Old Second Bank Q4 2025 Old Second Bancorp Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Old Second Bancorp Inc Earnings Call
On the call today, are Jim Iker. The company's chairman president and CEO. Brad Adams the company, coo and CFO.
Darren Campbell the company's head of National Specialty, lending and Gary Collins, the vice chairman of our board.
I will start with a reminder that old seconds comments today will contain forward-looking statements about the company's business strategies and Prospects, which are based on Management's, existing expectations in the current economic environment.
These statements are not a guarantee of future performance and results May differ materially from those projected.
Management would ask you to refer to the company's SEC filings for a full discussion of the company's risk factors.
The company does not undertake any duty to update such forward-looking statements.
On today's call, we will also be discussing certain non-gaap Financial measures.
These non-gaap measures are described and reconciled to their Gap. Counterparts and our earnings release, which is available on our website at oldsecond.com on the homepage under the investor relations tab.
Now, I will turn it over to Jim Iker.
Good morning, and thank you for joining us and thanks for your patience as we work through some technical uh, difficulties there.
Uh, I have uh several prepared opening remarks, give you my overview of the quarter then turn it over to Brad for additional details. We will then conclude with summary comments and thoughts about the future before we open it up to Q&A.
From a gap perspective. Net income was 28.8 million or 54 cents per diluted share in the fourth quarter and our Roa was 1.64%.
Fourth quarter, 2025 return, on average tangible. Common Equity was 16.15% and the tax equivalent efficiency ratio was 53.98%.
Fourth quarter, earnings were impacted by a couple of material adjusting items. The first being a 428,000 pre-tax loss on mortgage servicing rights.
And a 2.5 million in pre-tax acquisition related, expenses driven by 1.5 million of computer and data processing related to the core systems conversion as well as systems related to acquired operations.
Excluding those 2 items. Net income of the fourth quarter was 30.8 million or 58 cents per diluted share.
Tangible book value per share, increased 61 basis points to 14.12.
The tangible equity ratio increased 61 basis points from last quarter from 10.41 to 11.02%.
And is 98 basis points higher than the like period 1 year ago.
Common Equity, Tier 1 was 12.99% in the fourth quarter increasing from 12.444%. Last quarter and increasing 17 basis points from 1 year ago.
Our financials continue to reflect an exceptionally Strong, net interest margin at 5.09% for the fourth quarter, which is 4 bases. 4 basis, point improvement from last quarter and 41 basis point increase over the prior year like quarter on a tax equivalent basis.
Speaker #1: Good morning, everyone, and thank you for joining us today for Old Second Bancorp Inc's fourth quarter 2025 earnings call. On the call today are Jim Ecker, the company's chairman, president, and CEO; Brad Adams, the company's COO and CFO; Darren Campbell, the company's head of national specialty lending; and Gary Collins, the vice chairman of our board.
Pre-provision that revenues decrease from both interest earning deposits and securities balance declines coupled with a decline in rates.
The total cost of deposits was 115. Basis points for the fourth quarter, compared to 133 basis points for the prior link, quarter and 89 basis points from the fourth quarter of 2024,
Speaker #1: I will start with a reminder that Old Second's comments today will contain forward-looking statements about the company's business, strategies, and prospects, which are based on management's existing expectations and the current economic environment.
For the fourth quarter, 2025 compared to last quarter tax equivalent income on average earning assets. Decreased 1.8 million while interest expense on average interest bearing liabilities to increase 2 million
Speaker #1: These statements are not a guarantee of future performance, and results may differ materially from those projected. Management would ask you to refer to the company's SEC filings for a full discussion of the company's risk factors.
Loan. Deposit ratio. Now, sits at 93.9% as of year end compared to 91.4% last quarter and 83.5% as of 12312024.
The fourth quarter, 2025 experienced a slight increase in total loans.
Speaker #1: The company does not undertake any duty to update such forward-looking statements. On today's call, we will also be discussing certain non-GAAP financial measures. These non-GAAP measures are described and reconciled to their GAAP counterparts in our earnings release, which is available on our website at oldsecond.com on the homepage under the Investor Relations tab.
Excuse me, a slight decrease in total loans of 12.4 million from last quarter. Tax equivalent loan yields declined. 11 basis points.
during the fourth quarter of 2025 compared to the link quarter, but reflected a 48 basis point increase for the quarter year-over-year,
Decrease in yield comparison to the prior quarter is primarily a function of Fed rate, Cuts, working through the portfolio.
Speaker #1: Now I will turn it over to Jim Ecker.
Speaker #2: Good morning, and thank you for joining us, and thanks for your patience as we work through some technical difficulties there. I have several prepared opening remarks.
Million in general. Our collateral position is very good on Q4 downgraded credits. We recorded a
Speaker #2: I'll give you my overview of the quarter, then turn it over to Brad for additional details. We will then conclude with summary comments and thoughts about the future before we open it up to Q&A.
Speaker #2: From a GAAP perspective, net income was $28.8 million, or $0.54 per diluted share in the fourth quarter, and ROA was 1.64%. Fourth quarter 2025 return on average tangible common equity was 16.15%, and the tax-equivalent efficiency ratio was 53.98%.
$9 of net loan, charge offs in the fourth quarter of 2025 with the majority were 75% of those stemming from the Powersport portfolio and Commercial Real Estate owner occupied.
With regards to Powersports, I would say that loss is given to fault are running a bit higher than we expected. However, yields
In that portfolio are much higher than expected. And the contribution margin is both above expectations and improving.
Speaker #2: Fourth quarter earnings were impacted by a couple of material adjusting items. The first being a $428,000 pre-tax loss on mortgage servicing rights, and $2.5 million in pre-tax acquisition-related expenses driven by $1.5 million of computer and data processing related to the core systems conversion, as well as systems related to acquired operations.
Due to the nature of Power Sports business, gross. Charge offs are anticipated to run at a higher rate than Old. Second is historically experienced especially in a higher interest rate environment.
This is the nature of what is a very good business.
Investors should know that. The contribution margin is now at a multi-year high in this business and we're very bullish on our 2026 performance.
The allowance for credit losses on loans was 72.3 Million.
Speaker #2: Excluding those two items, net income in the fourth quarter was $30.8 million, or $0.58 per diluted share. Tangible book value per share increased 61 basis points to $14.12. The tangible equity ratio increased 61 basis points from last quarter, from 10.41% to 11.02%, and is 98 basis points higher than the like period one year ago.
As of December 31st 2025 or 1.38% of total loans from 75 million at September 30th 2025 which was 1.43% of total loans.
Unemployment and GDP, forecast used and future loss rate. Assumptions remain fairly static from last quarter with no material changes in the unemployment assumptions, on the upper end of the range based on recent fed projections.
Speaker #2: Common Equity Tier One was 12.99% in the fourth quarter, increasing from 12.44% last quarter and increasing 17 basis points from one year ago. Our financials continue to reflect an exceptionally strong net interest margin at 5.09% for the fourth quarter, which is a four basis point improvement from last quarter and a 41 basis point increase over the prior-year like quarter on a tax equivalent basis.
The impact of the global tariff, volatility continues to be considered within our modeling.
Provision levels quarter over link quarter, exclusive of day. 2 purchase accounting, impacts decreased 3 million and we're largely driven by the Powersports portfolio. Net charge off levels with other losses associated with previously, allocated provisions.
