Earnings call transcript: Old Second Bancorp Q2 2025 beats EPS estimates

Published 24/07/2025, 16:50
Earnings call transcript: Old Second Bancorp Q2 2025 beats EPS estimates

Old Second Bancorp Inc (OSBC) exceeded expectations in its Q2 2025 earnings report, posting an earnings per share (EPS) of $0.48 against a forecast of $0.47. Revenue reached $75.13 million, slightly above the anticipated $74.76 million. Despite the positive earnings surprise, the company’s stock price fell 3.6% to $18.60 during the trading session, reflecting broader market concerns. According to InvestingPro analysis, the stock is currently trading near its Fair Value, with a market capitalization of $806.5 million and a P/E ratio of 9.7x.

Key Takeaways

  • Old Second Bancorp’s EPS of $0.48 surpassed expectations by 2.13%.
  • Revenue of $75.13 million slightly exceeded forecasts.
  • Stock price declined by 3.6% despite positive earnings results.
  • The company’s net interest margin improved by 22 basis points year-over-year.
  • The recent acquisition of Evergreen Bank is seen as strategically beneficial.

Company Performance

Old Second Bancorp demonstrated solid performance in the second quarter of 2025, with notable improvements in net interest margin and a strong return on assets of 1.53%. The company’s strategic acquisition of Evergreen Bank is expected to enhance its market position, particularly in the powersports lending sector. Despite these achievements, the commercial client sentiment remains cautious, affecting capital expenditure and line utilization.

Financial Highlights

  • Revenue: $75.13 million, slightly up from forecasted $74.76 million.
  • Earnings per share: $0.48, above the expected $0.47.
  • Return on assets: 1.53%.
  • Return on average tangible common equity: 15.29%.
  • Net interest margin: Improved by 22 basis points year-over-year.

Earnings vs. Forecast

Old Second Bancorp reported an EPS of $0.48, beating the forecast of $0.47, resulting in a 2.13% surprise. This performance is consistent with the company’s historical trend of meeting or slightly exceeding market expectations. The revenue of $75.13 million also surpassed the forecast by 0.49%.

Market Reaction

Despite positive earnings results, Old Second Bancorp’s stock price fell by 3.6% to $18.60. This decline may reflect investor concerns over broader market conditions or sector-specific challenges. The stock remains within its 52-week range, with a high of $19.46 and a low of $14.14.

Outlook & Guidance

Old Second Bancorp is projecting low to mid-single-digit loan growth in 2025, with expectations for the Evergreen Bank conversion to occur in early Q4. The company is targeting a core expense growth rate of around 4% and anticipates maintaining a return on assets above 1.50%. The loan-to-deposit ratio is expected to reach 90% by the end of next year.

Executive Commentary

CEO Jim Ecker expressed confidence in the company’s profitability and balance sheet, stating, "We feel really good both about profitability and our balance sheet positioning." CFO Brad Adams highlighted the stability of the company’s margin, noting, "Our margin is stable and durable." Ecker also emphasized the strong performance in the first half of 2025.

Risks and Challenges

  • Commercial client caution may dampen capital expenditure and growth.
  • Integration of Evergreen Bank poses potential operational challenges.
  • Broader economic uncertainties could impact financial performance.
  • Competitive pressures in the banking sector may affect margins.
  • Regulatory changes could introduce additional compliance costs.

Q&A

During the earnings call, analysts inquired about the potential for rate cuts and the integration strategy for Evergreen Bank. The management addressed these concerns, emphasizing a focus on maintaining stable margins and exploring future acquisition opportunities.

Full transcript - Old Second Bancorp Inc (OSBC) Q2 2025:

Moderator/Operator: Good morning, everyone, and thank you for joining us today for Old Second Bancorp Incorporated second quarter twenty twenty five earnings call. On the call today are Jim Ecker, the company’s chairman, president, and CEO Brad Adams, the company’s COO and CFO and Gary Collins, the vice chairman of our board. I will start with a reminder that Old Second’s comments today will contain forward looking statements about the company’s business, strategies, and prospects, which are based on management’s existing expectations in the current economic environment. These statements are not a guarantee of future performance, and results may differ materially from those projected. Management would ask you refer to the company’s SEC filings for a full discussion of the company’s risk factors.

