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OS

OLD SECOND BANCORP INC (OSBC)·Q3 2025 Earnings Summary

Executive Summary

  • GAAP EPS was $0.18; adjusted diluted EPS was $0.53, reflecting substantial non-GAAP addbacks tied to Evergreen acquisition. Adjusted EPS exceeded Wall Street consensus ($0.507) while GAAP EPS declined materially due to day-two provision and deal costs . EPS consensus values marked with an asterisk were retrieved from S&P Global.
  • Revenue (per S&P Global definition) missed: $75.8M actual vs $80.45M consensus; net interest margin expanded to 5.05% (TE), and adjusted efficiency ratio improved to 52.10% . Revenue consensus values marked with an asterisk were retrieved from S&P Global.
  • Credit costs elevated: provision for credit losses of $19.7M and net charge-offs of $5.1M, largely from the Powersport portfolio acquired with Evergreen .
  • Board raised the common dividend by 17% to $0.07 per share, payable Nov 10, providing a supportive capital return signal amid integration progress .

What Went Well and What Went Wrong

What Went Well

  • Strong core profitability with NIM expansion to 5.05% TE; management highlighted asset yields “exceeding our expectations” and an efficiency ratio of 52.10% on an adjusted basis .
  • Evergreen integration completed “without significant disruption,” with management expecting the earn-back period to be “significantly shortened” versus initial estimates .
  • Fee growth: Wealth management fees +26% YoY and service charges +10% YoY boosted noninterest income, aided by Powersport-related fees from the acquired book .

What Went Wrong

  • Elevated provision and noninterest expense from acquisition impacts: day-two PCL of $13.2M and $11.5M of transaction-related costs drove GAAP EPS down .
  • Classified loans rose to $134.3M (+37.5% QoQ), with downgrades in commercial and owner-occupied CRE; net charge-offs increased to $5.1M, concentrated in Powersport .
  • Deposit costs moved higher with the acquired time and savings deposits; interest-bearing deposit cost rose to 1.91% in Q3 vs 1.30% in Q2 .

Financial Results

Income Statement and Profitability (GAAP)

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Net Interest & Dividend Income ($000)$60,578 $62,904 $64,234 $82,775
Provision for Credit Losses ($000)$2,000 $2,400 $2,500 $19,653
Noninterest Income ($000)$10,581 $10,201 $10,898 $13,109
Noninterest Expense ($000)$39,308 $44,505 $43,419 $63,163
Net Income ($000)$22,951 $19,830 $21,822 $9,871
Diluted EPS (GAAP)$0.50 $0.43 $0.48 $0.18
NIM (TE, %)4.64% 4.88% 4.85% 5.05%
Efficiency Ratio (GAAP, %)53.38% 56.46% 55.99% 64.46%
Adjusted Efficiency Ratio (%)52.31% 55.48% 54.54% 52.10%
ROAA (%)1.63% 1.42% 1.53% 0.56%
ROATCE (%)17.14% 14.70% 15.29% 6.16%

Adjusted EPS and Non-GAAP Reconciliation

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Adjusted Diluted EPS$0.52 $0.45 $0.50 $0.53
Adjusted Net Income ($000)$24,042 $20,605 $22,824 $28,363

Estimates vs Actuals (S&P Global)

MetricConsensusActualSurprise
EPS (Primary, $)0.507*0.53*+0.023 (beat)*
Revenue ($)80,450,000*75,801,000*-4,649,000 (miss)*

Values retrieved from S&P Global.

Balance Sheet & Capital

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Total Assets ($000)$5,615,142 $5,727,686 $5,701,294 $6,991,754
Total Loans ($000)$3,991,078 $3,940,232 $3,998,667 $5,265,014
Total Deposits ($000)$4,465,424 $4,852,791 $4,798,439 $5,760,250
Total Equity ($000)$661,390 $694,491 $718,649 $866,685
CET1 Ratio (%)12.86% 13.47% 13.77% 12.44%
TCE/TA (%)10.14% 10.34% 10.83% 10.41%

Asset Quality & Provisioning

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Nonperforming Loans ($000)$52,280 $34,791 $32,247 $47,985
ACL on Loans ($000)$44,422 $41,551 $42,990 $75,037
Net Charge-offs ($000)(155) 4,353 785 5,108
NPLs / Total Loans (%)1.3% 0.9% 0.8% 0.9%

Segment Loans (Period-End)

Segment ($000)Q2 2025Q3 2025
Commercial718,927 786,095
Leases524,513 550,201
CRE – Investor1,118,782 1,257,328
CRE – Owner Occupied652,449 680,412
Construction251,692 176,387
Residential – Investor50,976 69,362
Residential – Owner Occupied220,672 231,547
Multifamily333,787 378,213
HELOC111,265 234,885
Powersport—715,498
Other15,604 185,086
Total Loans3,998,667 5,265,014

