box" Retail ‘Total GommiAtmant (00's) $150,630 + Repayment based on strong net operating income, supported by secondary and tertiary repayments
Slide 37: Investor CRE — Office (December 31, 2020)
Investor CRE — Office (December 31, 2020) Old Second Balance Outstanding (000's) $138,788 Total Commitment (00's) $148,057 ‘Average Loan Commitment $1,827,866 Number of Active Payment Deferrals Modifications 1 Payment Modification Rate (% of Total Commitment) 0.08% Weighted Average Seasoning 3.94 ye
Slide 38: Commercial and Industrial (December 31, 2020)
Commercial and Industrial (December 31, 2020 Old Second Balance Outstanding (000's) $407,159 Total Commitment (00's) $624,483 ‘Average Loan Commitment $539,743 Number of Active Payment Deferrals Modifications 1 Payment Modification Rate (% of Total Commitment? 0.04%" Weighted Average Seasoning 3.63
Slide 39: Leasing (December 31, 2020)
Leasing (December 31, 2020) Balance Outstanding (000's) Total Commitment(000's) ‘Average Loan Commitment Number of Active Payment Deferrals Modifications Payment Modification Rate (% of Total Commitment) Weighted Average Seasoning Sa $141,601 Dedicated Leasing Service lendingteam 1.41 years Old Seco
Slide 40: Construction and Land Development
Construction and Land Development Old Second Balance Outstanding (00's) Lending focused on strong sponsorship with full recourse + Well diversified by property type with limited exposure to high-riskreal estate Total Commitment(000's) $144,132 (ie. Hotel, Recreational, igor Retal |arge scale land de
Slide 41: Multifamily (December 31, 2020)
Multifamily (December 31, 2020) Old Second Multifamily Portfolio Characteristics Multifamily Portfolio Characteristics Balance Outstanding (000's) $189,040 + Lending focused on full relationship and strong sponsorship ; 1 Noerposureto downtown highrise ultfsmiy Total Commitment(000's) S198 + Repayme
Slide 42: Payment Modifications
Payment Modifications (Cold secona + Adopted regulatory and accounting guidance to establish COVID-19 payment relief programs for retail and commercial borrowers in March 2020 + Approximately one third of all payment relief modifications have been interest only, while the remaining are full payment
Slide 43: Payment Modifications Continued
Payment Modifications Continued (ola secona First Modification Downgradeto Paid-off (No ratin + Credit management has assessed all Substandard 4% v 3% loans coming off payment modification for appropriate risk rating classification. * To date 34 loans have had a downgrade to either Special Mention o
Slide 44: Substandard Loan Migration
Substandard Loan Migration Old Second Credit Management of Substandard Loans + Total substandard (accruing and nonaccrual) loans, the most substantial component of the Bank's classified asset balance declined $3.9 million, or 8.33%, year over year. This was primarily the result of $15.2 milion in ba
Slide 45: SBA Payment Protection Program Loans
SBA Payment Protection Program Loans old Second Balance Outstanding (000's) $74,066 * Largestioan funded was $4.89 million, withthe balance ofloans over §2 million . totaling $20.55 million or 15.35% of total loans funded Total Commitment (00's), 574,086 + Balance of loans under $150,000 totaling $2
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