Old Second Bancorp (OSBC) Q3 2024 earnings summary

Executive summary

• Net income for Q3 2024 was $23.0 million ($0.50 per diluted share), up $1.1 million sequentially but down $1.4 million year-over-year, mainly due to higher deposit costs and increased noninterest expenses.

• Adjusted net income (non-GAAP) for Q3 2024 was $23.3 million, compared to $21.0 million in Q2 2024 and $24.8 million in Q3 2023.

• Tangible equity ratio increased to 10.14% sequentially; tangible book value per share rose over 30% year-over-year.

• Announced acquisition of five Illinois branches from First Merchants Bank, expected to close in Q4 2024, adding $304 million in deposits and $12 million in loans.

• Board declared a $0.06 per share dividend, a 20% increase, payable November 4, 2024.

Financial highlights

• Net interest and dividend income for Q3 2024 was $60.6 million, up 1.5% sequentially but down 3.9% year-over-year due to higher deposit costs.

• Noninterest income for Q3 2024 was $10.6 million, up from $9.9 million in Q3 2023, driven by wealth management and other income.

• Noninterest expense increased to $39.3 million in Q3 2024, up 3.8% sequentially and 5.0% year-over-year, mainly due to higher salaries, benefits, and transaction-related costs.

• Provision for credit losses was $2.0 million in Q3 2024, down from $3.0 million a year ago; net recoveries of $155,000 were recorded.

• Total assets were $5.67 billion at September 30, 2024, down $51.0 million from December 31, 2023.

Outlook and guidance

• Management expects mid-single digit organic loan growth in 2025, with Q4 2024 loan growth anticipated to be softer due to seasonality.

• Expense growth for 2025 projected in the 3%-5% range, mainly from salary and benefits; technology and infrastructure spending to be modest.

• Margin trends expected to decline modestly for the remainder of the year, mitigated by the branch acquisition closing in Q4 2024.

• Deposit migration into interest-bearing accounts is expected to slow following recent rate reductions on CD specials.

• Effective tax rate guidance for next quarter is 24.7635%.