Table of Contents I UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For transition period from to Commission File Number 000-10537 (Exact name of Registrant as specified in its charter) of incorporation or organization) Delaware 36-3143493 (State or ...

Financial Data and Key Metrics Changes - Net income for Q2 2025 was $21.8 million, or $0.48 per diluted share, reflecting strong profitability despite merger-related expenses and MSR mark-to-market losses [3][4] - Return on assets was 1.53%, and return on average tangible common equity was approximately 15.29% [4] - Common equity Tier one increased to 13.77% from 13.47% in the previous quarter [5] - Tangible equity ratio improved by 49 basis points from the last quarter and by 144 basis points year-over-year [4][5] - Net interest income increased by $1.3 million or 2.1% from the previous quarter, and by $4.5 million or almost 8% year-over-year [11] Business Line Data and Key Metrics Changes - Total loans increased by $58.4 million from the previous quarter, driven by growth in construction and lease portfolios [6] - Noninterest income performed well, with wealth management fees increasing by $324,000 or 11.7% and service charges on deposits rising by $280,000 or 11.2% [8] - Noninterest expense was $1.1 million lower than the prior linked quarter, reflecting strong expense discipline [9] Market Data and Key Metrics Changes - The loan-to-deposit ratio was 83.3% as of June 30, compared to 81.2% in the previous quarter [6] - Total cost of deposits was 84 basis points for Q2 2025, up from 82 basis points in both the prior linked quarter and the same quarter last year [6] Company Strategy and Development Direction - The company is focused on the effective integration of Evergreen Bank and optimizing the balance sheet for its impacts [9] - Management expressed confidence in the profitability and positioning of the company post-acquisition, with expectations of continued strong performance [10][17] - The company aims to maintain a disciplined approach to expenses, targeting core expense growth around 4% excluding acquisitions [14] Management's Comments on Operating Environment and Future Outlook - Management noted that commercial clients are weathering economic challenges well, although appetite for capital expenditures has been muted [28] - The company is optimistic about loan growth, projecting low to mid-single-digit growth for 2025 [29] - Management expressed confidence in maintaining strong margins despite potential interest rate cuts, indicating a stable and durable margin outlook [66][68] Other Important Information - The company repurchased approximately 327,000 shares at a modest discount to market following the Evergreen acquisition [13][60] - The integration of Evergreen Bank is expected to enhance the company's capital position and operational efficiency [12][58] Q&A Session Summary Question: What is the expected timing for the Evergreen conversion and expense run rate? - Management expects the conversion to occur in early to mid-fourth quarter, with a clearer run rate on operating expenses by the time of the fourth quarter report [20] Question: What is the loan-to-deposit balance brought over from Evergreen? - The loan-to-deposit ratio for Evergreen was just north of 90% [21] Question: Can you provide more detail on the classified assets related to owner-occupied CRE? - The classified assets stem from a large healthcare transaction in Oregon, with management confident in the collateral position and expected cash flow improvements [23] Question: How is commercial client sentiment currently? - Commercial clients are managing well, but there is muted appetite for capital expenditures, with some growth observed in leasing and commercial real estate [28] Question: What are the expectations for charge-offs going forward? - Charge-offs are expected to be around 30 basis points, with higher loss rates in powersport lending balanced by strong contribution margins [39] Question: How will the margin respond to potential interest rate cuts? - Management believes the margin will be less sensitive to rate cuts than previously expected, with a potential decrease of around four basis points for a 25 basis point cut [44] Question: What is the long-term outlook for ROA? - Management is confident that ROA will trend above 1.50% [72]

Old Second Bancorp (OSBC) came out with quarterly earnings of $0.48 per share, missing the Zacks Consensus Estimate of $0.49 per share. This compares to earnings of $0.46 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -2.04%. A quarter ago, it was expected that this financial holding company would post earnings of $0.46 per share when it actually produced earnings of $0.45, delivering a surprise of -2.17%.Over the last four q ...

