8-K: Old Second Bancorp Reports $19.8 Million Net Income for Q1 2025

Old Second Bancorp announces a net income of $19.8 million, or $0.43 per diluted share, for the first quarter of 2025, reflecting a slight increase from the previous quarter but a decrease compared to Q1 2024.

Summary

• Old Second Bancorp, Inc. reported a net income of $19.8 million, or $0.43 per diluted share, for the first quarter of 2025.
• This compares to a net income of $19.1 million, or $0.42 per diluted share, for the fourth quarter of 2024, and $21.3 million, or $0.47 per diluted share, for the first quarter of 2024.
• Adjusted net income was $20.6 million, or $0.45 per diluted share, for Q1 2025, compared to $20.0 million, or $0.44 per diluted share, for Q4 2024, and $21.2 million, or $0.47 per diluted share, for Q1 2024.
• Net interest and dividend income increased by $1.3 million, or 2.1%, from Q4 2024, and $3.1 million, or 5.2%, from Q1 2024, reaching $62.9 million.
• The company recorded a net provision for credit losses of $2.4 million in Q1 2025, compared to $3.5 million in both Q4 2024 and Q1 2024.
• Noninterest income was $10.2 million for Q1 2025, a decrease of $1.4 million, or 12.1%, from Q4 2024, and a decrease of $300,000, or 2.9%, from Q1 2024.
• Noninterest expense was $44.5 million for Q1 2025, an increase of $183,000, or 0.4%, from Q4 2024, and an increase of $6.3 million, or 16.4%, from Q1 2024.
• The effective tax rate for Q1 2025 was 24.3%.
• Total assets were $5.73 billion, total loans were $3.94 billion, and total deposits were $4.85 billion as of March 31, 2025.
• The Board of Directors declared a cash dividend of $0.06 per share of common stock, payable on May 5, 2025, to stockholders of record as of April 25, 2025.
• The company announced an agreement to acquire Evergreen Bank Group in February 2025.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. While the company reports a decrease in net income compared to the previous year, there are positive trends in net interest margin, nonperforming loans, and tangible book value per share. The acquisition of Evergreen Bank Group is also a positive development.

Positives

• Net income increased by $720,000 compared to the fourth quarter of 2024.
• Net interest and dividend income increased by $1.3 million, or 2.1%, from the fourth quarter of 2024.
• Net interest margin increased 19 basis points to 4.85% for the first quarter of 2025, compared to 4.66% for the fourth quarter of 2024.
• Nonperforming loans decreased as a percent of total loans, from 1.6% in March 2024 to 0.9% in March 2025.
• Tangible book value per share increased by more than 15% on both a linked quarter annualized and year over year basis.
• The company's efficiency ratio was a healthy 56.46%.

Negatives

• Net income decreased by $1.5 million compared to the first quarter of 2024.
• Noninterest income decreased by $1.4 million, or 12.1%, compared to the fourth quarter of 2024.
• Noninterest expense increased by $6.3 million, or 16.4%, compared to the first quarter of 2024.
• Total loans decreased by $41.1 million compared to December 31, 2024.
• Nonperforming loans increased in the first quarter of 2025, driven by nonaccrual loan inflows of $11.6 million.

Risks

• The strength of the United States economy in general and the strength of the local economies in which the company conducts its operations may be different than expected.
• Changes in legislation, regulation, policies, or administrative practices could adversely affect the company.
• Adverse conditions in the stock market, the public debt market and other capital markets could have a negative impact.
• Changes in interest rates may affect deposit and funding costs, net income, and the market value of assets.
• Elevated inflation could pose challenges to clients and the business.
• Events beyond the company's control may have a destabilizing effect on financial markets and the economy.
• The planned merger with Bancorp Financial, Inc. may not close if conditions are not satisfied or waived.

Future Outlook

The company expects the acquisition of Evergreen Bank Group to add meaningful consumer lending capabilities and enhance the flexibility and profitability of Old Second's balance sheet.

Management Comments

• Chairman, President and Chief Executive Officer Jim Eccher said Old Second reported strong results in the first quarter of 2025 led by exceptional margin performance and disciplined operating efficiency.
• Jim Eccher stated that the company is exceptionally proud of its performance and positioning to deliver value to stockholders over the remainder of the year.
• Jim Eccher believes the Evergreen Bank Group transaction will strengthen the company's competitive position in Chicago and represents a step forward in building the best bank possible for customers and communities.

Industry Context

The banking industry is currently navigating a complex environment with fluctuating interest rates, inflation concerns, and evolving regulatory landscapes. Old Second's focus on margin performance and operating efficiency aligns with industry trends aimed at maximizing profitability in this environment. The acquisition of Evergreen Bank Group reflects a strategy of consolidation and diversification seen among regional banks seeking to enhance their market presence and service offerings.

Comparison to Industry Standards

• Old Second's return on average assets (ROAA) of 1.42% is comparable to other regional banks of similar size.
• The efficiency ratio of 56.46% is competitive, indicating effective cost management.
• The tangible common equity to tangible assets (TCE/TA) ratio of 10.34% suggests a solid capital position.
• Comparing Old Second to peers like First Midwest Bancorp (now part of Old National Bancorp) and Wintrust Financial, their profitability metrics and capital ratios are within a similar range.
• The acquisition of Evergreen Bank Group mirrors the trend of regional bank consolidation, similar to recent mergers involving Huntington Bancshares and TCF Financial, and Old National Bancorp and First Midwest Bancorp.

Stakeholder Impact

• Shareholders will receive a cash dividend of $0.06 per share.
• Customers may benefit from the enhanced consumer lending capabilities and expanded services resulting from the Evergreen Bank Group acquisition.
• Employees may experience changes related to the integration of Evergreen Bank Group.
• The company's performance impacts the communities it serves through lending and community development activities.

Next Steps

• The company will proceed with the acquisition of Evergreen Bank Group.
• The company will continue to monitor and manage asset quality.
• The company will focus on delivering value to stockholders over the remainder of the year.
• The company will host a conference call on April 24, 2025, to discuss the financial results.

Key Dates

Keywords

net income, financial results, Old Second Bancorp, earnings, loans, deposits, merger, Evergreen Bank Group, nonperforming loans, interest margin