Speaker #2: Pre-provision net revenues decreased from both interest-earning deposit and securities balance declines, coupled with a decline in rates. The total cost of deposits was 115 basis points for the fourth quarter, compared to 133 basis points for the prior linked quarter and 89 basis points from the fourth quarter of 2024.
Non-interest income reflected a slight decrease in the fourth quarter, compared to the prior quarter, but continue to perform well compared to the prior year like quarter non-interest income. In the third quarter of 2025 reflected, a 430,000 death benefits on a bully policy which was not experienced in the fourth quarter 2025.
Mortgage Banking income was flat, compared to the link quarter and decline. 668,000 compared to the like prior year period primarily due to the volatility of mortgage servicing rights Mark to Market valuations.
Speaker #2: For the fourth quarter of 2025 compared to last quarter, tax-equivalent income on average earning assets decreased $1.8 million, while interest expense on average interest-bearing liabilities decreased $2.0 million.
Excluding the impact of mortgage servicing, right? Mark to Market adjustments, more Mortgage Banking, income increase, anomaly quarter over link quarter,
And from the prior like, period.
Speaker #2: Loan-to-deposit ratio now sits at 93.9% as of year-end compared to 91.4% last quarter and 83.5% as of 12/31/2024. The fourth quarter of 2025 experienced a slight increase in total loans—excuse me, a slight decrease in total loans of $12.4 million.
Other income decreased anomaly in the fourth quarter, 2025 compared to the prior link quarter, but increased 550,000 compared to the prior like quarter driven largely by Powersport service fees.
Speaker #2: From last quarter, tax equivalent loan yields declined 11 basis points during the fourth quarter of 2025 compared to the linked quarter, but reflected a 48 basis point increase for the quarter year-over-year.
Non-interest income increased 544,000, compared to the prior year, like quarter as wealth management fees increased 238,000 or 7.2%, and service charges on deposits increased 198,000 or 7.5%.
Total amount interest expenses for the fourth quarter of 2025 declined, 10.2 million.
Speaker #2: The decrease in yield compared to the prior quarter is primarily a function of Fed rate cuts working through the portfolio. Asset quality trends were relatively unchanged. Non-performing loans increased $4.8 million, and classified assets increased by $10 million.
From the prior link quarter, fourth quarter, experienced a decrease of 9.3 million and acquisition related cost.
Our efficiency ratio continues to be excellent and the tax equivalent efficiency ratio, adjusted to exclude.
Speaker #2: In general, our collateral position is very good on Q4 downgraded credits. We recorded $6 million of net loan charge-offs in the fourth quarter of 2025, with the majority, or 75%, of those stemming from the Powersport portfolio and commercial real estate owner-occupied.
Core deposit and tangibles amortization Oreo cost in the adjustments to net. Income is noted earlier was 51.28% for the fourth quarter compared to 52.1%.
for the third quarter of 2025,
Speaker #2: With regards to Powersports, I would say that losses given default are running a bit higher than we expected. However, yields in that portfolio are much higher than expected, and the contribution margin is both above expectations and improving.
So our Focus continues to be on the optimization of the balance sheet to perform and withstand the variability of the current and future interest rates. We continue to reduce Reliance on wholesale funding. As we allow the Legacy Evergreen Bank brokered CDs to run off and re-priced higher court or higher cost. Deposits in the falling interest rate.
Environment with that, I'll turn it over for Brad for additional color.
Speaker #2: Due to the nature of the powersports business, gross charge-offs are anticipated to run at a higher rate than Old Second has historically experienced, especially in a higher interest rate environment.
Thanks Jim. Um I don't have a time to talk about today. I would say that that um,
Speaker #2: This is the nature of what is a very good business. Investors should know that the contribution margin is now at a multi-year high in this business, and we're very bullish on our 2026 performance.
We're pretty darn excited to, to close the year like this, you know, running at a north of a 5% margin and ro8, you know, handsomely about 1 and a half.
Speaker #2: The allowance for credit losses on loans was $72.3 million as of December 31, 2025, or 1.38% of total loans, down from $75 million at September 30, 2025, which was 1.43% of total loans.
And our OTC above 17 and a half on an operating basis is, is pretty exceptional performance that. We're proud of
You know, EPS some 30% over last year integration fully done, um, integration at the end of last year as well, um, that's a lot of work. Um, and
to close the year like that, this is a is is a special gratifying.
Speaker #2: Unemployment and GDP forecast views and future loss rate assumptions remain fairly static from last quarter, with no material changes in the unemployment assumptions on the upper end of the range.
This quarter is not a lot of complexity to it, most of the stuff that we talked about last quarter is still true. Um, so I'll be relatively brief
Speaker #2: Based on recent Fed projections, the impact of the global tariff volatility continues to be considered. Within our modeling, provision levels quarter-over-link quarter, exclusive of day-two purchase accounting impacts, decreased $3 million and were largely driven by the Powersports portfolio net charge-off levels, with other losses associated with previously allocated provisions.
That is just income increased nominally this quarter uh, relative to last quarter at both around the 83 million dollar level.
Loan yields decreased to about 11 basis points and securities yields decreased a bit more at 14 basis points.
Total yield on interest, earning assets, decreased 8, basis points, over the link quarter.
Cost of interest bearing to deposits to decrease more uh at 24 basis points.
Speaker #2: Non-interest income reflected a slight decrease in the fourth quarter compared to the prior quarter, but continued to perform well compared to the prior-year like quarter.
In total interest bearing, liabilities decreased 15 basis points. The end result was a 4 basis point Improvement in the tax equivalent in them.
Uh, which is obviously pretty awesome.
Speaker #2: Non-interest income in the third quarter of 2025 reflected a $430,000 death benefit on a BOLI policy, which was not experienced in the fourth quarter of 2025.
um, tax, quit on them, for the fourth quarter of 2025 2025 increased 41 basis, points from 46 to 8 for the
period last year.
Speaker #2: Mortgage banking income was flat compared to the linked quarter and declined $668,000 compared to the like prior year period, primarily due to the volatility of mortgage servicing rights mark-to-market valuations.
Averaged loans increased 60 million or 1.2 million over link quarter with average deposits, declining 200 million.
Level, we expected deposit. Runoff is largely concentrated in high beta effectively, wholesale deposit, captions as planned.
Speaker #2: Excluding the impact of mortgage servicing mark-to-market adjustments, mortgage banking income increased nominally quarter-over-link quarter and from the prior-year like period. Other income decreased nominally in the fourth quarter of 2025 compared to the prior-link quarter, but increased $550,000 compared to the prior-year like quarter.
Loan origination activity in the fourth quarter. You may not know was actually very good and activity remains robust.
Certainly the market environment marginal spreads is far more favorable than it was in the first half of the year. And certainly at this time last year
Speaker #2: Driven largely by Powersports service fees, non-interest income increased $544,000 compared to the prior year like quarter, as wealth management fees increased $238,000, or 7.2%, and service charges on deposits increased $198,000, or 7.5%.
Uh payoffs especially in the part participation book have resulted in relatively flat balance sheet growth in the fourth in the fourth quarter.
Speaker #2: Total non-interest expenses for the fourth quarter of 2025 declined $10.2 million. From the prior linked quarter, the fourth quarter experienced a decrease of $9.3 million in acquisition-related costs.
This is interesting, balances in the CRA loan participation acquired with West Suburban decline by 53 million in the fourth quarter of this year. The largest 1 quarter runoff that we have seen to date in that portfolio. This was a significant headwind to Growing the balance sheet. This quarter organic activity remains exceptionally strong,
Other than that, everything I said last quarter remains true to the best of my knowledge. Balance sheet is exceptionally. Well positioned in margin Trends people.
