Old Second Reports Fourth Quarter 2017 Net Loss of $2.5 Million

AURORA, IL / ACCESSWIRE / January 24, 2018 / Old Second Bancorp, Inc. (the ''Company'' or ''Old Second'') (NASDAQ: OSBC), the parent company of Old Second National Bank (the ''Bank''), today announced financial results for the fourth quarter of 2017. The Company's net loss was $2.5 million, or $0.08 per diluted share, for the fourth quarter of 2017, as compared to net income of $5.0 million, or $0.17 per diluted share, for the fourth quarter of 2016.

Operating Results:

• Fourth quarter 2017 net loss was $2.5 million, reflecting a decrease in earnings of $10.6 million, or 131.1%, from the third quarter of 2017, and a decrease in earnings of $7.5 million, or 150.1%, from the fourth quarter of 2016.
• A nonrecurring, noncash charge of $9.5 million, or $0.31 per diluted share, was recorded as tax expense in the fourth quarter of 2017, stemming from the late December 2017 enactment of the ''Tax Cuts and Jobs Act.'' The act lowered the Federal corporate income tax rate, which caused the Company to record a valuation allowance with respect to its deferred tax asset. Adjusted earnings for the fourth quarter of 2017, a non-GAAP financial measure, which excludes this nonrecurring tax expense, were $7.0 million, or $0.23 per diluted share.
• Net interest and dividend income was $19.4 million for the fourth quarter of 2017, reflecting an increase of $103,000, or 0.5%, from the $19.3 million recorded in the third quarter of 2017, and an increase of $1.9 million, or 10.7%, over the fourth quarter of 2016. Net interest income continued to be favorably impacted in the fourth quarter of 2017 by the Company's fourth quarter 2016 acquisition of $221.0 million of loans from the purchase of the Chicago branch of Talmer Bank and Trust (''Talmer''). Purchase accounting accretion income realized in the fourth quarter of 2017 with respect to such acquisition totaled $213,000, as compared to $265,000 in the third quarter of 2017, and $604,000 in the fourth quarter of 2016.
• The Company recorded provision for loan losses expense of $750,000 in the fourth quarter of 2017, compared to $300,000 in the third quarter of 2017, and $750,000 in the fourth quarter of 2016.
• Noninterest income was $8.2 million for the fourth quarter of 2017, which reflects growth of $341,000, or 4.3%, over the third quarter of 2017, and a decrease of $244,000, or 2.9%, compared to the fourth quarter of 2016. The current year linked quarter growth was primarily driven by increases in gains on securities.The decline in the fourth quarter 2017 compared to the prior year like period was due to reductions in residential mortgage banking revenues, partially offset by increases in gains on securities.
• Noninterest expense was $16.2million for the fourth quarter of 2017 which reflects a decrease of $727,000, or 4.3%, as compared to the third quarter of 2017, and a decrease of $1.0 million, or 5.9%, from the fourth quarter of 2016. The decrease in the current year linked quarter expense is primarily due to reductions in salaries and employee benefits and OREO related costs, partially offset by increased advertising expense. The year over year decrease is primarily due to reductions in salaries and employee benefits and OREO related costs.
• On December 26, 2017, the Company announced the signing of a definitive agreement and plan of merger to acquire Greater Chicago Financial Corp. and its wholly-owned bank subsidiary, ABC Bank, in an all cash transaction valued at approximately $41.1 million. ABC Bank had total assets of $350.4 million as of September 30, 2017, including $246.3 million of total loans. This transaction is anticipated to close in the second quarter of 2018, and is subject to regulatory approval and customary closing conditions.
• On January 17 2018, the Company's Board of Directors declared a cash dividend of $0.01 per share payable on February 5, 2018, to stockholders of record as of January 26, 2018.

• The ratios shown above exceed levels required to be considered ''well capitalized.''

