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OS

OLD SECOND BANCORP INC (OSBC)·Q1 2025 Earnings Summary

Executive Summary

  • OSBC delivered solid Q1 with GAAP diluted EPS of $0.43 and adjusted diluted EPS of $0.45; Primary EPS (S&P definition) modestly beat consensus (0.45 vs 0.445) and “revenue” (S&P definition) significantly beat ($70.7M vs $60.0M) as margin expanded to 4.88% TE and funding costs fell sequentially . EPS/Revenue consensus from S&P Global marked with asterisks below.*
  • Net interest and dividend income rose to $62.9M (+2.1% q/q, +5.2% y/y) on a 20 bps q/q NIM (TE) expansion to 4.88%, aided by deposit growth and the payoff of higher-cost borrowings post-FRME branch acquisition .
  • Credit metrics improved y/y with criticized/classified balances down materially; Q1 included ~$4.4M of gross charge-offs (mostly one C&I) and $2.4M provision; NPL ratio remains sub-1% (0.9%) while ACL/loans is 1.1% .
  • Management guided NIM to be “stable to modestly down” from here (deposit flows raised the NIM “floor” by ~10 bps) and reaffirmed ~4% expense growth for 2025; tax rate mid-24% . Near-term stock catalysts: margin resilience vs rate-cut fears, improving credit trajectory, and expected Evergreen (Bancorp Financial) merger closing in 3Q25 adding high-yielding consumer origination capacity .

What Went Well and What Went Wrong

  • What Went Well

    • Margin and funding: NIM (TE) expanded to 4.88% (+20 bps q/q; +30 bps y/y) as deposit costs fell and FHLB advances rolled off; CFO: “exceptional margin performance… deposit growth accelerated throughout the quarter” .
    • Credit progress: Classified and criticized loans declined sharply y/y; CEO highlighted “nonperforming assets and classified loans have declined meaningfully… we are exceptionally proud of our performance” .
    • Balance sheet/capital: TCE/TA rose to 10.34%; CET1 improved to 13.47%—strong flexibility heading into Evergreen acquisition .

  • What Went Wrong

    • Noninterest income softness: Down $1.4M q/q (12.1%) to $10.2M on MSR mark-to-market losses (-$570k) and lower BOLI accretion; also down 2.9% y/y .
    • Expense pressure: Noninterest expense was flat q/q but up 16.4% y/y to $44.5M on salary/benefit growth, core deposit intangible amortization (FRME), and OREO costs; management expects OREO to normalize from Q2 .
    • Loan balances: Total loans declined $41.1M q/q; net paydowns in CRE owner-occupied and multifamily, and deliberate runoff of purchase participations (still ~$200M targeted for exit over 24 months) .

Financial Results

Income statement summary (oldest → newest)

MetricQ3 2024Q4 2024Q1 2025
Net Interest & Dividend Income ($M)$60.58 $61.58 $62.90
Noninterest Income ($M)$10.58 $11.61 $10.20
Provision for Credit Losses ($M)$2.00 $3.50 $2.40
Noninterest Expense ($M)$39.31 $44.32 $44.51
Net Income ($M)$22.95 $19.11 $19.83
Diluted EPS ($)$0.50 $0.42 $0.43

Profitability and efficiency

MetricQ3 2024Q4 2024Q1 2025
Net Interest Margin (TE) (%)4.64 4.68 4.88
Efficiency Ratio (GAAP) (%)53.38 57.12 56.46

Balance sheet snapshot (period-end)

MetricMar 31, 2024Dec 31, 2024Mar 31, 2025
Total Assets ($B)$5.62 $5.65 $5.73
Total Loans ($B)$3.97 $3.98 $3.94
Total Deposits ($B)$4.61 $4.77 $4.85
Total Equity ($B)$0.60 $0.67 $0.69
Company CET1 Ratio (%)12.02 12.82 13.47

