FIRST OAK BROOK BANCSHARES, INC., (NASDAQ:FOBB): 2006 First Quarter
Earnings (Unaudited) FIRST OAK BROOK BANCSHARES, INC.,
(NASDAQ:FOBB) announced net income for the first quarter of 2006 of
$3.422 million, down from $4.28 million for the first quarter of
2005. Diluted earnings per share were $0.34 for the first quarter
of 2006 compared to $0.43 for the first quarter of 2005, down 21%.
Earnings for the first quarter of 2006 included an income
adjustment totaling $1,034,000 ($672,000 after tax) related to the
conversion of merchant credit card processing fees ($768,000) and
trust fees ($266,000) from the cash basis to the accrual basis of
accounting. Both of these items had historically been recorded on a
one-month lag, and as a result of the income adjustment four months
of income for these items is included in the first quarter of 2006
as compared to three months in the first quarter of 2005. Excluding
this income adjustment, diluted earnings per share (EPS) were $.28
per share for the first quarter of 2006. Net interest income was
$11.464 million for the first quarter of 2006 compared to $12.815
million for the first quarter of 2005. The decrease in net interest
income resulted from a 53 basis point decrease in the net interest
margin to 2.17%, partially offset by an 11% increase in average
earning assets. The growth in average earning assets included an
increase in average loans of $245.2 million partially offset by a
decrease in average investments of $55.8 million. The decline in
the margin was primarily the consequence of interest rates rising
faster on deposits than on loans and investments. The Federal
Reserve's monetary policy where the Fed has been gradually
increasing short-term interest rates, the flattening of the "yield
curve" where shorter-term interest rates have caught up with
longer-term interest rates, and stiff competition among banks in
the highly competitive Chicago market were major factors driving
this margin compression. The Company recorded a provision for loan
losses of $180,000 in the first quarter of 2006. No provision was
recorded in the first quarter of 2005. Other income, excluding
securities gains and losses, increased 31% primarily as a result of
the following: -- Merchant credit card processing fees - up
$1,258,000, which includes the income adjustment of $768,000.
Without the income adjustment, merchant fees would have increased
$490,000, or 30%. The increase is primarily due to increased volume
and new customer growth. Merchant volume rose 24% to $99.3 million
at March 31, 2006 from $80.2 million at March 31, 2005. Merchant
outlets totaled 649 at March 31, 2006 as compared to 595 at March
31, 2005. (Related merchant credit card interchange expense was up
$359,000, or 26%, as noted below.) -- Investment management and
trust fees - up $370,000, which includes the income adjustment of
$266,000. Without the income adjustment, investment management and
trust fees would have increased $104,000, or 14%. The increase is
due to increases in discretionary assets under management which
rose to $874.7 million, up from $760.4 million at March 31, 2005.
Total trust assets under administration rose to $1.111 billion, up
from $951.5 million at March 31, 2005. -- Gain on mortgages sold -
up $60,000, primarily due to increased mortgage originations
arising from the "Guaranteed Best Rate" program. Mortgages
originated, including mortgages sold and mortgages held in the
portfolio, rose 12% to $20.8 million at March 31, 2006 from $18.6
million at March 31, 2005. At March 31, 2006 the pipeline was
greater than $14 million. -- Income from sale of covered call
options - down $182,000, or 73%, to $66,000 in 2006 compared to
$248,000 in 2005. -- Treasury management fees - down $206,000,
primarily due to higher earnings credit rates (ECRs) being paid on
commercial checking account balances. Treasury management clients
retain the option to pay for Bank services in cash fees or by
maintaining deposits in their checking accounts, or a combination
of both. As rates rise, so do the ECRs we offer clients on their
checking balances, and the less clients have to make up in cash
fees. Total treasury management fees are up $48,000 for the
comparable period. Other expenses rose 9% for 2006 primarily as a
result of the following: -- Merchant credit card interchange
expense - up $359,000, or 26%, primarily due to increased volume.