Asset Quality & Earning Assets:

• Nonperforming loans totaled $15.6 million at December 31, 2017, compared to $16.3 million at September 30, 2017, and $16.0 million at December 31, 2016. Credit metrics continue to be relatively stable regarding nonperforming loan levels, and management is carefully monitoring loans considered to be in a classified status. Nonperforming loans as a percent of total loans remained the same at 1.0% as of December 31, 2017 and September 30, 2017, and was 1.1% as of December 31, 2016.
• OREO assets totaled $8.4 million as of December 31, 2017, compared to $9.0 million at September 30, 2017, and $11.9 million at December 31, 2016. Valuation writedowns continued in the fourth quarter of 2017 with expense of $78,000 compared to $920,000 in the third quarter of 2017 and $265,000 in the fourth quarter of 2016. Nonperforming assets as a percent of total loans plus OREO decreased to 1.5% as of December 31, 2017, as compared to 1.6% as of September 30, 2017 and 1.9% as of December 31, 2016.
• Total loans were $1.62 billion at December 31, 2017, reflecting an increase of $23.4 million compared to September 30, 2017, and an increase of $138.8 million compared to December 31, 2016. Average loans (including loans held-for-sale) for the fourth quarter of 2017 were $1.60 billion, reflecting an increase of $46.2 million from quarterly average loans for the third quarter of 2017, and an increase of $209.1 million from quarterly average loans for the fourth quarter of 2016.
• Available-for-sale securities at fair value totaled $541.4 million at December 31, 2017, compared to $533.5 million at September 30, 2017, and $531.8 million at December 31, 2016. Pretax net gains of $639,000 on the sale of securities were realized in the fourth quarter of 2017, compared to gains of $102,000 in the third quarter of 2017 and losses of $193,000 in the fourth quarter of 2016.

Non-GAAP Presentations:

Management has disclosed in this earnings release certain non-GAAP financial measures to evaluate and measure the Company's performance, including earning per share, net interest margin, and efficiency ratio calculations. Management believes the earnings per share data is more informative for the user if the per share impact of certain nonrecurring activity is excluded for quarterly comparative purposes. The net interest margin is calculated by dividing net interest income on a tax equivalent basis by average earning assets for the period. Management believes this measure provides investors with information regarding balance sheet profitability. Consistent with industry practice, management has disclosed the efficiency ratio including and excluding certain nonrecurring items. These non-GAAP financial measures should not be considered as a substitute for GAAP financial measures, and we strongly encourage investors to review the GAAP financial measures included in this earnings release and not to place undue reliance upon any single financial measure. In addition, because non-GAAP financial measures are not standardized, it may not be possible to compare the non-GAAP financial measures presented in this earnings release with other companies' non-GAAP financial measures having the same or similar names.

Forward-Looking Statements:

This earnings release contains forward-looking statements. Forward-looking statements can be identified by words such as ''anticipated,'' ''expects,'' ''intends,'' ''believes,'' ''may,'' ''likely,'' ''will'' or other that indicate future periods. Examples of forward-looking statements include, but are not limited to, statements relating to the expected timing of the closing of the Greater Chicago Financial Corp. transaction. Such forward-looking statements are subject to risks, uncertainties, and other factors, including a downturn in the economy, particularly in the Company's markets, volatile credit and financial markets both domestic and foreign, potential deterioration in real estate values, regulatory changes and excessive loan losses, the inability to obtain the requisite regulatory approvals and Greater Chicago Financial Corp. shareholder approval for the proposed transaction and meet other closing terms and conditions, as well as additional risks and uncertainties contained in the ''Risk Factors'' and forward-looking statements disclosure contained in the Company's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, any or all of which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. The inclusion of this forward-looking information should not be construed as a representation by the Company or any person that future events, plans, or expectations contemplated by the Company will be achieved. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Conference Call:

The Company will host an earnings call on Thursday, January 25, 2018, at 11:00 a.m. Eastern Time (10:00 a.m. Central Time). Investors may listen to the Company's earnings call via telephone by dialing 877-407-8035. Investors should call the dial-in number set forth above at least 10 minutes prior to the scheduled start of the call.

A replay of the earnings call will be available until 11:59 p.m. Eastern Time (10:59 p.m. Central Time) on February 1, 2018, by dialing 877-481-4010, using Conference ID: 23230.

Contact:

Bradley S. Adams
Chief Financial Officer
630-906-5484

SOURCE: Old Second Bancorp Inc.