Old Second Bancorp, Inc. Reports Fourth Quarter 2024 Net Income of $19.1 Million, or $0.42 per Diluted Share

Rhea-AI Summary

Old Second Bancorp (NASDAQ:OSBC) reported Q4 2024 net income of $19.1 million, or $0.42 per diluted share, compared to $23.0 million ($0.50/share) in Q3 2024 and $18.2 million ($0.40/share) in Q4 2023. The quarter-over-quarter decrease was primarily due to a $1.5 million increase in credit loss provisions and a $5.0 million rise in noninterest expense.

Key Q4 2024 metrics include net interest income of $61.6 million, noninterest income of $11.6 million, and noninterest expense of $44.3 million. The company's efficiency ratio was 57.12%, with a return on average assets of 1.34%. Total assets stood at $5.65 billion, with total loans at $3.98 billion and deposits at $4.77 billion.

The Board declared a cash dividend of $0.06 per share, payable February 10, 2025. Nonperforming loans improved to 0.8% of total loans, down from 1.3% in Q3 2024.

Positive

• Nonperforming loans decreased significantly to 0.8% from 1.7% year-over-year
• Tangible book value per share increased by over 15% year-over-year
• Strong capital position with TCE/TA ratio improving to 10.04% from 8.53% year-over-year
• Net interest margin remained stable at 4.68%

Negative

• Q4 2024 net income decreased by $3.8 million from Q3 2024
• Provision for credit losses increased to $3.5 million from $2.0 million in Q3 2024
• Noninterest expense increased by $5.0 million (12.8%) quarter-over-quarter
• Total loans decreased by $61.6 million year-over-year

Insights

Financial Analyst

Old Second Bancorp's Q4 2024 results reveal a complex picture of strategic positioning and operational resilience. While quarterly earnings declined 17% sequentially to $19.1 million, the bank demonstrated robust underlying fundamentals and proactive risk management.

Three key metrics stand out: First, the net interest margin expanded to 4.68%, outperforming many regional bank peers in a challenging rate environment. Second, the dramatic 42% reduction in nonperforming loans to $30.3 million reflects aggressive problem loan resolution. Third, the tangible common equity ratio strengthened to 10.04%, providing ample capital buffer for growth opportunities.

The December acquisition of five First Merchants Bank branches represents a strategic expansion that should enhance deposit gathering capabilities and market presence. However, this contributed to a 12.8% increase in noninterest expenses, temporarily pressuring the efficiency ratio to 57.12%.

The bank's credit quality trends are particularly encouraging, with classified and criticized loans reaching their lowest levels since June 2022. The $3.5 million provision for credit losses appears prudent given the commercial real estate market challenges, though it's notably lower than the $8.0 million provision in Q4 2023.

Looking ahead, the bank's strong capital position (12.82% CET1 ratio) and improving asset quality metrics suggest it's well-positioned to capitalize on potential market opportunities in 2025, particularly if regional bank consolidation accelerates.

AURORA, IL / ACCESS Newswire / January 22, 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 fourth quarter of 2024. Our net income was $19.1 million, or $0.42 per diluted share, for the fourth quarter of 2024, compared to net income of $23.0 million, or $0.50 per diluted share, for the third quarter of 2024, and net income of $18.2 million, or $0.40 per diluted share, for the fourth quarter of 2023. Adjusted net income, a non-GAAP financial measure that excludes certain nonrecurring items, as applicable, was $20.3 million, or $0.44 per diluted share, for the fourth quarter of 2024, compared to $23.3 million, or $0.51 per diluted share, for the third quarter of 2024, and $19.1 million, or $0.42 per diluted share, for the fourth quarter of 2023. The adjusting item impacting the fourth quarter of 2024 included $1.5 million of transaction-related expenses due to the early December 2024 purchase of five branches from First Merchants Bank ("FRME"). The adjusting items impacting the third quarter of 2024 included $471,000 of FRME transaction-related expenses; the adjusting items impacting the fourth quarter of 2023 results included $1.2 million of nonrecurring litigation expense. See the discussion entitled "Non-GAAP Presentations" below and in the full release found at www.oldsecond.com, under the investor relations tab; the tables beginning on page 17 provide a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent.

Net income decreased $3.8 million in the fourth quarter of 2024 compared to the third quarter of 2024. The decrease was primarily due to a $1.5 million increase in provision for credit losses, as well as a $5.0 million increase in noninterest expense in the fourth quarter of 2024, compared to the prior linked quarter. These reductions to the current quarter's net income were partially offset by a $1.0 million increase in net interest and dividend income and a $1.0 million increase in noninterest income. Net income increased $885,000 in the fourth quarter of 2024 compared to the fourth quarter of 2023, primarily due to a decrease of $4.5 million in provision for credit losses, an increase in noninterest income of $2.9 million, and an increase in net interest income of $349,000. The year over year fourth quarter increase is partially offset by a $7.3 million increase in noninterest expenses.

