Q2 2026 Old Second Bancorp Inc Earnings Call
Speaker #1: Good morning, everyone, and thank you for joining us today for Old Second Bancorp Inc's second quarter 2026 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.
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.
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.
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 and under the Investor Relations tab.
Speaker #1: Now, I will turn it over to Jim Ecker.
Speaker #2: Okay. Good morning, and thank you for joining us. As customary, I have several prepared opening remarks to give my overview of the quarter and then turn it over to Brad for additional details.
Speaker #2: I will then conclude with certain summary comments and thoughts about the future before we open it up to Q&A. From a GAAP perspective, net income was 28.2 million, or 54 cents per diluted share in the second quarter.
Speaker #2: And return on assets was 1.65%. Second quarter 2026, return on average tangible common equity was 15.58%, and the tax equivalent efficiency ratio was 51.72%.
Speaker #2: Excluding all adjusting items, which include MSR valuation adjustments and the costs related to the 2025 acquisition of Bancorp Financial and its wholly-owned subsidiary, Evergreen Bank Group, net income for the quarter was 28.7 million, or 55 cents per diluted share.
Speaker #2: Second quarter earnings were impacted by 9.2 million of net loan charge-offs, which primarily included two credits that we discussed at length on last quarter's earnings call.
Speaker #2: A commercial and industrial charge-off of 3 million in the warehousing and distribution business that has seen its cash flow position erode over the last year.
This was an acquired credit, it was restructured into an AB node in 2023 due to challenges facing uh, the office Market.
At the time of the restructure, the B note was fully secured by the value of the underlying collateral.
But as recently experienced a decline in value, and based on an updated valuation, the B notes collectibility is now in doubt and was charged off.
The BO was previously fully allocated for prior quarters, and a portion of the note was accounted for in purchase accounting adjustments. As a result of the acquisition of Evergreen Bank Group,
The property continues to produce cash flow adequately to support the note at this time.
Net charge offs related to the Power Sport, business, total 2.8 million, which is a 1.1 million dollar reduction from the prior quarter, as seasonality related to this loan portfolio. Usually results in higher usage of ATVs and utvs that are collateral for these loans during the spring and summer months.
I would note that the contribution margin in this business has continued to trend higher and remains robust.
Tangible book value per share, increased to 14.77 at the end of the quarter.
From 14.35 at last quarter, the tangible equity ratio increased 12 basis points in the last quarter, from 11.07 to 11.19.
And it's 36 basis points higher than the like period 1 year ago.
Common Equity Tier 1 was 13.28% in the second quarter of 2026, increasing from 13.13% last quarter.
But decreased 49 basis points from a year ago.
This decline is primarily due to stock repurchases of approximately 40.2 million during 2026.
.23% for the second quarter. That's a 9 basis point improvement from last quarter, and a 38 basis point increase over the prior year like quarter, on a tax-equivalent basis.
Pre-provision net revenues increased in the second quarter from the prior quarter primarily due to Day Count, higher average, balances and lower average time deposit. Balances
Total cost of deposits was 100 basis points for the second quarter, compared to 105 basis points for the prior quarter, and 84 basis points for the second quarter of 2025.
For the second quarter of 2026, compared to last quarter tax equivalent income on average earning assets. Increase 2.8 million. While interest expense on, average bearing liabilities increased 658,000.
Loan to deposit ratio stands at 96.4% as of June 30th compared to 93.2% last quarter and 83.3%.
As of June 30th 2025.
Total loans increased 6 feet points 6 million during the second quarter. Partially reversing seasonal declines in the previous quarter.
Tax equivalent loan yields increased 12 basis points during the second quarter of 2026 compared to the linked quarter, and reflected a 63 basis point increase.
For the quarter year-over-year.
Increase in yield in comparison to the prior quarters, driven by higher short-term rates.
And repricing of lower-yielding loans that were originated in 2021 and 2022.
Turning to credit, asset quality trends improved during the quarter despite the elevated charge-offs. Non-performing loans decreased $19 million and classified assets declined $16.5 million. In general, our collateral position remained stable on classified assets. We recorded $9.2 million of net charge-offs in the second quarter, with the majority stemming from the Power Sports portfolio and one relationship each in commercial real estate investor and commercial.
Overall, we're pleased with the credit trends as NPAs declined 25% in the quarter.