The company does not undertake any duty to update such forward looking statements. On today’s call, we will also be discussing certain non GAAP financial measures. These non GAAP measures are described and reconciled to their GAAP counterparts in our earnings release, which is available on our website at oldsecond.com on the homepage and under the investor relations tab. So I will now turn it over to Jim Eckers. Over to you.

Jim Ecker, Chairman, President, and CEO, Old Second Bancorp: Good morning, everyone, and thank you for joining us. I have several prepared opening remarks. We’ll give you my overview of the quarter and then turn it over to Brent for additional details. I will then conclude with certain summary comments and thoughts about the future before we open it up to Q and A. Net income was $21,800,000 or $0.48 per diluted share in the second quarter.

Return on assets was 1.53%. Second quarter twenty twenty five return on average tangible common equity was about 15.29% and the tax equivalent efficiency ratio was 54.54%. Second quarter earnings were significantly impacted by a couple of items, The first being a $531,000 in MSR mark to market losses or $0 per share and an $810,000 charge in merger related expenses or $01 per diluted share primarily related to the Bancorp Financial merger, which closed on July 1. Despite these items, profitability of Old Second remains exceptionally strong and book value continue to compound heading into the July 1 close of the Evergreen Bank acquisition. The tangible equity ratio increased by 49 basis points from last quarter from 10.34% to 10.83% and has increased by 144 basis points over the like period one year ago.

Common equity Tier one was 13.77% in the second quarter, increasing from 13.47% last quarter. We feel really good both about profitability and our balance sheet positioning at this point. Brad will provide additional color on our capital positioning in his comments. Our financials continue to reflect a very strong net interest margin with pre provision net revenues increasing from exceptionally strong levels. For the 2025 compared to last quarter, tax equivalent income on average earning assets increased $1,700,000 while interest expense on average interest bearing liabilities increased 343,000 Net interest margin improved 22 basis points year over year on a tax equivalent basis and decreased three basis points compared to last quarter.

Total cost of deposits was 84 basis points for the second quarter compared to 82 basis points for both the prior linked quarter and for the second quarter of last year. The loan to deposit ratio is 83.3% as of June 30 compared to 81.2% last quarter and 87.9% as of June 30. I’ll let Brad talk about that more in a moment. Second quarter twenty twenty five reflected an increase in total loans of $58,400,000 from last quarter, driven by growth in construction and lease portfolios during the quarter. Tax equivalent loan yields reflected a three basis point decrease during the 2025 compared to the linked quarter and a four basis point decline for the quarter year over year.

Asset quality was largely stable this quarter with nonperforming assets essentially flat and only a modest increase in classified assets as well. We recorded a $1,200,000 of growth charge off in the second quarter of twenty twenty five, of which the majority was associated with a single C and I credit, which is fully reserved for. One property was moved to OREO during the quarter with a favorable outlook regarding its disposition this year. The allowance for credit losses on loans increased to $43,000,000 as of June 30 or 1.08% of total loans from $41,600,000 at March 31, which was 1.05 of total loans. Unemployment and GDP forecast views and future loss rate assumptions remain fairly static from last quarter with no material changes in the unemployment assumptions on the upper end of the range based on recent Fed projections.

The impact of the global tariff volatility was considered within our modeling. Provision levels quarter over linked quarter reflect no material change as our projections continue to be aligned with the prior quarter’s assumptions for allowance allocation. Noninterest income continued to perform very well in the second quarter compared to the prior year light quarter after excluding 893,000 in debt benefits and BOLI realized in 2024 as wealth management fees increased $324,000 or 11.7% and service charges on deposits increased $280,000 or 11.2%. Mortgage banking income reflected a slight increase in the 2025 compared to the prior linked quarter and a decrease in the prior year’s linked quarter, primarily due to volatility of mortgage servicing rights mark to market valuations. Excluding the impact of mortgage servicing rights mark to market adjustments, mortgage banking income increased nominally quarter over linked quarter and from the prior year like period.