Speaker #2: Our efficiency ratio continues to be excellent, and the tax equivalent efficiency ratio adjusted to exclude core deposit intangibles amortization Oreo cost in the adjustments to net income as noted earlier was 51.28% for the fourth quarter compared to 52.1% for the third quarter of 2025.
we may take down modestly in the first quarter, but
still be above 5.
Uh, loan growth, being targeted in the mid single digit level for next year.
Expense growth will be modest. Um,
Pretty inflationary Trends in employee benefits and salaries are going to be moderated by the realization of the cost saves associated with Evergreen.
Speaker #2: So, our focus continues to be on the optimization of the balance sheet to perform and withstand the variability of the current and future interest rates.
Buyback is on the table that we haven't done anything. This quarter.
After coming inevitable.
Speaker #2: We continue to reduce reliance on wholesale funding as we allow the legacy Evergreen Bank brokered CDs to run off and reprice higher core or higher-cost deposits in the falling interest rate environment.
I don't have anything to add about the tax rate other than it was really high this quarter.
Please don't ask me about that.
There isn't a lot of complicated stuff to go over beyond that, so I'll turn the call back over to Jim.
Speaker #2: With that, I'll turn it over to Brad for additional color. Thanks, Jim. I don't have a ton to talk about today. I would say that we're pretty darn excited to close the year like this.
Okay. Thanks, Brad in closing. We're very proud of the year. We just concluded and we believe the level of performance is reflective. The strength of the bank. We are building.
We're optimistic about next year or this year.
Speaker #2: Running at north of a 5% margin in ROA, handsomely above one and a half, and our OTCE above 17 and a half on an operating proud basis is pretty exceptional performance that we're proud of.
And all the opportunities that are in front of Old Second.
I would like to thank our team for their hard work and execution in 2025, including Integrations and systems, conversions, and upgrades that have been made us a much better Old Second.
I could not be more excited about the things we can accomplish next year.
Speaker #2: EPS, up some 30% over last year. Integration is fully done. Integration was completed at the end of last year as well. That's a lot of work, and to close the year like that is especially gratifying.
That concludes our prepared comments this morning, so I'll turn it over to the moderator and we can open it up to questions.
Thank you. At this time. We will be conducting a question and answer session.
Speaker #2: This quarter is not a lot of complexity to it. Most of the stuff that we talked about last quarter is still true. So I'll be relatively brief.
if you would like to ask a question, please press star 1 on your telephone keypad,
A confirmation tone. Will indicate your line is in the question queue?
Speaker #2: That interest income increased nominally this quarter. Relative to last quarter, both around the 83 million level. Loan yields decreased about 11 basis points and securities yields decreased a bit more at 14 basis points.
You may press star 2 if you would like to remove your question from the queue.
For participant, using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker #2: Total yield on interest-earning assets decreased 8 basis points over the link quarter. Cost of interest-bearing deposits decreased more at 24 basis points. And total interest-bearing liabilities decreased 15 basis points.
Once again, that is star 1 to ask a question 1 moment, please while we pull for questions,
Your first question for today is from Jeff rules with da Davidson.
Speaker #2: The end result was a 4 basis point improvement in the tax equivalent M, which is obviously pretty awesome. Tax equivalent M for the fourth quarter of 2025 increased 41 basis points from 4.68% for the period last year.
Uh, good morning, um, on the expense side. Uh, I just wanted to see if those those cost savings Brad. I couldn't tell. If are those fully captured or or was that, is there a tail into 26? That leads to that muted expense growth from
Speaker #2: Average loans increased $60 million, or $1.2 million over the linked quarter, with average deposits declining $200 million. The level was as we expected. Deposit runoff has largely concentrated in high beta, effectively wholesale, deposit captions as planned.
From your perspective, there's a tail in the 26. Um, employee benefits are up. Are expected to be up solidly in the double digits next year. Um,
Speaker #2: Loan origination activity in the fourth quarter, you may not know, was actually very good. And activity remains robust. Certainly, the market environment—marginal spreads—is far more favorable than it was in the first half of the year.
Good job.
Speaker #2: And certainly, at this time last year, payoffs, especially in the participation book, resulted in relatively flat balance sheet growth in the fourth quarter.
Not as good as flat but not as bad as it would be just on a pure Apples to Apples bases. So it kind of feels like a 3% type level as we get those Final Call stage run through
Speaker #2: West.
Gotcha. Uh, thanks and then on, on the credit front, uh, Jim. It it, you know, I I guess the charge off from the Powersports and you really outlined that that clearly very profitable on the, on the margin front. Just wanted to see on the net charge off uh, Pace. I think we talked about kind of 30 basis point level a little higher, um, is there anything that front end loaded or or could we expect kind of 3040, uh, going forward and and then and then secondly, on the credit side is, is that 30 to 89 day bucket. Uh, a little bit of an increase, anything to note, uh, on that, uh, balance. Thanks. Yeah, yeah, yeah. Good question. You know, I think we're, I think we need to be accustomed a little bit higher in that charge off rate due due to Powersports. That's just the nature of that business. I think, if you, if you look at the 6 million in charge offs 4, and a half was Powersport related,
uh, so only 1 and a half in the Legacy book uh which is more in line with with our historical Trends, but given that we're in a higher interest rate environment, we expect Power Sports to have maybe elevated
Charge us in in the next couple of quarters.
Um, and I think, you know, we have to look at that hand in hand with the contribution margin, which I mentioned, was at a, at a multi-year high. So, uh, obviously that's flowing through the margin and and profitability, uh, as it relates to 3089. We had a couple of of larger loans that were just passed maturity. Um, you know, we had a couple loans that, uh, obviously migrated into in a non acral that we're working through.
1 has a very low loan to value the others. Uh I've mixed use property
Uh, in Chicago, that has been very slow to least up.
At another couple.
Okay, thank you.
Thank you.
Your next question for today is from Nathan race with Piper Sandler.
Hey Nate. Hi, hi. Hi. This is Adam Cole on for Nathan race. Good morning and thanks for taking my questions.
Good morning. Yep.
Um, so maybe just a question for Brad on the margin was curious. If you could kind of frame out expectations for the first quarter with the full quarter impact of the December rate cut and just your your overall positioning if we were to get another cut or 2 in the middle part of the year and just where you think the Nim can settle out over the longer term.
I'd be very surprised if we're not around the 5% level for for the full year 2027.
2025. So,
I have a stepping in my time machine, their 2027, I have no comment on it at this point.
Okay. And, um,
I was just curious. Um, if you had the purchase accounting accretion number for the quarter,
The few hundred thousand. I I've talked about that before it's down substantially from last quarter. The thing that I would really like people to focus on is, is that the amount of purchase accounting that we have in our in in our numbers, this year um, in aggregate is less than the amount of purchase accounting that we're getting off the solar loan book. I mean, it it's nothing. I think there was 150 Grand it. It's not something that I really think is material to anyone's understanding of volt second at this point. Um, it was down substantially at like quarter, um, but the thing to keep in mind here is that the purchase accounting impact on, on, on the power sports portfolio is negative for the next 2 years. So the go forward business is better than what you're trying to isolate as the, as the, uh, Unruh repeatable portion in in the current periods. Um, it's actually a Tailwind going forward relative to a headwind
Gotta know that's that's super helpful and then maybe just moving to deposits, you know, you've called out letting exception price, deposits, run off from the acquisition. So I guess I'm curious how much is remaining of those deposits. And if you're seeing opportunities to reduce deposit costs on your legacy, non- maturity deposits.