(NASDAQ:OSBC) Exhibit 99.1 Contact: Bradley S. Adams For Immediate Release Chief Financial Officer July 23, 2025 (630) 906-5484 Old Second Bancorp, Inc. Reports Second Quarter 2025 Net Income of $21.8 Million, or $0.48 per Diluted Share AURORA, IL, July 23, 2025 – Old Second Bancorp, Inc. (the "Company," "Old Second," "we," "us," and "our") (NASDAQ: OSBC), the parent company of Old Second National Bank (the "Bank"), today announced financial results for the second quarter of 2025. Our net income was $21.8 m ...

Core Viewpoint - Old Second Bancorp (OSBC) has received an upgrade to a Zacks Rank 2 (Buy), indicating a positive trend in earnings estimates which is a significant factor influencing stock prices [1][4]. Earnings Estimates and Ratings - The Zacks rating system is based solely on a company's changing earnings picture, tracking the Zacks Consensus Estimate for EPS from sell-side analysts [2]. - The Zacks rating upgrade reflects an optimistic earnings outlook for Old Second Bancorp, which could lead to increased buying pressure and a rise in stock price [4][6]. Impact of Earnings Estimate Revisions - Changes in future earnings potential, as indicated by earnings estimate revisions, are strongly correlated with near-term stock price movements [5][7]. - Institutional investors utilize earnings estimates to determine the fair value of stocks, influencing their buying and selling actions, which subsequently affects stock prices [5]. Current Earnings Outlook for Old Second Bancorp - Old Second Bancorp is projected to earn $1.95 per share for the fiscal year ending December 2025, with no year-over-year change expected [9]. - Over the past three months, the Zacks Consensus Estimate for Old Second Bancorp has increased by 3%, indicating a positive trend in earnings estimates [9]. Zacks Rank System Overview - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 (Strong Buy) stocks historically generating an average annual return of +25% since 1988 [8]. - The upgrade of Old Second Bancorp to Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, suggesting a strong potential for market-beating returns in the near term [10][11].

Core Viewpoint - Momentum investing focuses on following a stock's recent price trends, aiming to buy high and sell higher, with the expectation that established trends will continue [1] Company Overview: Old Second Bancorp (OSBC) - OSBC currently holds a Momentum Style Score of B and a Zacks Rank of 2 (Buy), indicating strong potential for performance [3][4] - The stock has shown significant price appreciation, with a 19.67% increase over the past quarter and a 19.51% increase over the last year, outperforming the S&P 500's gains of 8.73% and 13.86% respectively [7] Price Performance - Over the past week, OSBC shares increased by 0.24%, while the Zacks Banks - Midwest industry saw a decline of 0.11% [6] - The monthly price change for OSBC is 7.01%, compared to the industry's 2.94% performance, indicating strong relative strength [6] Trading Volume - OSBC's average 20-day trading volume is 196,731 shares, which serves as a baseline for price-to-volume analysis; rising prices with above-average volume are typically bullish [8] Earnings Outlook - In the past two months, two earnings estimates for OSBC have been revised upward, increasing the consensus estimate from $1.89 to $1.95 for the full year [10] - For the next fiscal year, one estimate has moved up with no downward revisions, indicating positive sentiment regarding future earnings [10] Conclusion - Given the strong momentum indicators and positive earnings outlook, OSBC is positioned as a solid momentum pick for investors seeking near-term opportunities [12]

[Cautionary Note Regarding Forward-Looking Statements](index=4&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section outlines potential risks and uncertainties, including economic conditions, strategic execution, and the pending Bancorp Financial merger, that could materially affect Old Second Bancorp's actual results - Key risks include **economic conditions** (inflation, real estate values), ability to execute **growth strategies**, integration of **acquired businesses**, and changes in **U.S. monetary policy and interest rates**[10](index=10&type=chunk) - The company highlights specific risks related to its **pending merger with Bancorp Financial, Inc.