Other income was flat in the second quarter compared to the prior linked quarter and higher compared to the prior year like quarter. Expense discipline continues to be strong with total noninterest expense for the 2025 at $1,100,000 less than the prior linked quarter. Our efficiency ratio continues to be excellent as the tax equivalent efficiency ratio adjusted to exclude core deposit intangibles, amortization, acquisition costs and OREO costs was 54.54 compared to 55.48% for the first quarter of twenty twenty five. Our focus now is on the effective integration of Evergreen Bank and optimizing the balance sheet for its impacts. We have sold the bulk of the acquired securities portfolio from Evergreen and reduced reliance on wholesale funding within the legacy Evergreen Bank as it was merged in Old Second.

Nothing really has changed relative to our expectations in terms of financial performance and targets associated with

Brad Adams, COO and CFO, Old Second Bancorp: the

Jim Ecker, Chairman, President, and CEO, Old Second Bancorp: transaction. Cost based estimates are on target and earnings expectations are maybe biased slightly higher. Next quarter will, of course, be slightly messy and feature the bulk of acquisition related expenses. With that, I’ll turn it over to Brad for additional color. Thank you, Jim.

Net interest income increased by $1,300,000 or 2.1% to $64,000,000 for the quarter ended June 30 relative to the prior quarter of $62,900,000 also increased $4,500,000 or almost 8% from the year ago like quarter. Tax equivalent yields increased 16 basis points and loan yields were three basis points lower in the 2025 compared to the first quarter. Total yield on interest earning assets decreased two basis points over the linked quarter to five sixty eight. Interest bearing deposits and total interest bearing liability costs experienced a two basis point increase. The end result was a three basis point decrease from the tax equivalent end of $4.85 for the quarter ended from $4.88 last quarter.

We believe this continues to be exceptional margin performance. Average deposits increased $51,000,000 or 1.1% quarter over linked quarter. That’s primarily seasonal and not a lot going on underneath the hood there. Hold second should continue to build capital as evidenced by the 144 basis point improvement in the TCE ratio over the past year, which means we have added 1.78 of tangible book value over the last twelve months, pretty strong performance. Evergreen will absorb some of this capital cushion.

However, second, we’ll still have an exceptionally strong and flexible capital position. To that end and subsequent to the end of the quarter, we repurchased approximately 327,000 shares and a privately negotiated transaction at a modest discount to market. Our perceptions on capital returns continue to evolve given the Evergreen Bank acquisition consumed significantly less capital than almost any other potential deal we could have done. Our financials remain relatively uncluttered by the impact of purchase accounting going forward due to the lack of significant fair value marks associated with the transaction. Noninterest expense was materially on track with the previous quarter, increasing $1,100,000 primarily due to significantly lower OREO expenses in the current quarter.

Noninterest expense is running higher year over year, increasing $5,500,000 compared to the same quarter last year, primarily due to higher salaries and employee benefits as well as occupancy costs, computer data processing and core deposit intangibles. Most of the core deposit and intangible expense related to the five branches we acquired late last year. Overall, we are hopeful we can keep core expense growth exclusive of acquisitions in the kind of 4% area. Not a lot going on in terms of this quarter. Think it’s pretty transparent.

The trends remain very strong. Still feel very good, as Jim mentioned, about the estimates we put forward as it relates to Evergreen. Also mentioned by slightly higher. I think that from a rate standpoint, things feel roughly balanced to me in terms of status quo versus some level of recession and or rate cuts. I don’t see rate cuts happening absent a recession.