We, we talked about this um, last quarter. The the thing to remember is is that fixing and returning to an Old Second like, funding profile is a multi-stage process. Uh, some of it we did prior to um bringing on the Evergreen balance sheet and some of it will do after, um, we probably need to replace
In order to complete the process in terms of the amount of wholesale funding um effective wholesale funding. That's on the balance sheet right now. Um
That's part of the reason why the margin is so darn resilient at this point because we do have substantially more funding that benefits from falling rates, uh, than we typically, otherwise would have. So, it's not necessarily A Bad Thing to, to, to focus on at least at this stage. It's not what I want over the long term, um, but right now, it's actually a benefit. Um, I would say just the number to keep in mind is, is that I would like to look 3 to 400 million different on the liability side.
Got it. And then, um, maybe just last 1 from me, you know, um, digging into the mid single digit loan growth. Guys. I was curious what your expectations are for growth in the power sports, vertical specifically,
Slightly less than that. Would be my expectation.
Got it. Uh, thanks for taking my questions.
All right. Thank you.
Once again, if you would like to ask a question, please press star 1.
Your next question for today is from Terry McAvoy with Stevens.
Hi, good morning guys. How are you?
Um, maybe could you just remind us of the profile of a typical Powersport borrower? And and I asked, I'm just curious. Where do they line up in this k-shaped economy? And um is there typically has their it typically been uh some seasonality in terms of the the charge offs within that portfolio?
Sure Terry. Hey Darren if you're there and on you want to take that 1?
Brad Adams: But the thing to keep in mind here is that the purchase accounting impact on the PowerSports portfolio is negative for the next two years. So the go-forward business is better than what you're trying to isolate as the unrepeatable portion in the current periods. It's actually a tailwind going forward relative to a headwind.
Bradley Adams: But the thing to keep in mind here is that the purchase accounting impact on the PowerSports portfolio is negative for the next two years. So the go-forward business is better than what you're trying to isolate as the unrepeatable portion in the current periods. It's actually a tailwind going forward relative to a headwind.
Yeah, I can do that. Hey Terry, how you doing good? Yeah, Terry the um, you know, the average, uh, cycle score, you know, for our portfolio and, and the power sports and 7:30, with the biggest percentage of that uh, in your Tier 1 bucket, which has a average FICO score of 776. Uh, but from seasonality perspective Terry our busy season starts March 1st through, you know, it's really the second and the third quarter uh from uh origination perspective where you have most of your business and you're in from a risk perspective from, you know, either dealing with your losses, we have more of that in the other 2 quarters especially at year end, like to say, we're going to compete with Santa Claus at the year end. The number is elevated a little bit and then stabilize out again as you get into the second quarter.
But it's been I've been Terry. I've been doing it for 30 years and it's it's been pretty consistent Trends, uh, for 30 straight years in this in this portfolio.
But the thing to keep in mind here is that the purchase accounting impact on, on, on the Powersports portfolio is negative for the next two years. So the go-forward business is better than what you're trying to isolate as the, as the, uh, unrepeatable portion in the current periods. Um, it's actually a tailwind going forward relative to a headwind.
[Analyst]: Got it. No, that's super helpful. And then maybe just moving to deposits. You've called out letting exception pricing deposits runoff from the acquisition. So I guess I'm curious how much is remaining of those deposits and if you're seeing opportunities to reduce deposit costs on your legacy non-maturity deposits.
[Analyst]: Got it. No, that's super helpful. And then maybe just moving to deposits. You've called out letting exception pricing deposits runoff from the acquisition. So I guess I'm curious how much is remaining of those deposits and if you're seeing opportunities to reduce deposit costs on your legacy non-maturity deposits.
Brad Adams: We talked about this last quarter. The thing to remember is that fixing and returning to an Old Second Bancorp funding profile is a multi-stage process. Some of it we did prior to bringing on the Evergreen balance sheet, and some of it we'll do after. We probably need to replace $300 to $400 million in deposits with our type of funding in order to complete the process. In terms of the amount of wholesale funding, effective wholesale funding that's on the balance sheet right now, that's part of the reason why the margin's so darn resilient at this point because we do have substantially more funding that benefits from falling rates than we typically otherwise would have. So it's not necessarily a bad thing to focus on, at least at this stage. It's not what I want over the long term, but right now it's actually a benefit.
Bradley Adams: We talked about this last quarter. The thing to remember is that fixing and returning to an Old Second Bancorp funding profile is a multi-stage process. Some of it we did prior to bringing on the Evergreen balance sheet, and some of it we'll do after. We probably need to replace $300 to $400 million in deposits with our type of funding in order to complete the process. In terms of the amount of wholesale funding, effective wholesale funding that's on the balance sheet right now, that's part of the reason why the margin's so darn resilient at this point because we do have substantially more funding that benefits from falling rates than we typically otherwise would have. So it's not necessarily a bad thing to focus on, at least at this stage. It's not what I want over the long term, but right now it's actually a benefit.
Got it. No, that's super helpful. And then maybe just moving to deposits—you know, you've called out letting exception-priced deposits run off from the acquisition. So I guess I'm curious how much is remaining of those deposits, and if you're seeing opportunities to reduce deposit costs on your legacy non-maturity deposits.
Great thanks for being on the call. Um yeah and then as a follow-up uh Brad just Capital Management I think you said Sherry purchased inevitable. Um I look back the stocks up 20% from 3 months ago so the Stock's higher is that just a a comment on where your Capital levels are or should I read into maybe the m&a market and and what you see happening in 26
No.
Shortage of discussions happening. The question is is what's the right deal for Old Second at the right time. Uh and how much Capital do we need to do that. Um, clearly
I got it wrong and, and that we were basically running a big fat Christmas Club savings account. And in order to acquire the capital for for an acquisition and we needed
Fraction of what we had saved up. Um, so it's just a function of of what we need versus what we have. Um, obviously we generated a ton of capital and it, I'm not uncomfortable where we are. I just don't really see any to to grow it much from. Here is the thing.
Makes sense. Uh, thanks for taking my questions. Appreciate it. Thank you Terry. Thanks, Terry.
Your next question is from Brian.
Good morning, guys.
Brad Adams: I would say just the number to keep in mind is that I would like to look $300 to 400 million different on the liability side.
I would say just the number to keep in mind is that I would like to look $300 to 400 million different on the liability side.
Hi Brian. Hey.
Uh 3 to 400 million dollars in deposits with our type of funding in order to complete the process in terms of the amount of wholesale funding um effective wholesale funding, that's on the balance sheet right now. Um, that's part of the reason why the margin is so darn resilient at this point because we do have substantially more funding that benefits from falling rates, uh, than we typically, otherwise would have. So, it's not necessarily A Bad Thing to, to, to focus on at least at this stage. It's not what I want over the long term, um, but right now, it's actually a benefit. Um, I would say just the number to keep in mind is, is that I would like to look 3 to 400 million different on the liability. So,
[Analyst]: Got it. Then maybe just last one from me, digging into the mid-single-digit loan growth. Guy, I was curious what your expectations are for growth in the PowerSports vertical specifically.
[Analyst]: Got it. Then maybe just last one from me, digging into the mid-single-digit loan growth. Guy, I was curious what your expectations are for growth in the PowerSports vertical specifically.
Brad Adams: Slightly less than that would be my expectation.
