Old Second Bancorp, Inc. Reports First Quarter 2025 Net Income of $19.8 Million, or $0.43 per Diluted Share

AURORA, IL / ACCESS Newswire / April 23, 2025 / Old Second Bancorp, Inc. (the "Company," "Old Second," "we," "us," and "our") (NASDAQ: OSBC), the parent company of Old Second National Bank (the "Bank"), today announced financial results for the first quarter of 2025. Our net income was $19.8 million, or $0.43 per diluted share, for the first quarter of 2025, compared to net income of $19.1 million, or $0.42 per diluted share, for the fourth quarter of 2024, and net income of $21.3 million, or $0.47 per diluted share, for the first quarter of 2024. Adjusted net income, a non-GAAP financial measure that excludes certain nonrecurring items, as applicable, was $20.6 million, or $0.45 per diluted share, for the first quarter of 2025, compared to $20.0 million, or $0.44 per diluted share, for the fourth quarter of 2024, and $21.2 million, or $0.47 per diluted share, for the first quarter of 2024. The pre-tax adjusting items impacting the first quarter of 2025 included the exclusion of $570,000 of mortgage servicing rights ("MSRs") mark to market losses, and $454,000 of transaction-related expenses primarily from the First Merchants Bank ("FRME") branch purchase in December 2024 as well as the pending merger with Bancorp Financial, Inc. ("Bancorp Financial") that was announced in late February 2025. The adjusting items impacting the fourth quarter of 2024 included the exclusion of $385,000 of MSRs mark to market gains and $1.5 million of transaction-related expenses due to the FRME branch purchase. The adjusting item impacting the first quarter of 2024 included the exclusion of $94,000 of MSRs mark to market gains. See the discussion entitled "Non-GAAP Presentations" below and the tables beginning on page 17 within the full earnings release found at www.oldsecond.com under the investor relations tab, that provide a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent.

Net income increased $720,000 in the first quarter of 2025 compared to the fourth quarter of 2024. The increase was primarily due to a $1.1 million decrease in provision for credit losses, as well as a $3.0 million decrease in interest expense in the first quarter of 2025, compared to the prior linked quarter. These increases to the current quarter's net income were partially offset by a $1.7 million decrease in interest and dividend income and a $1.4 million decrease in noninterest income. Net income decreased $1.5 million in the first quarter of 2025 compared to the first quarter of 2024, primarily due to an increase of $6.3 million in noninterest expense, partially offset by a $3.1 million increase in net interest and dividend income, a $1.1 million decrease in provision for credit losses, and a $861,000 decrease in provision for income taxes.

Operating Results

• First quarter 2025 net income was $19.8 million, reflecting a $720,000 increase from the fourth quarter of 2024, but a decrease of $1.5 million from the first quarter of 2024. Adjusted net income, as defined above, was $20.6 million for the first quarter of 2025, an increase of $639,000 from adjusted net income for the fourth quarter of 2024, but a decrease of $637,000 from adjusted net income for the first quarter of 2024.

• Net interest and dividend income was $62.9 million for the first quarter of 2025, reflecting an increase of $1.3 million, or 2.1%, from the fourth quarter of 2024, and an increase of $3.1 million, or 5.2%, from the first quarter of 2024.

• We recorded a net provision for credit losses of $2.4 million in the first quarter of 2025 compared to a net provision for credit losses of $3.5 million in the fourth quarter of 2024 and the first quarter of 2024.

• Noninterest income was $10.2 million for the first quarter of 2025, a decrease of $1.4 million, or 12.1%, compared to $11.6 million for the fourth quarter of 2024, and a decrease of $300,000, or 2.9%, compared to $10.5 million for the first quarter of 2024.

• Noninterest expense was $44.5 million for the first quarter of 2025, an increase of $183,000, or 0.4%, compared to $44.3 million for the fourth quarter of 2024, and an increase of $6.3 million, or 16.4%, compared to $38.2 million for the first quarter of 2024.

• We had a provision for income tax of $6.4 million for the first quarter of 2025, compared to a provision for income tax of $6.3 million for the fourth quarter of 2024 and a provision for income tax of $7.2 million for the first quarter of 2024. The effective tax rate for each of the periods presented was 24.3%, 24.7%, and 25.3%, respectively.

• On April 15, 2025, our Board of Directors declared a cash dividend of $0.06 per share of common stock, payable on May 5, 2025, to stockholders of record as of April 25, 2025.

