Old Second Bancorp, Inc. - 10-Q Summary (Q1 1996)
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended March 31, 1996, for Old Second Bancorp, Inc., a Delaware corporation headquartered in Aurora, Illinois. The company operates as a bank holding company. As of May 9, 1996, there were 2,350,165 shares of common stock outstanding.
Key Financial Metrics
| Metric | Q1 1996 | Q1 1995 |
|---|---|---|
| Total Assets | $748.6 million | $760.7 million (Year-end 1995) |
| Net Loans | $388.2 million | $393.3 million (Year-end 1995) |
| Total Deposits | $658.7 million | $669.3 million (Year-end 1995) |
| Net Interest Income | $7.38 million | $7.18 million |
| Total Other Income | $1.96 million | $1.60 million |
| Total Other Expenses | $5.59 million | $5.75 million |
| Net Income | $2.48 million | $2.13 million |
| Earnings Per Share | $1.06 | $0.91 |
| Cash Flow from Operations | $1.41 million | $2.83 million |
| Cash Flow from Investing | $5.15 million | ($7.25 million) |
| Cash Flow from Financing | ($13.57 million) | ($19.47 million) |
| Stockholders' Equity | $75.9 million | $75.4 million (Year-end 1995) |
Material Changes vs. Prior Period
- Profitability: Net income increased 16.5% year-over-year to $2.48 million, driven by higher net interest income and non-interest income.
- Interest Income: Total interest income rose 8.2% to $13.49 million, while interest expense increased 15.9% to $6.11 million, resulting in a 2.9% increase in net interest income.
- Non-Interest Income: Increased 22.1% to $1.96 million, primarily due to a 32.1% jump in trust fees and a 28.3% rise in other income.
- Expense Management: Total other expenses decreased 2.7% to $5.59 million. A significant 98.3% reduction in FDIC insurance expense ($342,000 decrease) offset increases in salaries, marketing, and equipment costs.
- Balance Sheet: Total assets declined 1.6% from the prior year-end, with net loans down 1.3% and total deposits down 1.6%. Demand deposits fell 5.8%.
Outlook, Risks, and Unusual Items
- Accounting Changes: The company adopted FAS 121 (Impairment of Long-Lived Assets) and FAS 123 (Stock-Based Compensation) effective January 1, 1996. Management stated these adoptions had no material effect on financial position or results.
- Liquidity: Operating cash flow decreased to $1.41 million from $2.83 million in the prior year, primarily due to increased activity in mortgages held for resale. Investing activities generated $5.15 million in cash, a reversal from the prior year's usage, driven by a net decrease in loans.
- Dividends: Dividends declared were $0.20 per share, consistent with the prior year.
- Management Commentary: Management noted that results for the three months ended March 31, 1996, are not necessarily indicative of full-year results. No Form 8-K reports were filed during the quarter.
Investor Verification Checklist
- Verify the sustainability of the 98.3% reduction in FDIC insurance expenses and whether this rate reduction is permanent.
- Confirm the trend in demand deposits, which declined 5.8% year-over-year, and its impact on future funding costs.
- Review the composition of "Mortgages Held for Resale," which contributed to a $2.36 million cash outflow in operating activities.
- Assess the impact of the 15.9% increase in interest expense relative to the 8.2% increase in interest income on future net interest margins.
- Monitor the decline in Net Unrealized Gain on Investments, which decreased by $1.55 million, offsetting retained earnings growth.