Bradley Adams: Slightly less than that would be my expectation.
Got it. And then, maybe just one last one from me. You know, digging into the mid-single-digit loan growth, I was curious what your expectations are for growth in the power sports vertical specifically.
Can you talk a little bit Brad about or Jim? Uh, you talked about the production being exceptional this quarter versus kind of the payoffs and then the piece from the Western Urban that was running off. Just maybe how much ran off on that West Suburban and then how much is left there that maybe a headwind going forward. But then, um, just trying to get your, your take on, you know, this kind of mid single digit loan growth but kind of the production being, you know, better to kind of that's been in a long time.
Slightly less than that would be my.
[Analyst]: Got it. Thanks for taking my questions.
[Analyst]: Got it. Thanks for taking my questions.
Brad Adams: All right. Thank you.
Bradley Adams: All right. Thank you.
Got it. Uh, thanks for taking my questions.
All right. Thank you.
Operator: Once again, if you would like to ask a question, please press star one. Your next question for today is from Terry McAvoy with Stephens.
Operator: Once again, if you would like to ask a question, please press star one. Your next question for today is from Terry McAvoy with Stephens.
Once again, if you would like to ask a question, please press star 1.
Your next question for today is from Terry McAvoy with Stevens.
Terry McEvoy: Hi. Good morning, guys. How are you?
Terry McEvoy: Hi. Good morning, guys. How are you?
[Company Representative] (Old Second Bancorp): Hey, Terry.
Darin Campbell: Hey, Terry.
Hi, good morning guys. How are you?
Jim Eccher: Hey, Terry.
James Eccher: Hey, Terry.
We had we had some pretty big pay Downs, uh, some of it was welcomed in the syndication portfolio, but we also had early payoffs.
Terry McEvoy: Maybe could you just remind us of the profile of a typical PowerSports borrower? And I ask, I'm just curious, where do they line up in this K-shaped economy? And has there typically been some seasonality in terms of the charge-offs within that portfolio?
Terry McEvoy: Maybe could you just remind us of the profile of a typical PowerSports borrower? And I ask, I'm just curious, where do they line up in this K-shaped economy? And has there typically been some seasonality in terms of the charge-offs within that portfolio?
Uh, in multifamily uh, and and Commercial Real Estate. A lot of it, stemming from property sales,
Um, maybe could you just remind us of the profile of a typical Powersport borrower? And, and I ask—I'm just curious where do they line up in this K-shaped economy? And, um, is there typically—has there typically been, uh, some seasonality in terms of the charge-offs within that portfolio?
Jim Eccher: Sure. Terry, hey, Darren, if you're there and on, you want to take that one?
James Eccher: Sure. Terry, hey, Darren, if you're there and on, you want to take that one?
[Company Representative] (Old Second Bancorp): Yeah, I can do that. Hey, Terry, how are you doing?
Darin Campbell: Yeah, I can do that. Hey, Terry, how are you doing?
Sure, Terry. Hey Darren, if you're there and you want to take that one,
Terry McEvoy: Good.
Terry McEvoy: Good.
[Company Representative] (Old Second Bancorp): Yeah, Terry, the average cycle score for our portfolio in the PowerSports is 730 with the biggest percentage of that in your Tier 1 bucket, which has an average cycle score of 776. But from a seasonality perspective, Terry, our busy season starts 1 March through; it's really Q2 and Q3 from an origination perspective where you have most of your business. And from a risk perspective, from either delinquency or losses, you have more of that in the other two quarters, especially at year-end. Like I say, when you compete with Santa Claus at year-end, the numbers elevate a little bit and then stabilize out again as you get into Q2. But I've been, Terry, I've been doing it for 30 years, and it's been pretty consistent trends for 30 straight years in this portfolio.
Darin Campbell: Yeah, Terry, the average cycle score for our portfolio in the PowerSports is 730 with the biggest percentage of that in your Tier 1 bucket, which has an average cycle score of 776. But from a seasonality perspective, Terry, our busy season starts 1 March through; it's really Q2 and Q3 from an origination perspective where you have most of your business. And from a risk perspective, from either delinquency or losses, you have more of that in the other two quarters, especially at year-end. Like I say, when you compete with Santa Claus at year-end, the numbers elevate a little bit and then stabilize out again as you get into Q2. But I've been, Terry, I've been doing it for 30 years, and it's been pretty consistent trends for 30 straight years in this portfolio.
Where I think we get encouraged as as the, the pipeline today or as a as of the end of the year is the highest. It's been in probably 6 to 7 quarter. So, uh, that gives us a lot of optimism that, you know, we're going to have a pretty good first half of the year in 26, and I think, you know, mid single digit growth is, is certainly, uh, achievable this year.
Gotcha. And how big is that? Where is that the syndication book today? How how, how, how far is that down? And maybe how much more to go there? Is that a headwind going forward?
it's uh, well when we at the start of
At the end of uh 2021 which is when we closed on the West Suburban.
We had, uh, about 772 million in commitments. We we've had that um,
As of the end of of 2025, from a balance perspective, we got about 285 million left. I would anticipate a third of that will continue to run off and it will probably keep the remainder.
Yeah, I can do that. Hey Terry, how you doing good? Yeah, Terry the um, you know, the average uh, cycle score, you know, for our portfolio in, in the power sports and 7:30 with the biggest percentage of that uh, in your Tier 1 bucket, which has a average 5 to score of 776. Uh, but from seasonality perspective Terry our busy season starts March 1st through. You know, it's really the second and the third quarter uh from uh origination perspective where you have most of your business and you're in from a risk perspective from, you know, either dealing with your losses, we have more of that in the other 2 quarters, especially at year end, like to see when we compete with Santa Claus at the year end. The number is elevated a little bit and then
Stabilize out again, as you get into the second quarter.
Terry McEvoy: Great. Thanks for being on the call. And then as a follow-up, Brad, just capital management. I think you said share repurchase inevitable. I look back, the stock's up 20% from three months ago. So the stock's higher. Is that just a comment on where your capital levels are, or should I read into maybe the M&A market and what you see happening in 2026?
Terry McEvoy: Great. Thanks for being on the call. And then as a follow-up, Brad, just capital management. I think you said share repurchase inevitable. I look back, the stock's up 20% from three months ago. So the stock's higher. Is that just a comment on where your capital levels are, or should I read into maybe the M&A market and what you see happening in 2026?
And I would tell you that those numbers that Jim's referencing are inclusive of some additions related to to Evergreen. So what you're really talking about over a 5 year? Period is is an almost an 80% reduction in that in that loan book.
But it's been, I've been there. I've been doing it for 30 years and it's it's been pretty consistent Trends, uh, for 30 straight years in this in this portfolio.
Yeah, gotcha. Okay. And Brad, I think you mentioned the stability in the margin, just maybe being down potentially a bit in in 1 Q. I guess, is that? I guess what's I guess? What's the I guess the modest headwind here in 1 q and just in terms of that the balance sheet that, you know, the runoff that you expect, it sounds like there's still
Brad Adams: No, the M&A market feels good. There's no shortage of discussions happening. The question is, what's the right deal for Old Second at the right time, and how much capital do we need to do that? Clearly, I got it wrong in that we were basically running a big fat Christmas club savings account in order to acquire the capital for an acquisition, and we needed a fraction of what we had saved up. So it's just a function of what we need versus what we have. Obviously, we generate a ton of capital, and I'm not uncomfortable where we are. I just don't really see a need to grow it much from here is the thing.