Financial Highlights

¹ See the discussion entitled "Non-GAAP Presentations" below and the table on page 18 in the full earnings release that provides a reconciliation of this non-GAAP financial measure to the most comparable GAAP equivalent.

² Both the Company and the Bank ratios are inclusive of a capital conservation buffer of 2.50%, and both are subject to the minimum capital adequacy guidelines of 7.00%, 8.50%, 10.50%, and 4.00% for the Common equity tier 1, Tier 1 risk-based, Total risk-based and Tier 1 leverage ratios, respectively.

³ The prompt corrective action provisions are applicable only at the Bank level, and are 6.50%, 8.00%, 10.00%, and 5.00% for the Common equity tier 1, Tier 1 risk-based, Total risk-based and Tier 1 leverage ratios, respectively.

Chairman, President and Chief Executive Officer Jim Eccher said "Old Second reported strong results in the first quarter of 2025 led by exceptional margin performance and disciplined operating efficiency. Tangible book value per share increased by more than 15% on both a linked quarter annualized and year over year basis despite the dilution associated with a branch purchase transaction in the fourth quarter of 2024. Nonperforming assets and classified loans have declined meaningfully on both year over year and linked quarter basis as well. First quarter return on average assets and return on average tangible common equity were 1.42% and 14.70%, respectively, the tax equivalent net interest margin was expanded meaningfully to 4.88% and the efficiency ratio was a very healthy 56.46%. This strong bottom-line performance and a well-positioned balance sheet drove an increase in the tangible common equity capital ratio to 10.34% from 9.04% for the prior year like period. We are exceptionally proud of our performance from both a bottom line perspective and in positioning ourselves to deliver value to our stockholders over the remainder of the year."

"In February, we announced an agreement to acquire Evergreen Bank Group, a $1.5 billion bank holding company headquartered in Oak Brook, Illinois. We believe the transaction will add meaningful consumer lending capabilities and enhance the flexibility and profitability of Old Second's balance sheet. Darin Campbell and his team have built an exceptional business that will diversify our revenue streams, enhance our management depth and provide a continuing opportunity to drive long-term stockholder value. Most importantly, we believe it strengthens our competitive position in Chicago and represents a step forward in our efforts to build the best bank possible for our customers and communities."

Asset Quality & Earning Assets

• Nonperforming loans, comprised of nonaccrual loans plus loans past due 90 days or more and still accruing, totaled $34.8 million at March 31, 2025, $30.3 million at December 31, 2024, and $65.1 million at March 31, 2024. Nonperforming loans, as a percent of total loans, were 0.9% at March 31, 2025, 0.8% at December 31, 2024, and 1.6% at March 31, 2024. The increase in the first quarter of 2025 for nonperforming loans is driven by nonaccrual loans inflows of $11.6 million, primarily driven by two larger commercial relationships, partially offset by $7.1 million of nonaccrual outflows. Nonaccrual loan outflows consist of $1.7 million paid off, $1.5 million of fully charged off loans, and $3.9 million of partial principal reductions from payments and partial charge-offs.

• Total loans were $3.94 billion at March 31, 2025, reflecting a decrease of $41.1 million compared to December 31, 2024, and a decrease of $29.2 million compared to March 31, 2024. The decrease from the prior quarter end as well as year over year was largely driven by the declines in commercial, commercial real estate-owner occupied and multifamily portfolios. Average loans (including loans held-for-sale) for the first quarter of 2025 totaled $3.96 billion, reflecting a decrease of $44.0 million from the fourth quarter of 2024, and a decrease of $60.3 million from the first quarter of 2024.

• Available-for-sale securities totaled $1.15 billion at March 31, 2025, compared to $1.16 billion at December 31, 2024 and $1.17 billion at March 31, 2024. The unrealized mark to market loss on securities totaled $59.7 million as of March 31, 2025, compared to $68.6 million as of December 31, 2024, and $85.0 million as of March 31, 2024, due to market interest rate fluctuations as well as changes year over year in the composition of the securities portfolio. During the quarter ended March 31, 2025, we had security purchases of $82.9 million, and security maturities, calls and paydowns of $106.3 million, compared to security purchases of $84.9 million and security maturities, calls and paydowns of $101.2 million during the quarter ended December 31, 2024. During the quarter ended March 31, 2024, we had security purchases of $15.7 million, $32.7 million of maturities and paydowns, and sales of $5.3 million, which resulted in net realized gains of $1,000. We may continue to buy and sell strategically identified securities as opportunities arise.