**, such as **failure to obtain regulatory or stockholder approvals**, **not realizing anticipated benefits**, and **potential business disruptions**[12](index=12&type=chunk) - Operational and market risks mentioned include **competitive pressures from FinTech companies**, **cybersecurity threats**, **vendor failures**, and the **impact of geopolitical events** like the war in Ukraine and conflicts in the Middle East[10](index=10&type=chunk) [PART I – FINANCIAL INFORMATION](index=7&type=section&id=PART%20I) [Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) The unaudited consolidated financial statements for Q1 2025 show total assets increased to **$5.73 billion**, with net income decreasing to **$19.8 million** from **$21.3 million** in Q1 2024 [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets increased to **$5.73 billion**, driven by higher cash, while net loans slightly decreased and total deposits grew to **$4.85 billion** Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $256,121 | $99,329 | | Net loans | $3,898,681 | $3,937,717 | | Total assets | $5,727,686 | $5,649,377 | | Total deposits | $4,852,791 | $4,768,731 | | Total liabilities | $5,033,195 | $4,978,343 | | Total stockholders' equity | $694,491 | $671,034 | [Consolidated Statements of Income](index=8&type=section&id=Consolidated%20Statements%20of%20Income) For Q1 2025, net income was **$19.8 million** (**$0.43 per diluted share**), down from **$21.3 million** (**$0.47 per diluted share**) in Q1 2024, primarily due to higher noninterest expenses despite increased net interest income Income Statement Summary (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net interest and dividend income | $62,904 | $59,783 | | Provision for credit losses | $2,400 | $3,500 | | Noninterest income | $10,201 | $10,501 | | Noninterest expense | $44,505 | $38,241 | | Net income | $19,830 | $21,312 | | Diluted earnings per share | $0.43 | $0.47 | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash and cash equivalents increased by **$156.8 million** in Q1 2025, driven by net cash inflows from investing activities (**$76.7 million**) and financing activities (**$62.2 million**), partially offset by operating activities Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $17,838 | $47,389 | | Net cash provided by investing activities | $76,737 | $93,890 | | Net cash provided by (used in) financing activities | $62,217 | ($143,330) | | **Net change in cash and cash equivalents** | **$156,792** | **($2,051)** | [Notes to Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, acquisitions, and financial instruments, highlighting the December 2024 branch acquisition and the pending Bancorp Financial merger announced in February 2025 - On December 6, 2024, the Company acquired **five branches from First Merchants Bank**, recording **$24.8 million in assets** and **$268.0 million in deposits**, resulting in **$6.8 million of goodwill**[32](index=32&type=chunk)[33](index=33&type=chunk) - A **merger agreement was signed with Bancorp Financial, Inc.** on February 24, 2025, with the transaction **expected to close in the third quarter of 2025**, **pending regulatory and stockholder approvals**[38](index=38&type=chunk)[40](index=40&type=chunk) - The **allowance for credit losses (ACL) on loans** was **$41.6 million** as of March 31, 2025, or **1.05% of total loans**, with a **provision of $2.4 million** recorded in Q1 2025[57](index=57&type=chunk)[210](index=210&type=chunk) - The Company and its subsidiary bank **exceeded all regulatory capital requirements** to be considered **'well capitalized'** as of March 31, 2025[98](index=98&type=chunk)[101](index=101&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=56&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2025 financial results, noting a decrease in net income to **$19.8 million** due to higher noninterest expenses, despite growth in net interest income and improved asset quality [Overview](index=56&type=section&id=MD%26A_Overview) Net income for Q1 2025 was **$19.8 million** (**$0.43 per diluted share**), a decrease from Q1 2024, primarily due to a **$6.3 million** rise in noninterest expense Quarterly Financial Highlights | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income | $19.8M | $21.3M | | Diluted EPS | $0.43 | $0.47 | | Net Interest Income | $62.9M | $59.8M | | Noninterest Expense | $44.5M | $38.2M | - Adjusted net income (a non-GAAP measure) was **$20.6 million** for Q1 2025, compared to **$21.2 million** for Q1 2024[160](index=160&type=chunk)[162](index=162&type=chunk) - **Classified assets** decreased by **22.5%** to **$88.4 million** at March 31, 2025, from **$114.1 million** at December 31, 2024[165](index=165&type=chunk) [Results of Operations](index=62&type=section&id=MD%26A_Results_of_Operations) Pretax income for Q1 2025 decreased to **$26.2 million**, mainly due to a **$6.3 million** increase in noninterest expense, partially offset by a **$3.1 million** rise in net interest income - **Net interest income** increased by **$3.1 million** year-over-year, primarily due to a significant decrease in **interest expense on other short-term borrowings**[168](index=168&type=chunk) - **Noninterest income** decreased by **$0.3 million** year-over-year, mainly due to a **$0.5 million** decline in **residential mortgage