Bradley Adams: No, the M&A market feels good. There's no shortage of discussions happening. The question is, what's the right deal for Old Second at the right time, and how much capital do we need to do that? Clearly, I got it wrong in that we were basically running a big fat Christmas club savings account in order to acquire the capital for an acquisition, and we needed a fraction of what we had saved up. So it's just a function of what we need versus what we have. Obviously, we generate a ton of capital, and I'm not uncomfortable where we are. I just don't really see a need to grow it much from here is the thing.
Great, thanks for being on the call. Um, yep, and then as a follow-up—uh, Brad, just capital management. I think you said Sherry purchased Inevitable. Um, I looked back, the stock's up 20% from three months ago, so the stock's higher. Is that just a comment on where your capital levels are, or should I read into maybe the M&A market and what you see happening in '26?
Couple hundred million of, you know, exception based, you know, brokered CDs that like you said is benefiting now, but that's going to continue to run off. That's what's left to go in terms of what I'm just, I'm just being really impressed with man because the reality is that the biggest headwind of the margin is, is
No, M&A market feels good. There's no shortage of discussions happening. The question is, what's the right deal for Old Second at the right time, and how much capital do we need to do that? Clearly,
is probably going to me me deciding to buy treasuries um, especially if if people keep making noises about
I got it wrong, and that we were basically running a big, fat Christmas Club savings account. And in order to acquire the capital for an acquisition, we needed—
Invading countries that are largely ice. Um, so you know, the more we see moves like that, um,
I would be comfortable adding.
Fraction of what we had saved up. Um, so it's just a function of what we need versus what we have. Um, obviously we generated a ton of capital and I'm not uncomfortable where we are. I just don't really see any to grow it much from here, is the thing.
Terry McEvoy: Makes sense. Thanks for taking my questions. Appreciate it.
Terry McEvoy: Makes sense. Thanks for taking my questions. Appreciate it.
Brad Adams: Thank you, Terry.
Bradley Adams: Thank you, Terry.
Jim Eccher: Thanks, Terry.
James Eccher: Thanks, Terry.
Makes sense. Uh, thanks for taking my questions. Appreciate it. Thank you Terry. Thanks, Terry.
Operator: Your next question is from Brian Martin with Janney.
Operator: Your next question is from Brian Martin with Janney.
Assets that that largely don't offer obviously a 5% spread um so it's it's just a function of that I also just don't want to go on here and say that hey the margin is going to go up from 5.09. I'm not going to say that. So I I'm I'm the biggest headwind Brian.
Your next question is from.
Brad Adams: Hey, Brian.
Bradley Adams: Hey, Brian.
Brian Martin: Good morning, guys.
Brian Martin: Good morning, guys.
Jim Eccher: Morning, Brian.
James Eccher: Morning, Brian.
Good morning, guys.
Brian Martin: Hey. Can you talk a little bit, Brad or Jim? You talked about the production being exceptional this quarter versus kind of the payoffs and then the piece from the West Suburban that was running off. Just maybe how much ran off on that West Suburban and then how much is left there that maybe a headwind going forward, but then just trying to get your take on this kind of mid-single-digit loan growth, but kind of the production being better than it's been in a long time.
Brian Martin: Hey. Can you talk a little bit, Brad or Jim? You talked about the production being exceptional this quarter versus kind of the payoffs and then the piece from the West Suburban that was running off. Just maybe how much ran off on that West Suburban and then how much is left there that maybe a headwind going forward, but then just trying to get your take on this kind of mid-single-digit loan growth, but kind of the production being better than it's been in a long time.
Brian, Brian. Hey
Me personally, got you got you? Okay and Jim I I just going to the the Chris has her classified for a minute. I guess classified through up a little bit. Um I guess and you know I guess the
How, how do you see that the, the those Trends going forward and and do you have how are the special mentions? I don't know that you mentioned that, but or if you qualify those, were those up or down in the quarter.
Yeah, the float classified certainly. We had a lot of migration in and migration out, you know, I think uh,
You know where we're seeing a little bit of.
Can you talk a little bit Brad about or Jim? Uh, you talked about the production being exceptional this quarter versus kind of the payoffs and then the piece from the Western Urban that was running off. Just maybe how much ran off on that West Suburban and then how much is left there? That maybe a headwind going forward. But then, um, just trying to get your your take on, you know, this kind of mid single digit loan growth but kind of the production being, you know, better to kind of it's been in a long time.
Jim Eccher: Yeah, Brian. The fourth quarter, actually, surprisingly, was our best production quarter of the year. Normally, that's a softer quarter along with the first quarter, but it was exceptionally strong along multiple verticals. The challenges, Brad pointed out, we had some pretty big paydowns. Some of it was welcome in the syndication portfolio, but we also had early payoffs in multifamily and commercial real estate, a lot of it stemming from property sales. Where I think we get encouraged is the pipeline today, or as of the end of the year, is the highest it's been in probably six to seven quarters. That gives us a lot of optimism that we're going to have a pretty good first half of the year in 2026, and I think mid-single-digit growth is certainly achievable this year.
James Eccher: Yeah, Brian. The fourth quarter, actually, surprisingly, was our best production quarter of the year. Normally, that's a softer quarter along with the first quarter, but it was exceptionally strong along multiple verticals. The challenges, Brad pointed out, we had some pretty big paydowns. Some of it was welcome in the syndication portfolio, but we also had early payoffs in multifamily and commercial real estate, a lot of it stemming from property sales. Where I think we get encouraged is the pipeline today, or as of the end of the year, is the highest it's been in probably six to seven quarters. That gives us a lot of optimism that we're going to have a pretty good first half of the year in 2026, and I think mid-single-digit growth is certainly achievable this year.
Uh, degradation at portfolios in is in the cni book and companies just showing weaker performance by and large collateral positions are, are are pretty good. We're not seeing a whole lot of of of loss given the fault at this point, uh, but it's going to take, it's going to take some time to work to work.
Strong along multiple verticals, the challenge is, Brad pointed out. We had, we had some pretty big paydowns—uh, some of it was welcomed in the syndication portfolio, but we also had early payoffs.
I think the the positive news from from our perspective is you know, the the the net change in in in special mentioned or watched ones is, was down. Materially we had uh,
Uh, in multi-family, uh, and—and commercial real estate, a lot of it stemming from property sales,
I think only a couple loans migrate in and you know, we had
Over 15 million in in reduction in that bucket. So those are early stage indicators for us. So that should
Help us move forward.
Where I think we get encouraged as as the, the pipeline today or as a as of the end of the year, is the highest. It's been in probably 6 to 7 quarters. So, uh, that gives us a lot of optimism that, you know, we're going to have a pretty good first half of the year in 26, and I think, you know, mid single digit growth is, is certainly, uh, achievable this year.
Brian Martin: Gotcha. And how big is that? Where is that syndication book today? How far is that down, and maybe how much more to go there? Is that a headwind going forward?
Brian Martin: Gotcha. And how big is that? Where is that syndication book today? How far is that down, and maybe how much more to go there? Is that a headwind going forward?
Gotcha. And how big is that? Where is that—the syndication book—today? How far is that down, and maybe how much more to go there? Is that a headwind going forward?
Jim Eccher: Well, at the end of 2021, which is when we closed on West Suburban, we had about $772 million in commitments. We've had that as of the end of 2025. From a balance perspective, we've got about $285 million left. I would anticipate 1/3 of that will continue to run off, and we'll probably keep the remainder.