-- Salaries and employee benefits - up $231,000, primarily due to
higher compensation costs and an increase in average full-time
equivalents (FTE). -- Occupancy and equipment - up $252,000,
primarily due to branch expansion. The Bank opened four branches in
2005 (one in March and three in October), bringing its total to 21.
Chief Executive Officer's Comments Richard M. Rieser, Jr., Company
CEO said, "As anticipated, earnings for the first quarter of 2006
are down from 2005 due to the margin pressure that is expected to
continue through most of 2006. "As published in our recent Annual
Report, we are less than satisfied with our loan to deposit ratio
which lags peers and our loan mix which is underweighted in
commercial loans. Our plan is to improve these metrics. Therefore,
we are heartened by the first quarter trend - with our loans up $66
million over year-end, an annualized rate of 20%. We are especially
pleased that most of this loan growth was in the commercial
segments. Our loan to deposit ratio improved from 70% to 72%.
Looking forward, we expect to continue to shrink our investment
portfolio and use cash flows from investments, deposits and
borrowings to fund our strong loan pipeline. "Also, in the first
quarter of 2006 we continued to build our fee income stream.
Investment management and trust fees (excluding income adjustment)
climbed 14% to $838,000. Merchant credit card fees (excluding
income adjustment) rose 30% to $2,141,000. And gains on mortgages
sold increased 68% to $148,000. "Our two new branches on the
affluent North Shore in Glencoe and Northbrook -- branded Chicago
Private Bank (CPB) -- have been so well-received (combined deposits
of $86.7 million after six months) we've decided to expand the
brand to our Glenview office on the North Shore and to our Chicago
office at Dearborn and Huron Streets during the second quarter of
2006. All three of our North Shore offices will operate as
full-service Chicago Private Banks - with concierge services and
other Chicago Private Bank amenities. The decision to rebrand our
Huron office as Chicago Private Bank resulted from the successful
introduction of a senior private banker at that location in the
first quarter, coupled with the consonance of using the 'Chicago
Private Bank' name in downtown Chicago." Assets and Equity at March
31, 2006 (Unaudited) Total assets were a record $2.326 billion at
March 31, 2006, up 4% from $2.229 billion at December 31, 2005 and
up 13% from $2.058 billion at March 31, 2005. Shareholders' equity
was $132.5 million at March 31, 2006 compared to $134.6 million at
December 31, 2005 and $128.0 million at March 31, 2005. Book value
per share stood at $13.43 at March 31, 2006. Equity includes an
accumulated other comprehensive loss of $11.079 million at March
31, 2006 related to the Company's investment portfolio compared to
$7.607 million of other comprehensive loss at December 31, 2005.
Other comprehensive income or loss rises or falls with increases or
decreases in the market value of that portion of the investment
portfolio which is classified as available-for-sale. Oak Brook
Bank's capital ratios met the "well capitalized" criteria of the
FDIC. "Well capitalized" status reduces regulatory burdens and
lessens FDIC insurance assessments. Asset Quality (Unaudited) Net
charge-offs at March 31, 2006 totaled $144,000 compared to net
recoveries of $3,000 at March 31, 2005. In 2006, charge-offs of
$259,000 and recoveries of $115,000 relate primarily to the
Company's indirect vehicle portfolio. In 2005, charge-offs of
$123,000 related primarily to the Company's indirect vehicle
portfolio. Recoveries totaled $126,000, of which $80,000 related to
the Company's indirect vehicle portfolio and $32,000 was
restitution from the 60 W. Erie loan fraud. As of March 31, 2006,
the Company's allowance for loan losses stood at $8.85 million, or
.64% of loans outstanding, compared to $8.81 million, or .67% of
loans outstanding, at December 31, 2005. At March 31, 2006,
nonperforming loans (including nonaccrual loans of $147,000 and
loans past due greater than 90 days of $177,000) were $324,000,
compared to $797,000 at December 31, 2005. At March 31, 2006,
nonperforming assets totaled $529,000, down from $900,000 at
December 31, 2005. Nonperforming assets include nonperforming loans
of $324,000 and repossessed vehicles held for sale of $205,000.
