Old Second Bancorp, Inc. Q3 FY2025 earnings call

James Eccher provided an overview of the quarter, noting net income, adjusting items from the Bancorp Financial acquisition, and impact of the acquisition on net interest margin. Brad Adams discussed net interest income increase, NIM at 5.05%, average loans and deposits growth, systems conversion completion, and focus on integrating Evergreen and optimizing the balance sheet. Operational points included acquisition impacts, loan portfolio composition, credit quality, noninterest income, noninterest expense, and efficiency ratio.

From a GAAP perspective, net income was $9.9 million or $0.18 per diluted share in the third quarter of 2025. Return on assets was 0.56%. Third quarter 2025 return on average tangible common equity was 6.16% and tax equivalent efficiency ratio was 64.46%. Excluding adjusting items, net income for the third quarter of 2025 was $28.4 million or $0.53 per diluted share. Net interest margin was 5.05%, up 20 basis points from last quarter. Average loans increased $1.26 billion or 32% over the linked quarter, and average deposits increased $1.08 billion or 22%.

Expectation of earn back period for Evergreen to be significantly shortened from 3 years. Net purchase accounting accretion income to be a small contributor going forward. Expectation of low to mid-single-digit growth in 2026. Capital will build quickly, return on TCE approaching 17%.

Impact of global tariff volatility on modeling. Potential runoff of exception price deposits. Credit risk in certain industries like trucking and transportation.

Q: Terry McEvoy asked about runoff of exception price deposits and replacement with legacy Old Second types of deposits.

A: Bradley Adams responded about hundreds of millions in market priced funding, aiming to replace with Old Second type funding over 6-18 months.

Q: Terry McEvoy asked about future originations in Powersports and tier focus.

A: Darin Campbell stated focus on all tiers but historically in top 2 tiers, 75% or better.

Q: Terry McEvoy asked about Powersport fees seasonality.

A: Darin Campbell said fees are consistent across quarters, with originations in second and third quarters.

Q: Nathan Race asked about margin expectations and Fed cuts.

A: Bradley Adams discussed margin sensitivity to rates and optimism about margin even with rate cuts.

Q: David Long asked about expense growth and core commercial loan pipeline.

A: James Eccher mentioned strong organic growth, robust pipelines, and ongoing search for additional talent.

Q: Jeff Rulis asked about acquired problem loans and M&A.

A: James Eccher talked about resolved remediation and Bradley Adams mentioned balance sheet readiness for M&A.

Q: David Konrad asked about deposit beta and wealth management outlook.

A: Bradley Adams discussed deposit beta and James Eccher noted strong wealth management fees growth.

Q: Brian Martin asked about loan growth outlook and reserves.

A: Bradley Adams talked about loan growth sustainability and James Eccher discussed reserve management in Powersport.