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per shareQ4 2025$0.06 $0.07 Raised 17%
NIM trajectoryNear termNot formalizedManagement expects NIM ~flat around 5% as rates decline Maintained/stable tone
Core expense growth (ex-Evergreen)2026 outlookNot formalized~4% core expense growth; Evergreen cost saves offset inflation New disclosure
Loan growth outlook2H25–2026Not formalizedLow single-digit organic growth; robust pipelines in sponsor finance New disclosure
Funding mix6–18 monthsNot formalizedReplace exception-priced deposits over time; deposit acquisition focus Strategic update
BuybackOngoingProgram approved Dec 2024; 326,854 shares bought at $18 in Q3 “Open and on the table” per CFO Maintained availability

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
Integration & accretionFRME branch integration; Evergreen announced Q1; closed July 1; conservative accretion assumptions Integration “best we have ever done”; earn-back shortened vs initial estimate Improving
Margin & rate sensitivityNIM expanded to 4.88% in Q1; 4.85% in Q2; cost of deposits controlled NIM 5.05%; management expects flat NIM even with potential Fed cuts; SOFR sensitivity noted Positive/Stable
Funding & depositsQ1–Q2: deposit mix stabilized post-FRME; controlling cost Plan to let brokered CDs run off; aim to acquire deposits; remix over 6–18 months Strategic shift
Credit costs & asset qualityNPLs declining Q1–Q2; ACL ~1.1%; charge-offs moderated Day-two PCL $13.2M; ACL 1.43%; NCOs $5.1M led by Powersport; classified loans up Mixed/Pressure
Powersport portfolioNew consumer lending capability anticipated with Evergreen Higher-than-expected LGD; yields and contribution margin above expectations; originations skew to top tiers Accretive with managed risk
Sponsor finance pipelineSoft 1H25; recovery expected Strong 2H25 outlook; $150–$200M typical annual originations Reaccelerating
Wealth managementGrowing AUM and fees; modest growth +25%+ fee growth; strong new AUM Strengthening

Management Commentary

  • “We are very encouraged about the trends…including strong loan growth, encouraging pipelines and excellent core profitability…our initial estimates on earnings accretion…appear conservative as asset yields are exceeding our expectations.” — Jim Eccher, CEO .
  • “Net interest margin is above 5%, and…capital will build quickly…return on TCE…approaching 17%... earnings have positive catalysts to push substantially above the $2 run rate.” — Brad Adams, COO/CFO .
  • “Losses given default [in Powersport] are running a little bit higher than expected…however, loan yields are much higher…and the contribution margin is…improving.” — Jim Eccher .

Q&A Highlights

  • Deposit strategy: about “a couple hundred million” of market-priced funding to run off; plan to acquire deposits and remix liabilities over 6–18 months .
  • Powersport origination mix: focus on tiers 1–2 (~75% historically) with consistent fee income, peak originations in Q2–Q3 .
  • Margin outlook: NIM expected roughly flat; SOFR path is key driver; sensitivity per 25 bps cut now ~4–5 bps on margin .
  • Credit trajectory: NPL increases largely administrative; classified assets collateralized; near-term resolutions expected; consumer recession seen as shallow/short .
  • Expense guidance: core expense growth around 4% into 2026, with Evergreen cost saves offsetting inflation in benefits .

Estimates Context

  • EPS beat and revenue miss versus S&P Global consensus: Adjusted EPS $0.53 vs $0.507 consensus; Revenue $75.8M vs $80.45M consensus [GetEstimates]. Values retrieved from S&P Global.
  • Implications: Street models likely need higher provision and opex assumptions post-Evergreen, offset by higher NIM and fee income run-rate; normalized EPS trajectory remains favorable given accretion and cost saves .

Key Takeaways for Investors

  • Core margin strength and integration execution underpin the medium-term thesis; NIM at 5.05% (TE) with stable outlook despite prospective rate cuts .
  • Near-term GAAP earnings are noisy (day-two PCL, deal costs), but adjusted EPS and core profitability demonstrate accretive Evergreen economics .
  • Credit costs elevated by Powersport mix; management views yield/profitability as sufficient to absorb higher LGD; watch NCOs trend and ACL calibration .
  • Deposit cost pressure from acquired CDs will be actively remixed; strategic deposit acquisition and runoff of brokered CDs support funding stability .
  • Dividend increase (+17% to $0.07) signals confidence and capital build post-close, adding a tangible shareholder return catalyst .
  • Sponsor finance recovery and robust pipelines suggest low single-digit organic loan growth near term, adding to acquired consumer lending momentum .
  • Tactical consideration: results may drive estimate rebalancing (higher provision/opex, higher NIM), with potential multiple support as integration milestones and cost saves materialize .