8-K: Old Second Bancorp Reports Strong Q2 2026 Financial Results

Old Second Bancorp, Inc. announced robust second quarter 2026 financial results, with net income rising to $28.2 million, or $0.54 per diluted share.

Summary

• Old Second Bancorp, Inc. reported strong financial results for the second quarter ended June 30, 2026.
• Net income increased to $28.2 million, or $0.54 per diluted share, up from $25.6 million, or $0.48 per diluted share, in the first quarter of 2026.
• Adjusted net income was $28.7 million, or $0.55 per adjusted diluted share, compared to $26.0 million, or $0.49 per adjusted diluted share, in the prior quarter.
• Net interest and dividend income rose by 2.69% to $83.3 million.
• Net interest margin (NIM) on a fully tax-equivalent basis increased by nine basis points to 5.23%.
• Provision for credit losses decreased to $7.5 million from $9.5 million in the prior quarter.
• Noninterest income grew by 5.00% to $13.3 million.
• Noninterest expense increased by 2.08% to $51.3 million.
• The efficiency ratio improved to 51.72%, and the adjusted efficiency ratio was 50.80%.
• Return on average assets (ROAA) was 1.65%, and return on tangible common equity (ROATCE) was 15.58%.
• Total loans increased by $60.6 million to $5.25 billion.
• Total deposits decreased by $120.3 million to $5.44 billion.
• Nonperforming loans decreased to $56.5 million from $75.5 million.
• The company's Board of Directors declared a cash dividend of $0.07 per share.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a positive report, with strong sequential improvements in profitability, margin expansion, and asset quality metrics, despite some noted elevated charge-offs.

Positives

• Net income increased to $28.2 million in Q2 2026 from $25.6 million in Q1 2026.
• Diluted earnings per share rose to $0.54 from $0.48 quarter-over-quarter.
• Adjusted net income and adjusted diluted EPS also showed sequential improvement.
• Net interest and dividend income increased by $2.2 million (2.69%) to $83.3 million.
• Net interest margin (NIM) expanded by 9 basis points to 5.23% on a tax-equivalent basis.
• Provision for credit losses decreased by $2.0 million to $7.5 million.
• Noninterest income increased by $631,000 (5.00%) to $13.3 million.
• Efficiency ratio improved by 68 basis points to 51.72%.
• Return on average assets (ROAA) increased to 1.65% from 1.51%.
• Return on tangible common equity (ROATCE) increased to 15.58% from 14.20%.
• Tangible book value per share showed double-digit percentage growth on an annualized basis.
• Nonperforming, classified, and criticized assets all decreased meaningfully.
• Allowance for Credit Losses (ACL) to total loans was 1.34%, and ACL to nonperforming loans was 124.60%.
• Tangible common equity to tangible assets ratio increased to 11.19% from 11.07%.

Negatives

• Total deposits decreased by $120.3 million (2.16%) to $5.44 billion, attributed to seasonal declines and the runoff of higher-rate brokered deposits.
• Net charge-offs were elevated in the second quarter, largely resulting from one downtown Chicago office credit and one cash-flow-dependent commercial relationship.
• The company experienced a $15.5 million increase in treasury stock due to share repurchases and stock award vestings, reducing capital.
• Litigation expense increased by $172,000, primarily related to two customer disputes.

Risks

• The strength of the U.S. economy and local economies may differ from expectations.
• Adverse changes in asset quality, delinquencies, and charge-offs could lead to increased credit losses.
• Adverse developments in the commercial real estate market, particularly the office sector, could increase credit losses.
• Changes in legislation, regulation, policies, or administrative practices could negatively impact operations.
• Risks associated with potential future acquisitions, including execution and integration challenges.
• Adverse conditions in stock, public debt, and other capital markets could have a negative impact.
• Changes in interest rates could affect deposit costs, net income, and asset values.
• Elevated inflation poses risks to the overall economy and could challenge clients and the business.
• Events beyond control, such as pandemics, war, or cybersecurity incidents, could destabilize financial markets and the economy.

Future Outlook

The company is proud of its performance and is positioning itself to deliver even better results in the second half of the year. Forward-looking statements indicate expectations for economic outlook, balance sheet growth, and capital building.

Management Comments

• Old Second reported strong results in the second quarter of 2026 led by exceptional revenue and margin performance and disciplined operating efficiency.
• Tangible book value per share exhibited double-digit percentage growth on an annualized basis despite the repurchase of 732,000 shares during the quarter.
• Nonperforming, classified and criticized assets all decreased meaningfully during the second quarter, and we believe we are adequately reserved for any future losses.
• Overall results are exceptionally strong across the board, despite a relatively elevated level of net charge-offs, with second quarter return on average assets and return on average tangible common equity of 1.65% and 15.58%, respectively.
• The tax equivalent net interest margin expanded nine basis points quarter over linked quarter to 5.23% and the efficiency ratio was a very healthy 51.72%.
• This strong bottom-line performance and a well-positioned balance sheet drove an increase in the tangible common equity capital ratio to 11.19% from 11.07% for the prior linked period.
• We are proud of our performance both from a bottom-line perspective and in positioning ourselves to deliver even better results to our stockholders over the last half of the year.

Industry Context

StockSavvy.ai notes that Old Second Bancorp's Q2 2026 results demonstrate resilience and operational strength within the current banking environment, characterized by a focus on margin expansion and cost control. The reported increase in net interest margin and improved efficiency ratio are positive indicators in a competitive landscape.

Comparison to Industry Standards

• The reported Net Interest Margin (NIM) of 5.23% on a tax-equivalent basis for Q2 2026 is strong compared to many regional banks, which often see NIMs in the 3-4% range, though specific peer comparisons would require further analysis.
• The efficiency ratio of 51.72% is a solid performance, indicating efficient operations. Industry benchmarks for efficiency ratios can vary, but generally, ratios below 60% are considered good.
• Return on Average Tangible Common Equity (ROATCE) of 15.58% is a robust figure, suggesting strong profitability relative to tangible equity. Many well-performing banks aim for ROATCE in the mid-to-high teens.
• The loan growth of $60.6 million in Q2 2026, bringing total loans to $5.25 billion, indicates moderate expansion. This growth rate needs to be assessed against the overall loan growth trends of comparable community and regional banks.

Legal Proceedings

• Two unrelated customer disputes with limited exposure are noted, contributing to litigation expense.

Stakeholder Impact

• Shareholders: Positive impact due to increased net income, EPS, and a declared cash dividend of $0.07 per share.
• Creditors: Stable outlook with strong capital ratios (e.g., Common equity tier 1 capital ratio at 13.28%).
• Employees: Potential for increased incentive accruals due to strong performance, as noted in salary and employee benefits expense.
• Customers: Continued access to banking services, with a focus on managing credit risk across various loan segments.

Next Steps

• Continue to monitor loan portfolio performance and credit quality.
• Focus on delivering improved results in the second half of the year.
• Manage deposit costs and funding sources effectively.
• Execute on strategic initiatives to drive further growth and profitability.

Key Dates

Recommendation

The filing shows solid operational performance and sequential improvement in key financial metrics, including profitability and asset quality. However, the elevated net charge-offs in specific segments and the decrease in total deposits warrant a cautious approach. While positive, the results are largely expected and do not present a significant catalyst for a strong buy or sell recommendation at this time.

Keywords

Old Second Bancorp, Q2 2026 Earnings, Net Income, Earnings Per Share, Net Interest Margin, Loan Portfolio, Credit Quality, Efficiency Ratio