Old Second Bancorp (OSBC) M&A Announcement summary

Deal rationale and strategic fit

• The combination enhances competitive positioning in the western Chicago suburbs and expands presence in the Chicago market, adding significant consumer lending capabilities, especially in powersports lending, a national niche with high yields and defensible market position.

• The transaction diversifies and strengthens asset generation, adding a best-in-class consumer lending franchise focused on powersport loans, with Evergreen's powersports lending representing about 60% of its loan balances and a 2024 portfolio yield of 8.84%.

• The combined entity will have approximately $7.1B in assets, $6.0B in deposits, and $5.2B in loans, making it the second largest community bank under $10B in assets in Chicago.

• The merger leverages longstanding relationships, shared core values, and Old Second's low-cost deposit franchise, enhancing management depth and product offerings.

• The acquisition brings a meaningful consumer lending vertical, increasing consumer lending concentration to about 20% of the portfolio.

Financial terms and conditions

• Aggregate consideration is approximately $197 million, priced at 1.31x tangible book value, with 75% stock and 25% cash.

• Bancorp Financial shareholders will receive 2.5814 shares of Old Second common stock and $15.93 in cash per share, with an implied purchase price of $62.60 per share based on Old Second's closing price of $18.08 on Feb 24, 2025.

• Evergreen shareholders will own about 15% of the pro forma entity; pro forma ownership is 85% Old Second, 15% Evergreen.

• The transaction is projected to be 16% EPS accretive, with ROA up 13 basis points and ROTCE up 267 basis points after full cost savings.

• TCE ratio at closing is expected to be about 9.6%, providing flexibility for future investments or capital return.

Synergies and expected cost savings

• Identified $12 million in annual pre-tax cost savings, representing about 30% of the combined expense base, with 50% realized in 2025 and 100% by early 2026.

• Cost savings stem from employee, occupancy, G&A, and other expenses, and are expected to be achieved without impacting business operations.