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 from $24.3 million ($0.54 per share) in Q3 2023, 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 book value per share increased over 30% year-over-year and sequentially on an annualized basis.

• A 20% increase in the common dividend was announced, with a $0.06 per share dividend paid November 4, 2024.

• 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.

Financial highlights

• Net interest and dividend income for Q3 2024 was $60.6 million, up 1.5% sequentially but down from $63.0 million in Q3 2023 due to higher deposit costs.

• Net interest margin (tax-equivalent) was 4.64% in Q3 2024, compared to 4.64% in Q3 2023.

• Noninterest income was $10.6 million, up year-over-year, driven by wealth management and other income, and lower securities losses.

• Noninterest expense increased to $39.3 million, mainly due to higher salaries, benefits, incentive accruals, and $471,000 in acquisition costs.

• Provision for credit losses was $2.0 million in Q3 2024, down from $3.0 million in Q3 2023; net recoveries of $155,000 were recorded.

Outlook and guidance

• Management expects mid-single digit organic loan growth in 2025, with Q4 2024 loan pipelines softer seasonally but better than last year.

• Expense growth for 2025 is projected in the 3%-5% range, mainly from salary and benefits, with modest technology spending.

• Margin trends are expected to decline modestly due to rate cuts, but the impact will be mitigated by a branch acquisition and deposit inflows.

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

• Provisioning for credit losses is expected to remain around $2 million per quarter, barring deterioration.