The allowance for credit losses on loans was $70.4 million as of June 30th, or 1.34% of loans, compared to $72.1 million at March 31st, 2026, which was 1.39% of loans.
Unemployment and GDP forecasts use the future loss rate. Assumptions remain fairly static from last quarter, with no material changes in the unemployment assumptions, which remain on the upper end of the range, based on recent projections.
The impact of global Terror volatility. In the war in Iran. Continues to be considered within our modeling.
Provision levels, quarter over linked quarter, decreased by $2.5 million to $7.5 million.
And we're partially driven by significant movements and delinquencies when compared to the forecast period, resulting in a negative qualitative adjustment.
Additionally, some larger charge jobs taken during the quarter had to have been provided for or allocated for in prior quarters.
Broadly, we are encouraged at the positive credit Trends with the reduction in non-performing assets and classified assets, quarter over link quarter.
The office portfolio continues to be under pressure, broadly.
With valuations coming in at their steepest, discounts to prior levels, and rents declining broadly, the good news is we don't have anything classified in that vertical, and very much of it on a relative basis. It only represents about 3% of the portfolio.
Non-interest income increased $631,000, or 5%, in the quarter compared to the prior linked quarter.
And a $2.4 million increase, or 21.7%, from the prior year like quarter.
Wealth management had a strong quarter. Income was up there, $245,000 quarter over linked quarter, and increased $525,000 compared to the prior year linked quarter.
Mortgage banking income increased $97,000 compared to the linked quarter, and increased $543,000 compared to the like period.
A year ago, primarily due to the changes in mortgage servicing rights, mark-to-market valuations.
MSR valuation was flat quarter over linked quarter. However, excluding the impact of mortgage servicing rights mark-to-market adjustments, mortgage banking income increased to $164,000 over the prior year like period.
Support loan service fees and dealer chargebacks, and lease syndication fees.
Total non-interest expense for the second quarter increased $1 million from the prior linked quarter, driven by higher officer incentive and employee insurance costs within salaries and employee benefits.
Elevated OREO expenses as of the first quarter of 2026.
Realizing that gains on property sales as well as gap insurance refunds related to Legacy Evergreen activity within other expense.
Altogether. Our efficiency ratio continues to be excellent. As the tax equivalent efficiency ratio, adjusted to exclude core deposit and tangible amortization, Oreo costs. And the adjustments to net income is noted earlier with 50.8% for the second quarter compared to 51.7% for the first quarter.
Overall, the bank continues to perform at an exceptionally high level operating Leverage is strong. The margin is stable.
And fee income, businesses are performing. Well, we're doing a nice job of adding additional Talent throughout the organization.
Credit is on an approving Trend and I'm hopeful that we will soon be able to demonstrate the full earnings power of Old Second.
I'll now turn it over to Brad for additional color.
Thanks Jim. I'll be brief. There's not a lot of controversial from from my corner of the world.
Or confusing for that matter. Uh, and that interest income increased to 83.3 million for the quarter.
Relative to last quarter, it is $81.1 million.
An increase of $19 million, or almost 30%, from the year-ago quarter.
The interesting thing about this quarter is tax-equivalent loan yields increased by 12 basis points. In the securities, yields increased by 6 basis points.
That is the fundamental driver of what I guess I would call a margin surprise—an increase of 9 basis points, relative to our expectations of giving back a few.
And that largely stemmed from.
Interest rate increases along the curve particularly. And so for an overnight index, swap rates.
That began after kind of instability in the Middle East kicked up, and the price of oil went up and all that, none of which, um,
Could have been expected.
Speaker #3: ridiculously good at this point. 5.23 relative to 514 last quarter, 38 basis points up year over year. We did have some loan growth this quarter on an average basis.
Uh, worked out well, I guess. Um, obviously, the margins—
ridiculously good at this point.
Um,
Speaker #3: It was only 14 million. Obviously, Jim went through the period end. Deposit runoff was a little higher than I expected. Deposit funding costs came down, which I did not expect.
Speaker #3: I would say that both loan and deposit market competition is very robust right now. We are seeing that both in terms of pricing and structure on the loan side, and we are seeing deposit competition pretty significantly above the Fed funds curve and the Treasury curve at this point.
Speaker #3: So things are pretty aggressive out there. Loan origination activity in the second quarter reflected a seasonal increase of 60 million in the pipeline remains strong.
Speaker #3: Certainly, market environment, including pricing challenges due to tariffs and the uncertainty with the Warner and results in some reluctance, some borrowers to invest in capital projects.