Obviously, there’s some butterfly somewhere that’s slapping its wings that can make things very different than that expectation. But as we sit here right now, I feel exceptionally good about how we’re positioned. And I believe that while it’s difficult to give a margin forecast for next quarter, given we’re not done with the fair value marks, I’m very bullish that our margin will remain at exceptionally strong levels over the remainder of the year and into next. With that, I would like to turn the call back over to Jim. Thank you, Brad.

In closing, Brad mentioned, we feel this is a very solid quarter for the company. We remain confident in our positioning and extremely excited with what the Evergreen Bank transaction will add for us. We’re off to a strong start for the first half of twenty twenty five, and we are extremely optimistic about the rest of the year ahead as we welcome the Evergreen team and its product offerings. That concludes our prepared comments this morning. So I’ll turn it over to the moderator and open it up to questions.

Moderator/Operator: Thank you very much. At this time, we’ll be conducting our question and answer session. Star one on your phone keypad now. A confirmation tone will indicate that your line is in the queue. You may press star two if you would like to remove your question from the queue.

For any participants using speaker equipment, it may be necessary to pick up your handset before you press the keys. Please wait a moment while we poll for any questions. Thank you. Your first question is coming from Jeff Rulis of DA Davidson. Jeff, your line is live.

Jim Ecker, Chairman, President, and CEO, Old Second Bancorp: Thanks. Good morning. Good morning. Just wanted to check check-in on the maybe the timing of of conversion expected on on Evergreen and and and on that expense run rate, it’s a it’s a two part, the the conversion timing and then run rate, kinda looking at kinda 52, 53 on a core basis. Does that sound in the ballpark?

Yes, I think so. Some of that relates to timing of the cost base. The conversion, we expect to be kind of early fourth quarter type range, early to mid. So we’ll we by the time we report fourth quarter and kind of December is the first time that you will see a closer to final run rate on operating expenses, and then first quarter should be relatively clean. Got it.

And then if you can remind us just that acquisition date, the loan to deposit balances brought over? I have that, like, for everything. Yeah. They were just north of 90%. 90% loan deposits.

Well, the the actual The actual level? I think it’s $1.31300000000.0 dollars. One two of loans. Yeah. $1.02 and change.

Okay. Got it. And then is it the last one on the the you you called out the owner occupied CRE that brought in the classifieds. If you could just wrap a little more detail about kind of geography or your position on that on that one. Yes, Jeff.

It really stems from one large health care transaction in Oregon. We don’t see a loss of this at all. We’re in a very strong collateral position, 70% covered loan to value. The facility had some restrictions put on by the state of Oregon, which caused a drag on their ability to lease up the facility. A lot of those restrictions have been freed up, and we expect cash flow to get stronger in each subsequent quarter.

So we got a good sponsor behind this as well. So we don’t see any loss given the fall here. Got you. Okay. I’ll step back.

Thank you. Thanks, Jeff. Thank you.

Moderator/Operator: Thank you very much. And your next question is coming from David Long of Raymond James. David, your line is live.

Jim Ecker, Chairman, President, and CEO, Old Second Bancorp: Good morning, everyone. Just first question relates to just overall commercial client sentiment. When we were back in April having this call, were coming off of Liberation Day and everything seemed to be toned down a bit. Just curious what you’re hearing from your commercial customers and their appetite to grow their business and close some of the loans that may be in your pipeline? Yes.

I think, first of all, Dave, I would say our commercial clients are weathering the other tariff on certainly exceptionally well. Appetite for CapEx has been muted, I would say, for the first half of the year. And that shows up in pretty low levels of line utilization. We are seeing pockets of growth our leasing group and some in commercial real estate. We haven’t even though we had a pretty good quarter from a loan growth perspective, that did not come with any growth in our sponsor finance group.

That group has been obviously a historically very strong performer for us. Loan demand in that area has somewhat weak, although they are reporting pretty strong second half pipeline. And then you couple that with Evergreen Bank, which typically historically is a very strong second and third quarter asset generator in the Powersports area. So we’re encouraged by loan pipelines. And the second quarter for us, that was our strongest growth quarter over two years.