Asset quality (ratios are period-end; NCOs are quarterly)

MetricMar 31, 2024Dec 31, 2024Mar 31, 2025
Nonperforming Loans ($M)$65.1 $30.3 $34.8
NPLs / Total Loans (%)1.6 0.8 0.9
NPAs / (Loans+OREO+Repo) (%)1.8 1.3 1.0
ACL / Loans (%)1.1 1.1 1.1
Net Charge-offs ($M, quarterly)$3.70 $4.90 $4.35

Loan portfolio mix (balances, $M)

SegmentMar 31, 2024Dec 31, 2024Mar 31, 2025
Commercial$796.6 $800.5 $732.9
Leases$425.6 $491.7 $505.5
CRE – Investor$1,018.4 $1,078.8 $1,105.4
CRE – Owner Occupied$782.6 $683.3 $670.0
Construction$169.2 $201.7 $205.8
Multifamily$387.5 $351.3 $341.3
Total Loans$3,969.4 $3,981.3 $3,940.2

Consensus vs actual (Q1 2025)

MetricConsensus*Actual*
Primary EPS (S&P definition) ($)0.445*0.45*
Revenue (S&P definition) ($M)60.0*70.705*
EPS – # of estimates6*—
Revenue – # of estimates5*—
Target Price Consensus Mean ($)22.08*22.08*

Values marked with * retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin trajectory2025Sensitivity of ~7 bps NIM decline per 25 bp cut (prior commentary) “Stable to modestly down” from here; NIM “floor” raised ~10 bps; ~4 bps per cut with Evergreen Improved outlook (raised floor; less downside per cut)
Expense growthFY 2025~4% y/y growth (shared last quarter) Reaffirmed ~4% for 2025; OREO expense to normalize from Q2 Maintained
Tax rateOngoingMid-24% historically Mid-24% remains appropriate (“around here”) Maintained
Loan growth2025NALow single-digit growth hoped for in 2H; guarded near term New directional outlook
Securities/spreadsNear termNAOn sidelines; risk of spread widening; cautious on near-term purchases New directional
Share repurchasePost-mergerProgram in place Active post-close; currently constrained by Reg M Timing clarified

Earnings Call Themes & Trends

TopicQ3 2024 (Q-2)Q4 2024 (Q-1)Q1 2025 (Current)Trend
Net interest marginTE NIM 4.64% TE NIM 4.68% (+4 bps q/q) TE NIM 4.88% (+20 bps q/q) on lower funding costs, deposit growth Improving
Deposits/liquidityNAMix improved; FRME deposits reduced borrowings Period-end deposits +$84M q/q; LDR 81.2% (vs 83.5% q/q, 86.1% y/y) Strengthening
Credit remediationOffice/healthcare addressed across 2024 (implied)OREO expense elevated; NPLs fell sharply y/y Classified/criticized down significantly; big C&I cleanup this qtr; NPAs -27% q/q Improving
Loan growth/outlookNANASeasonal growth typical Q2–Q3; cautious near term; 2H improvement hoped Guarded near term
Macro/tariffsNANACustomers “wait-and-see”; tariff uncertainty cited; fewer cuts expected New headwind
M&A (Evergreen)NANADeal announced Feb-25; adds consumer lending, reduces asset sensitivity Positive strategic
ExpensesNAEfficiency ratio 57.12%; y/y expense growth from FRME/OREO Efficiency ~55–56% (TE adjusted); OREO normalizing from Q2 Normalizing

Management Commentary

  • CEO Jim Eccher: “Old Second reported strong results… led by exceptional margin performance and disciplined operating efficiency… ROAA 1.42% and ROATCE 14.70%… tax-equivalent NIM expanded to 4.88% and the efficiency ratio was… 56.46%... TCE capital ratio to 10.34% from 9.04%” .
  • Strategy and M&A: “In February, we announced an agreement to acquire Evergreen Bank Group… diversify our revenue streams… enhance our management depth… strengthen our competitive position in Chicago” . KBRA summarized the deal as ~$200M (~1.3x P/TBV), 75% stock/25% cash, closing expected 3Q25 .
  • CFO Brad Adams: “NIM (TE) to 4.88%… margin surprised us… source was deposit flows… as rate cuts occur, with Evergreen, ~4 bps NIM impact per cut vs ~7 bps before; deposit flows raised the NIM floor ~10 bps” .