James Eccher: Well, at the end of 2021, which is when we closed on West Suburban, we had about $772 million in commitments. We've had that as of the end of 2025. From a balance perspective, we've got about $285 million left. I would anticipate 1/3 of that will continue to run off, and we'll probably keep the remainder.
it's uh, well when we at the start of
That's so, so, so the special mention. We're down on a link quarter basis, or did I hear that wrong? Yeah, down down, 15 million in the quarter about 15 million. Okay, perfect. And in the last 1 or 2 for me, and I'll jump off with the uh, Brad you mentioned on the expenses just to just to clarify that your comment. The 3% was you were talking about 3%, growth year-over-year and expenses. So, you know, 25 expenses to 26, is 3, are you talking about something else there in terms of your comments? No, that's what I'm talking about.
At the end of 2021, which is when we closed on West Suburban.
Yeah. Okay. And then just on the buyback, uh,
We had, uh, about $772 million in commitments. We've had that, um,
Your your general comments, are we? We expected it, you know, like can you give any sense on what how you're thinking about the buyback brand? Or is it just, you expect to begin that this quarter and, you know, based on pricing that all, you know, be be opportunistic.
Order. Yeah.
Brad Adams: I would tell you that those numbers that Jim's referencing are inclusive of some additions related to Evergreen. What you're really talking about over a five-year period is almost an 80% reduction in that loan book.
Bradley Adams: I would tell you that those numbers that Jim's referencing are inclusive of some additions related to Evergreen. What you're really talking about over a five-year period is almost an 80% reduction in that loan book.
I'm not pricing, I'm not price sensitive at this point.
Got you?
Brian Martin: Yeah. Gotcha. Okay. And Brad, I think you mentioned the stability in the margin just maybe being down potentially a bit in Q1. I guess, I guess what's the modest headwind here in Q1? And just in terms of the balance sheet, the runoff that you expect, it sounds like there's still a couple hundred million of exception-based brokered CDs that, like you said, is benefiting now, but that's going to continue to run off. That's what's left to go in terms of what?
Brian Martin: Yeah. Gotcha. Okay. And Brad, I think you mentioned the stability in the margin just maybe being down potentially a bit in Q1. I guess, I guess what's the modest headwind here in Q1? And just in terms of the balance sheet, the runoff that you expect, it sounds like there's still a couple hundred million of exception-based brokered CDs that, like you said, is benefiting now, but that's going to continue to run off. That's what's left to go in terms of what?
As of the end of of 2025, from a balance perspective, we got about 285 million left. I would anticipate a third of that will continue to run off and it will probably keep the remainder. And I would tell you that those numbers that Jim's referencing are inclusive of some additions related to to Evergreen. So what you're really talking about over a 5 year? Period is is an almost an 80% reduction in that in that loan book.
Yeah, gotcha. Okay. And Brad, I think you mentioned the stability in the margin, just maybe being down potentially a bit in in 1 Q. I guess, is that? I guess what's I guess? What's the I guess the modest headwind here in 1 q and just in terms of that the balance sheet that, you know, the runoff that you expect, it sounds like there's still
Brad Adams: I'm just being really pessimistic, man, because the reality is that the biggest headwind to the margin is probably going to mean deciding to buy treasuries, especially if people keep making noises about invading countries that are largely ICE. So the more we see moves like that, I would be comfortable adding assets that largely don't offer, obviously, a 5% spread. So it's just a function of that. I also just don't want to go on here and say that, "Hey, the margin's going to go up from 5.09." I'm not going to say that. So I'm the biggest headwind, Brian, me personally.
Bradley Adams: I'm just being really pessimistic, man, because the reality is that the biggest headwind to the margin is probably going to mean deciding to buy treasuries, especially if people keep making noises about invading countries that are largely ICE. So the more we see moves like that, I would be comfortable adding assets that largely don't offer, obviously, a 5% spread. So it's just a function of that. I also just don't want to go on here and say that, "Hey, the margin's going to go up from 5.09." I'm not going to say that. So I'm the biggest headwind, Brian, me personally.
Okay, in the m&a invite and, uh, environment. Uh, you said it's good with lots of discussions. Um, what is kind of the optimal Target today? Look like for Old Second. If you are looking at m&a, I know the last 1 was obviously, uh, acid driven. I'm not, I'm not sure how much that that I can be helpful on an answer there because I can tell you that, I wouldn't have described Evergreen if you'd asked me that 18 months ago. So, um, you know, I think the only thing that that investors can be certain of is, is that we're not going to do anything unless it makes us a better Bank. Um, and that's what we're focused on.
A couple hundred million of, you know, exception based, you know, brokered CDs that like you said is benefiting now, but that's going to continue to run off. That's what's left to go in terms of what I'm just, I'm just being really impressed with this man because the reality is that
All right. Yeah. Brian I would I would say our priority this year is is is really
the the biggest headwind of the margin is is is probably going to meet me deciding to buy treasuries um especially if if people keep making noises about
fully integrating uh Evergreen which I which we're about there. Uh but really focusing on on organically growing the balance sheet and and optimizing it that would be priority 1.
Invading countries that are largely ice. Um, so you know, the more we see moves like that, um,
I would be comfortable adding.
Yeah, that's what I was getting at. I I felt like it was more if there was m&a, it was like more on the deposit side rather than the after, but we'll, we'll be opportunistic, but it's, it's certainly not in the near term for us. Yeah. Okay, understood. Thanks, guys. Thank you.
Assets that largely don't offer, obviously, a 5% spread—so it's just a function of that. I also just don't want to go on here and say that, hey, the margin is going to go up from 5.09. I'm not—
We have reached the end of the question and answer session and I will now turn the call over to Jim Iker for closing remarks.
Going to say that. So I—I'm, I'm the big—biggest headwind, Brian.
Brian Martin: Gotcha. Okay. And Jim, I just want to go into the criticized and classified for a minute. I guess classifieds are up a little bit.
Brian Martin: Gotcha. Okay. And Jim, I just want to go into the criticized and classified for a minute. I guess classifieds are up a little bit.
Okay. Thanks everyone for uh, joining us this morning again. Apologize for the technical difficulties. Uh we look forward to speaking with you again. Uh, next quarter. Goodbye.
Jim Eccher: Yep.
James Eccher: Yep.
Brian Martin: I guess, how do you see those trends going forward? How are the Special Mention trends? I don't know that you mentioned that, but if you qualify those, were those up or down in the quarter?
Brian Martin: I guess, how do you see those trends going forward? How are the Special Mention trends? I don't know that you mentioned that, but if you qualify those, were those up or down in the quarter?
this concludes today's
Me personally, got you, got you. Okay, and Jim, I just—I just going to the—the Chris has her classified for a minute. I guess classifieds are up a little bit. Um, I guess, and, you know, I guess the—
conference and you may disconnect your lines at this time. Thank you for your participation.
Jim Eccher: Yeah. Well, classified loans, certainly, we had a lot of migration in and migration out. I think where we're seeing a little bit of degradation in portfolios is in the C&I book, and companies are just showing weaker performance. By and large, collateral positions are pretty good. We're not seeing a whole lot of loss given default at this point, but it's going to take some time to work through this. I think the positive news from our perspective is the net change in Special Mention or watch loans was down materially. We had, I think, only a couple of loans migrate in, and we had over $15 million in reduction in that bucket. So those are early-stage indicators for us, so that should help us move forward.