banking revenue** and a **$0.7 million** decrease in the change in **cash surrender value of BOLI**[165](index=165&type=chunk)[181](index=181&type=chunk) - **Noninterest expense** rose by **$6.3 million** (**16.4%**) year-over-year, driven by increases in **salaries and benefits** (**+$2.7 million**), **OREO expense** (**+$1.8 million**), and **occupancy costs** (**+$0.6 million**)[167](index=167&type=chunk)[185](index=185&type=chunk) - The **effective tax rate** was **24.3%** in Q1 2025, compared to **25.3%** in Q1 2024[187](index=187&type=chunk) [Financial Condition](index=69&type=section&id=MD%26A_Financial_Condition) Total assets increased to **$5.73 billion** due to higher cash, while total loans decreased and total deposits grew to **$4.85 billion**, with improved asset quality and strong capital ratios - **Total loans** decreased by **$41.1 million** in Q1 2025, primarily due to paydowns in the **commercial and commercial real estate-owner occupied portfolios**[192](index=192&type=chunk) - **Nonperforming loans** increased to **$34.8 million** (**0.9% of total loans**) at Q1 2025 from **$30.3 million** (**0.8% of total loans**) at year-end 2024[194](index=194&type=chunk) - **Net charge-offs** were **$4.4 million** in Q1 2025, primarily from one commercial relationship and one construction loan[202](index=202&type=chunk) - **Total deposits** increased by **$84.1 million** in Q1 2025, with growth across **non-interest bearing demand, savings, NOW, and money market accounts**, partially offset by a decline in **time deposits**[219](index=219&type=chunk) - The **tangible common equity to tangible assets ratio** (non-GAAP) increased to **10.40%** at March 31, 2025, from **10.11%** at December 31, 2024[230](index=230&type=chunk)[231](index=231&type=chunk) [Liquidity](index=79&type=section&id=MD%26A_Liquidity) The company maintains strong liquidity, with cash and cash equivalents increasing to **$256.1 million** due to net cash inflows from financing and investing activities, supplemented by available credit lines - **Cash and cash equivalents** increased by **$156.8 million** during Q1 2025 to a total of **$256.1 million**[233](index=233&type=chunk)[238](index=238&type=chunk) - **Net cash from financing activities** was a source of **$62.2 million**, primarily due to an **$84.3 million increase in deposits**, offset by a **$20.0 million paydown of other short-term borrowings**[237](index=237&type=chunk) - The company has access to **additional funding sources**, including an undrawn **$30.0 million line of credit** with a third-party financial institution[238](index=238&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=61&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company manages interest rate risk with a moderately asset-sensitive balance sheet, projecting a **7.7%** increase in net interest income from a **100 basis point increase** in rates - The company's balance sheet has a **moderately asset-sensitive profile**, where **variable rate assets** reprice faster than its **deposit base**[243](index=243&type=chunk) Net Interest Income Sensitivity Analysis (March 31, 2025) | Immediate Rate Change | Dollar Change (in thousands) | Percent Change | | :--- | :--- | :--- | | +200 bps | $39,012 | 14.5% | | +100 bps | $20,661 | 7.7% | | -100 bps | $(21,166) | (7.9)% | | -200 bps | $(41,942) | (15.6)% | - Management believes the **economic effect of recently enacted tariffs** will manifest as **higher prices**, reversing the course of **lower inflation**, which could put **upward pressure on expenses** and **weaken borrower financial conditions**[248](index=248&type=chunk) [Controls and Procedures](index=62&type=section&id=Item%204.%20Controls%20and%20Procedures) The CEO and CFO concluded that disclosure controls and procedures were effective, with no material changes to internal controls over financial reporting during Q1 2025 - The CEO and CFO concluded that as of March 31, 2025, the Company's **disclosure controls and procedures were effective**[249](index=249&type=chunk) - **No changes in internal control over financial reporting occurred** during the quarter ended March 31, 2025, that have **materially affected, or are reasonably likely to materially affect, these controls**[250](index=250&type=chunk) [PART II – OTHER INFORMATION](index=63&type=section&id=PART%20II) [Legal Proceedings](index=63&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ordinary course legal actions, with management expecting no material adverse effect on its financial position - The Company is involved in legal actions arising from normal business activities, but management believes the ultimate liabilities will not have a **material adverse effect on its financial position**[253](index=253&type=chunk) [Risk Factors](index=63&type=section&id=Item%201.A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the