Old Second Bancorp (OSBC) Q4 2024 earnings summary

Executive summary

• Q4 2024 net income was $19.1 million ($0.42 per diluted share), down from $23.0 million in Q3 2024, but up from $18.2 million in Q4 2023, with a return on assets of 1.34% and return on average tangible common equity of 13.79%.

• Adjusted net income was $20.3 million, excluding $1.5 million in transaction expenses from the FRME branch purchase.

• Profitability remained strong despite a $3.5 million provision for credit losses, $1.7 million in OREO write-downs, and $1.5 million in merger-related expenses.

• Tangible equity ratio increased by 151 basis points year-over-year to 10.04%, and tangible book value per share rose over 15% year-over-year.

• Board declared a $0.06/share dividend, payable Feb 10, 2025.

Financial highlights

• Net interest income rose to $61.6 million, up $1 million sequentially and $349,000 year-over-year, with noninterest income up 33% year-over-year to $11.6 million.

• Tax equivalent net interest margin (NIM) was 4.68% for Q4 2024, up from 4.64% in Q3 and 4.62% in Q4 2023.

• Average deposits increased $114 million (2.5%), and period-end total deposits rose $303 million (6.8%) from the prior quarter, mainly due to the FRME branch acquisition.

• Noninterest expense rose 12.8% from Q3 2024 and 19.7% year-over-year to $44.3 million, mainly due to transaction and OREO costs.

• Provision for credit losses was $3.5 million, up from $2.0 million in Q3 2024, but down from $8.0 million in Q4 2023.

Outlook and guidance

• Margin trends for 2025 are expected to trend down slowly, with NIM guidance in the 4.40–4.50% range, but management expects to outperform if rates remain stable.

• Operating expense growth is targeted at 4–5% for 2025, inclusive of the full impact of the FRME acquisition.

• Loan growth is targeted in the mid-single digits, with optimism for improved demand and pricing.

• Management expects further reduction in nonperforming assets in early 2025, citing aggressive credit remediation and strong profitability.

• Expected charge-offs for 2025 are in the 10–20 basis point range, lower than 2024.