AURORA, IL / ACCESSWIRE / April 17, 2024 / Old Second Bancorp, Inc. (the "Company," "Old Second," "we," "us," and "our") (NASDAQ:OSBC), the parent company of Old Second National Bank (the "Bank"), today announced financial results for the first quarter of 2024. Our net income was $21.3 million, or $0.47 per diluted share, for the first quarter of 2024, compared to net income of $18.2 million, or $0.40 per diluted share, for the fourth quarter of 2023, and net income of $23.6 million, or $0.52 per diluted share, for the first quarter of 2023. Adjusted net income, a non-GAAP financial measure that excludes certain nonrecurring items, as applicable, was $21.3 million, or $0.47 per diluted share, for the first quarter of 2024, compared to $19.1 million, or $0.42 per diluted share, for the fourth quarter of 2023, and $23.4 million, or $0.52 per share, for the first quarter of 2023. There were no adjusting items impacting the first quarter of 2024; significant adjusting items impacting the fourth quarter of 2023 results included a $1.2 million litigation reserve related to prior years' overdraft fee compliance. See the discussion entitled "Non-GAAP Presentations" below and the tables beginning on page 17 of the full earnings release that provide a reconciliation of each non-GAAP measure to the most comparable GAAP equivalent.

Net income increased $3.1 million in the first quarter of 2024 compared to the fourth quarter of 2023. The increase was primarily due to the decrease of $4.5 million in provision for credit losses and the $1.8 million increase in noninterest income primarily due to a more favorable mark on the fair value of mortgage servicing rights, which were partially offset by a $1.5 million decrease in net interest and dividend income, a $1.2 million increase in noninterest expense and a $518,000 increase in provision for income taxes. Net income decreased $2.3 million in the first quarter of 2024 compared to the first quarter of 2023, primarily due to a decrease in net interest income of $4.3 million year over year driven by contraction in the securities portfolio, as well as higher market rates and increased short-term borrowing. The higher market rates and increased borrowing resulted in a $7.5 million increase to interest expense.

Operating Results

First quarter 2024 net income was $21.3 million, reflecting a $3.1 million increase from the fourth quarter 2023, and a decrease of $2.3 million from the first quarter of 2023. Adjusted net income, as defined above, was $21.3 million for the first quarter of 2024, an increase of $2.2 million from adjusted net income for the fourth quarter of 2023, and a decrease of $2.1 million from adjusted net income for the first quarter of 2023.
Net interest and dividend income was $59.8 million for the first quarter of 2024, reflecting a decrease of $1.5 million, or 2.4%, from the fourth quarter of 2023, and a decrease of $4.3 million, or 6.7%, from the first quarter of 2023.
We recorded a net provision for credit losses of $3.5 million in the first quarter of 2024, compared to a net provision for credit losses of $8.0 million in the fourth quarter of 2023, and a net provision for credit losses of $3.5 million in the first quarter of 2023.
Noninterest income was $10.5 million for the first quarter of 2024, an increase of $1.8 million, or 20.3%, compared to $8.7 million for the fourth quarter of 2023, and an increase of $3.2 million, or 42.9%, compared to $7.4 million for the first quarter of 2023.
Noninterest expense was $38.2 million for the first quarter of 2024, an increase of $1.2 million, or 3.3% compared to $37.0 million for the fourth quarter of 2023, and an increase of $2.3 million, or 6.5%, compared to $35.9 million for the first quarter of 2023.
We had a provision for income tax of $7.2 million for the first quarter of 2024, compared to a provision for income tax of $6.7 million for the fourth quarter of 2023 and a provision of $8.4 million for the first quarter of 2023. The effective tax rate for each of the periods presented was 25.3%, 26.9%, and 26.3%, respectively.
On April 16, 2024, our Board of Directors declared a cash dividend of $0.05 per share of common stock, payable on May 6, 2024, to stockholders of record as of April 26, 2024.

Financial Highlights

	Quarters Ended
(Dollars in thousands)	March 31,			December 31,			March 31,
	2024			2023			2023
Balance sheet summary
Total assets	$	5,616,072		$	5,722,799		$	5,920,283
Total securities available-for-sale		1,168,797			1,192,829			1,455,068
Total loans		3,969,411			4,042,953			4,003,354
Total deposits		4,608,275			4,570,746			4,897,220
Total liabilities		5,019,913			5,145,518			5,423,413
Total equity		596,159			577,281			496,870

Total tangible assets	$	5,518,957		$	5,625,104		$	5,820,751
Total tangible equity		499,044			479,586			397,338

Income statement summary
Net interest income	$	59,783		$	61,235		$	64,086
Provision for credit losses		3,500			8,000			3,501
Noninterest income		10,501			8,729			7,350
Noninterest expense		38,241			37,026			35,922
Net income		21,312			18,225			23,607
Effective tax rate		25.33	%		26.92	%		26.26	%