There was no balance in OREO at March 31, 2006 due to the completed
sales of all 24 units and 53 parking spaces at the 60 W. Erie
condominium project. The Company is maintaining a warranty reserve
to pay for any known or anticipated obligations. The Bank remains
the plaintiff in a number of civil lawsuits brought against various
individuals and entities which arose as a result of the fraud
perpetrated by original developers of this property. The amount and
timing of any recoveries from the government mandated restitution
or the civil lawsuits cannot be ascertained at this time. Expanding
Branch Network (Unaudited) Oak Brook Bank currently operates 21
banking offices, 17 in the western suburbs of Chicago, three in the
northern suburbs of Chicago, and one at Huron and Dearborn Streets
in downtown Chicago, in addition to an Internet branch at
www.obb.com. The Bank has announced the planned opening of two
additional offices in Homer Glen in the southwest suburbs
(currently under construction and expected to open in mid 2006) and
Oak Lawn (expected to open in late 2006)in the south suburbs of
Chicago. The Bank continues to evaluate branch expansion
opportunities in the greater Chicago area. Although the opening of
new offices increases operating expenses until breakeven is
reached, management believes judicious branch expansion is a key to
the Company's longer-term profitable growth prospects. Shareholder
Information (Unaudited) The Company's common stock trades on the
Nasdaq Stock Market(R) under the symbol FOBB. FOBB remained a
member of the Russell 2000(R) Index effective July 1, 2005 for a
term of one year. Seventeen firms make a market in the Company's
Common stock. The following seven firms provide research coverage:
Howe Barnes Investments, Inc.; Sandler, O'Neill & Partners;
Stifel Nicolaus & Co.; Keefe, Bruyette & Woods, Inc.; FTN
Financial Securities Corp.; A.G. Edwards; and Sidoti & Co. At
our Web site www.firstoakbrook.com you will find shareholder
information including this press release and electronic mail boxes.
You will also have the option of directly linking to additional
financial information filed with the SEC. The consolidated balance
sheets, income statements, and selected financial data are
enclosed. Forward-Looking Statements This release contains certain
forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended. The Company intends
such forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995, and this statement is
included for purposes of invoking these safe harbor provisions.
Forward-looking statements, which are based on certain assumptions
and describe the Company's future plans, strategies and
expectations, can generally be identified by use of the words
"believe," "expect," "intend," "anticipate," "estimate," "project,"
or similar expressions. The Company's ability to predict results or
the actual effect of future plans or strategies is inherently
uncertain and actual results may differ materially from the results
projected in forward-looking statements due to various factors.
These risks and uncertainties include, but are not limited to,
fluctuations in market rates of interest and loan and deposit
pricing; a deterioration of general economic conditions in the
Company's market areas; legislative or regulatory changes; adverse
developments in our loan or investment portfolios; the assessment
of the provision and reserve for loan losses; significant increases
in competition or changes in depositor preferences or loan demand,
difficulties in identifying attractive branch sites or other
expansion opportunities, or unanticipated delays in regulatory
approval or construction buildout; difficulties in attracting and
retaining qualified personnel; and possible dilutive effect of
potential acquisitions or expansion. These risks and uncertainties
should be considered in evaluating forward-looking statements and
undue reliance should not be placed on such statements. We
undertake no obligation to update publicly any of these statements
in light of future events except as may be required in subsequent
periodic reports filed with the Securities and Exchange Commission.