Speaker #3: So we're still kind of in a wait-and-see mode on that front. Overall, I still feel pretty good repurchase approximately 2.5 million shares through June 30th, 2027.
Overall, I still feel pretty good about loan growth on a full-year basis. I don't see much of a reason to step down from what we talked about before—maybe a little bit more of a bias towards the low single-digit level.
From a stock repurchase perspective, we acquired 700 and 732,000 shares during the second quarter at an average price of $21.108.
Our results, obviously, in reduction to equity and growth in the treasury stock of $15.4 million.
This enhanced EPS and the quarter by about a penny.
Year to date repurchases under the stock repurchase program. Total of 1.9 million shares at an average price of 2031.
We had exhausted the previously approved stock repurchase program, which was 5% at the time, pre-Evergreen.
Speaker #3: I would expect that we will.
And the board of directors have approved, the new plan to repurchase approximately 2 and a half million shares through June 30th 2027.
If you pin me down and hit me with a rock, I would say we probably give back a few basis points, but my track record is starting to look pretty poor on that.
That prognostication.
I realize I've been saying that for the last few quarters and it hasn't happened.
Obviously, rates along the curve went up quite a bit. As I said,
um,
Those trends remain stable here, and high-cost deposit attrition slows. I would expect that a few basis points of contraction to occur, but it may not.
Loan growth for 2026 still target, load them in single digits. As I said expense growth will continue to be modest in the quarters ahead.
I think we're particularly encouraged by a 30% reduction in our special mention loans.
The rest of the bank is performing, far ahead of our expectations.
We remain optimistic about loan growth, as Brad mentioned, and the potential for more.
Strategic growth opportunity as well.
That concludes our prepared comments this morning, so I'll turn it over to the moderator and we can open it up to Q&A.
Certainly. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad.
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One moment, please, while we pull for questions.
Your first question for today is from Nathan Race with Piper Sandler.
Hey guys, good morning. Thanks for taking the questions.
Um, morning, mate.
Hopefully some nice clean up in terms of uh classified loans and non-performers in the quarter and sounds like you know, you guys um, largely mopped up, you know, some of the, you know, lingering. Um,
Credits on the office commercial real estate loan and also that cni loan in the quarter. So, you know, just curious as you look out over the next, you know, several quarters. What do you think is kind of a, a better kind of projection in terms of where, you know, charge offs can shake out for a little second with hopefully kind of more benign, uh, non-performer inflows and so forth in the future.
Yeah. Nate I think that I think the the big takeaway for us is quarters not only the the meaningful reduction in in criticizing classified NPA but to have a 30% reduction in special mentioned which is generally a leading indicator for for future problems.
I think gives us uh, some optimism, you know, Power Sports is also had a nice reduction in charge us. We going to see a little more charge up in that vertical but we're seeing it. Maybe a different can speak to this later but we're certainly seeing a normalization in the seasonal Trends and and charge offs you know, having said that you know that we're still working through a couple a couple of credits but you know, we haven't seen, uh, anything new really pop up, you know, in the last couple quarters that had not been previously identified. So I think we're really close to having a, you know, a very clean quarter on a on a credit front which should
You know, I think that will really drive exceptional performance.
Okay that's helpful. Thanks Jen. Then maybe Brad just thoughts on how the margin could Trend in the back half of the year. I know, you know, it's going to be dependent on Market rates, you know, similar to what we saw in terms of the impact in the second quarter. But you know, just any thoughts in terms of what you're seeing in terms of kind of where average rates on
On loan production these days, and just uh, any thoughts on kind of where deposits and overall cost trend?
Yeah. Um,
Start with a caveat that there's like 52 ways that I can be wrong. Um if something changes and and the next week or something like that. Um the magnitude of the rag, wrongness will be relatively subdued though.
if I had to guess, I would say that that we would be at kind of a
in the third quarter, and maybe $515 million in the fourth.
That's my best guess. Um,
but,
I fully recognize my track records crap. I I think I said that the margin was going down before it crossed 5. Um, so
You know, at least I'm wrong on the right side of it.
Somewhat comforting. Um,
But, you know, best guess 100 ways I can be wrong.
And underpinning that is essentially the belief that loan yields can only go down from here. And then, you know, deposit costs are likely going higher as well, all being from a very, very low base.