So we think low to mid single digit growth is possible still for 2025. Got it. Thanks, Jim. Appreciate it. And then as a follow-up, you mentioned the Evergreen deal and maybe having a little bit more of a positive bias than when the deal was announced.

Is tied to the performance of that bank since you’ve announced the deal? And then as a tie into that, just any turnover worth noting with with that transaction? Yes. They’re performing well ahead of what we had assumed. I mean, the way it only works is you basically have to stop here and you have to project in terms of what it’s going to be and what level of profitability it’s performing at and projected forward one year, two year, three years as a stand alone entity that’s for better or worse.

That’s kind of industry standard how it’s done. They are already as a stand alone entity performing at the profit level that I had assumed for all of next year. So they are running better than than what we had expected. It’s a great asset, Max. It’s it’s it’s certainly free to probably do our margin, which I had assumed it would be.

That’s difficult to say with fair value not not completed. That’s the bias right now. My gut’s usually pretty good. I didn’t give any credit. I was right on March this quarter even though I nobody got mad at it.

We missed it by 20 basis points last quarter because I guess we missed it in the right direction. But but overall, things feel pretty good. Great. Thanks, Brad. Appreciate it.

Yep.

Moderator/Operator: Thank you very much. Our next question is coming from Nathan Race of Piper Sandler. Nathan, your line is live.

Nathan Race, Analyst, Piper Sandler: Hey, guys. Good morning. Thanks for taking my questions.

Jim Ecker, Chairman, President, and CEO, Old Second Bancorp: You’re have you’re gonna have to talk you, aren’t you, Nathan?

Nathan Race, Analyst, Piper Sandler: No. I would not go in that arena with you. Probably long enough. I was hoping to talk about the outlook for charge offs going forward. You know, obviously, you’re picking up a higher risk reward business from Evergreen when you think about their lending specialties.

Just curious with that business in the fold and all the improvement on the legacy yield second side of things, how you’re thinking about kind of the charge off trajectory going forward?

Jim Ecker, Chairman, President, and CEO, Old Second Bancorp: Yes. I obviously, it’s a solid quarter for us from a charge off perspective. I think we just had $1,000,000 which is fully reserved for. But I think investors should know that in powersport lending in general, loss rates can run a little bit higher, but you have to look at that hand in hand with the contribution margin that that portfolio generates. So losses in that book could be anywhere between, what, 11.5%.

Yes. Feel like that’s pretty good. But you’re also looking at a portfolio with an average coupon today, new asset is going on around 9%. So you have to look at both things hand in hand going forward.

Nathan Race, Analyst, Piper Sandler: Right. So if I was doing some quick back of the envelope math on their portfolio and overlaying that loss rate, am I in the ballpark of around kind of 30 basis points going forward of charge off? Yes.

Jim Ecker, Chairman, President, and CEO, Old Second Bancorp: I think so. I think that’s good.

Nathan Race, Analyst, Piper Sandler: Okay. Great. And then obviously, with Evergreen, you’re picking up a higher beta deposit franchise, particularly relative to legacy Old Second. So I was just curious, Brad, to maybe get your updated thoughts on how you think the margin responds following a 25 basis point type cut at some point going forward?

Jim Ecker, Chairman, President, and CEO, Old Second Bancorp: Yeah. When is that?

Nathan Race, Analyst, Piper Sandler: I’ll let you pontificate on that, Brad.

Jim Ecker, Chairman, President, and CEO, Old Second Bancorp: Oh, man. I was just in Chick fil A yesterday, and what used to be $13 is now $16, and that happened to, like, in the last two weeks. And somebody just forward me the price increases at Walmart in the last thirty days. I I am you know, My interest rate prognosticator newsletter has a really hard time seeing our rate cut this year. I don’t see a basis for it.

I think people will squawk for it. Here we are also in a land of mean stocks running again. Jim had to exit this call for a little bit to go buy some GameStop and some Kohl’s, I think. So he’ll be back in just a second. So it’s against my moral fiber and something approximating religion to think about a rate cut this year doesn’t make any sense to me.