-0- *T FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited) (Unaudited) March 31,
December 31, March 31, 2006 2005 2005
------------------------------------ (Dollars in thousands) Assets
Cash and due from banks $35,403 $37,445 $29,196 Fed funds sold and
interest- bearing deposits with other banks 42,472 3,316 12,065
Investment securities: Held-to-maturity, at amortized cost 34,991
33,118 35,783 Available-for-sale, at fair value 722,386 738,277
778,134 Trading, at fair value 893 924 902 Non-marketable
securities - FHLB stock 20,378 20,378 19,676 ----------- ----------
----------- Total investment securities 778,648 792,697 834,495
Loans: Commercial 119,160 130,772 118,584 Syndicated 87,210 63,272
47,108 Construction 138,965 122,689 89,320 Commercial mortgage
307,478 279,018 240,081 Residential mortgage 134,860 130,819
115,141 Home equity 162,747 158,279 151,075 Indirect auto 334,926
333,863 278,409 Indirect Harley Davidson 74,014 71,341 55,147 Other
consumer 18,871 22,211 7,574 ----------- ---------- -----------
Total loans, net of unearned income 1,378,231 1,312,264 1,102,439
Allowance for loan losses (8,848) (8,812) (8,549) -----------
---------- ----------- Net loans 1,369,383 1,303,452 1,093,890
Other real estate owned, net of valuation reserve - 15 5,130
Premises and equipment, net of accumulated depreciation 41,207
40,684 35,203 Bank owned life insurance 26,100 25,853 25,102 Other
assets 33,032 25,830 23,071 ----------- --------- ---------- Total
assets $2,326,245 $2,229,292 $2,058,152 =========== ==========
=========== FIRST OAK BROOK BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited) (Unaudited) March 31,
December 31, March 31, 2006 2005 2005
------------------------------------ (Dollars in thousands)
Liabilities Noninterest-bearing demand deposits $263,822 $278,667
$267,247 Interest-bearing deposits: Savings deposits and NOW
accounts 278,272 258,683 273,019 Money market accounts 240,786
267,060 139,742 Time deposits: Under $100,000 494,721 493,443
399,463 $100,000 and over 628,491 585,829 651,706 -----------
---------- ----------- Total interest-bearing deposits 1,642,270
1,605,015 1,463,930 ----------- ---------- ----------- Total
deposits 1,906,092 1,883,682 1,731,177 Fed funds purchased and
securities sold under agreements to repurchase 59,993 31,531 26,821
Treasury, tax and loan demand notes 321 6,472 1,205 FHLB of Chicago
borrowings 183,880 133,888 134,910 Junior subordinated notes issued
to capital trusts 23,713 23,713 23,713 Other liabilities 19,762
15,419 12,362 ----------- ---------- ----------- Total liabilities
2,193,761 2,094,705 1,930,188 Shareholders' equity: Preferred stock
- - - Common stock 21,850 21,850 21,850 Surplus 9,263 9,021 7,844
Accumulated other comprehensive loss (11,709) (7,607) (6,061)
Retained earnings 126,102 124,455 117,397 Less: cost of shares in
treasury (13,022) (13,132) (13,066) ----------- ----------
----------- Total shareholders' equity 132,484 134,587 127,964
----------- ---------- ----------- Total liabilities and
shareholders' equity $2,326,245 $2,229,292 $2,058,152 ===========
========== =========== FIRST OAK BROOK BANCSHARES, INC. AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three
months ended March 31, % (In thousands except per share 2006 2005
Change data) ------------------------------------ Interest and
dividend income: Loans $19,459 $13,862 40 Investment securities:
U.S. Treasuries and U.S. Government agencies 7,617 7,623 - State
and municipal obligations 418 425 (2) Corporate and other
securities 682 838 (19) Fed funds sold and interest- bearing
deposits with other banks 610 126 384 ----------- ---------- Total
