Continues to maintain strong capital ratios, prudent asset quality management and expense control.

AURORA, Ill. -- (Business Wire)

Old Second Bancorp, Inc. (the “Company” or “Old Second”) (NASDAQ: OSBC), parent company of Old Second National Bank (the “Bank”), today announced results of operations for the first quarter of 2012. The Company reported a net loss of $3.0 million, compared to a net loss of $3.1 million in the first quarter of 2011. The Company’s net loss available to common shareholders of $4.2 million, or $0.30 per diluted share, for the quarter compared to a net loss available to common shareholders of $4.3 million, also $0.30 per diluted share, in the first quarter of 2011.

The Company’s $6.1 million provision for loan losses for the first quarter of 2012 compared to a $4.0 million provision in the first quarter of 2011. The allowance for loan losses was 37.95% of nonperforming loans as of March 31, 2012 an improvement from 37.42% as of December 31, 2011 and compared to 37.89% a year earlier.

“We continue to improve against our established goals and to exceed the capital ratio objectives in our OCC agreement for both our leverage and total capital ratio,” said Bill Skoglund, Chairman and CEO.

“As of March 31, 2012, the Bank’s leverage ratio was 9.22%, down 12 basis points from December 31, 2011, and 47 basis points above the 8.75% objective in our OCC agreement. The Bank’s total capital ratio was 12.88%, down 9 basis points from December 31, 2011, and 163 basis points above the objective of 11.25% in our OCC agreement.”

“Another quarter over quarter decline in nonperforming assets continues a trend found in 2011 and reflects our ongoing hard work and progress,” continued Skoglund. “Local and national economies continue to improve slowly and in an uncertain manner, but we will find more and better opportunities to provide outstanding service to our customers and to return our organization to profitability as our local markets stabilize,” he said.

Old Second further improved its overall asset quality by adding more than $50 million in available for sale securities under its managed investment program. As the Company’s business plan continues to evolve back to a growth strategy, the structure of its profit centers evolves to meet changing goals. This month, the Commercial Bank will move to a regional approach to better serve customers and to expand development opportunities, with Commercial lenders partnering with their Retail colleagues on Business Banking relationships.

2012 Financial Highlights/Overview

Earnings

• First quarter net loss before taxes of $3.0 million compared to a net loss before taxes of $3.1 million in the same quarter of 2011.
• First quarter net loss to common stockholders of $4.2 million compared to a net loss to common stockholders of $4.3 million in the same quarter of 2011.
• The tax-equivalent net interest margin was 3.48% during the first quarter of 2012 compared to 3.50% in the same quarter of 2011, and reflected an increase of 4 basis points compared to the fourth quarter of 2011.
• Noninterest income of $10.5 million was $1.5 million higher for the quarter ended March 31, 2012, as compared to 2011 reflecting higher mortgage sale and OREO lease revenues.
• Noninterest expenses of $22.5 million were $2.1 million or 8.7% lower in the quarter ended March 31, 2012 than in the same period in 2011 reflecting reduced expenses in most categories most notably FDIC insurance reflecting assessment changes..

Capital

• Bank leverage capital ratio decreased to 9.22% from 9.34% at December 31, 2011.
• Bank total capital ratio decreased to 12.88% from 12.97% at December 31, 2011.
• Company leverage ratio decreased to 4.68% from 4.98% at December 31, 2011.
• Company total capital ratio decreased to 11.79% from 12.38% at December 31, 2011.
• Company tangible common equity to tangible assets decreased from (0.08)% in the fourth quarter of 2011 to (0.25)% in the first quarter of 2012 and declined from 0.22% at March 31, 2011.

Asset Quality/Balance Sheet Overview

• Nonperforming loans declined $13.5 million (9.7%) during the first quarter of 2012 to $125.4 million as of March 31, 2012, from $138.9 million as of December 31, 2011.
• The provision for loan loss expense increased to $6.1 million for the first quarter ended March 31, 2012, compared to $4.0 million in the same period in 2011 and $1.4 million in the fourth quarter of 2011.
• Loans that were classified as performing but 30 to 89 days past due and still accruing interest decreased to $7.4 million at March 31, 2012, from $12.1 million at December 31, 2011 and $12.2 million at March 31, 2011.
• Securities available-for-sale increased $51.8 million during 2012 to $359.4 million from $307.6 million at December 31, 2011 with no significant impact on the current liquidity profile and under limits specified in our Investment Policy. At $154.7 million or 43.0% of the total portfolio, U. S. Government agency mortgage backed securities are the largest component of the total portfolio.

Non-GAAP Presentations: Management has traditionally disclosed certain non-GAAP ratios to evaluate and measure the Company’s performance, including a net interest margin calculation. 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. Management also presents an efficiency ratio that is non-GAAP. The efficiency ratio is calculated by dividing adjusted noninterest expense by the sum of net interest income on a tax equivalent basis and adjusted noninterest income. Management believes this measure provides investors with information regarding the Company’s operating efficiency and how management evaluates performance internally. Consistent with industry practice, management also disclosed the tangible common equity to tangible assets and the Tier 1 common equity to risk weighted assets in the discussion immediately above and in the following tables. The tables provide a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent.

Forward Looking Statements: This report may contain forward-looking statements. Forward looking statements are identifiable by the inclusion of such qualifications as expects, intends, believes, may, likely or other indications that the particular statements are not based upon facts but are rather based upon the Company’s beliefs as of the date of this release. Actual events and results may differ significantly from those described in such forward-looking statements, due to changes in the economy, interest rates or other factors. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events. For additional information concerning the Company and its business, including other factors that could materially affect the Company’s financial results, please review our filings with the Securities and Exchange Commission.

¹ Tabular disclosures of the tax equivalent calculation including the net interest margin and efficiency ratio for the quarters ending March 31, 2012, and 2011, respectively, are presented below

² The information to reconcile GAAP measures and the ratios of Tier 1 capital, total capital, tangible common equity or Tier 1 common equity, as applicable, to average total assets, risk-weighted assets or tangible assets, as applicable, are presented below

³ The Company and the Bank are subject to regulatory capital requirements administered by federal banking agencies. Those agencies define the basis for these calculations including the prescribed methodology for the calculation of the amount of risk-weighted assets.

The following tables provide a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent. (Dollar amounts in thousands- unaudited)

Contacts:

Old Second Bancorp, Inc.
J. Douglas Cheatham
Chief Financial Officer
(630) 906-5484

Source: Old Second Bancorp, Inc.