Yeah. So the things that are really driving it for us is the speed of the attrition of of what is effectively.
Mimics wholesale on, on the deposit side, our ability to to backfill that growth with different types of deposits. Um, loan yields fuel relatively stable, um we've been essentially the same rate environment except for the last 3 months uh, for almost 18 months. 24 months now on the asset side. Um obviously um, when we talk about this in the past um year 1 of of, kind of
Rates moving back lower um is pretty great within the Powersports business year 2 is a little bit.
Uh, not as good in year three, it's worse. So the tailwind of margin expansion from Powersports is, we're certainly in the very late innings of that.
uh I I've been remiss in pointing out at this point that another ridiculously strong increase in the contribution, margin from Powersports, this quarter um the business continues to be exceptional, um, but
I I think the biggest thing is is the biggest Delta on on margin and being able to nail it down right now is is the speed of attrition on on effectively, wholesale deposits and, and our success and backfilling
Okay, it's a liability these days.
I think you're seeing that from other banks. It's—
I've always believed it was a liability world, just broadly, but more so today than ever.
Understood and then maybe 1 last 1 just on Capital Management, you know, curious you know if we expect you know the piece of BuyBacks to step up relative to the 7 quarter. I looks like they came down a little bit versus 1 q and then just you know within kind of the Capital Management context, curious kind of what the appetite and kind of prospects are on the acquisition front these days.
Uh, ladder question first. Um, well-priced M&A that adds something to our franchise value is something we're always interested in. Um, I believe the market is still favorable for that.
As it relates to stock buyback activity, we have been buying as much as we can. I expect that to continue, obviously. We're still growing capital, even buying back as many shares, but I think it's reasonable to expect that we will fully execute this authorization as well over the next 12 months.
Okay, great. I appreciate all the color. Thanks, guys.
Thanks Nate.
Your next question is from Brandon rude with Stevens Inc.
Morning.
I guess my first one, uh, to
follow up on 1 of your earlier answers there. Brad the, uh, back filling the higher rate attrition on, on the positive side, with quartz, with core deposits,
What rate is kind of neat now to, uh, generate that core deposit growth? Or, maybe said another way, what's the blended and, in engineering, deposit rate for that new growth?
You know.
I'm not sure, I, I get the gist of the question, um, to maintain the margin. The reality is, is that if we ran out, 200 million dollars of effectively, wholesale funding right now, uh, it would be margin accretive to replace it with wholesale funding.
That is the nature of the deposit competition that exists marginally right now. So I get what you're asking—at what rate can we generate deposit growth?
Um,
I'm not sure it really matters. It's just a question of how much wholesale funding are you willing to stomach? The reality is, when you look like us, which is largely retail, core deposit funded,
Adding wholesale funding is is more assets sensitivity which doesn't hurt. It's the trade. I'm willing to make so that that's why what you're hearing from me is relatively bullish because there's these levers that are out there and additionally, we can pay off the remainder of of
Of, um, sub debt that exists out there too. There are various levers that you can pull, um, the net-net of which is that margin feels pretty stable. But I, you know, I'm contemplating therapy to not say, "Hey, the margin can go up from here." I don't really want to say that anymore. Um, so it's more of a gives and takes and what have you, I guess?
Okay, yeah, got it. Uh, thank you for that, and then—
Just on the expense side. E, efficiency ratio is in the low 50s as a percent of assets, expenses are mid to high 90s is is is, is there anything in the near term? Any in Investments, coming down the pipeline that may change? Um, e e e uh either of those metrics.
Not materially, no. But the reality is that, you know, there's no deferred maintenance here. We have capital projects underway across the board to make us an even better bank, and we don't shy away from them.
That's the challenge of growing a bank. So those things are continuing; they are in the run rate, and they are in the future prognostications.
Okay, perfect. Thank you. Um, maybe just 1 last 1, uh, thanks for the comments on the commercial real estate, uh, charge us on, on, on this on the cni loan is that still on balance sheet or is that now, um, off balance sheet, or maybe you can just kind of walk through that a bit more. Yeah, no, it's it's it's, uh, it's still on balance sheet brand the companies.
Is in the process of of transacting. And, and we're, we're just working through and being conservative with, uh, taking additional charges as to, where we believe. Uh, a sale price, will will eventually
happen. So I expect that credit to
be fully resolved.
Within the next quarter.
Okay, uh, thank you very much.
Thank you.