interest and dividend income 28,786 22,874 26 Interest expense:
Savings deposits and NOW accounts 1,205 855 41 Money market
accounts 2,182 641 240 Time deposits 10,725 6,565 63 Fed funds
purchased and securities sold under agreements to repurchase 275
195 41 Treasury, tax and loan demand notes 37 11 236 FHLB of
Chicago borrowings 2,351 1,366 72 Junior subordinated notes issued
to capital trusts 547 426 28 ----------- ---------- Total interest
expense 17,322 10,059 72 ----------- ---------- Net interest income
11,464 12,815 (11) Provision for loan losses 180 - (a) -----------
---------- Net interest income after provision for loan losses
11,284 12,815 (12) FIRST OAK BROOK BANCSHARES, INC. AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three
months ended March 31, % (In thousands except per share 2006 2005
Change data) ------------------------------------ Other income:
Service charges on deposit accounts: Treasury management 751 957
(22) Retail and small business 313 265 18 Investment management and
trust fees 1,104 734 50 Merchant credit card processing fees 2,909
1,651 76 Gains on mortgages sold, net 148 88 68 Increase in cash
surrender value of bank owned life insurance 247 244 1 Income from
sale of covered call options 66 248 (73) Securities dealer income
79 35 126 Other operating income 386 353 9 Net investment
securities gains (a) (losses) (71) 163 ----------- ---------- Total
other income 5,932 4,738 25 Other expenses: Salaries and employee
benefits 6,728 6,497 4 Occupancy 1,070 876 22 Equipment 574 516 11
Data processing 538 489 10 Professional fees 326 306 7 Postage,
stationery and supplies 288 241 20 Advertising and business
development 565 511 11 Merchant credit card interchange 1,721 1,362
26 Other operating expense 526 520 1 ----------- ---------- Total
other expense 12,336 11,318 9 ----------- ---------- Income before
income taxes 4,880 6,235 (22) Income tax expense 1,458 1,955 (25)
----------- ---------- Net income $3,422 $4,280 (20) ===========
========== Diluted earnings per share $0.34 $0.43 (21) ===========
========== (a) Percentage change information not meaningful. FIRST
OAK BROOK BANCSHARES, INC. AND SUBSIDIARIES SELECTED CONSOLIDATED
FINANCIAL DATA (UNAUDITED) Three months ended March 31, % (In
thousands except per share 2006 2005 Change data)
------------------------------------ AVERAGE BALANCES: Loans, net
of unearned income $1,326,341 $1,081,121 23 Investment securities
788,609 844,395 (7) Earning assets 2,168,306 1,946,964 11 Total
assets 2,286,611 2,062,705 11 Demand deposits 273,190 271,126 1
Total deposits 1,858,593 1,699,831 9 Interest bearing liabilities
1,865,184 1,643,990 13 Shareholders' equity 134,728 133,066 1
COMMON STOCK DATA: Earnings per share: Basic 0.35 0.43 (19) Diluted
0.34 0.43 (21) Weighted average shares outstanding: Basic 9,901,477
9,840,088 1 Diluted 10,008,458 10,006,833 - Cash dividends paid per
share $0.18 $0.16 13 Market price at period end $26.75 $29.29 (9)
Tangible book value per share $13.43 $12.85 5 Price to book ratio
1.99x 2.28x (13) Price to earnings ratio (1) 16.93x 15.75x 7 Period
end shares outstanding 9,866,586 9,768,374 1 FINANCIAL RATIOS
Return on average assets (2) 0.61% 0.84% (27) Return on average
shareholders' equity (2) 10.30% 13.04% (21) Overhead ratio (2)
1.20% 1.37% (12) Efficiency ratio (2) 70.91% 64.48% 10 Net interest
margin on average earning assets (2, 3) 2.17% 2.70% (20) Net
interest spread (2, 3) 1.64% 2.31% (29) Dividend payout ratio (2)
51.86% 41.57% 25 (1) Calculated using the end of period market
price divided by the last twelve months diluted earnings of $1.58
per share in 2006 and $1.86 per share in 2005. (2) Annualized