Profitability ratios
Return on average assets (ROAA)		1.51	%		1.27	%		1.62	%
Return on average equity (ROAE)		14.56			13.18			19.86
Net interest margin (tax-equivalent)		4.58			4.62			4.74
Efficiency ratio		53.59			50.82			47.52
Return on average tangible common equity (ROATCE)		17.80			16.43			25.54
Tangible common equity to tangible assets (TCE/TA)		9.04			8.53			6.83

Per share data
Diluted earnings per share	$	0.47		$	0.40		$	0.52
Tangible book value per share		11.13			10.73			8.90

Company capital ratios¹
Common equity tier 1 capital ratio		12.02	%		11.37	%		9.91	%
Tier 1 risk-based capital ratio		12.55			11.89			10.43
Total risk-based capital ratio		14.79			14.06			12.79
Tier 1 leverage ratio		10.47			10.06			8.56

Bank capital ratios ^{1, 2}
Common equity tier 1 capital ratio		13.06	%		12.32	%		11.98	%
Tier 1 risk-based capital ratio		13.06			12.32			11.98
Total risk-based capital ratio		14.03			13.24			13.10
Tier 1 leverage ratio		10.89			10.41			9.83

¹Both the Company and the Bank ratios are inclusive of a capital conservation buffer of 2.50%, and both are subject to the minimum capital adequacy guidelines of 7.00%, 8.50%, 10.50%, and 4.00% for the Common equity tier 1, Tier 1 risk-based, Total risk-based and Tier 1 leverage ratios, respectively.
²The prompt corrective action provisions are applicable only at the Bank level, and are 6.50%, 8.00%, 10.00%, and 5.00% for the Common equity tier 1, Tier 1 risk-based, Total risk-based and Tier 1 leverage ratios, respectively.

Chairman, President and Chief Executive Officer Jim Eccher said "Old Second reported strong results in the first quarter with exceptional profitability and stable to improving trends. Return on average assets and return on average tangible common equity came in at 1.51% and 17.8%, respectively, and the efficiency ratio remains strong at just over 53% despite seasonally high expenses. The net interest margin is proving to be quite resilient despite volatility in market interest rates and asset quality continues to trend favorably with continuing positive migration and no surprises in the first quarter. Over the year ago quarter, our tangible book value per share has increased by 25% and our common equity Tier 1 ratio now exceeds 12% from under 10% just a year ago. The strength of our balance sheet today, combined with exceptional profitability, provides us the flexibility to continue to invest for growth while evaluating the potential to return capital to stockholders in the near term. In short, balance sheet flexibility, combined with continuing strength in core banking trends, gives me confidence Old Second can deliver another strong year in 2024 for our stockholders, communities and employees. I have never been more excited for the future of Old Second."

Asset Quality & Earning Assets

Nonperforming loans, comprised of nonaccrual loans plus loans past due 90 days or more and still accruing, totaled $65.1 million at March 31, 2024, $68.8 million at December 31, 2023, and $64.5 million at March 31, 2023. Nonperforming loans, as a percent of total loans, were 1.6% at March 31, 2024, 1.7% at December 31, 2023, and 1.6% at March 31, 2023. The decrease in the first quarter of 2024 is driven by a partial charge-off of $3.9 million for a commercial real estate-owner occupied loan.
Total loans were $3.97 billion at March 31, 2024, reflecting a decrease of $73.5 million compared to December 31, 2023, and a decrease of $33.9 million compared to March 31, 2023. The decrease year over year was largely driven by the declines in commercial and commercial real estate-owner occupied portfolios. Average loans (including loans held-for-sale) for the first quarter of 2024 totaled $4.02 billion, reflecting an increase of $2.9 million from the fourth quarter of 2023 and an increase of $86.9 million from the first quarter of 2023.
Available-for-sale securities totaled $1.17 billion at March 31, 2024, compared to $1.19 billion at December 31, 2023, and $1.46 billion at March 31, 2023. The unrealized mark to market loss on securities totaled $85.0 million as of March 31, 2024, compared to $84.2 million as of December 31, 2023, and $105.6 million as of March 31, 2023, due to market interest rate fluctuations as well as changes year over year in the composition of the securities portfolio. During the quarter ended March 31, 2024, we had security purchases of $15.7 million, security maturities of $2.0 million, paydowns of $30.7 million, and sales of $5.3 million, resulting in net realized gains of $1,000, compared to security purchases of $9.2 million, paydowns of $25.6 million, no sales of securities and $55.9 million of maturities and calls during the quarter ended December 31, 2023, which resulted in net realized losses of $2,000. During the quarter ended March 31, 2023, we had $4.2 million of security purchases, $37.7 million of security paydowns, calls and maturities, and security sales of $66.2 million, which resulted in net realized losses of $1.7 million. We may continue to buy and sell strategically identified securities as opportunities arise.