Your next question for today, is from Jeff rulis, with da Davidson
Thanks. Good morning. Um, just a couple follow through, uh, follow-ups on. Maybe the margin. Brad. Just wanted to kind of confirm that any uh, sort of recovered.
Interest on maybe some problem loan resolution that may have, uh, added to the—or I guess, any one-time in that $523, and then if you could, uh, do you have the June, uh, monthly average for margin?
I don't have it in front of me, but no, I'm not aware of any one-time or other positively impactful items in the quarter.
It was largely stable throughout the quarter. It started going up, okay? It was going up when we were on this call last quarter.
um, I just didn't believe
I mean, I think largely too, as Brad pointed out, there were three levers that drove it. We had some repricing of some...
2021 and 2022 vintage commercial real estate loans that came
Came up from maturity.
We had some the you know, how you'll deposit costs.
Uh, price lower out. And uh and then we had some securities. Also rolling up that were reinvested at that higher yields.
Uh got it. Um and then on the just on the fee income front, um your thoughts on I guess, we'd expect maybe boldly to to normalize but that wealth management number pretty encouraging. If you could just kind of touch on kind of see income overall fee income levels um in the second half.
if you think,
Um, yeah, I mean, we've been we've been a low, you know, a low single digit grower and, and see income. I mean wealth or wealth group, uh, continues to to be successful and bring in a new assets under management. They've obviously benefited from
You know, from an equity market uptick.
Um, but we fully expected to drive.
I would think low single-digit growth, and if we
You know, see any pickup in the mortgage bank, you know, we could get to—
You know, mid single digits.
Okay.
that's,
Pretty much. We've seen the end of it. Just wanted to kind of housekeeping, I believe. So, yes.
We have one branch we just shuttered last month, so we'll have a little bit of a pickup.
I don't go forward-basis there, but yeah, we're largely through that.
Got it. Thank you.
Your next question is from Ken coat with Raymond James.
Hi, good morning, guys. Thanks, thanks for taking my question. Um,
Brad. I appreciate the commentary on sharing purchases and um, sounds like you're going to be uh, continuing that going forward, but I'm just wondering how sensitive you guys are to the share price and valuation. And at what point do you share with purchases not make sense from your perspective?
I'm not sensitive to it. The reality is that...
We have more capital than we would otherwise need.
Certainly, as an M&A opportunity—and we have more capital than any M&A opportunity that we would have an appetite for—um,
The reality is, is that buying back?
Fully, this authorization would still not result in capital levels going down, so it's just a question—it's a lever to return capital to shareholders such that we don't grow it as fast. And it really is that simple. It's a tax-efficient return of capital to shareholders.
Although I don't like that 1% tax 1 tiny bit. I would I I feel remiss if I don't throw an editorial in there, but whatever. Yep, understood thanks. And then, uh, apologies. If I missed this. But, um, going into the loan growth, it looked great in the quarter. And what's about to me was, uh, the commercial growth. Can you just provide maybe a little bit more detail there? Just given the impressive growth and also considering the competitive backdrop that he had talked about
Yeah, it's Brad. Mentioned it remains exceptionally competitive. I, you know, last quarter, first quarter we had
you know, we saw some
Some pullback, which we normally do in the first quarter—uh, growth this quarter really came from, really, three or four buckets or, or, or the middle markets C&I group.
Uh, a commercial real estate group.
Sponsored finance. And then Powersport had, uh, had some had some growth this quarter when we, when we thought, maybe it would be relatively flat. But, you know, power during can speak to that. But second quarter and third quarter, generally pretty good in that business and we're optimistic. That we we may see some growth in the third quarter as well. But
Uh, those are the drivers. The competition remains fierce—there's no question about it—but we're encouraged by our pipelines today.
Great. Thanks for taking my questions.
Thank you.
Once again, if you would like to ask a question, please press star 1.
Your next question for today, is from Brian Martin with green capital.
Hey, good morning, guys.
Brian, Brian, Brian, just on the credit front, Jim, I guess that seems like the, you know...
There's some nice improvement potentially coming in. I know you've got a couple of credits you talked about still working through, but can you just kind of give some thought on how you think credit plays out, I mean, over the next couple quarters? What would you expect in terms of some meaningful resolution? Just a handful of things coming back, or just in general, given what you see today?
Yeah. I mean we're we're having we printed what 70 basis points in in charge of this quarter. I mean I I'd like to say we're going to get back into that, you know.