ratio. (3) Tax equivalent basis. The net interest margin
calculations include the effects of tax equivalent adjustments for
tax exempt loans and investment securities using a tax rate of 35%
in 2006 and 2005. Tax equivalent interest income for the three
months ended March 31, 2006 and 2005 includes a tax equivalent
adjustment of $138 and $134, respectively. FIRST OAK BROOK
BANCSHARES, INC. AND SUBSIDIARIES SELECTED CONSOLIDATED FINANCIAL
DATA (UNAUDITED) March 31, December 31, March 31, (Dollars in
thousands) 2006 2005 2005 ------------------------------------
CAPITAL RATIOS Company Consolidated $167,193 $165,180 $156,692 Tier
1 capital ratio 10.01% 10.23% 11.43% $176,044 $173,992 $165,241
Total risk-based capital ratio 10.54% 10.77% 12.05% $167,193
$165,180 $156,692 Capital leverage ratio 7.23% 7.36% 7.55% Oak
Brook Bank (minimum for "well capitalized"): $165,050 $152,688
$144,750 Tier 1 capital ratio (6%) 9.91% 9.51% 10.63% $173,901
$161,500 $153,299 Total risk-based capital ratio (10%) 10.44%
10.06% 11.26% $165,050 $152,688 $144,750 Capital leverage ratio
(5%) 7.17% 6.85% 7.01% TRUST ASSETS Discretionary assets under
management $874,698 $832,816 $760,390 Total assets under
administration 1,111,127 1,057,098 951,534 ASSET QUALITY RATIOS
Nonperforming loans $324 $797 $126 Nonperforming assets (1) 529 900
5,328 Nonperforming loans to total loans 0.02% 0.06% 0.01%
Nonperforming assets to total assets 0.02% 0.04% 0.26% Net
charge-offs to average loans (annualized) 0.04% 0.01% 0.00%
Allowance for loan losses to total loans 0.64% 0.67% 0.78%
Allowance for loan losses to 27.31x 11.06x 67.85x nonperforming
loans ROLLFORWARD OF ALLOWANCE FOR LOAN LOSSES Balance at January 1
$8,812 $8,546 Charge-offs during the period: Commercial loans - (1)
Indirect vehicle loans (257) (118) Consumer loans (2) (4)
----------- ----------- Total charge-offs (259) (123) -----------
----------- Recoveries during the period: Construction, land
acquisition and development loans - 32 Indirect vehicle loans 114
80 Consumer loans 1 14 ----------- ----------- Total recoveries 115
126 ----------- ----------- Net (charge-offs) recoveries during the
period (144) 3 Provision for loan losses 180 - -----------
----------- Allowance for loan losses at March 31 $8,848 $8,549
=========== =========== (1) Includes nonperforming loans, OREO and
repossessed vehicles. FIRST OAK BROOK BANCSHARES, INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATED QUARTERLY STATEMENT OF INCOME
(UNAUDITED) 2006 2005 ------- -----------------------------------
First Fourth Third Second First Quarter Quarter Quarter Quarter
Quarter ------- ------- ------- ------- ------- (In thousands
except per share data) Interest income $28,786 $28,233 $26,266
$24,681 $22,874 Interest expense 17,322 15,431 13,548 11,658 10,059
------- ------ ------ ------ ------ Net interest income 11,464
12,802 12,718 13,023 12,815 Provision for loan losses 180 180 180 -
- Other income 5,932 4,891 5,349 5,226 4,738 Other expense 12,336
12,026 12,071 11,735 11,318 ------- ------ ------ ------ ------
Income before income taxes 4,880 5,487 5,816 6,514 6,235 Income tax
expense 1,458 1,653 1,752 2,059 1,955 ------- ------- -------
------- ------- Net income $3,422 $3,834 $4,064 $4,455 $4,280
======= ======= ======= ======= ======= Basic earnings per share
$0.35 $0.39 $0.41 $0.45 $0.43 ======= ======== ======== ========
======= Diluted earnings per share $0.34 $0.38 $0.41 $0.45 $0.43
======= ======= ======= ======= ====== ROA (1) 0.61% 0.69% 0.74%
0.84% 0.84% ROE (1) 10.30% 11.45% 11.86% 13.54% 13.04% Net interest
margin (1) 2.17% 2.44% 2.48% 2.62% 2.70% (1) Annualized ratio *T
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