Non-GAAP Presentations

Management has disclosed in this earnings release certain non-GAAP financial measures to evaluate and measure our performance, including the presentation of adjusted net income, net interest income and net interest margin on a fully taxable equivalent basis, and our efficiency ratio calculations on a taxable equivalent basis. The net interest margin fully taxable equivalent is calculated by dividing net interest income on a tax equivalent basis by average earning assets for the period. Consistent with industry practice, management has disclosed the efficiency ratio including and excluding certain items, which is discussed in the noninterest expense presentation on page 7 of the full filing of this release; see the investor relations tab at oldsecond.com for this full release.

We consider the use of select non-GAAP financial measures and ratios to be useful for financial and operational decision making and useful in evaluating period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenditures or assets that we believe are not indicative of our primary business operating results or by presenting certain metrics on a fully taxable equivalent basis. We believe these measures provide investors with information regarding balance sheet profitability, and we believe that management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, analyzing, and comparing past, present and future periods.

These non-GAAP financial measures should not be considered as a substitute for GAAP financial measures, and we strongly encourage investors to review the GAAP financial measures included in this earnings release and not to place undue reliance upon any single financial measure. In addition, because non-GAAP financial measures are not standardized, it may not be possible to compare the non-GAAP financial measures presented in this earnings release with other companies' non-GAAP financial measures having the same or similar names. The tables beginning on page 17 of the full filing of this release provide a reconciliation of each non-GAAP financial measure to the most comparable GAAP equivalent; see the investor relations tab at oldsecond.com for this full release.

Cautionary Note Regarding Forward-Looking Statements

This earnings release and statements by our management may contain forward-looking statements within the Private Securities Litigation Reform Act of 1995. Forward looking statements can be identified by words such as "should," "anticipate," "expect," "estimate," "intend," "believe," "may," "likely," "will," "forecast," "project," "looking forward," "optimistic," "hopeful," "potential," "progress," "prospect," "remain," "deliver," "continue," "trend," "momentum," "remainder," "beyond," "and "near" or other statements that indicate future periods. Examples of forward-looking statements include, but are not limited to, statements regarding the economic outlook, loan growth, deposit trends and funding, asset-quality trends, balance sheet growth, and building capital. Such forward-looking statements are subject to risks, uncertainties, and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements, (1) the strength of the United States economy in general and the strength of the local economies in which we conduct our operations may be different than expected; (2) the rate of delinquencies and amounts of charge-offs, the level of allowance for credit loss, the rates of loan growth, or adverse changes in asset quality in our loan portfolio, which may result in increased credit risk-related losses and expenses; (3) changes in legislation, regulation, policies, or administrative practices, whether by judicial, governmental, or legislative action; (4) risks related to future acquisitions, if any, including execution and integration risks; (5) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) could have a negative impact on us; (6) changes in interest rates, which has and may continue to affect our deposit and funding costs, net income, prepayment penalty income, mortgage banking income, and other future cash flows, or the market value of our assets, including our investment securities; (7) elevated inflation which causes adverse risk to the overall economy, and could indirectly pose challenges to our clients and to our business; and (8) the adverse effects of events beyond our control that may have a destabilizing effect on financial markets and the economy, such as epidemics and pandemics, war or terrorist activities, essential utility outages, deterioration in the global economy, instability in the credit markets, disruptions in our customers' supply chains or disruption in transportation. Additional risks and uncertainties are contained in the "Risk Factors" and forward-looking statements disclosure in our most recent Annual Report on Form 10-K, and Quarterly Reports on Form 10-Q. The inclusion of this forward-looking information should not be construed as a representation by us or any person that future events, plans, or expectations contemplated by us will be achieved. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

Conference Call

We will host a call on Thursday, April 18, 2024, at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) to discuss our first quarter 2024 financial results. Investors may listen to our call via telephone by dialing 888-506-0062, using Entry Code: 259215. Investors should call into the dial-in number set forth above at least 10 minutes prior to the scheduled start of the call.

A replay of the call will be available until 11:00 a.m. Eastern Time (10:00 a.m. Central Time) on April 25, 2024, by dialing 877-481-4010, using Conference ID: 50298.

Contact:	Bradley S. Adams
	Chief Financial Officer
	(630) 906-5484

SOURCE: Old Second Bancorp Inc.

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Old Second Bancorp, Inc. Reports First Quarter 2024 Net Income of $21.3 Million, or $0.47 per Diluted Share