Company's 2024 Annual Report on Form 10-K - **No material changes have occurred** to the **risk factors disclosed in the 2024 Annual Report on Form 10-K**[254](index=254&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=63&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) A stock repurchase program for up to **2,234,896 shares** was authorized in December 2024, with no shares repurchased during Q1 2025 - A **stock repurchase program** for up to **2,234,896 shares** was authorized in December 2024 and is effective until December 31, 2025[255](index=255&type=chunk) - **No shares were repurchased** during the quarter ended March 31, 2025[257](index=257&type=chunk)[258](index=258&type=chunk) [Defaults Upon Senior Securities](index=63&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities - There were **no defaults upon senior securities**[259](index=259&type=chunk) [Other Information](index=64&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement in Q1 2025 - **No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement** in Q1 2025[261](index=261&type=chunk) [Exhibits](index=65&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including the Bancorp Financial merger agreement and CEO/CFO certifications - Key exhibits include the **merger agreement with Bancorp Financial, Inc.**, and **certifications by the CEO and CFO pursuant to Sarbanes-Oxley**[264](index=264&type=chunk)

Core Viewpoint - Old Second Bancorp (OSBC) is currently identified as a strong value stock with a Zacks Rank of 2 (Buy) and a Value grade of A, indicating it may be undervalued in the market [4][7]. Valuation Metrics - OSBC has a P/E ratio of 8.28, which is lower than the industry average of 10.09. Over the past 52 weeks, its Forward P/E has ranged from 7.18 to 10.39, with a median of 8.81 [4]. - The P/B ratio for OSBC stands at 1.07, significantly below the industry average of 1.95. Its P/B has fluctuated between 0.97 and 1.30 over the past year, with a median of 1.15 [5]. - OSBC's P/CF ratio is 7.69, compared to the industry's average of 14.94. This ratio has varied from 6.47 to 9.42 in the last 12 months, with a median of 8.01 [6]. Investment Outlook - The combination of OSBC's favorable valuation metrics and strong earnings outlook suggests that the stock is likely undervalued, making it an attractive investment opportunity [7].

Financial Data and Key Metrics Changes - Net income for Q1 2025 was $19.8 million, or $0.43 per diluted share, with a return on assets (ROA) of 1.42% and a return on average tangible common equity of 14.70% [6] - The tangible common equity ratio increased by 30 basis points from the previous quarter to 10.34%, and common equity Tier 1 rose to 13.47% from 12.82% [8] - The tax equivalent efficiency ratio was 55.48%, reflecting strong profitability despite various impacts on earnings [22] Business Line Data and Key Metrics Changes - Net interest income increased by $1.3 million, or 2.1%, to $62.9 million compared to the previous quarter, and up $3.1 million, or 5.2%, from the same quarter last year [25] - Total loans decreased by $41.1 million from the prior linked quarter, primarily due to net paydowns in commercial real estate and multifamily portfolios [10] - Noninterest income grew by $528,000, or 20.6%, in wealth management fees and $304,000, or 12.6%, in service charges on deposits compared to the prior year [21] Market Data and Key Metrics Changes - The total cost of deposits was 82 basis points for Q1 2025, down from 89 basis points in the previous quarter and 71 basis points a year ago [12] - The loan-to-deposit ratio was 81.2% as of March 31, 2025, compared to 83.5% last quarter and 86.1% a year ago [13] - Criticized loans decreased by 42% year-over-year to $116.7 million, marking the lowest levels in three years [16] Company Strategy and Development Direction - The company aims to manage liquidity and capital while building commercial loan origination capabilities for long-term stability [22] - There is a focus on creating a more stable long-term balance sheet mix featuring more loans and less securities [22] - The company is optimistic about future growth opportunities, particularly with the pending merger with Evergreen Bank Group [32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning and opportunities ahead, noting a strong start to 2025 [37] - The outlook for loan demand is cautious, with expectations for modest growth in the second half of the year [71] - Management remains optimistic about credit quality improvements and believes that future quarters will show positive trends [74] Other Important Information - The company recorded $4.4 million in gross loan charge-offs in Q1 2025, primarily related to one C&I loan that was downgraded [14] - Noninterest expense increased by $183,000 compared to the