Whereas before, we had said we’d lose somewhere between four to seven basis points for every 25 basis point cut. I would say that’s 25% lighter conservatively on a pro form a basis. But there’s more margin movement for us right now just in balance sheet movement. As Jim mentioned, we sold the entire securities portfolio and reduced the wholesale funding. All those assets were limited.

They were being carried at a net negative margin contribution. So are a number of things going on under the hood that are more powerful than movements and expected interest rates within the Fed and futures curve. Put it this way, we gave up three basis points this quarter despite something approximating 40 basis points of movement out the SOFR curve. So I think we’re less sensitive than maybe people expect at this point. And I have been somewhat surprised at the margin durability given what the curve has done over the last year.

I think that if you had three beers in me, I I would probably raise what what I believe the long term margin for is for old second on a stand alone basis before Evergreen was added to it. So this this is if you know me, this is about as bullish as I found, monotone and all. I’d say if you make me assume there’s a rate cut this year, I would say four basis points to give up. Man, I answered that with a lot of words. Yes.

I I would say that we’re three weeks after the close, right, of Evergreen. And you’re right, they are higher paid funding shots, but we started bringing high yield money markets down and deposit levels have been remarkably solid. We have not seen a whole lot of runoff. And again, it’s only been three weeks, but I would agree with Brad right now. Things are about as good as we could hope.

Nathan Race, Analyst, Piper Sandler: Got it. That’s really helpful color and thoughts. So Brad, just maybe start for the third quarter, given the repositioning of some of the securities portfolio at Evergreen and some of the other impacts from the deal, how do think of kind of like a range of the margin for the third quarter?

Jim Ecker, Chairman, President, and CEO, Old Second Bancorp: Hey, I’m going go flat, but there is wider margin there than typical would be. So it’s flat, plus or minus 10 basis points instead of plus or minus five. And bearing in mind when I answer that, last quarter, said flat, and it went up by 20 basis points. So without the fair value of what’s getting done, it’s difficult to say with any precision, but it doesn’t feel like down is what I’d say.

Nathan Race, Analyst, Piper Sandler: Okay. That’s helpful. Sounds like you’re more keyed in on the margin outlook and tax rate, so I’ll leave it there. Thanks, guys. Very good, Nick.

Moderator/Operator: Thank you very much. And your next question is coming from David Conrad of KBW. David, your line is live.

Brad Adams, COO and CFO, Old Second Bancorp: Yeah. Hey. Good morning. Just just a

Jim Ecker, Chairman, President, and CEO, Old Second Bancorp: little bit of a follow-up to to that recent discussion. Just maybe add a little color to, you know, absence of of what you paid down in wholesale deposits, kinda what is their cost of funds bringing over? And maybe maybe the leverage you guys have over the next year plus of just working down that with your strong deposit franchise. I mean, you you can see what their cost of funds were in in in their stand alone financials. It’s in the four range.

Where do I expect to be by the end of next quarter? I would expect reliance on purely market rate funds, and that’s something with a 4% handle to be 100,000,000 to $200,000,000 less. So I’ll let you master later that. But in aggregate, the overall stand alone cost of funds within Evergreen should be down somewhere between thirty and seventy basis points. Again, movements here, and I’m speaking about a quarter that is only onethree of the way done.

So it’s a little difficult. Decisions are being made on the fly here, for example. Nobody’s asking yet, but I I I don’t think he’d be able to sell that sort of solar loan portfolio that he had mentioned previously because I don’t want to sell it where we have to market. Then it the market is steep, but it actually becomes a pretty good asset. So, you know, we’re learning as we go here, but that’s about as precise as I can get at this point.