Non-GAAP Presentations
Management has disclosed in this earnings release certain non-GAAP financial measures to evaluate and measure our performance, including the presentation of adjusted net income, net interest income and net interest margin on a fully taxable equivalent basis, and our efficiency ratio calculations on a taxable equivalent basis. The net interest margin fully taxable equivalent is calculated by dividing net interest income on a tax equivalent basis by average earning assets for the period. Consistent with industry practice, management has disclosed the efficiency ratio including and excluding certain items, which is discussed in the noninterest expense presentation on page 7 of the full earnings release, found on our website at www.oldsecond.com, under the investor relations tab.

We consider the use of select non-GAAP financial measures and ratios to be useful for financial and operational decision making and useful in evaluating period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenditures or assets that we believe are not indicative of our primary business operating results or by presenting certain metrics on a fully taxable equivalent basis. We believe these measures provide investors with information regarding balance sheet profitability, and we believe that management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, analyzing, and comparing past, present and future periods.

These non-GAAP financial measures should not be considered as a substitute for GAAP financial measures, and we strongly encourage investors to review the GAAP financial measures included in this earnings release and not to place undue reliance upon any single financial measure. In addition, because non-GAAP financial measures are not standardized, it may not be possible to compare the non-GAAP financial measures presented in this earnings release with other companies' non-GAAP financial measures having the same or similar names. The tables beginning on page 17 in our full earnings release found at our website at www.oldsecond.com, provide a reconciliation of each non-GAAP financial measure to the most comparable GAAP equivalent.

Cautionary Note Regarding Forward-Looking Statements
This earnings release and statements by our management may contain forward-looking statements within the Private Securities Litigation Reform Act of 1995. Forward looking statements can be identified by words such as "should," "anticipate," "expect," "estimate," "intend," "believe," "may," "likely," "will," "forecast," "project," "looking forward," "optimistic," "hopeful," "potential," "progress," "prospect," "remain," "deliver," "continue," "trend," "momentum," "remainder," "beyond," "build," "and "near" or other statements that indicate future periods. Examples of forward-looking statements include, but are not limited to, statements regarding the economic outlook, balance sheet growth, building capital, statements regarding the outlook and expectations of Old Second and Bancorp Financial, Inc. with respect to their planned merger, the anticipated strategic and financial benefits of the merger and the timing of the closing of the proposed merger. Such forward-looking statements are subject to risks, uncertainties, and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements, (1) the strength of the United States economy in general and the strength of the local economies in which we conduct our operations may be different than expected; (2) the rate of delinquencies and amounts of charge-offs, the level of allowance for credit loss, the rates of loan growth, or adverse changes in asset quality in our loan portfolio, which may result in increased credit risk-related losses and expenses; (3) changes in legislation, regulation, policies, or administrative practices, whether by judicial, governmental, or legislative action; (4) risks related to pending or future acquisitions, if any, including execution and integration risks; (5) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) could have a negative impact on us; (6) changes in interest rates, which has and may continue to affect our deposit and funding costs, net income, prepayment penalty income, mortgage banking income, and other future cash flows, or the market value of our assets, including our investment securities; (7) elevated inflation which causes adverse risk to the overall economy, and could indirectly pose challenges to our clients and to our business; (8) the adverse effects of events beyond our control that may have a destabilizing effect on financial markets and the economy, such as trade disputes, epidemics and pandemics, war or terrorist activities, essential utility outages, deterioration in the global economy, instability in the credit markets, disruptions in our customers' supply chains or disruption in transportation, and disruptions caused from widespread cybersecurity incidents; and (9) the possibility that not all conditions to closing of the planned merger will be satisfied or waived, including receipt of required regulatory approvals and adoption of the merger agreement by stockholders of Bancorp Financial, Inc. Additional risks and uncertainties are contained in the "Risk Factors" and forward-looking statements disclosure in our most recent Annual Report on Form 10-K, and Quarterly Reports on Form 10-Q. The inclusion of this forward-looking information should not be construed as a representation by us or any person that future events, plans, or expectations contemplated by us will be achieved. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

Conference Call
We will host a call on Thursday, April 24, 2025, at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) to discuss our first quarter 2025 financial results. Investors may listen to our call via telephone by dialing 888-506-0062, using Entry Code: 944947. Investors should call into the dial-in number set forth above at least 10 minutes prior to the scheduled start of the call.

A replay of the call will be available until 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on May 1, 2025, by dialing 877-481-4010, using Conference ID: 52242.

CONTACT
Bradley S. Adams
Chief Financial Officer
(630) 906-5484

SOURCE: Old Second Bancorp Inc.