Q&A Highlights

  • Margin durability: Management more bullish; deposit flows and Evergreen raise the NIM floor; fewer rate cuts expected, and each cut impacts less (~4 bps vs ~7 bps prior) .
  • Loan book cleanup: One large C&I charge-off substantially addressed; forward outlook benefits from sharply lower criticized/classified and fewer specific allocations .
  • Demand/macro: Clients in “wait-and-see” posture amid tariff uncertainty; leasing activity steady; minimal projected Q2 loan growth; hope for 2H pickup .
  • Deposits and consumer activity: Lower-balance customer transaction activity remains softer (trend for ~1 year), average balances at low end stabilized by tax refunds .
  • Capital/deployment: Buyback constrained by Reg M pre-close but “on the table” post-merger; strong liquidity (LDR ~81%) supports optionality .

Estimates Context

  • Q1 2025 Primary EPS (S&P) was a slight beat (0.45 actual vs 0.445 consensus)* and S&P “Revenue” significantly beat ($70.705M vs $60.0M consensus); 6 EPS and 5 revenue estimates contributed; target price consensus mean ~$22.08.
    • EPS consensus vs actual: 0.445 vs 0.45*.
    • Revenue consensus vs actual: $60.0M vs $70.705M*.
    • Target Price Consensus Mean: $22.08*. Values retrieved from S&P Global.

Key Takeaways for Investors

  • Margin resilience is the near-term driver: NIM expanded to 4.88% and management raised the NIM “floor” via stronger deposits; each Fed cut now has a smaller NIM impact (~4 bps) than previously assumed .
  • Credit risk trending better: Criticized/classified loans down sharply y/y; Q1 charge-offs were concentrated in one C&I credit that is now substantially resolved; NPLs remain sub-1% .
  • Operating leverage poised to improve: Expense growth guided to ~4% with OREO costs normalizing, while margin remains “stable to modestly down” .
  • Deposit-led balance sheet strength: Deposits grew $84M q/q; LDR 81.2% gives capacity to absorb Evergreen assets and selectively add higher-return loans .
  • Evergreen adds profitable growth vectors: Higher yielding consumer originations diversify earning assets and reduce asset sensitivity; integration risk deemed manageable per KBRA .
  • Estimate revisions: Expect modest upward adjustments to revenue/NII and Primary EPS given the beat and raised NIM floor; noninterest income/OREO normalization should aid visibility .
  • Trading implications: Positive skew near-term on margin durability and credit progress; medium-term upside tied to smooth Evergreen close/integration and sustaining deposit momentum .
Notes on non-GAAP:
- Adjusted diluted EPS $0.45 excludes $570k MSR MTM losses and $454k transaction-related expenses; see reconciliations **[357173_0000357173-25-000032_tmb-20250423xex99d1.htm:0]** **[357173_0000357173-25-000032_tmb-20250423xex99d1.htm:26]** **[357173_0000357173-25-000032_tmb-20250423xex99d1.htm:27]**.
- NIM presented on both GAAP and TE bases; TE reconciliations provided **[357173_0000357173-25-000032_tmb-20250423xex99d1.htm:6]** **[357173_0000357173-25-000032_tmb-20250423xex99d1.htm:26]**.

Citations:

  • Press release and 8-K Q1 2025 (including exhibits and tables):
  • Q1 2025 earnings call transcript:
  • Q4 2024 8-K/press release:
  • Evergreen (Bancorp Financial) transaction context (KBRA release):