Old Second Bancorp (OSBC) Q4 2024 earnings summary

Executive summary

• Net income for Q4 2024 was $19.1 million, or $0.42 per diluted share, down from $23.0 million in Q3 2024 and up from $18.2 million in Q4 2023, with ROA at 1.34% and return on average tangible common equity at 13.79%.

• Adjusted net income was $20.3 million, excluding $1.5 million in transaction expenses from the First Merchants 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 book value per share rose over 15% year-over-year, despite branch purchase dilution, and tangible equity ratio increased 151 basis points year-over-year to 10.04%.

• The First Merchants branch acquisition contributed to deposit growth and improved funding costs.

Financial highlights

• Net interest income rose to $61.6 million, up $1 million sequentially and $349,000 year-over-year, with noninterest income increasing 9.7% sequentially and 33.0% year-over-year to $11.6 million.

• Tax equivalent net interest margin (NIM) increased to 4.68% from 4.64% last quarter and 4.62% a year ago.

• Average deposits increased $114 million (2.5%), and period-end deposits rose $303 million (6.8%) from the prior quarter, driven by 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 acquisition 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 expected to trend down slowly, with NIM guidance in the 440–450 basis point range if rates decline.

• Operating expense growth targeted at 4–5% for 2025, inclusive of First Merchants acquisition.

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

• Charge-off range for 2025 expected to be 10–20 basis points, significantly lower than 2024.

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