Old Second Bancorp (OSBC) Q2 2024 earnings summary

Executive summary

• Net income for Q2 2024 was $21.9 million ($0.48 per diluted share), up from Q1 2024 but down from $25.6 million in Q2 2023, mainly due to higher interest expense and increased provision for credit losses.

• Adjusted net income for Q2 2024 was $21.0 million, compared to $25.6 million in Q2 2023; for the first six months, adjusted net income was $42.3 million, down from $49.0 million year-over-year.

• The company remains well-capitalized, with all regulatory capital ratios above required thresholds as of June 30, 2024.

• Asset quality improved, with nonperforming and classified assets at their lowest since year-end 2022.

• Board declared a $0.05 per share dividend, payable August 5, 2024.

Financial highlights

• Net interest and dividend income for Q2 2024 was $59.7 million, down $93,000 sequentially and $3.9 million year-over-year, primarily due to higher deposit costs and lower securities income.

• Tax equivalent net interest margin (NIM) was 4.63%, up 5 basis points from Q1 2024 and nearly flat year-over-year.

• Noninterest income rose to $11.1 million, up 6.0% from Q1 2024 and 35.3% from Q2 2023, driven by wealth management, card-related, mortgage banking, and BOLI-related income.

• Noninterest expense was $37.9 million, down 1.0% sequentially but up 8.7% year-over-year, mainly due to higher salaries, technology, and advertising costs.

• Provision for credit losses was $3.8 million, up from $2.0 million in Q2 2023, reflecting higher charge-offs and risk rating migration.

Outlook and guidance

• Loan growth is expected to be low- to mid-single digits in Q3 and Q4 2024, with optimism from a strong pipeline.

• Margin trends anticipated to be flat or slightly down for the remainder of the year; each 25bp Fed cut would reduce margin by 5-7 basis points.

• Efficiency ratio expected in the low 50s with higher rates, mid- to high 50s if rates fall significantly.

• Noninterest expense projected to remain relatively flat, around $23 million per quarter.

• Management remains focused on compounding tangible book value and maintaining strong returns on equity.