But moving past past this quarter, I guess, can your deposit growth, you know, absorb their loan growth, or you continue to kinda fund marginally with with that set of the bank? We’ve got we’ve got substantial amount of room given where our standalone loan to deposit ratio is and time deposit runoff coming in future quarters. It’s not an overnight thing. But as we exit next year, if I had to guess, I would say we would be at a 90% loan to deposit ratio and an overall cost of funds that’s substantially better than A plus B. I’ve previously about a desire to pick up some supplemental small deposit franchise equivalent to, say, a First Merchants branch deal that we did prior, that would that would mean that we basically return us to where we were before.

So there’s there’s certainly room for that. Will it come to fruition? I don’t know. Hope so. Got it.

Thank you. Yep.

Moderator/Operator: Thank you very much. Your next question is coming from Terry McEvoy of Stephens. Terry, your line is live.

Brad Adams, COO and CFO, Old Second Bancorp: Thanks. Maybe just a follow-up, Brad, on that last question. Would your preference be to wait until Evergreen is integrated before your next transaction or something along the lines like you just mentioned became for sale? Would you would you take a a serious look this year?

Jim Ecker, Chairman, President, and CEO, Old Second Bancorp: I mean, we’re always looking, but ideal timing wouldn’t be before October or not. I think I think there there would be serious risk of, like, a palace too and and me falling out a window or something like that, you know, people will be very upset with me internally. Acquisitions are a lot of work. And, you know, you hear things banged about in this industry of it’s only four branches or it’s only five branches or it’s it’s only 10 branches. And that is a a a wild understatement on the amount of work that’s involved.

This one does have some advantages that help us, mainly a similar core that makes things a little bit easier, but there are a whole lot of i’s and a whole lot of d’s that need to be dotted and crossed so you get it right. It’s a lot better than it used to be, but small missteps and conversions can can put you in the newspaper as we’ve seen even in some deals around this town in the last couple of years. We don’t want to be in the near I think in a perfect world, we’d like to pause here, digest the deal integrated and start growing organically a little better. But as you know, M and A time lines are unpredictable, rarely seller and buyer time lines come into alignment. So we’ll continue to be opportunistic, but we’ve got plenty to do today.

Brad Adams, COO and CFO, Old Second Bancorp: Appreciate that. And then you mentioned repurchasing 327,000 shares in a private sale. Did that happen after the deal? And were the sellers connected to the bank that sold, or was that separately or separate? And then I get a follow-up with the appetite for incremental buyback.

Jim Ecker, Chairman, President, and CEO, Old Second Bancorp: It was a private equity investment, and it was subsequent to the deal closing. The execution price was $18 per share a quarter. R500 a viable option for us, Barry.

Nathan Race, Analyst, Piper Sandler: Great. Thanks for taking my questions. K.

Moderator/Operator: Thank you very much. Just a reminder, if there are any remaining questions, you can join the queue now by pressing star one on your phone keypad. Our next question is coming from Brian Martin of Janney. Brian, your line is live.

Brad Adams, COO and CFO, Old Second Bancorp: Hey. Good morning, guys.

Jim Ecker, Chairman, President, and CEO, Old Second Bancorp: Hey, Brian. Hey, Brian.

Brad Adams, COO and CFO, Old Second Bancorp: I’ll leave the tax question, Brad, since it sounds like you don’t wanna end on that anyhow. So maybe just one back for the for the margin, Brad, just bigger picture. You know, once things reset in third quarter and you get through some of noise, sounds like you’re more optimistic than pessimistic, but just directionally from there, how should we be thinking about the margin kind of in a flat rate environment? I mean, who knows what what happens at the Fed? But once you kind of reset and get through the noise that you’re talking about this quarter, can you give any thoughts just directly how the margin kind of what the puts or takes on the outlook thereafter?

Jim Ecker, Chairman, President, and CEO, Old Second Bancorp: I mean, a flat rate environment, a long curve, meaning that we don’t see this this whipsaw and and so forth and overnight index rates that we’ve seen over the last ninety days. They’re truly flat along the curve. Our margin is stable and durable, It’s slightly higher with what Evergreen brings to the table. Obviously, different per scenarios from from that, from totally stable, which, you know, doesn’t really exist in nature. Things are always moving one direction or another.