Operating Results

• Fourth quarter 2024 net income was $19.1 million, reflecting a $3.8 million decrease from the third quarter of 2024, and an increase of $885,000 from the fourth quarter of 2023. Adjusted net income, as defined above, was $20.3 million for the fourth quarter of 2024, a decrease of $3.0 million from adjusted net income for the third quarter of 2024, and an increase of $1.2 million from adjusted net income for the fourth quarter of 2023.

• Net interest and dividend income was $61.6 million for the fourth quarter of 2024, reflecting an increase of $1.0 million, or 1.7%, from the third quarter of 2024, and an increase of $349,000, or 0.6%, from the fourth quarter of 2023.

• We recorded a net provision for credit losses of $3.5 million in the fourth quarter of 2024 compared to a net provision for credit losses of $2.0 million in the third quarter of 2024, and a net provision for credit losses of $8.0 million in the fourth quarter of 2023.

• Noninterest income was $11.6 million for the fourth quarter of 2024, an increase of $1.0 million, or 9.7%, compared to $10.6 million for the third quarter of 2024, and an increase of $2.9 million, or 33.0%, compared to $8.7 million for the fourth quarter of 2023.

• Noninterest expense was $44.3 million for the fourth quarter of 2024, an increase of $5.0 million, or 12.8%, compared to $39.3 million for the third quarter of 2024, and an increase of $7.3 million, or 19.7%, compared to $37.0 million for the fourth quarter of 2023.

• We had a provision for income tax of $6.3 million for the fourth quarter of 2024, compared to a provision for income tax of $6.9 million for the third quarter of 2024 and a provision for income tax of $6.7 million for the fourth quarter of 2023. The effective tax rate for each of the periods presented was 24.7%, 23.1%, and 26.9%, respectively. The reduction in the effective tax rate in the third and fourth quarters of 2024, compared to the fourth quarter of 2023, reflects the new state ruling regarding tax rate apportionment factors related to income generated from securities or loans originated in other states.

• On January 21, 2025, our Board of Directors declared a cash dividend of $0.06 per share of common stock, payable on February 10, 2025, to stockholders of record as of January 31, 2025.

Financial Highlights

		Quarters Ended
(Dollars in thousands)		December 31,				September 30,				December 31,
		2024				2024				2023
Balance sheet summary
Total assets		$	5,649,377			$	5,671,760			$	5,722,799
Total securities available-for-sale			1,161,701				1,190,854				1,192,829
Total loans			3,981,336				3,991,078				4,042,953
Total deposits			4,768,731				4,465,424				4,570,746
Total liabilities			4,978,343				5,010,370				5,145,518
Total equity			671,034				661,390				577,281
Total tangible assets		$	5,534,086			$	5,575,789			$	5,625,104
Total tangible equity			555,743				565,419				479,586
Income statement summary
Net interest income		$	61,584			$	60,578			$	61,235
Provision for credit losses			3,500				2,000				8,000
Noninterest income			11,610				10,581				8,729
Noninterest expense			44,322				39,308				37,026
Net income			19,110				22,951				18,225
Effective tax rate			24.68	%			23.11	%			26.92	%
Profitability ratios
Return on average assets (ROAA)			1.34	%			1.63	%			1.27	%
Return on average equity (ROAE)			11.38				14.29				13.18
Net interest margin (tax-equivalent)			4.68				4.64				4.62
Efficiency ratio			57.12				53.38				50.82
Return on average tangible common equity (ROATCE) 1			13.79				17.14				16.43
Tangible common equity to tangible assets (TCE/TA)			10.04				10.14				8.53
Per share data
Diluted earnings per share		$	0.42			$	0.50			$	0.40
Tangible book value per share			12.38				12.61				10.73
Company capital ratios 2
Common equity tier 1 capital ratio			12.82	%			12.86	%			11.37	%
Tier 1 risk-based capital ratio			13.34				13.39				11.89
Total risk-based capital ratio			15.54				15.62				14.06
Tier 1 leverage ratio			11.30				11.38				10.06
Bank capital ratios 2, 3
Common equity tier 1 capital ratio			12.89	%			13.49	%			12.32	%
Tier 1 risk-based capital ratio			12.89				13.49				12.32
Total risk-based capital ratio			13.82				14.45				13.24
Tier 1 leverage ratio			10.90				11.46				10.41

