Old Second ((OSBC)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Old Second’s recent earnings call painted a picture of robust financial performance, buoyed by the successful integration of the Evergreen acquisition. The company reported improved net interest margins and a rise in noninterest income, signaling effective strategic moves. However, challenges were noted, including increased provisions for credit losses and higher noninterest expenses due to acquisition costs. Asset quality showed some stress, with a rise in nonperforming loans and classified assets, indicating areas that require attention.
Net Interest Margin Improvement
The earnings call highlighted a significant improvement in Old Second’s net interest margin, which increased to 5.05% in the third quarter of 2025. This marks a 20 basis point improvement from the previous quarter and a 41 basis point increase year-over-year, showcasing the company’s effective management of interest income and expenses.
Successful Evergreen Acquisition
Old Second successfully completed the acquisition of Bancorp Financial and Evergreen Bank Group on July 1. This strategic move has been seamlessly integrated, enhancing net interest income and expanding the company’s loan portfolio, which is expected to drive future growth.
Noninterest Income Growth
The company reported a $2.1 million increase in noninterest income compared to the prior year. This growth was driven by a 26.1% rise in wealth management fees and over a 10% increase in service charges on deposits, reflecting strong performance in these areas.
Dividend Increase
Reflecting confidence in its ongoing performance, Old Second announced a 17% increase in its quarterly dividend. This move underscores the company’s commitment to returning value to its shareholders.
Record Loan Growth
Total loans saw a substantial increase of $1.27 billion, primarily due to the acquisition, with an additional $72 million in organic loan growth during the third quarter. This growth highlights the company’s expanding market presence and lending capabilities.
Increased Provision for Credit Losses
The company reported increased provision levels for credit losses, attributed to a new consumer mix and higher historical loss rates. Net charge-offs to average loans rose to 39 basis points in the third quarter of 2025, indicating a cautious approach to credit risk management.
Higher Noninterest Expenses
Noninterest expenses rose by $19.7 million over the prior quarter, with $11.8 million related to acquisition costs. This increase reflects the financial impact of integrating new acquisitions into the company’s operations.
Asset Quality Concerns
There were concerns over asset quality, as nonperforming loans and classified assets increased, particularly in the commercial and industrial (C&I) portfolio. Industries such as transportation and warehousing faced challenges, contributing to these asset quality issues.
Powersport Portfolio Losses
The Powersport business experienced higher-than-expected losses, though loan yields were higher than anticipated. This indicates a mixed performance in this segment, requiring strategic adjustments.
Forward-Looking Guidance
During the earnings call, Old Second provided forward-looking guidance, expressing optimism about its strategic positioning and future prospects. The company reported a GAAP net income of $9.9 million, with a return on assets of 0.56% and a return on average tangible common equity of 6.16%. Despite acquisition-related impacts, the net income excluding adjustments was $28.4 million. The company remains optimistic about further growth opportunities following the successful integration of Evergreen Bank.
In summary, Old Second’s earnings call reflected a strong financial performance with strategic acquisitions driving growth. While there are challenges in asset quality and increased expenses, the company’s forward-looking guidance remains optimistic, with expectations of continued growth and shareholder value enhancement.