35 to 45 basis points, you know with uh we're going to we're going to run a little bit higher with Powersport right, but we saw a nice reduction.
Um, you know, second quarter over first, we're working through a couple more credits but we're we're, we're optimistic. We're going to, we're going to see Improvement again, next quarter, not only in, in, in charge off levels, but in overall migration and, and we, we hope to see further reductions and, and classifies an MPA.
Okay. And is there anything— I mean, I guess in terms of, you know, how much of a reduction in NPAs we could see in the coming quarters? Are there a couple of meaningful things you're working on? Is it just kind of some granular stuff, or more big picture? How should we think about it?
this, you know, we're only
You know, we're not even halfway through the quarter, but we've already had a couple of small wins early in the quarter. There are also a couple of larger ones where we're optimistic that we can hopefully get them resolved.
um,
um, that that has
that has popped up in the last, you know, couple of quarters. So,
we're encouraged and I said, as I mentioned it, you know, my a prepared comments, the fact that
Special mention was down, you know, 30%.
It's usually a pretty good leading indicator as to...
You know, future migrations, the trends.
Yep. And do you have that number, Jim? What the special mention were when you said 30% from the previous quarter, is just what? What's the barometer there?
Um, it would they were down 12 and a half million.
In the quarter, about 40 million to 27 million.
Okay perfect. All right and then just 1 or 2. Last 1 for me. The the uh,
Brad, you talked about you just kind of the m&a which you've talked about in the past. But in terms of size is, is there something I mean? Are you guys in?
Preference wise, if you if you found an opportunity, a smaller or bigger.
To kind of comment—just kind of how you're thinking about that with the approval times and whatnot—it seems like it had been smaller, but maybe that's not the case.
I'd say the bias is towards smaller right now, but I...
I don't really rule anything out. It's just that at the end of the day, the question is: does doing a transaction make the franchise more valuable?
And 99 times out of 100. That's a deposit based question, obviously not always, um, because we've done an asset generator deal. Um, but
um,
There's no interest in betting the farm at this point. What we have here is pretty special, as is shown in the profitability numbers, and...
It's not easy to find a transaction that makes you a better bank, but they're out there with some work on the front end and the back end. So, I am optimistic we can get something done in relatively short order.
Gotcha. And then, just last thing, you, you talked about that contribution margin. I guess your outlook for that. Contribution margin. I think it's was up again. I'll I'll I'll let, I'll let Darren answer that 1. Yeah.
Right, right. Right. Right.
Yep. Hey, yeah, so customer support and for, um, for the national specialty lending, and Jim and Brad both mentioned that it's a historical high for us. I expect that to continue through this year with some reductions coming next year, coming down a little bit next year as—
So, we changed rates a little bit lower in the middle of this year, and so you'll start seeing, as the portfolio turns over, a little bit more of that impact in '27 than you would this year. Nothing material, but you will see it come down a little bit.
Gotcha. Okay. I think what's important to understand that portfolio APR on this right now over 10%
and and you know, loss the loss rate came down from over a little over 2% to to 180 so you can see the contribution margin
You know, well over 8.5% of that business is, which is extraordinary.
Yeah, no, it's great. Um,
I think that answers most of it. The only thing I could ask you, Brad, that I don't know if you haven't commented on—or maybe it's just not something you'd want to at this point—but just in terms of...
You know, the stability and the margin near term—if we think about going into next year—I mean, what are kind of the puts and takes on directly where you would expect the margin to be? You know, not quantifying a number, but just kind of direct me on how you think about it as you go into it.
Next year.
Well.
I think we won this war like 47 times now. So I'd say if that becomes like 57 times then maybe interest rates would go down along the curve and inflation would dampen and then and then you would probably give back a little bit more margin.
but,
I, I
Normally I talk about this stuff over a beer but I I I fundamentally believe that the world is shedding. The idea that rates are somehow anchored to zero interest rate policy, I believe those days are done.
Uh, and as long as that is the case and and and I'm correct about that. Then fundamentally this is a very high margin financial institution, just based on the quality of the funding. Um, so I am very bullish, a very elevated margin for a very long time. Uh, I guess is the way I put that.
That is, uh, that's helpful. So I appreciate you taking the questions, guys. Yep. Thanks, Brian.
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 joining us this morning, and we look forward to talking to you again.
In the third quarter. Goodbye.
This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