¹ See the discussion entitled "Non-GAAP Presentations" below and the table on page 18 found in the full earnings release at www.oldsecond.com, which 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 fourth quarter of 2024 with exceptional profitability and positive trends in a number of verticals. Tangible book value per share increased by more than fifteen percent on a year over year basis inclusive of the dilution associated with a branch purchase transaction in the fourth quarter. We believe we are being proactive in addressing commercial loans facing deterioration from higher interest rates, declining appraisal values and cash flow pressures. Importantly, classified and criticized loans have declined meaningfully both year over year and linked quarter and are now at their lowest levels since June 2022. We have seen previously identified loans work toward resolution and the pace of upgrades relative to downgrades has improved dramatically. Losses realized in the fourth quarter in both the loan portfolio and in OREO write downs drive the expectation of further meaningful reduction in nonperforming assets early in 2025. Exceptional profitability has afforded Old Second the opportunity to aggressively address problem acquired credits and position us to deliver improved performance in 2025. Fourth quarter return on average assets and return on average tangible common equity were 1.34% and 13.79%, respectively, the tax equivalent net interest margin was stable at 4.68% and the efficiency ratio is a very healthy 57.12%. This strong bottom-line performance and a well-positioned balance sheet drove an increase in the tangible common equity capital ratio to 10.04% from 8.53% last year end, in light of the strength of the balance sheet and resilient income statement and margin trends. In summary, we are proud of the sustainability of our performance this year and believe we are well positioned to capitalize on growth opportunities that we believe will come our way in the near future."

Asset Quality & Earning Assets

• Nonperforming loans, comprised of nonaccrual loans plus loans past due 90 days or more and still accruing, totaled $30.3 million at December 31, 2024, $52.3 million at September 30, 2024, and $68.8 million at December 31, 2023. Nonperforming loans, as a percent of total loans, were 0.8% at December 31, 2024, 1.3% at September 30, 2024, and 1.7% at December 31, 2023. The decrease in the fourth quarter of 2024 for nonperforming loans is driven by net nonaccrual loans outflows of $23.3 million, partially offset by $1.3 million of net inflows of loans past due 90 days or more and still accruing. Nonaccrual loan outflows consist of $8.9 million paid off, largely driven by one commercial real estate - investor loan of $6.6 million, a $13.0 million commercial real estate - owner occupied relationship transferred to OREO, $8.3 million of partial principal reductions from payments, and $3.2 million of upgrades. The nonaccrual outflows were partially offset by additions of $10.0 million, primarily driven by one large commercial real estate - owner occupied relationship.

• Total loans were $3.98 billion at December 31, 2024, reflecting a decrease of $9.7 million compared to September 30, 2024, and a decrease of $61.6 million compared to December 31, 2023. The decrease 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 fourth quarter of 2024 totaled $4.00 billion, reflecting an increase of $36.3 million from the third quarter of 2024, and a decrease of $13.4 million from the fourth quarter of 2023.

• Available-for-sale securities totaled $1.16 billion at December 31, 2024, compared to $1.19 billion at September 30, 2024 and December 31, 2023. The unrealized mark to market loss on securities totaled $68.6 million as of December 31, 2024, compared to $56.2 million as of September 30, 2024, and $84.2 million as of December 31, 2023, due to market interest rate fluctuations as well as changes year over year in the composition of the securities portfolio. During the quarter ended December 31, 2024, we had security purchases of $84.9 million, and security maturities, calls and paydowns of $101.2 million, compared to security purchases of $22.7 million and security calls and paydowns of $31.3 million during the quarter ended September 30, 2024. During the quarter ended December 31, 2023, we had security purchases of $9.2 million and $81.6 million of maturities, calls, and paydowns, which resulted in net realized losses of $2,000. 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 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 are found in the full earnings release at www.oldsecond.com, under the investor relations tab, beginning on page 17, which 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," "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, loan growth, deposit trends and funding, asset-quality trends, balance sheet growth, and building capital. 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; and (8) the adverse effects of events beyond our control that may have a destabilizing effect on financial markets and the economy, such as 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. 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, January 23, 2025, at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) to discuss our fourth quarter 2024 financial results. Investors may listen to our call via telephone by dialing 888-506-0062, using Entry Code: 894547. 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 January 30, 2025, by dialing 877-481-4010, using Conference ID: 51807.

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

SOURCE: Old Second Bancorp Inc.

View the original press release on ACCESS Newswire

FAQ

What was OSBC's earnings per share in Q4 2024?

Old Second Bancorp reported earnings of $0.42 per diluted share in Q4 2024.

How much did OSBC's nonperforming loans decrease in Q4 2024?

Nonperforming loans decreased to $30.3 million (0.8% of total loans) in Q4 2024, down from $52.3 million (1.3%) in Q3 2024.

What dividend did OSBC declare for Q4 2024?

OSBC declared a cash dividend of $0.06 per share, payable on February 10, 2025, to stockholders of record as of January 31, 2025.

How did OSBC's net interest margin perform in Q4 2024?

OSBC's net interest margin was 4.68% in Q4 2024, showing stability compared to 4.64% in Q3 2024.

What was OSBC's efficiency ratio in Q4 2024?

OSBC's efficiency ratio was 57.12% in Q4 2024, compared to 53.38% in Q3 2024.