But I feel very good about what our margin outlook is. We’re not offside on any of that. We do have a sub debt issue that we’ll have to deal with next year that will be negative to margin. I don’t know what the plan is for that yet. But assuming that that that is taken care of in a way that’s not deleting the margin, then I would say our margin is both stable and durable.

Brad Adams, COO and CFO, Old Second Bancorp: Gotcha. And and you talked about just kind of the long term floor, you know, maybe being raised. How are you thinking about that kind of that long term floor on where the margin is as you look prospectively?

Jim Ecker, Chairman, President, and CEO, Old Second Bancorp: Well, I mean, you’ve heard me say it before that I do not believe that there is a pathway back to a 0% interest rate world and that banks like us are are are fundamentally better positioned even though there aren’t many banks like us. But and I had said previously, saved everybody’s time of going back to your transcripts, I said previously that I believe that our margin flow was probably around 4% If you you tied me down and maybe answer the question today, which you kind of are, it’s it’s probably more like four twenty five would be my guess at an absolute floor.

Brad Adams, COO and CFO, Old Second Bancorp: Gotcha. Well, I appreciate all the color. And then how about just in terms of, you know, once you given some of the noise that’s gonna play out here in the near term with the deal, you know, can you talk about what you know, when you get to that maybe first quarter of next year with the deal closed, integrated, kind of how you’re thinking about ROA just to be kind of back into kind of how we should think about things. But what do you think ROA is gonna trend to in in ’26, whether if you point to a quarter or a year, Brad? I I you know, whatever you can offer just in terms of your outlook from where we stand today.

Jim Ecker, Chairman, President, and CEO, Old Second Bancorp: I see you’re confusing me now. Are we are we talking about rate cut plans again, or are we talking about are we still talking about stable interest rates? What what are we talking about here?

Brad Adams, COO and CFO, Old Second Bancorp: What what are yeah. We’ll go with your your scenario, Brad. I I don’t know just like you don’t know. I guess I’m just wondering where you think ROA is gonna land, you know, in in your in your thinking, which sounds like final rate cuts. So go with that.

That’s fine.

Jim Ecker, Chairman, President, and CEO, Old Second Bancorp: I I would feel very comfortable above a one fifty ROA.

Brad Adams, COO and CFO, Old Second Bancorp: Above a one fifty. Okay. Okay. And then I think you answered the question about buyback. You’re you’re you’re on the table at this point for Open.

Jim Ecker, Chairman, President, and CEO, Old Second Bancorp: Open to it. Yes.

Brad Adams, COO and CFO, Old Second Bancorp: Open to it. Okay. And then just last one is loan growth. It sounds like you’re a bit more optimistic on loan growth.

Jim Ecker, Chairman, President, and CEO, Old Second Bancorp: Yes. That was Yeah. The second and third quarter are generally our better quarters, Brian, you know that. But I’m most encouraged about it, having more lending verticals help sustain that growth has been encouraging. Now to be fair, we did not have as many payoffs or paydowns in the second quarter, but it was one of our stronger origination quarters that we’ve had in some time.

I would expect some growth again in the third quarter and then probably some stabilization in the fourth and first quarter.

Brad Adams, COO and CFO, Old Second Bancorp: Okay. Perfect. Well, thank you guys for taking the questions.

Jim Ecker, Chairman, President, and CEO, Old Second Bancorp: Thanks, Brian.

Moderator/Operator: Thank you very much. Well, we appear to have reached the end of our question and answer session. I will now turn the call back over to Jim for any closing remarks.

Jim Ecker, Chairman, President, and CEO, Old Second Bancorp: Okay. Thanks everyone for joining us this morning and for your interest in our company. We look forward to speaking with you again next quarter. Goodbye.

Moderator/Operator: Thank you very much. This does conclude today’s conference. You may disconnect your phone lines at this time, and have a wonderful day. We thank you for your participation.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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