James Eccher: Yeah. Well, classified loans, certainly, we had a lot of migration in and migration out. I think where we're seeing a little bit of degradation in portfolios is in the C&I book, and companies are just showing weaker performance. By and large, collateral positions are pretty good. We're not seeing a whole lot of loss given default at this point, but it's going to take some time to work through this. I think the positive news from our perspective is the net change in Special Mention or watch loans was down materially. We had, I think, only a couple of loans migrate in, and we had over $15 million in reduction in that bucket. So those are early-stage indicators for us, so that should help us move forward.
How, how do you see that—the, the, those trends going forward? And then, do you have—how are the special mentioned trends? I don't know that you mentioned that, or if you qualify those—were those up or down in the quarter?
Yeah, that little classifies certainly. We had a lot of migration in and migration out, you know, I think, uh,
You know where we're seeing a little bit of.
Uh, degradation at portfolios is in the CNI book, and companies are just showing weaker performance. By and large, collateral positions are pretty good. We're not seeing a whole lot of...
Of of loss given default at this point. Uh, but it's going to take, it's going to take some time to work to work through this. I think the, the positive news from from our perspective is, you know, the, the, the net change in, in, in special mention or watch loans, is was down. Materially we had, uh,
I think only a couple loans migrate in, and, you know, we had—
Over $15 million in reduction in that bucket. So those are early stage indicators for us. So that should
Help us move forward.
Brian Martin: Gotcha. So the Special Mention, we're down on a quarter basis? Or did I hear that wrong?
Brian Martin: Gotcha. So the Special Mention, we're down on a quarter basis? Or did I hear that wrong?
Jim Eccher: Yeah. Down $15 million in the quarter.
James Eccher: Yeah. Down $15 million in the quarter.
Brian Martin: Down $15 million. Okay. Perfect. And the last one or two for me, and I'll jump off. Brad, you mentioned on the expenses, just to clarify that your comment, the 3%, you were talking about 3% growth year-over-year in expenses. So 25 expenses to 26 is 3, or were you talking about something else there in terms of your comments?
Brian Martin: Down $15 million. Okay. Perfect. And the last one or two for me, and I'll jump off. Brad, you mentioned on the expenses, just to clarify that your comment, the 3%, you were talking about 3% growth year-over-year in expenses. So 25 expenses to 26 is 3, or were you talking about something else there in terms of your comments?
Brad Adams: No, that's what I'm talking about.
Bradley Adams: No, that's what I'm talking about.
Brian Martin: Yeah. Okay. And then just on the buyback, your general comments, we expect that it's. Can you give any sense on how you're thinking about the buyback, Brad? Or is it just you expect to begin that this quarter and based on pricing, that'll be opportunistic?
Brian Martin: Yeah. Okay. And then just on the buyback, your general comments, we expect that it's. Can you give any sense on how you're thinking about the buyback, Brad? Or is it just you expect to begin that this quarter and based on pricing, that'll be opportunistic?
That's so, so, so the special mention. We're down on the link quarter basis, or did I hear that wrong? Yeah, down down down 15 million in the quarter about 15 million. Okay, perfect. And in the last 1 or 2 for me and I'll jump off was the uh Brad. You mentioned on the expenses just to just to clarify that your comment, the 3%, it was you were talking about 3%, growth year-over-year and expenses. So you know, 25 expenses to 26, is 3, are you talking about something else there in terms of your comments? No, that's what I'm talking about.
Yeah. Okay. And then just on the buyback, uh,
That'll you know, be be opportunistic.
Brad Adams: I expect it will begin in relatively short order, yeah. I'm not price-sensitive at this point.
Bradley Adams: I expect it will begin in relatively short order, yeah. I'm not price-sensitive at this point.
I I expect it will begin in relatively short order. Yeah.
Brian Martin: Gotcha. Okay. And the M&A environment, you said it's good with lots of discussions. What is kind of the optimal target today look like for Old Second if you are looking at M&A? I know the last one was obviously asset-driven.
Brian Martin: Gotcha. Okay. And the M&A environment, you said it's good with lots of discussions. What is kind of the optimal target today look like for Old Second if you are looking at M&A? I know the last one was obviously asset-driven.
I'm not pricing, I'm not pricing it at this point.
Gotcha. Okay, and the M&A invite and, uh, environment. Uh, you said it's good with lots of discussions. Um, what is
Kind of the optimal target today look like for Old Second, if you are looking M&A? I know the last one was obviously—
Brad Adams: I'm not sure how much that I can be helpful on an answer there because I can tell you that I wouldn't have described Evergreen if you'd asked me that 18 months ago. So I think the only thing that investors can be certain of is that we're not going to do anything unless it makes us a better bank, and that's what we're focused on.
Bradley Adams: I'm not sure how much that I can be helpful on an answer there because I can tell you that I wouldn't have described Evergreen if you'd asked me that 18 months ago. So I think the only thing that investors can be certain of is that we're not going to do anything unless it makes us a better bank, and that's what we're focused on.
Uh, asset driven. I'm not—I'm not sure how much I can be helpful on an answer there, because I can tell you that I wouldn't have described Evergreen if you'd asked me that.
Um, you know, I think the only thing that investors can be certain of is that we're not going to do anything unless it makes us a better bank.
Jim Eccher: Yeah. Brian, I would say our priority this year is really fully integrating Evergreen, which we're about there, but really focusing on organically growing the balance sheet and optimizing it. That would be priority one.
James Eccher: Yeah. Brian, I would say our priority this year is really fully integrating Evergreen, which we're about there, but really focusing on organically growing the balance sheet and optimizing it. That would be priority one.
And that's what we're focused on.
Oh yeah, Brian, I would say our priority this year is really...
Fully integrating uh Evergreen which I which we're about there. Uh but really focusing on on organically growing the balance sheet and and optimizing it.
We priority 1.
Brian Martin: Yeah. That's what I was getting at. I felt like it was more if there was M&A, it was likely more on the deposit side rather than the asset side.
Brian Martin: Yeah. That's what I was getting at. I felt like it was more if there was M&A, it was likely more on the deposit side rather than the asset side.
Jim Eccher: Yeah. We'll be opportunistic, but it's certainly not in the near term for us.
James Eccher: Yeah. We'll be opportunistic, but it's certainly not in the near term for us.
Brian Martin: Yeah. Okay. Understood. Thanks, guys.
Brian Martin: Yeah. Okay. Understood. Thanks, guys.
Jim Eccher: Thank you.
James Eccher: Thank you.
Yeah, that's what I was getting at. I I felt like it was more if there was m&a, it was like more on the deposit side rather than the could be, we'll be out for 2 minutes but it's, it's certainly not in the near term for us. Yeah. Okay understood. Thanks guys. Thank you.
Operator: We have reached the end of the question and answer session, and I will now turn the call over to Jim Eccher for closing remarks.
Operator: We have reached the end of the question and answer session, and I will now turn the call over to Jim Eccher for closing remarks.
Jim Eccher: Okay. Thanks, everyone, for joining us this morning. Again, apologize for the technical difficulties. We look forward to speaking with you again next quarter. Goodbye.
James Eccher: Okay. Thanks, everyone, for joining us this morning. Again, apologize for the technical difficulties. We look forward to speaking with you again next quarter. Goodbye.
We have reached the end of the question and answer session and I will now turn the call over to Jim Iker for closing remarks.
Okay, thanks everyone for, uh, joining us this morning again. Apologize for the technical difficulties. Uh, we look forward to speaking with you again next quarter.
Goodbye.
Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
