Old Second Bancorp (OSBC) Q1 2025 earnings summary

Executive summary

• Net income for Q1 2025 was $19.8 million ($0.43 per diluted share), up $720,000 from Q4 2024 but down from $21.3 million ($0.47 per share) in Q1 2024, mainly due to higher noninterest expense and lower noninterest income, partially offset by higher net interest income and lower provision for credit losses.

• Adjusted net income (non-GAAP) was $20.6 million for Q1 2025, compared to $21.2 million in Q1 2024, excluding mortgage servicing rights mark-to-market and nonrecurring items.

• Tangible book value per share increased over 15% annualized both sequentially and year-over-year, despite dilution from a branch purchase.

• The company is optimistic about future quarters, citing improved credit quality, strong balance sheet positioning, and the expected benefits from the Evergreen Bank Group and Bancorp Financial mergers.

• Completed acquisition of five Illinois branches from First Merchants Bank in December 2024, adding $268 million in deposits and $7.1 million in loans.

Financial highlights

• Net interest and dividend income rose to $62.9 million in Q1 2025, up 2.1% sequentially and 5.2% year-over-year, driven by higher yields and lower short-term borrowing costs.

• Net interest margin (tax-equivalent) expanded to 4.88% from 4.68% in Q4 2024 and 4.58% in Q1 2024.

• Noninterest income was $10.2 million, down 12.1% sequentially and 2.9% year-over-year, mainly due to lower mortgage banking revenue and BOLI adjustments, partially offset by higher wealth management and deposit service charges.

• Noninterest expense increased 16.4% year-over-year to $44.5 million, primarily from higher salaries, benefits, occupancy, legal, and OREO expenses.

• Provision for credit losses was $2.4 million, down from $3.5 million in Q1 2024, reflecting higher commercial charge-offs and updated economic forecasts.

Outlook and guidance

• Margin trends for 2025 are expected to be stable to modestly down, with deposit growth providing flexibility.

• Management targets low single-digit loan growth for the second half of 2025, with a cautious approach to new lending.

• Expense growth is expected to be around 4% for 2025, with a focus on expense control and liquidity management.

• The pending Evergreen Bank Group and Bancorp Financial mergers are expected to enhance margin, capital flexibility, and competitive positioning.

• Forward-looking statements highlight risks from economic conditions, interest rates, integration of acquisitions, and regulatory changes.