previous quarter, primarily due to salary and employee benefit increases [34] - The efficiency ratio adjusted to exclude certain costs was 55.48%, indicating strong expense discipline [22] Q&A Session Summary Question: Comments on margin performance and future rate cuts - Management indicated that they do not expect three rate cuts and believe inflation is stickier, suggesting a more stable margin outlook [43][44] Question: Loan book outlook and participation loans - Management is working to exit approximately $200 million in participation loans over the next 24 months and is optimistic about the repositioning of the loan book [48] Question: Trends in commercial clients' sentiment - Management noted a "wait and see" approach among commercial clients, with expectations for loan demand to improve in the second half of the year [71] Question: Reserve levels and credit quality outlook - Management expressed confidence in their credit outlook, stating that criticized and classified loans have been trending down significantly [73] Question: Expectations for expense growth - Management aims to keep expense growth in the 4% range for the year, despite some noise in the first quarter [36]

Financial Data and Key Metrics Changes - Net income for the first quarter of 2025 was $19.8 million, or $0.43 per diluted share, with a return on assets (ROA) of 1.42% and a return on average tangible common equity of 14.7% [3][4] - The tangible common equity ratio increased by 30 basis points from the previous quarter to 10.34%, and common equity Tier 1 rose to 13.47% from 12.82% [5] - Net interest income increased by $1.3 million or 2.1% from the previous quarter and by $3.1 million or 5.2% year-over-year [16] Business Line Data and Key Metrics Changes - Total loans decreased by $41.1 million from the previous quarter, primarily due to net paydowns in commercial and multifamily portfolios [7] - The purchase participation portfolio declined by $46 million or over 10% in the quarter, and since the West Suburban acquisition, it has decreased by nearly 49% [8][9] - Noninterest income grew by $528,000 or 20.6% in wealth management fees and $304,000 or 12.6% in service charges on deposits [13] Market Data and Key Metrics Changes - Tax equivalent income on average earning assets increased by $221,000 or 0.3%, while interest expense on average interest-bearing liabilities decreased by $2.9 million or 21.3% [6] - The total cost of deposits was 82 basis points for the first quarter of 2025, down from 89 basis points in the previous quarter [8] Company Strategy and Development Direction - The company aims to manage liquidity and capital while building commercial loan origination capabilities for long-term stability [15] - The focus is on creating a more stable long-term balance sheet with a mix of more loans and fewer securities to maintain returns on equity [15] - The company is optimistic about the upcoming merger with Evergreen Bank Group, which is expected to enhance profitability [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning and opportunities ahead, noting a strong start to 2025 [25] - The sentiment among commercial clients is cautious, with a "wait and see" approach due to market uncertainties, particularly regarding tariffs [50] - Management does not foresee a significant increase in loan demand in the second quarter but is hopeful for an uptick in the second half of the year [51] Other Important Information - The efficiency ratio adjusted to exclude certain costs was 55.48%, slightly higher than the previous quarter [15] - The allowance for credit losses on loans decreased to 1.05% of total loans, reflecting a reduction in criticized loans [12] Q&A Session Summary Question: Comments on margin performance and future rate cuts - Management indicated that while there may be expectations for rate cuts, they do not foresee significant declines in margins due to strong deposit flows and the upcoming merger [27][28] Question: Status of noncore loans and credit quality - The company is actively working to exit a significant portion of its purchase participation portfolio and has made progress in addressing credit quality [30][32] Question: Trends among lower balance deposit customers - There has been a significant slowdown in card transactions and a decrease in average balances among lower balance deposit customers, a trend that has been ongoing for about a year [42][43] Question: Loan demand expectations and economic sentiment - Management noted that commercial real estate activity is cautious, with clients waiting for clarity on tariffs before proceeding with new deals [50][51] Question: Charge-off trajectory and credit outlook - The company is optimistic about future credit quality, with a focus on maintaining low charge-offs and addressing any potential weaknesses proactively [56][58]